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ARIZONA STATE SENATE
Fifty-Fifth Legislature, First Regular Session
centrally assessed property; valuation; pipelines.
Purpose
Outlines circumstances that require the Arizona Department of Revenue (ADOR) to adjust the base value used to determine the full cash value (FCV) of pipeline property.
Background
Statute directs 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).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
1. Requires ADOR to adjust the base value used to determine the FCV of pipeline property to accurately assess ongoing business operations, income and property.
2. Determines the circumstances that require adjustments to the base value are as follows:
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 the court, 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.
3. Requires, in the case of a final court ruling, the FCV of the system plant determined by the court for the most recent tax year involved in any such tax appeal is the base value for the subsequent tax year and requires ADOR to adjust all valuations for future tax years if an outlined circumstance occurs.
4. 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.
5. Requires any agreement to adjust the base value to correct an error in the calculation of the FCV to be in writing and signed by the Director of ADOR and an officer of the pipeline company before the base value is adjusted.
6. Becomes effective on the general effective date, retroactive to tax years beginning January 1, 2016.
Prepared by Senate Research
January 25, 2021
MG/gs