Survey of Railroad and Utility Taxation Practices Among the States: 2005 Update
1. Basis for taxation:
For railroads and public service companies, the Property Tax Administrator shall ascertain the total taxable value, including franchise, and the net book value of tangible personalty property. Market value is the basis for the real and franchise portion of the taxable value. The net book value of tangible personal property is the Nebraska adjusted basis multiplied by the appropriate Nebraska depreciation factor.
2. Property subject to taxation:
Railroads and Public Services Companies -- real, franchise, and net book value of tangible personalty property.
Carlines -- Net book value of tangible personal property, i.e. rail cars, as determined per Nebraska statutes.
Air carriers -- Net book value of tangible personal property, i.e. flight equipment, as determined by Nebraska statutes.
Exempt -- Tangible personal property, which is not depreciable excluding motor vehicles, business inventory, intangible personal property.
3. Classification (if applicable):
By state constitution, all property is to be valued uniformly and proportionately within its respective class. Real property, personal property and agricultural land are separate classes. Property protected by federal law from discriminatory state or local taxation, i.e., railroads and carlines, is a separate class. By statute, all real property is assessed at or near 100% of actual (market) value. Personal property is assessed at 100% of its taxable net book value.
4. Level of government which determines basis for tax liability - ad valorem property tax:
For railroads and public service companies, the Department of Property Assessment and Taxation is responsible for determining the allocated taxable value. The Tax Equalization and Review Commission is responsible for equalizing only the real portion of these companies' values with other real property in the state. The Property Tax Administrator may adjust the railroads' taxable net book personal property to the level of other taxable commercial and industrial personal property in the state. The final allocated taxable value, as equalized or adjusted, is certified to the county assessors and placed on the local tax roll. Assessors value any non-operating property locally.
For carlines and air carriers, the Department Property Assessment and Taxation is responsible for determining the allocated net book personal property. The Property Tax Administrator may adjust the carlines' taxable net book personal values to the level of other taxable commercial and personal property value in the state. Carlines and air carriers are taxed using the state's average tax rate. Carline taxes are then distributed to the counties' taxing subdivision proportionately to the railroad taxes levied. Air carrier taxes are distributed to counties to the credit of county general fund, proportionate to the amount the county's property taxes levied compared to the total taxes levied in the state.
5. Report filing and valuation method(s) required by statute for ad valorem taxation:
Railroads and public service companies are required to annually file all information necessary for the valuation of the company property (e.g. physical inventory and finances -- income statement, balance sheet, debt and stock information, operating statistics for system versus state, etc.).
Carlines and air carriers are required to annually file information according to prescribed forms, deemed necessary to determine the net book value of their personal property.
Generally, the statutes indicate responsibility for determining taxable value and the regulations explain the procedure in detail.
6. Practical application of valuation method(s):
Railroad and utility companies are valued by the unit method, using all available approaches to value (income, cost, stock and debt, equity residual, etc.). No specific weight is given to each approach. The income approach, when possible, is viewed as most applicable to these types of properties in the correlation of the final value.
Actual value of tangible personal properly is removed from the allocated unit value and a net book value, determined per Nebraska statues, is added back. The ratio used to remove actual value of personal property from the allocated unit value is gross investment of personal versus total for utilities and net book investment of personal versus total for railroads.
Net book personal property value is determined by multiplying the Nebraska adjusted basis by the appropriate depreciation factor for the recovery period. The Nebraska adjusted basis is general and the original cost of the item, the depreciation factor is based on date placed in service, and the recovery period is the same as the federal Modified Accelerated Costs System (MACRS). The depreciation factors are statutory; 150 percent declining balance, switching to straight line, half-year convention.
7. Valuation treatment of large facilities such as power plants, dams, or rail yards:
Power Plants -- Nebraska is 100% public power; Power plants are not subject to an ad valorem tax. They pay an "in-lieu of tax". Every public power district that was organized to provide electricity and paid an in-lieu of tax in 1957 continues to pay annually that same amount of property taxes assessed in 1957, so long as it owns said property. Any public power district that sells electricity within an incorporated city or village shall pay an in lieu of tax based on 5% of the gross retail sales collected from within the city or village, less the amount of the 1957 in lieu of tax, if applicable, that was allocated to the city or village.
Dams -- if privately owned, such property would be subject to local assessment.
Rail yards -- all rail yards owned and controlled by operating railroad companies would be included in the railroad unit value appraisal. Other rail yards, e.g. private rail car repair facilities owned by someone other than an operating railroad company, would be subject to local assessment by the assessors.
8. Apportionment method(s) required by statute:
Railroads -- the first five percent of the taxable value is distributed to the taxing subdivisions where the railroad company has investment in general office buildings or machine repair facilities proportionate to company's total investment in these facilities within the state.
The balance of the railroad's taxable value is distributed to the taxing subdivisions based on a formula in which 50 percent of valuation is based on miles of main track and side track, and 50 percent is based on the density factor of main track and side track. The value per mile of side track shall equal the value of the line divided by the following quantity: the number of miles of sidetrack plus two times the number of miles of main track. The value per mile of main track shall equal twice the value per mile of side track as computed above.
Taxable value of public utilities is apportioned to all taxing subdivisions in proportion to the ratio of the original cost of all operating real and tangible personal property of the company having a situs in that taxing subdivision to the original cost of all real and tangible personal property of that company having a situs in the state.
For carlines and aircarrier see #4 above for distribution of taxes, per statute.
9. Practical application or apportionment requirements:
To the state -- Allocation of railroad, utility, or carline value to the state is not specified by statute. For railroads and utilities a combination of various property, income, and use factors per type of industry are used, as the Property Tax Administrator deems appropriate. For carlines, Nebraska miles versus system miles is typically used along with other information submitted by the company such as speed studies.
Allocation of aircarrier taxable value is specified by statute to be the average of Nebraska versus system (1) arrivals/departures, (2) revenue tons, and (3) originating revenues. The aircarrier may petition for, or the Tax Commissioner may require a different allocation to achieve an equitable allocated taxable value.
Among local units -- Apportionment among the counties see item #8 for railroad and utility value; item #4 for carline and aircarrier taxes.
10. Apportionment treatment of large facilities such as power plants, dams, or rail yards:
Power plants -- The 1957 in-lieu of tax receipts are distributed based upon the distribution that was in place in 1957. The in-lieu of tax receipts for the 5% gross sales shall be distributed to the city or village from where the revenues were collected, the school district located in that city or village and the county. The distribution is based on the proportionate share the individual levies in the preceding year bore to the total of such levies.
Dams -- based on the political taxing subdivisions in which the property has situs.
Rail yards -- Rail yards are part of the operating railroad assessments; see #7 and #8. Any locally assessed rail yards would be based on political subdivisions in which the property has situs.
11. Description of assessment appeals system:
Railroads and public utilities -- Companies may file a protest with the Property Tax Administrator if they feel aggrieved as to the valuation or method of allocation established. The Property Tax Administrator shall act upon the appeal and shall issue an order. The Property Tax Administrator's order may be appealed to the Tax Equalization and Review Commission. The Tax Equalization and Review Commission shall act upon the appeal and shall issue an order. Any order of the Tax Equalization and Review Commission can be appealed to the Court of Appeals.
Carlines and air carriers -- Companies may file a protest with the Property Tax Administrator if they feel aggrieved as to the valuation or method of allocation established. The Property Tax Administrator shall act upon the appeal and issue an order. The Property Tax Administrator's order may be appealed to the Tax Equalization and Review Commission. Any order of the Tax Equalization and Review Commission can be appealed to the Court of Appeals.
12. Status of deregulation/restructuring of electric generating and impact on valuation and apportionment methods used:
There has been no impact. Nebraska is 100% public power.
13. State Government Staffing:
Staff consists of three employees (full-time equivalent basis).
Law Source(s): Nebraska Statutes Reissued 1996, 2002 Cumulative Supp., and Chapter 77 Revenue and Taxation.
Statutes: Section 77-600's Railroads and Carlines, Section 77-800's Public Service Companies, Section 77-1244-1250 Air carriers
Title 350, Regulation Chapter 30: Property Valued by the State