Survey of Railroad and Utility Taxation Practices Among the States: 2005 Update
1. Basis for taxation:
Both ad valorem and gross receipts.
2. Property subject to taxation:
Taxable: All real and personal.
Exempt: Air and water pollution control.
3. Classification (if applicable):
4. Level of government which determines basis for tax liability - ad valorem property tax:
Railroad - State assesses operating property, local governments assess non-operating property.
Utilities - State values personal, distributable (over large areas) property. Local governments assess the real estate.
5. Report filing and valuation method(s) required by statute for ad valorem taxation:
Except for railroad car companies, the Department of Local Government Finance shall determine value by first determining the approximate unit value of each public utility company. The value of the distributable property of a public utility company, other than a RR car company, equals the remainder of (1) the unit value of the company, minus (2) the value of the company's fixed property.
In order to determine the unit value of a utility company, the State Board may consider: (1) book value, (2) cost of replacement or reproduction, less depreciation, (3) cost of establishing and developing the business, (4) amount and market value of outstanding securities, (5) valuations determined by another governmental agency or by a judicial decision, (6) statistics and reports prepared by the company or by a private organization, (7) earnings capitalized at a reasonable rate, and (8) any other relevant information.
The value of the distributable property of a railroad car company equals the value of all the company's distributable property multiplied by an adjustment factor.
There are no statutory valuation methods. Statute requires annual report from companies, including value of real estate by local jurisdiction.
Companies are subject to a penalty of $100/day for late report. If State, etc. has to calculate a value without data, that value cannot be appealed by the company, unless they can prove fraud.
6. Practical application of valuation method(s):
Real estate is generally assessed using RCNLD; personal property is generally assessed using historic cost less depreciation. The cost of depreciable personal property must be reported at the tax basis of such property as defined in 26 USC §1012.
7. Valuation treatment of large facilities such as power plants, dams, or rail yards:
The state treats power plants as utilities and values as indicated above, along with rail yards. Dams are valued locally at the true tax value (new basis for local valuation in Indiana).
8. Apportionment method(s) required by statute:
To the state - Statute specifies formula involving mileage for railroad car companies only.
Among local units - This varies by type of utility, e.g., the assessed value of telephone, telegraph and cable company property is apportioned among taxing jurisdictions by determining the product of (1) the total assessed value of the company's indefinite-situs distributable property, multiplied by (2) a fraction, the numerator of which is the company's lines and cables, including laterals, which are located in the taxing district and the denominator of which is the length of the company's lines and cables, including laterals which are located in the state.
Similarly, for railroad companies, the formula is (1) the total assessed valuation of the railroad company's indefinite-situs distributable property, multiplied by (2) a fraction, the numerator of which is the relative value of the company's main lines, branch lines, main tracks, second main tracks, and side tracks, including all leased lines and tracks, which are located in the taxing district, and the denominator of which is the relative value of the main lines, branch lines, etc., which are located in the state.
9. Practical application or apportionment requirements:
To the state - By site for utilities, except railroads, which are computed based on total property with a percentage allocated to Indiana.
Among local units - Rely on companies' reports showing location of property, except for cellular, microwave, etc.
10. Apportionment treatment of large facilities such as power plants, dams, or rail yards:
Power plants and rail yards are apportioned by the state according to situs. Dams are valued locally.
11, Description of assessment appeals system:
Owner has 10 days from receipt of tentative notice to appeal with Department of Local Government Finance. Further appeal can be made to the Indiana Board of Tax Review.
12. Status of deregulation/restructuring of electric generating and impact on valuation and apportionment methods used:
Very little action has occurred regarding deregulating and restructuring in Indiana. The state does allow for "abnormal obsolescence" (unanticipated, unexpectedly unforeseen changes in market value and technological innovations).
13. State Government Staffing:
Staff consists of three employees (full-time equivalent basis).
Law Source(s): IC6-1.1-8 60IAC6.2.