Survey of Railroad and Utility Taxation Practices Among the States: 2005 Update
Local taxes: Assessed by local municipality (city or borough). Real and personal property are to be assessed at 100% of value. There is a tax limit of 30 mills (3%), however, this limit does not apply to bonded indebtedness. The local assessor assesses utilities located within a municipality. Most utilities are owned either by the government or by cooperatives (which are exempt from local property taxes), however, there are several utilities statewide that have sold to private companies and are now subject to a property tax. The local assessor assesses such property.
Railroad: The Alaska Railroad is owned by the State of Alaska and as such, is exempt from property tax.
Oil and Gas property: Property used for oil or gas exploration, production or pipeline transportation is exempt from local assessment but subject to a state property tax of 20 mills. The State of Alaska, Department of Revenue estimates the value of this property. The State does prorate taxes for those municipalities that have oil or gas property located within their boundaries. The proration will consist of the proportionate share of the value and taxed at the mill rate at which other property within the municipality is taxed.
A municipality may levy and collect taxes on taxable oil and gas property only by using one of the following methods:
(a) A municipality may levy and collect a tax on the full and true value of taxable oil and gas property as valued by the Department of Revenue at a rate not to exceed that which produces an amount of revenue from the total municipal property tax equivalent to $1,500 a year for each person residing in its boundaries.
(b) A municipality may levy and collect a tax on the full and true value of that portion of taxable oil and gas property as assessed by the Department of Revenue which value, when combined with the value of property otherwise taxable by the municipality, does not exceed the product of 225 percent of the average per capita assessed full and true value of property in the state multiplied by the number of residents of the taxing municipality.
2. Property subject to taxation:
Taxable: Real and personal property
Exempt: Intangible personal property
Optional exemptions: There are a variety of local optional exemptions that a municipality may exempt, including all or a portion of personal property. There are also several categories of real property that may be exempted. However, these exemptions are added back to the local full value for state shared revenues, including school funding.
3. Classification: N/A
4. Level of government which determines basis for tax liability- ad valorem property tax:
Oil or gas exploration, production or transportation (pipelines) -- State Department of Revenue.
All other property -- Local municipality
5. Report filing and valuation methods required by statute for ad valorem taxation:
The department may require by notice every person having ownership or control of an interest in property taxable under this chapter to submit a return in the form prescribed by the department, based on property values existing on January 1 of each year, except as otherwise provided in statute. The department by written notice may require a person to provide additional information within 30 days of the notice. The department may make an investigation of property on which a return has been filed or of taxable property upon which no return has been filed. In either case, the department may make its own valuation of the taxable property, which is prima facie evidence of full and true value.
The department shall assess property for the tax levied under AS 43.56.010(b) and AS 29.45.080 on property used or committed by contract or other agreement for use for the pipeline transportation of gas or unrefined oil or for the production of gas or unrefined oil at its full and true value as of January 1 of the assessment year.
The department shall assess property for the taxes levied under AS 43.56.010(a) at its full and true value as of January 1 of the assessment year except that in the case of taxable property used or committed by contract or other agreement for the pipeline transportation of gas or unrefined oil or for the production of gas or unrefined oil to be transported by that pipeline, the first assessment date shall be the construction commencement date. If the construction commencement date is used as the assessment date, the tax payable shall be prorated on the basis of the assessment year remaining.
The full and true value of taxable property used or committed by contract or other agreement for use in the exploration for gas or unrefined oil, or in the operation or maintenance of facilities for the exploration for gas or unrefined oil, is the estimated price that the property would bring in an open market and under the then prevailing market conditions in a sale between a willing seller and a willing buyer both conversant with the property and with prevailing general price levels.
The full and true value of taxable property used or committed by contract or other agreement for the production of gas or unrefined oil or in the operation or maintenance of facilities for the production of gas or unrefined oil is: (1) on the construction commencement date the actual (original) cost incurred or accrued with respect to the property as of the date of assessment; (2) determined on each January 1 thereafter on the basis of replacement cost less depreciation based on the economic life of proven reserves.
The full and true value of taxable property used or committed by contract or other agreement for pipeline transportation of gas or unrefined oil or in the operation or maintenance of facilities for the pipeline transportation of gas or unrefined oil is: (1) on the construction commencement date and until January 1 following the date the pipeline begins to transport gas or unrefined oil, the actual cost incurred or accrued with respect to the property as of the date of assessment; (2) determined on each January 1 thereafter with due regard to the economic value of the property based on the estimated life of the proven reserves of gas or unrefined oil then technically, economically, and legally deliverable into the transportation facility; however, if the proven reserves of gas or unrefined oil then technically, economically, and legally deliverable indicate an economic life materially shorter than the estimated physical life of the transportation facility, the full and true value is the actual cost reduced by an annual allowance for depreciation on a straight line basis over an economic life based on the actual elapsed life from the commencement of full operation to the date of assessment plus the estimated remaining life of the proven reserves of gas and unrefined oil then technically, economically, and legally deliverable into the transportation facility as of the date of the assessment; (3) on the assessment date next following inability to use or construct all or a substantial part of the facility for a period of 90 or more consecutive days because of natural disaster or legal prohibition, or other events beyond the control of a person having ownership or control of the property, adjusted to take into account any diminution in value. For purposes of this section, "actual cost" and "replacement cost" do not include interest capitalized before or during the period of construction nor the value of intangible drilling expenses. In the case of taxable property under construction, "actual cost" for purposes of this section means the costs incurred or accrued with respect to the property as of the date of assessment.
6. Practical application of valuation methods: See #5.
7. Valuation treatment of large facilities: Rail yards and dams are exempt, as they are owned by the State of Alaska. Power plants that may be privately owned are valued (by the local assessor) on a cost less depreciation basis within the municipality in which it is located.
8. Apportionment method required by statute: Only property that is centrally assessed and apportionment required is the Trans-Alaska Pipeline System (TAPS). The apportionment is based upon the prorated value of property actually located within a taxing jurisdiction times the local mill rate for property taxes.
9. Practical application of apportionment requirements: See #8.
10. Apportionment treatment of large facilities: None other than #8 for oil and gas property.
11. Description of assessment appeals system: Oil and gas property is appealed to the Department of Revenue and is handled by a hearing officer and decision is determined. The taxpayer may appeal this decision to the State Assessment Review Board (SARB). (The SARB is made up of individuals appointed by the governor and confirmed by the legislature by individuals knowledgeable in oil and gas and assessment fields) The SARB's decision may then be appealed to Superior Court for a trial de novo, and that decision may be appealed to the State Supreme Court.
12. Status of deregulation/restructuring of electric generation and impact on valuation and apportionment methods used: Since Alaska contains no centrally assessed electrical generation facilities, this has not and is not expected to become an issue.
13. State Government staffing: The Department of Revenue staffs one full time position of State Petroleum Assessor. That person contracts with private firms for valuation assistance.
The Department of Community and Economic Development staffs one full time position of State Assessor for determining the full value of all property on a local basis in cooperation with local assessors.