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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:

All utilities are subject to an ad valorem property tax. A gross receipts tax is levied on water companies at two percent. Electric and gas utilities pay a net corporate income tax and consumption tax. Telecommunications companies pay either a minimum tax or a net corporate income tax. Special regulatory revenue taxes are also imposed on the utility and railroad companies to pay for the cost of regulation.

2. Property subject to taxation:

Taxable:     Real property and tangible personal property subject to local property taxes; railroad rolling stock subject to special state tax but exempt from local tax (this state tax is actually distributed to localities by the state)

Exempt:     Intangibles; railroad rolling stock is exempt from local tax

3. Classification (if applicable):

The State Corporation Commission assesses all real and tangible personal property. All state-assessed property is taxed at the real estate rate with the exception of automobiles and trucks, which carries the personal property rate.

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

The State Department of Taxation sets the assessments of railroads and pipeline companies and the State Corporation Commission sets assessments for other utilities. These assessments are used to levy local property taxes.

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

Companies are required to file information returns annually with the relevant State government departments. No specific method of valuation is required in statute.

6. Practical application of valuation method(s):

Virginia courts have effectively banned use of the unit approach to valuation of utility and railroad companies in deciding a case brought by a municipality which believed that the resulting values were too low. Valuation has thus reverted to summation of original cost less depreciation for the non-land inventory within each municipality and application of assessments comparable to similar nearby land for the land component. This non-unit, cost based approach was the one traditionally used in Virginia before the Department of Taxation introduced the unit approach.

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

Large facilities such as power plants are currently valued using original cost less depreciation.

8. Apportionment method(s) required by statute:

There are no statutory requirements relating to apportionment in general. It is not really an issue since the unitary valuation has been banned by the courts.

The state-collected rolling stock tax is apportioned to municipalities based on a statutory formula: half is allocated based on the municipality's share of statewide track value and half is allocated based on share of track mileage.

9. Practical application or apportionment requirements:

Since the courts have banned the unitary valuation approach, apportionment has been according to the actual location of the property. The location in each taxing unit is summed and valued separately from that located in other taxing units.

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

Not applicable.

11. Description of assessment appeals system:

Both property owners and local taxing jurisdictions have the right of administrative appeal of state-assessed values within 90 days of their certification. The State Corporation Commission hears such appeals by administrative judges, and further appeal may be made to the State Supreme Court. Property owners of pipelines or railroads, and affected local taxing jurisdictions may also seek administrative appeal of values established by the Department of Taxation. If dissatisfied with administrative ruling, aggrieved parties have three years to appeal in Richmond circuit court.

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

Virginia continues with its implementation of the Restructuring Act. Approximately 2.9 million electricity customers now have the right to choose an alternative supplier of electricity. Electric deregulation has caused some electric suppliers' assessments to increase due to the difference in the way the assessments are computed. Previously when the electric suppliers were assessed locally, the assessment methods varied by locality.

13. State Government Staffing:

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

Law Source(s):     Virginia Constitution, Article X; Title 58.1, Va. Code, Chapter 26

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