Survey of Railroad and Utility Taxation Practices Among the States: 2005 Update
1. Basis for taxation:
Market Value - Ad valorem property tax for all utilities.
2. Property subject to taxation:
Taxable: Real, personal; tangible and intangible.
3. Classification (if applicable):
Railroads - Assessment Rate 25%.
Utilities (water, electric, pipelines, telephone, etc): - Assessment Rate 33%.
4. Level of government which determines basis for tax liability - ad valorem property tax:
All public utility property (including railroads) is State assessed. The Director of Property Valuation within the Kansas State Department of Revenue annually determines the fair market value of property, both real and personal, tangible and intangible of every public utility.
5. Report filing and valuation method(s) required by statute for ad valorem taxation:
Every public utility with property in Kansas must make an annual return in writing to the Director of Property Valuation of information deemed necessary for the appraisal and apportionment of values of said property. Compliance is enforced by State Attorney General.
Fair market value is used and defined as amount in money that a well informed buyer is justified in paying and a well informed seller is justified in accepting for property in an open and competitive market, assuming that the parties are acting without undue compulsion.
The Division of Property Valuation shall, where, practicable, determine the unit valuation, allocated to Kansas, and may consider the following factors: (a) original cost, (b) original cost less depreciation or reproduction cost less depreciation, or both, or replacement cost new less depreciation, except that where either method is used, proper allowance and deduction shall be made for functional or economic obsolescence and for operation of non-profitable facilities which require regulatory body approval to eliminate, (c) the market or actual value of all outstanding capital stock and debt, (d) the utility operating income capitalized at a just and reasonable rate, (e) other pertinent information.
6. Practical application of valuation method(s):
Weightings applied to the unit valuation indicators depend upon the availability and reliability of data pertaining to each approach to value. Generally, the capitalized income approach is considered the most reliable. Original cost less depreciation is the preferred type of cost approach whenever used.
7. Valuation treatment of large facilities such as power plants, dams, or rail yards:
All utility facilities are treated within the unit valuation approach.
8. Apportionment method(s) required by statute:
Apportionment to the state -- The method of assigning a portion of the unit valuation to the state must be a "generally accepted method." Kansas uses an original cost method on all utilities (Kansas Original Cost divided by System Original Cost) and a five-factor formula of trackage and tonnage for railroads.
Apportionment to the taxing jurisdictions -- For all utilities the apportionment method of assigning assessed value to taxing jurisdictions within the state is statutory and based upon an original cost methodology (original cost situs, as a percent of original cost in the state, applied to the state allocation of assessable market value).
For railroads, the apportionment method of assigning assessed value to taxing jurisdictions is a combination of track mileage (miles of track in jurisdiction divided by total Kansas miles) and the original cost as described above.
9. Practical application or apportionment requirements:
The "law" and the "rules and regulations" make no allowance for variation from statute. Less than the full five-factor formula is used in railroads if data are unavailable.
10. Apportionment treatment of large facilities such as power plants, dams, or rail yards:
There is no deference made with respect to the size of the facility.
11. Description of assessment appeals system:
(a) A utility or railroad has 15 days from the Director's notice of value in which to request an informal conference with the Director. At the end of the conference, the Director will confirm or amend his value. During the informal conference, the utility or railroad can present evidence of value.
(b) A utility or railroad has 30 days from the Director's notice of value in which to appeal to the State Board of Tax Appeals (BOTA) who conducts a de novo evidentiary trial.
(c) Appeals from BOTA can be made to the Kansas Court of Appeals or if "of statewide significance" to the Kansas Supreme Court.
12. Status of deregulation/restructuring of electric generating and impact on valuation and apportionment methods used:
Electric deregulation has been annually considered by the legislature. There are no active bills under consideration. Deregulation legislation has had no impact on apportionment methods. Deregulation legislation has exempted green power generation facilities from ad valorem property taxation. Deregulation legislation has created limited ad valorem taxation exemptions for new generation and transmission facilities. Exemption periods vary from 4 years to 12 years depending on the type and ownership of the facility.
13. State Government Staffing:
The Utility Section of the State Appraised Bureau of the Division of Property Valuation of the Kansas Department of Revenue consists of six full time positions (1-Supervisor, 4-Utility Appraisers and 1-Tax Examiner). One Bureau Chief and an as needed Division attorney support the section. [Note: One appraiser staff position has been vacant for more than two years due to budget constraints.]
Law Source(s): The majority of relevant statutes can be found in Chapter 79-5a.