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Department of Taxation and Finance

Survey of Railroad and Utility Taxation Practices Among the States: 2005 Update


1. Basis for taxation:

Ad valorem property tax.

Every electric, gas, telegraph, telephone and water utility subject to regulation by the Public Utilities Commission shall also be subject to an assessment of not more than .25% on its intrastate gross operating revenues to be used to fund Commission activities, such as rate-making.

Every corporation, person or association operating any railroad under lease or otherwise shall also pay an annual excise tax to the State Tax Assessor.

2. Property subject to taxation:

Taxable: All realty in state is taxable, except for specific exemptions. Railroads, buildings, whether in or out of the located right--of-way, their lands outside of the located right-of-way, and so much of located right-of-way over which railroad service has been abandoned, are taxable and regarded as nonresident land.

All personalty in state and all personalty owned by residents is also subject to taxation, with exceptions, e.g., with just value of less than $1,000.

Exempt: All other railroad property. Property in possession of a common carrier while in interstate transportation or held en route to destination in through bill of lading.

Industrial inventories and stock in trade are exempt. Intangible personal property is exempt.

3. Classification (if applicable):


4. Level of government which determines basis for tax liability - ad valorem property tax:

Telecommunication property - Tax assessed and collected by state.

Railroad and electric utilities - Assessed and taxed by local governments. However, state does provide advisory appraisals.

5. Report filing and valuation method(s) required by statute for ad valorem taxation:

Non-specific valuation methods are required by statute, but assessors are strongly advised to consider all three. Reporting requirements are administered by local governments.

Every railroad company shall file with the State Tax Assessor annually a railroad excise tax return.

The amount of annual excise tax on railroads is determined as follows: The amount of gross transportation receipts for the preceding calendar year shall be compared with the net railway operating income for that year. When the net income does not exceed 10% of the gross receipts, the tax shall be 3.25% of the gross receipts. When the net income exceeds 10% of the gross receipts, the tax is 3.75% of the gross receipts. When net income exceeds 15% of receipts, but is not greater than 20%, the tax is 4.25% of receipts, etc. up to a 5.25% tax when income is greater than 25% of receipts.

6. Practical application of valuation method(s):

Majority of local governments use net book depreciated value; for electric transmission and delivery equipment, original cost less depreciation is generally used. RCNLD is used for valuing railroad buildings.

State uses factored (trended to present) historical cost less depreciation for telecommunications. State receives reports from electric and telecommunication companies and forwards to local governments.

7. Valuation treatment of large facilities such as power plants, dams, or rail yards:

Power plants are no longer valued solely according to net book depreciated value. All three approaches to value are used.

8. Apportionment method(s) required by statute:

No statutory requirements.

Tangible personal property used in business is assessed either where it is located or where it is being used.

When a railroad is partly within and partly without the state, the excise tax is equal to the same proportion of the gross transportation receipts in the state and determined by dividing the gross receipts over the railway's whole extent (within and without the state) by the total number of miles operated to obtain the average gross receipts per mile, and the gross receipts in the state shall be taken to the average gross receipts per mile multiplied by the number of miles operated in the state -- the net railway operating income within the state is similarly determined.

9. Practical application or apportionment requirements:

To the state - by site.
Among local units - by site.

10. Apportionment treatment of large facilities such as power plants, dams, or rail yards:

Not applicable.

11. Description of assessment appeals system:

Appeals are first made with municipal board of assessment review. Next level of appeal is with State Board of Property Tax Review. Further appeal can be made in the state judiciary.

12. Status of deregulation/restructuring of electric generating and impact on valuation and apportionment methods used:

Full deregulation has occurred. As the regulated utilities have sold off generating stations to outside firms, local assessing units can no longer rely on cost approaches alone without facing assessment challenges.

13. State Government Staffing:

Staff consists of one employee (full-time equivalent basis).

Law Source(s):     Property tax statutes in Title 36 (telecommunication in section 457)

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