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ARIZONA STATE SENATE
Fifty-Fourth Legislature, Second Regular Session
centrally assessed property; valuation; pipelines.
Purpose
Outlines circumstances that require an adjustment to the base value used to determine the full cash value (FCV) of pipeline property.
Background
Statute directs the Arizona Department of Revenue (ADOR) to annually determine the valuation of all pipelines that operate in Arizona and report the locations, descriptions and valuations to the respective county assessor for inclusion on the county tax roll. ADOR determines the FCV of a pipeline by: 1) determining the base value, which is the final FCV of the system plant in service in the preceding valuation year; 2) computing the value change factor; 3) multiplying the base value and value change factor to compute the preliminary system value; 4) computing the allocation factor; and 5) computing the sum of the value of construction work in progress, materials and supplies, noncapitalized leased operating property and gas stored underground, and the preliminary system value and multiplying that by the allocation factor (A.R.S. Title 42, Chapter 14, Article 5).
The Joint Legislative Budget Committee fiscal note for S.B. 1204, which is an identical measure to H. B. 2352, estimated that there would be no direct fiscal impact. While the state and local taxing jurisdictions may be required to issue refunds for property taxes levied on pipeline property after TY 2015, such refunds would not be the result of S.B. 1204 but rather of the final court decision on pending valuation appeals (JLBC fiscal note).
Provisions
1. Requires the base value used to determine the FCV of pipeline property to be adjusted, if one of the following circumstances applies:
a) a final court ruling that the FCV of a pipeline determined using the required statutory valuation formula is more than the market value determined using standard appraisal methods and techniques;
b) an agreement between a pipeline company and ADOR resulting from a pending tax appeal, in which the parties enter into a binding stipulation, approved by a court of competent jurisdiction, to adjust the FCV of the system plant in service as of a specific valuation date; and
c) an agreement between a pipeline company and ADOR to correct an error in the calculation of the FCV of the system plant in service for a pipeline that operates in Arizona.
2. Requires, in the case of a final ruling, the FCV of the system plant determined by the court for the most recent tax year involved in any such tax appeal to be the base value for the subsequent tax year and requires ADOR to adjust all valuations for future tax years if an outlined circumstance occurs.
3. Requires, in the case of a binding stipulation or an agreement to correct an error, ADOR to adjust the base value as set forth in the binding stipulation or agreement.
4. Requires any agreement to adjust the base value to correct an error to be in writing and signed by the Director of ADOR and an officer of the pipeline company before the base value is adjusted.
5. Becomes effective on the general effective date, retroactive to tax years beginning January 1, 2016.
House Action
WM 2/19/20 DPA 6-3-0-1
3rd Read 3/02/20 31-25-4
Prepared by Senate Research
March 9, 2020
MG/gs