BEFORE THE STATE TAX COMMISSION OF UTAH
: FINDINGS OF FACT,
v. ) CONCLUSIONS OF LAW
: AND FINAL DECISION
PROPERTY TAX DIVISION OF THE : Appeal No. 86 0185
UTAH STATE TAX COMMISSION, )
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.
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
Joe B. Pacheco G. Blaine Davis