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

STATE OF OKLAHOMA

1. Basis for taxation:

All taxable property shall be assessed annually as of January 1, at its fair cash value, estimated at the price it would bring at a fair voluntary sale for: The highest and best use for which the property was actually used during the preceding calendar year; or the highest and best use for which the property was last classified for use if not actually used during the preceding year.

2. Property subject to taxation:

All property in this state, whether real or personal, except that which is specifically exempted by law, and except that which is relieved of ad valorem taxation by reason of the payment of an in lieu tax, shall be subject to ad valorem taxation. Fees or taxes levied by the provisions of the Oklahoma Statutes (Title 68, Section 2805) shall be in lieu of ad valorem taxation, whether in lieu of real property taxation, personal property taxation, or both as provided by law on the following properties: aircraft; motor vehicles; vessels; motors; freight cars: other items as expressly provided by law to be subject to fees or certain taxes in lieu of ad valorem taxation. Shares of stock, all interests in property held in trust, promissory notes debentures, accounts and bills receivable, bills, money, cash on hand, and money on deposit are exempt from ad valorem taxation as intangible personalty.

3. Classification (if applicable):

None.

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

The State Board of Equalization relies on the valuations provided to it by the Oklahoma Tax Commission. After certification by the Board, assessed values are provided to the county assessors who enter the respective values to their assessment rolls. Oklahoma Constitution, Article 10, Section 8A specifies that all property assessed by the State Board of Equalization be assessed for ad valorem taxation at the percentage of its fair cash value, estimated at the price it would bring at a fair voluntary sale, at which it was assessed on January 1, 1996. On January 1, 1996 the assessment ratio for public service companies was 22.85%, and for railroads and airlines, which are also centrally valued for the State Board of Equalization by the Oklahoma Tax Commission, the assessment ratio was 11.84%.

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

Unspecified, beyond valuation at fair cash value. Railroads, Airlines and Public Service Companies are required to provide a sworn list of schedules, applicable regulatory and annual reports to stockholders. These relate to the financial status and performance of the entity, state allocation and situs information and property inventories of the reporting company. The State Board of Equalization has the right to inspect these properties.

6. Practical application of valuation method(s):

The Oklahoma Tax Commission utilizes a unit valuation methodology. Income, cost (original) and market indicators are correlated to find the unit or system correlated unit value to which a state allocation factor is applied to find the unit value allocated to Oklahoma, to which a taxable property ratio will be applied which takes into consideration any exempt property, which results in the Oklahoma taxable unit value.

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

Oklahoma Constitution, Article 5 states, "The power of taxation shall never be surrendered, suspended, or contracted away. Taxes shall be uniform upon the same class of subjects". If the facility or facilities are a part of a railroad, airline or public service company being valued centrally by the Oklahoma Tax Commission for the State Board of Equalization, it will be given the same due diligence as any other like property reported.

8. Apportionment method(s) required by statute:

None.

9. Practical application or apportionment requirements:

The Oklahoma Tax Commission utilizes a unit valuation methodology. Value is allocated to the state, depending on industry, utilizing original cost, usage and operational factors. The state value is then apportioned to the proper taxing jurisdiction utilizing original cost.

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

Oklahoma Constitution, Article 5 states, "The power of taxation shall never be surrendered, suspended, or contracted away. Taxes shall be uniform upon the same class of subjects". If the facility or facilities are a part of a railroad, airline or public service company being valued centrally by the Oklahoma Tax Commission for the State Board of Equalization, it will be given the same due diligence as any other like property reported.

11. Description of assessment appeals system:

Railroads, airlines and public service companies have a twenty day protest period beginning the date which the notification letter from the State Board of Equalization utilizes to notify the company of their Oklahoma taxable unit value, the appropriate assessment ratio, and the company's assessed value as certified by the State Board of Equalization. Form 989 is to be timely filed with the Court of Tax Review outlining the year and nature of the protest, fair cash and assessed values in controversy, fair cash and assessed values as certified, fair cash and assessed values as indicated by taxpayer, and the percentage of taxes to be paid under protest.

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

No such restructuring or deregulation has yet taken place.

13. State Government Staffing:

Staff consists of five full-time employees (full-time equivalent basis).

Law Source(s):     Oklahoma Constitution, Article 5, Article 10 Section 6A, Article 10 Section 8A, Article 22. Oklahoma Statutes, Title 68, Sections 2803 through 2805, Section 2808, and Sections 2847 through 2887.

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