Survey of Railroad and Utility Taxation Practices Among the States: 2005 Update
1. Basis for taxation:
Railroads pay a one percent ad valorem property tax to the State, which returns half of the revenue to towns in which the railroads are located. Other transportation companies pay an ad valorem property tax of 1 1/4 percent to the State. Electricity utility property, including generating facilities, are subject to an ad valorem property tax to the state (under Act 60), as well as for local ad valorem taxation.
In lieu of ad valorem taxation at either the state or local level, telecommunications property is subject to, by owners' choice, a state gross receipts tax (ranging from 2.5 to 5.25 percent of gross operating revenues), or a state tax of 2.37 percent of net book value (the latter option has to date been preferred).
2. Property subject to taxation:
All real and tangible personal property used in conducting utility's business, except for telecommunications equipment. Intangibles are exempt.
3. Classification (if applicable):
All property is assessed at 100 percent of market value.
4. Level of government which determines basis for tax liability - ad valorem property tax:
Railroads are valued as systems by the Vermont Property Valuation and Review Division of the Department of Taxes. Responsibility for valuation of other utilities except telecommunications equipment and one electric generation facility rests at the local level. In practice it is often done with the assistance of the Division, with advisory appraisals.
5. Report filing and valuation method(s) required by statute for ad valorem taxation:
Railroads must file reports annually with the Property Valuation and Review Division. Other utilities also file similar reports with the Division. There are no statutory requirements pertaining to specific valuation methodology to establish market value.
6. Practical application of valuation method(s):
The method currently used is depreciated cost. An obsolescence deduction is calculated from a set of eight factors computed by comparing financial performance characteristics of Vermont railroads with performance of national 'blue chip" railroads.
Utility appraisals made by the Property Valuation and Review Division (advisory) are cost-based. The Handy-Whitman manual is used to develop original costs in conjunction with the Iowa depreciation method, for valuing transmission non-telecommunications equipment. Distribution equipment (at least through state advisory appraisals) is valued more by average replacement cost less depreciation for physical and economic obsolescence, as well as for population density of the municipality.
7. Valuation treatment of large facilities such as power plants, dams, or rail yards:
Power plants (with one exception) are valued locally, as well as dams. Plants and dams as part of hydroelectric generating facilities are valued by the income approach on a kilowatt-hour basis (method used in state advisory appraisals).
8. Apportionment method(s) required by statute:
Railroads: No specific method is required for interstate allocation of railroad property. However, the Commissioner "may take into consideration the value of the entire railroad system..... the mileage thereof both within and without this state, its engines, cars, and other equipment and such other information, facts and circumstances as will aid him therein."
Other Transportation Companies: Allocation to Vermont is based on miles traveled in Vermont to miles traveled in the system.
Other Utilities: Not applicable.
9. Practical application or apportionment requirements:
Railroads: Apportionment is based on miles of track. Buildings are assigned to the taxing units they are located in.
Other Utilities: Local governments are individually responsible for valuation of the portion of the utility's property within their jurisdictions. Their valuations are based on number of miles of pipeline, wires, etc., as determined by cost-based methods, plus land values. Apportionment, as practiced in unit-valuation methodology, is not relevant in the Vermont system.
10. Apportionment treatment of large facilities such as power plants, dams, or rail yards:
The values of state-assessed power plants and dams are allocated by situs. By contrast, the values of the rail yards are distributed along the respective operating rail systems.
11. Description of assessment appeals system:
Appeals on local property assessments are first made at local boards, with further appeal to local boards of civil authority, then, if necessary to either superior court or to state administrative appeals (preferred). Values set by the state can be made to the state administrative appellate board.
12. Status of deregulation/restructuring of electric generating and impact on valuation and apportionment methods used:
Deregulation and restructuring has made little headway in Vermont. The state has recommended the income approach in the valuation of generating facilities, but it cannot be attributed to restructuring activity.
13. State Government Staffing:
Staff consists of three employees (full-time equivalent basis).
Law Source(s): Vermont Tax law, Title 5, Aeronautics and Surface Transp.
Generally; Title 30, Public Service; Title 32, Taxation and Finance.