Survey of Railroad and Utility Taxation Practices Among the States: 2005 Update
1. Basis for taxation:
Most utilities, including railroads, pay an ad valorem property tax. Telephone companies are state assessed on property, on behalf of local municipalities. Power companies pay an annual license fee, but are subject to local assessment on property not used in their businesses. The property tax on utility property is a State tax; local governments can not tax the business property of a utility.
2. Property subject to taxation:
Taxable: Real property; "operating property" (much of the latter, e.g., railroad cars, would be considered personal property in New York). Intangible property is also taxable.
Exempt: Waste treatment facilities; licensed motor vehicles; computers.
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:
In general the State Department of Revenue is responsible for administering the property tax on utility companies. However, "non-operating" property of utilities such as buildings and related structures is locally assessed and taxed. When all property of a heat, light, or power company fall within a single city, town, or village, it is locally assessed. When an airline uses only one airport, it is locally assessed.
5. Report filing and valuation method(s) required by statute for ad valorem taxation:
Companies must file information reports annually with the Department of Revenue. Neglect or refusal to file a report can result in a fine of $25 and the company can not contest the liability determination made by the Department.
No specific valuation method, other than a requirement that unitary valuation be employed, is specified in statute. The statute does require that the Department use "recognized appraisal methods, which may include, but are not limited to, the capitalized income, cost, and stock and debt indicators of value regardless of the method of accounting for legitimate business purposes used by the taxpayer." (Section 76.07.35)
6. Practical application of valuation method(s):
State prefers to use all methods whenever possible. For large, healthy companies, all three approaches can often be used effectively. However, this is not possible with some companies. Recent valuation of airlines, for example, produced negative net incomes, making the income approach inapplicable. Since many are not publicly traded, the stock/debt approach could not be used. As a result, the (original) cost approach was applied.
7. Valuation treatment of large facilities such as power plants, dams, or rail yards:
Power Plants: State assessed license fees.
Rail Yards: The assessed values of repair yard facilities are remitted back to the local municipalities where they are located by statute.
Dams: Locally assessed, if not operations of power companies.
8. Apportionment method(s) required by statute:
To the state -- Railroads are apportioned to Wisconsin based on a combination of the following ratios: ton miles of revenue freight; cars originated, terminated, or received at connections; tons of revenue freight on line; depreciated cost of property; and unit miles. Air carriers are apportioned based on a combination of the following factors: flight hours; depreciated original cost; transport and transport-related revenue; and tons of revenue passengers and revenue cargo. Natural gas pipeline companies are apportioned based on the gross cost of gas plant and other property. Other pipeline companies are apportioned based on the following factors: gross cost of line of pipe; gross cost of other property; barrel-miles; and number of barrels received and delivered.
Among local units -- Not applicable, since property is not locally taxed.
9. Practical application or apportionment requirements:
Follows statute closely.
10. Apportionment treatment of large facilities such as power plants, dams, or rail yards:
Power Plants: Based on three factors -- original cost, payroll, and sales.
Rail Yards: Apportioned back to municipality where located based on depreciated cost.
11. Description of assessment appeals system:
Appeals of ad valorem tax is through Dane County Circuit Court. Appeals of license fees are through Tax Appeals Commission, then to Circuit Court.
12. Status of deregulation/restructuring of electric generating and impact on valuation and apportionment methods used:
No major changes or impact on valuation or apportionment.
13. State Government Staffing:
Staff consists of four employees (full-time equivalent basis).
Law Source(s): Wisconsin Statutes, Section 76