Court case · 1992
Texas Instruments Inc. v. Commissioner
T.C. Memo 1992-306
U.S. Tax Court
Mixed result
The facts
Semiconductor and manufacturing facilities mixed specialized process systems (waste treatment, switchgear, process plumbing, dedicated electrical) with normal building systems.
What the court decided
Process-support gear in a high-tech plant qualified as personal property. General building systems and permanent structures stayed real property. The case is cited by the IRS alongside Morrison for extending functional allocation to equipment-serving systems.
Why it matters for your study: Authority for sorting specialized process equipment in factories, labs, and clean rooms: the parts that exist for the production line, not the building.
Parts the case looked at
- waste treatment
- switchgear
- process plumbing
- localized fire protection
- dedicated electrical
- lab/special rooms
- partitions
- tanks
- landscaping
Background
Texas Instruments built and ran semiconductor and manufacturing facilities. Those buildings mix two worlds: specialized process systems like waste treatment, switchgear, and dedicated electrical, and ordinary building systems like partitions, ceilings, and general power.
The dispute, decided in T.C. Memo 1992-306, required the Tax Court to walk through the facilities item by item and decide which world each asset belonged to.
For capital-heavy manufacturers, the answer drives enormous depreciation differences.
What the court actually analyzed
The court sorted assets by function. Per the IRS audit guide's case table, the section 1245 winners included waste treatment facilities, the electrical switchgear structure, plumbing for equipment, air conditioning in the telephone room, localized fire protection systems, security fencing, interior landscaping, certain concrete floor and column work, and the category of electrical systems dedicated to equipment.
The section 1250 losers included drywall partitions, the water pump structure, water and fuel oil tanks, lab and special rooms, the concrete slab floor and wood deck, window wall partitions, suspended ceilings, emergency doors, sprinkler heads, exterior landscaping, and the general electrical categories: substations and transformers, the high-voltage system, and spare transformers, breakers, and cable.
The pattern is clean. Dedication to the process wins. General capability loses. Even within one trade, electrical, the dedicated category qualified while the general categories stayed with the building. The IRS audit guide cites the case with Morrison for extending functional allocation reasoning to equipment-serving systems.
How it shows up in a study
Texas Instruments is our sorting template for industrial, lab, clean room, and data-heavy facilities. In Appendix A it backs classification calls on process waste systems, dedicated electrical, equipment plumbing, and localized fire protection.
The four-category electrical breakdown is especially useful. It mirrors how we document electrical claims: identify what each subsystem feeds, claim the dedicated portions, and leave the general distribution with the building unless a load study supports an allocation.
It also tempers expectations honestly. The same case that won waste treatment lost suspended ceilings and lab rooms. We present both sides to clients so the study's claims match what courts actually allow.
What it does not mean
This case does not make a factory's whole infrastructure short-life property. The taxpayer lost on many items, including tanks, ceilings, partitions, lab rooms, and most of the electrical system. Mixed results are the norm in these facilities.
It also does not let labels do the work. "Process-related" is a conclusion that must be proven asset by asset. The telephone room air conditioning won because it served equipment. A similar unit serving people would lose.
As a Tax Court memorandum opinion, it is persuasive rather than binding precedent. Its real-world force comes from the IRS audit guide adopting its results in the case table.
Primary source
Read the official text for yourself, or share it with your advisor.
- Category
- Asset classification
- Outcome
- Mixed result
- Applies to
- Industrial, Manufacturing, Lab, Clean Room, Datacenter
- Status
- Vetted
This page explains a tax authority in plain words. It is not tax advice for your situation. The way this authority applies to your property is reviewed by a licensed tax professional. Citation is provided so you or your advisor can read the primary source.