Some big businesses in Utah think they're taxed unfairly by the State Tax Commission. They look for equity (and probably lower taxes).
And the whole mess of how railroads, telecommunication companies and utilities pay property taxes will likely fall into the laps of legislators in a couple of months when the general session convenes.Some believe the so-called centrally assessed businesses have bypassed Truth in Taxation requirements (see accompanying story) and so haven't paid their fair share of taxes. But that wasn't the issue before the Tax Review Commission Friday.
The Review Commission is trying to find a solution to the mess the centrally assessed property system is in. Currently, big, powerful taxpayers routinely appeal their property tax assessments: first, to the Tax Commission, then to court.
A July special legislative session dealt with part of the problem. Or more aptly worded, put off part of the problem when lawmakers avoided a homeowner property-tax increase in 1997 by repealing a new law that would have required the escrowing of disputed centrally assessed property taxes. Those taxes will flow to counties, cities and schools this year.
But if the problem isn't fixed, the taxing entities could end up refunding disputed taxes in a couple of years.
Friday, several centrally assessed property taxpayers hinted that Tax Commission staffers had fudged taxation formulas to bring in a set level of taxes, even after the Tax Commission or courts ordered one part of the centrally assessed taxpayers' formulas reduced.
That charge was heatedly denied by Brent Eyre, assistant director of the Tax Commission's property tax division.
Beyond that argument, PacifiCorp and Questar officials say the Tax Commission should stop using stock prices as part of its property tax assessments.
Centrally assessed firms are mines, utilities and other businesses whose assets cross county lines. Because a railroad is sold rarely, it's tough to find "fair market value" by looking at comparable sales, as is the case with residential property assessments.
So, Utah uses a method of looking at the big businesses' assets, including profitability and stock prices.
"We say don't use stock prices of a whole firm to value tangible property," said Robert Strong, property and revenue tax manager for PacifiCorp, the parent company of Utah Power.
The stock price has little or nothing to do with the fair market value of a firm's property. And fair market value is the standard defined in the Utah Constitution, he added.
Brent Gardner, executive director of the Utah Association of Counties, partly came to the Tax Commission's defense. He said the commission's methodology is sound; many states use it. "The question is one of judgment" in putting together all varieties of information and best-guess estimates of a big firm's assets, Gardner said.
Gardner added, however, that at the very least the Tax Commission needs more resources in assessing big, multicounty businesses. There isn't enough money to call in expert witnesses when a big firm appeals its taxes to the Tax Commission or in court.
Gardner said he fears the lack of resources results in a kind of plea bargain, where the Tax Commission gives in to appeals and counties risk losing millions of dollars in disputed taxes.
Rep. Ray Short, R-Holladay, co-chairman of the Legislature's Revenue and Taxation Committee, put lawmakers' concerns succinctly: "Government needs money. You (big businesses) have disagreed forever over how centrally assessed values are set. I don't care. Government wants its money. Is there a better way (to tax centrally assessed firms) to get it? We've argued over this for the seven years I've been up here (in the Legislature)."
But the big business tax experts gave few alternatives. They just don't like the way it's done now. Tax Review Commission Chairman Gary Cornia said the group will continue studying the problem, hopefully coming up with some alternatives for the 1998 Legislature.