Survey of Railroad and Utility Taxation Practices Among the States: 2005 Update
1. Basis for taxation:
Ad valorem property tax.
2. Property subject to taxation:
Taxable: Real and tangible personal property. Utility companies are subject to gross receipts tax.
Exempt: Construction work in progress, Maryland licensed motor vehicles, fuel stock, and certain software. Machinery and equipment used to generate electricity for sale is 50% exempt.
3. Classification (if applicable):
Real and personal property is assessed at 100%.
4. Level of government which determines basis for tax liability - ad valorem property tax:
Utility and railroad operating property is assessed by the State Department of Assessments and Taxation.
5. Report filing and valuation method(s) required by statute for ad valorem taxation:
Utilities and railroads file an Annual Operating Property Tax Return due April 15. Operating property is assessed using the unit method. Maryland law requires that the Department of Assessment annually value the operating unit "by considering the earning capacity of the operating unit and all other factors relevant to a determination of value." The Department allocates to Maryland the value that is reasonably attributable to the state. The value remaining after deducting exempt property is the assessment of the operating property.
6. Practical application of valuation method(s):
Generally the income and cost approaches are considered. The stock and debt approach is used where applicable. The appraiser considers the quality and quantity of the data available when making a final determination of value.
7. Valuation treatment of large facilities such as power plants, dams, or rail yards:
All operating property is valued and assessed as part of the operating unit. Personal property of non-utility electric generating plants is valued centrally using cost less standard depreciation. Generators and turbines are classified as personal property. Real property of non-utility electric generating plants is valued and assessed by the local state assessment office. Some electric generating plants continue to be assessed as part of the operating unit.
8. Apportionment method(s) required by statute:
If railroad operating property is located permanently in more than one county or municipal corporation, the Department shall apportion the assessment of that operating property among the counties and municipal corporations where the property is located. If railroad operating property is not located permanently in a county, the Department shall apportion the assessment of that property on the basis of the ratio of the all track mileage, excluding trackage rights, of the railroad operated in each county to the total of all track mileage operated in the State.
Utility operating property is apportioned based on the situs of the property.
9. Practical application or apportionment requirements:
See number 8.
10. Apportionment treatment of large facilities such as power plants, dams, or rail yards:
Utility operating property is apportioned based on the situs of the property. Non-utility real property is assessed by the local state assessment office. Non-utility personal property is apportioned to the county in which the property is located.
11. Description of assessment appeals system:
The taxpayer may appeal the Notice of Assessment to the Department within 45 days of the date of the Notice. When a determination is made on the Department level appeal, a Final Notice of Assessment is issued. The taxpayer may appeal the Final Notice directly to the Maryland Tax Court within 30 days of the date of the Final Notice.
12. Status of deregulation/restructuring of electric generating and impact on valuation and apportionment methods used:
In 1999, the Maryland General Assembly passed legislation to provide for the restructuring of the electric utility industry. As part of the legislation, HB 366 the Electric and Gas Utility Tax Reform Act was passed. Electric rates were reduced frozen for a specified period of time. Utility companies were required to prepare transition plans and to implement final agreements that had been approved by the Maryland Public Service Commission. Customers were allowed to choose their electricity provider beginning July 1, 2000. Electric utility companies continue to provide delivery service. The legislation also provides for Standard Offer Service (SOS) for all customers for specified periods of time that extend through 2008. The utility companies and the Maryland Public Service Commission are currently negotiating the extension of market-based Standard Offer Service.
Electric generating plants that were sold or transferred by the utility company are reclassified as non-utility generators. Real property of non-utility generating plants is assessed by the local state assessment office similar to other commercial and industrial property. Personal property of electric generating plants is assessed centrally by the Utility Valuation Section using original cost less standard depreciation. All non-utility electric generators are required to file an Annual Property tax Return (Form 17-G). Machinery and equipment used to generate electricity for sale is subject to a 50% exemption. This exemption applies to utility as well as non-utility electric generating machinery and equipment. As new electric generating plans are built they are classified as non-utility generators.
13. State Government Staffing:
Staff consists of three full time and one part time employees.
Law Source(s): Tax Property Article 8-108 and 8-109