BEFORE THE STATE TAX
COMMISSION OF UTAH
_____________________________________
XXXXX
:
Petitioner, )
: FINDINGS
OF FACT,
v. ) CONCLUSIONS OF LAW
: AND FINAL
DECISION
)
PROPERTY TAX
DIVISION OF THE : Appeal No. 86 0185
UTAH STATE TAX
COMMISSION, )
:
Respondent. )
_____________________________________
STATEMENT OF CASE
This
is an appeal to a formal hearing from an informal decision rendered by the Utah
State Tax Commission on XXXXX, which decision found that Respondent complied
with Tax Commission rules and the statutes of the State of Utah and which
denied Petitioner's alternative valuation approach. A formal hearing was held on XXXXX, in the offices of the Utah
State Tax Commission. G. Blaine Davis,
Commissioner, heard the matter for the Commission. XXXXX and XXXXX represented
the Petitioner. XXXXX, Assistant
Attorney General, and XXXXX represented the Respondent.
The
valuation placed on the subject property by Respondent as of XXXXX was
$$$$$. Petitioner stated that the
method used by Respondent does not represent fair market value as of the lien
date. Petitioner stated that in XXXXX,
11,000 barrels were produced while in XXXXX, 3,500 barrels were produced. Petitioner stated that this is a disguised
severance tax.
Respondent
stated that there is no dispute over mathematics but over methodology. Respondent also represented, and-Petitioner
acknowledged, that all properties similar to the subject property have been
uniformly valued by the same methodology for several years. Petitioner raises the issue this year
because oil prices have fallen, and the adopted method determines the January 1
value based upon the average price of oil during past periods. Therefore, in periods of falling prices the
January 1 value will be higher than if the average oil price for entire year
(rather than for prior periods) had been used. Conversely, in periods of rising
prices the value will be lower than if the average oil price for the entire
year had been used. However, as of
January 1, the date for which the determination of value should be made, the
oil prices for the coming year are not known.
FINDINGS OF FACT
Tax
Commission Rule R884-10P-1B requires the taxable value of underground oil and
gas rights to be 400% of the prior years proceeds, less applicable exempt
federal, state, and Indian royalties.
Utah
Code Ann. § 59-1-102(2) (1953) defines
fair market value as "the amount at which property would change hands
between a willing buyer and a willing seller, neither being under any
compulsion to buy or sell and both having reasonable knowledge of the relevant
facts." It is axiomatic that there
is a strong relationship between the value of a property and the income it
produced for the prior periods and the-valuation of many properties is based on
the income for the prior periods.
The
tax assessed on the subject property amounted to $$$$$. Petitioner calculated
that the taxes should be $$$$$, paid this amount and requested that the
Commission determine this sum to be considered as taxes paid in full.
CONCLUSIONS OF LAW
Respondent
properly applied the statutes of the State of Utah and Tax Commission rules to
determine the fair market value of the subject property as of XXXXX.
The
Tax Commission finds no basis on which to reduce the market value. The Tax Commission
does not accept Petitioner's methodology of using actual figures for a two year
payout, less 20% for expenses, plus surface equipment valuation. The Tax Commission does not accept taxes
paid in the amount of $$$$$ to be payment in full for the tax year XXXXX.
The
Tax Commission is required to assess all tangible property within Utah at
"a uniform and equal rate in proportion to its value, to be ascertained as
provided by law." Utah Const. art.
XIII, 2(1). Respondent has assessed all other properties similar to the
subject property in a manner consistent with the methodology used for the
subject property, and therefore, must assess the subject property in the same
manner to comply with the requirements of the Utah Constitution, as well as to
comply with the basic fairness requirements.
FINAL DECISION
Based
on the foregoing, it is the decision of the Utah State Tax Commission that
Petitioner's appeal for the tax year XXXXX be denied.
The
assessment of the subject property by the Property Tax Division of the Utah
State Tax Commission, including the methodology used therein, is hereby
affirmed.
DATED
this 10 day of March, 1988.
BY ORDER OF THE STATE TAX COMMISSION OF UTAH.
R. H. Hansen Roger
O. Tew
Chairman Commissioner
Joe B.
Pacheco G.
Blaine Davis
Commissioner Commissioner