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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. Utilities also pay a State gross receipts tax. Transportation companies are exempt from the gross receipts tax provided they have paid the ad valorem tax.

2. Property subject to taxation:

All real property, plus tangible personal property. Real property is taxable for school purposes only, and personal property for county purposes.

3. Classification (if applicable):

None. All property is supposed to be assessed at 100 percent in Texas. The State Comptroller's Office audits county assessing units to insure that this standard is complied with.

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

Railroads and other utilities are locally assessed in Texas. In most of the State, the work is done under contract by private appraisal firms. The State Comptroller's Office apportions rolling stock of railroads to counties.

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

Companies are required to supply inventory information to the Chief Appraiser in each county and to the comptroller's office. An appraiser must consider the three approaches to value.

6. Practical application of valuation method(s):

No information available. Methodology varies among the 254 county assessing units. If the cost approach is utilized, it is original cost.

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

Facilities are valued by local appraisal districts (counties), and as such are valued as indicated in #6.

8. Apportionment method(s) required by statute:

Intrastate apportionment of railroad rolling stock must be based on the mileage of the railroad in each county. There are no specific requirements for apportionment of other property.

9. Practical application or apportionment requirements:

Apportionment of railroad rolling stock is based on miles of track in Texas vs. system miles, and miles of track within each taxing unit. Apportionment of pipeline companies to Texas is based on a combination of original cost, net book value, and revenue considerations. Apportionment of pipeline companies to taxing units is based on miles of pipeline of a particular type.

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

Not applicable -- unitary valuation is not used in Texas.

11. Description of assessment appeals system:

Railroads and utilities may appeal assessments to an administrative law judge. Central appraisal districts and independent school districts may appeal levels of assessment determined in ratio study, which may use railroad and utility assessed values.

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

Texas has undergone deregulation and restructuring, as generating plants have been divested from transmission and delivery. Merchant power plants can no longer be valued by appraisal districts as units.

13. State Government Staffing:

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

Law Source(s):     Texas Constitution, Art. VIII, Title 32, Ch. 10 - Public Utilities; Natural Resources Code, Ch. 111; Title 1, Property Tax Code; Title 2, State Tax Code.

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