Survey of Railroad and Utility Taxation Practices Among the States: 2005 Update
1. Basis for taxation:
Assessed value (AV), defined as the greater of maximum assessed value (MAV) or real market value (RMV). MAV is defined as 103 percent of the property's AV from the prior year plus new property or improvements. RMV is defined as the price a willing buyer and willing seller would agree upon in an open marketplace.
2. Property subject to taxation:
Centrally assessed properties, which include utilities and certain transportation companies, are taxed on the value of real and personal, tangible and intangible property, used or held by a company as owner, occupant, lessee or otherwise for future use. Improvements on cooperative telephone companies are subject to gross receipts taxes in lieu of property taxes. Exempt property includes FCC License value and aircraft, watercraft and railcars undergoing major work.
3. Classification (if applicable):
4. Level of government which determines basis for tax liability - ad valorem property tax:
Oregon Department of Revenue (DOR) certifies centrally assessed values and apportions these values to the county assessors. Properties not currently used in utility operations are valued by the county assessors.
5. Report filing and valuation method(s) required by statute for ad valorem taxation:
Each company must file a report as provided by DOR on or before February 1st for Small Water Transportation Companies, Small Electric Companies and Electric Cooperatives. All other companies must file on or before March 15th. Every company is allowed an extension on a year-by-year basis at the discretion of the appraiser. Certain companies are also required to file PUC and FERC forms along with their annual reports.
No specific valuation methods are outlined in statute. DOR may personally inspect the property under assessment or rely on information provided in the annual report, as well as reports filed to any of the counties, boards, offices or commissions of this state.
6. Practical application of valuation method(s):
Centrally assessed companies are valued using the cost, income or market approaches or a combination of two or more. There is no formal weighting procedure, if more than one approach is used the weighting is done based on the quality and quantity of data used for each approach. The cost approaches that are used are the Historical Cost Less Depreciation (HCLD) and the Replacement Cost New Less Depreciation (RCNLD). Depreciation for the HCLD method is simply book depreciation from the company. Depreciation for RCNLD method is calculated by factors that we have determined are appropriate for each category (if applicable). For the income approach DOR develops industry specific capitalization rates and rates of return (yield capitalization). These rates are based on information from Mergeant, S&P, Value Line and various other sources depending on the industry. The market approach that DOR uses is mostly the Stock and Debt method.
7. Valuation treatment of large facilities such as power plants, dams, or rail yards:
Same as other companies
8. Apportionment method(s) required by statute:
Value is to be allocated to the state by deducting unit value not situated in Oregon, plus all non-system property value within Oregon (to be valued by local assessors). Within the state, DOR will distribute values by rail mileage, wire mileage and pipeline mileage. Values that cannot be distributed over these miles are apportioned by situs, such as values of pumping or generating stations.
9. Practical application or apportionment requirements:
Generally use Western States Association of Tax Administrators (WSATA) handbook guidelines. Allocation to the state is accomplished by using depreciated original cost, net revenue, gross revenue and generating capacity (kwh) for electrical utilities. Apportionment within the state is assigned first by situs-specific system property, then by miles of rail, wire or pipeline adjusted for intensity of use (e.g. ton mileage).
10. Apportionment treatment of large facilities such as power plants, dams, or rail yards:
Same as other companies.
11. Description of assessment appeals system:
First level of review is called "Director's Review" and is within DOR. After the proposed notices of assessment are mailed to companies they have 20 days to file an appeal with the Director of DOR. Appeals are heard by the Director and decisions are made by August 1st of the assessment year. Companies are required to file this type of appeal prior to moving on to other routes of appeal. After the Director's decision companies can file an appeal with the Magistrate Division of the Oregon Tax Court. Decisions from the Magistrate level can be appealed to the Regular Division of the Oregon Tax Court.
12. Status of deregulation/restructuring of electric generating and impact on valuation and apportionment methods used:
The deregulation process has slowed, although it is still being looked at. This is due to the negative experiences in California. Currently, deregulation or the idea of it does not have an impact on our valuation or apportionment methods.<.p>
13. State Government Staffing:
Seven full time utility appraiser/analysts. Five are senior appraisers and two are principal appraisers or team leaders.
Law Source(s): Oregon Revised Statutes Chapter 3088