BEFORE THE STATE TAX
COMMISSION OF UTAH
_____________________________________
XXXXX
Petitioner, )
:
v. ) INFORMAL DECISION
:
)
PROPERTY TAX
DIVISION OF THE : Appeal No. 86 0261
STATE TAX
COMMISSION OF UTAH, )
:
Respondent. )
_____________________________________
STATEMENT OF CASE
This
is an appeal to the Utah State Tax Commission from a XXXXX tax assessment made
by the Property Tax Division of the Utah State Tax Commission (Respondent).
An
Informal Hearing was held on July 1, XXXXX in the offices of the Utah State Tax
Commission. James E. Harward, Hearing Officer,
heard the matter for the Commission.
XXXXX represented the Petitioner.
XXXXX and XXXXX represented the Respondent.
The
subject property consists of improvements and equipment on a shale oil site
located in XXXXX County. The site was
established in XXXXX pursuant to a contract with the Department of Energy to
carry out an oil shale research and development program. The contract was completed on XXXXX. Prior to the expiration of the contract,
Petitioner organized a joint venture with XXXXX, and submitted the proposal to
the XXXXX for price and loan guarantees.
On XXXXX, Congress abolished the XXXXX.
Subsequently, XXXXX withdrew from the joint venture.
Petitioner
asserts that since the demise of the XXXXX, facilities at the shale oil site
have no further value, except as salvage.
Petitioner submitted an itemized list of the salvageable equipment with
its estimated current sale value and asserted that the remainder of the
facilities should have a 100% obsolescence factor.
Respondent
agreed that the oil shale industry is depressed, but asserted that most of
Petitioner's equipment is in fairly good operating condition and that there is
a use for the property. Respondent used
an obsolescence factor of 42%, i.e., there was a 42% reduction over the XXXXX
valuation. This obsolescence factor was
derived from studies of coal companies in the 1980s.
FINDINGS
1. Petitioner had the burden of proof to
establish that the XXXXX assessed value of the subject property was other than
the amount assessed by the Respondent.
Petitioner presented no evidence other than the itemized list of
salvageable equipment. This list
carries little weight since it was compiled by Petitioner and is not
corroborated by figures from independent estimators or by evidence such as
sales of similar equipment at other shale oil sites. Petitioner's assertion
that the remainder of the facilities should have a 100% obsolescence factor is
also unsupported. Therefore,
Petitioner's position is unacceptable.
Respondent's
reliance on the coal industry model is not entirely accurate, but it is helpful
since there has been no data compiled for the oil shale industry and since
obsolescence due to a market downturn has been a factor in its assessment of
coal companies. The coal industry experienced
a downturn in the 1980s and obsolescence was applied in the assessment of coal
companies. The obsolescence factor for oil shale companies must be greater than
that for coal companies since the oil shale industry has completely collapsed
while the coal industry has not.
Respondent adjusted for this difference by increasing the obsolescence
factor from that of the coal company model, which used a 25% obsolescence on
improvements and a 35% obsolescence on equipment. The obsolescence factor on the subject property is 42%.
DECISION AND ORDER
Therefore,
it is the Decision of the Utah State Tax Commission that the Petition of XXXXX
be denied.
The
XXXXX assessment of XXXXX is sustained.
DATED
this 3 day of September, 1986.
BY ORDER OF THE STATE TAX COMMISSION OF UTAH.
R. H. Hansen Roger
O. Tew
Chairman Commissioner
Joe B.
Pacheco
Commissioner