Utah State Tax Commission decision could mean millions for the county
December 24, 2015
A recent ruling by the Utah State Tax Commission concerning the assessment of pipelines could open the door for Summit County to recoup millions of dollars in uncollected property taxes.
In the case of Summit Water Distribution Company vs. the Summit County Board of Equalization, the Utah State Tax Commission ruled that pipelines are not personal property, according to Summit County Chief Civil Deputy Attorney Dave Thomas. The Tax Commission’s November decision found that the water pipeline owned and operated by Summit Water Distribution Company is real property.
"If they are not considered personal property that means that they cannot be depreciated. All the pipelines in the state have always been historically taxed as personal property by the Tax Commission," Thomas said. "The Tax Commission’s decision in our case has fairly sweeping changes to the way pipelines are valued for purposes of property tax because if they are not personal property and they are instead real property then all of the value that has been lost over time should have been taxed but wasn’t."
The majority of pipelines, including gas and oil, are centrally assessed by the Property Tax Division of the Utah State Tax Commission rather than local assessors because most of the pipelines cross multiple counties and jurisdictions. The pipelines have always been assessed as personal property, Thomas said, before adding that now "all centrally assessed pipelines throughout the state should be subject to a certain amount of recapture."
"The tax code says you can go back five years and the Tax Commission should go back five years and recoup the taxes that should have been paid on centrally assessed oil and gas pipelines," Thomas said. "Obviously that would be a big deal because you are probably talking about millions of dollars even for Summit County, which doesn’t have as many pipelines as some other jurisdictions."
Any reimbursement would be distributed to the various entities that benefit from property taxes.
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"It certainly will mean increased revenue for the school district going forward and it could mean reduced property taxes for homeowners due to a tax shift with pipeline companies, but this is all contingent on the Tax Commission following through with what we believe they are legally bound to do, which is, to reassess those pipelines," Thomas said. "At this point in time the question we have for the Tax Commission is, ‘how do you intend to implement your November decision?’ So far the Tax Commission has not responded to us."
Summit County and the Utah Association of Counties are concerned about how the Tax Commission is going to proceed because it is "probably going to be a very political thing, especially any reaction from the legislature to the recent decision," Thomas said.
"I think we are just looking to see what the Tax Commission is going to do as a result of the decision and how they are going to move forward. We want to make sure moving forward they actually implement the decision that was made," Thomas said.
Steve Martin, Summit County assessor, referred to the implications of the ruling as a "windfall," before adding "that’s a lot of money."
"All these miles of pipeline suddenly became real property that over the years have always been assessed as personal property," Martin said. "We are talking about millions and millions of dollars worth of value that has been depreciated that we can now go back and recapture.
"However, if that happens then all the oil companies will sue the Tax Commission or go to the legislature and make sure that pipelines are personal property," Martin added.
Kim Carson, chair of the County Council, said it is too early to tell what the implications of the ruling would mean for Summit County.
Several messages that were left with representatives of the Utah State Tax Commission were unreturned.
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