BEFORE THE STATE TAX COMMISSION
OF UTAH
_____________________________________
XXXXX
)
:
Petitioner, )
:
v. ) INFORMAL DECISION
:
)
PROPERTY TAX
DIVISION, : Appeal No. 86 0263
STATE TAX
COMMISSION OF UTAH, )
:
Respondent. )
_____________________________________
STATEMENT OF CASE
An
Informal Hearing was held on December 11, XXXXX. XXXXX, Hearing Officer, heard the matter for the Utah State Tax
Commission. XXXXX, Manager, Ad Valorem
Tax, represented Petitioner. XXXXX
represented the Respondent. At issue is
the XXXXX assessment of Petitioner's XXXXX located in XXXXX County, Utah. XXXXX testified that the XXXXX was purchased
in XXXXX, that production commenced in XXXXX, but that the quality of the
reserves was never what it was represented to be. XXXXX said that the BTU content was inadequate and that the
sulphur was too high for the coal to be used in XXXXX, the coal's intended
market. The XXXXX was closed in XXXXX,
and put up for sale although security was maintained at the mine until the
summer of XXXXX when the portal was closed.
XXXXX indicated that Petitioner does not dispute Respondent's real
property assessment but feels that obsolescence was not properly applied to
improvements and personal property.
Petitioner pointed to the attempted sale of the mine, the reclamation
work, and the physical depreciation of the equipment as evidence of
obsolescence.
XXXXX
testified that when the Petitioner put the mine up for sale in XXXXX, it asked
for several million dollars. However,
there were no buyers. Subsequently,
Petitioner tried to sell the mine to XXXXX, a sister company that was not
interested in buying the mine, and in XXXXX tried to give the mine to
XXXXX. XXXXX would not take the mine
free, because it knew that Petitioner had operated the mine as efficiently as
possible and that the mine was simply uneconomical.
XXXXX
testified that Petitioner filed a reclamation plan with the state and posted an
$$$$$ bond in XXXXX. The cost of
reclamation will total about $$$$$ which is more than the value the state
assigned the property. Because the
reclamation plan had been filed and the bond had been posted prior to the lien
date of January 1, XXXXX, the obsolescence factor should be higher than the
factor applied by the state.
XXXXX
also testified that the equipment had remained idle since XXXXX (the equipment
was sold in XXXXX, after the lien date) and had remained in the exact place on
the premises that it was on when the mine was closed. XXXXX testified that most of the equipment was purchased used and
that used equipment depreciates faster than equipment purchased new. XXXXX indicated that there had been a good
deal of physical deterioration of the property.
XXXXX
recommended on behalf of the Petitioner that the valuation that Petitioner
assigned the personal property in its XXXXX return be allowed to stand. XXXXX said that he applied a 50%
obsolescence factor to the personal property based on a suggestion that XXXXX
had verbally made to Petitioner. XXXXX
suggested that a $0 value be applied to the masonry part of the office
building, and that no more than $$$$$ per square foot be assigned to the metal
part of the building. He indicated that
the building will be allowed to remain on the property and will probably be
used to shelter cattle. XXXXX did not
specifically mention other improvements in the hearing so it is assumed he
wished the values he assigned the other improvements in the XXXXX return to
stand. XXXXX recommended that no change
be made to Respondent's assessment on the land.
XXXXX
presented a memorandum outlining Respondent's position, which is to retain the
value Respondent assigned Petitioner's property in the XXXXX assessment. As support for this position, XXXXX
indicated that fair market value of the property must be the fair market value
as of the lien date, January 1, XXXXX.
XXXXX indicated that reclamation had not begun on the lien date, but
that if actual reclamation work on the land had begun by that date, the work
would affect the value of the property.
XXXXX said that the Tax Commission staff was aware at the time of the
XXXXX assessment that the portal would be closed and the property would be
reclaimed in XXXXX. It is Respondent's
view that reclamation should not affect the valuation of the property until
actual physical work has begun because although a plan has been filed and a
bond posted, the mine may subsequently be reopened.
XXXXX
asserted that methods of valuation should be uniform throughout the state. He said that most coal mines throughout the
state are in a similar situation.
Almost all of the Utah coal mines have shut down either permanently or
temporarily in the last four or five years.
Some of the coal mines have been reclaimed. XXXXX indicated that Respondent is aware of the current problems
in the coal industry.
XXXXX
testified that Respondent allowed a 25% obsolescence factor on the improvements
and a 35% obsolescence factor on the equipment. Obsolescence was based on the
XXXXX study of sales of equipment of Utah coal mines. XXXXX recognizes that the study is old but asserted that he has
seen no better data on which to rely.
He testified that Respondent does not use a straight-line physical
depreciation schedule. Instead, Respondent
uses a guide similar to the NADA guide for used cars. The guide supplies a value for used equipment based on normal
wear and tear. The obsolescence factor
reflects shutdown and further depreciation.
XXXXX
strongly objected to the use of the XXXXX equipment sale study as a base of
determining obsolescence because it is too old. He also objected to XXXXX's comparison of the XXXXX to XXXXX in
XXXXX, asserting that no two mines are alike.
FINDINGS
The
Commission finds that although Petitioner presented ample evidence in support of
applying an economic obsolescence and physical depreciation factor, it did not
sustain its burden of proving its obsolescence factor was more rationally based
than Respondent's. Petitioner's
obsolescence factor was based on the verbal opinion of someone in a related
company. However, Respondent's
obsolescence factors were based on a study, albeit an old, and possibly an
outdated, study. Without more concrete
evidence supporting its position, however, Petitioner's request for relief must
be denied.
DECISION AND ORDER
Based
on the foregoing, it is the decision and order of the Utah State Tax Commission
that Respondent's assessment be sustained.
DATED
this 21 day of January, 1987.
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