BEFORE THE STATE TAX COMMISSION OF UTAH
v. ) INFORMAL DECISION
PROPERTY TAX DIVISION OF THE ) Appeal No. 87-0567
UTAH STATE TAX COMMISSION, )
STATEMENT OF CASE
This is an appeal to the Utah State Tax Commission concerning the valuation of the subject property as of XXXXX. An informal hearing was held on XXXXX in the offices of the Utah State Tax Commission. David J. Angerhofer, Hearing Officer, heard the matter for the Tax Commission. XXXXX represented the Petitioner. XXXXX, Assistant Attorney General, represented the Respondent. The subject property consists of two producing oil wells in XXXXX along with related personal property. Both wells are in the XXXXX. Petitioner asserted that the assessed value for the personal property and for the oil and gas value as determined by Respondent exceeds market value. Petitioner referred to Utah Code Ann. 59-3-1 (1953) for the definition of fair market value:"'value' and 'full cash value' mean the amount at which the property would be taken in payment of a just debt due from a solvent debtor." Petitioner presented a list of equipment for each well and a current value assigned to each item of personal property. The Petitioner valued each item of personal property at the price at which he could reasonably expect to sell it on the open market. An item such as a submersible pump was assigned no value because it would be destroyed when removed. Petitioner estimated the oil and gas value using a discounted cash flow analysis to determine a present worth of the minerals-in-place. For the well described as RU-15-1AE, Petitioner estimated the value of the personal property to be $$$$$ and the value of the minerals to be $$$$$ for a total value of $$$$$. For the well described as RU-18-1AE, Petitioner estimated the personal property to be $$$$$ and the mineral value to be $$$$$ for a total of $$$$$. The total value of both wells as of the lien date is $$$$$, rounded to $$$$$. This is the value which should be agreed upon between a willing buyer and a willing seller as of the lien date. Petitioner noted that the subject property actually did sell in XXXXX for $$$$$. Market conditions have not changed between XXXXX. Respondent valued the subject property at $$$$$ as of XXXXX. Respondent valued the personal property as a going concern and it determined the taxable value of the underground oil and gas rights to be 400% of the preceding year's proceeds less applicable exempt federal, state, and Indian royalties and windfall profits tax. Respondent stated that it has valued the subject property in accordance with Tax Commission Rule R884-10P-1 for the pump, heater-treater, valves and gauges. Respondent used the XXXXX flat well rates for XXXXX pumping wells to value the oil and gas equipment. Respondent used the XXXXX Table of Percent of Remaining Value from Original Cost, column 8. The latter table was for property not included in the flatwell rate table. Respondent stated that Petitioner's discounted cash flow analysis is unreliable. Petitioner has done two discounted cash flow analyses for this appeal and they differ by $$$$$.
Petitioner does not dispute the figures which Respondent used in Respondent's estimation of value. Instead, Petitioner objects to the methodology. Respondent has properly valued the subject property using Tax Commission R884-10P-1 and has valued the subject property consistently with other similar property throughout the state of Utah. The Tax Commission does not accept Petitioner's discounted cash flow analysis on the basis that it is too unreliable given the variables involved and the type of property which is being valued. The Tax Commission also finds that the personal property must be valued as a going concern and not as individual items of equipment to be removed from the site.
DECISION AND ORDER
Based on the foregoing, it is the Decision and Order of the Utah State Tax Commission that Petitioner's appeal of the taxable value of the subject property as of XXXXX be denied. The assessment by the Property Tax Division of the Utah State Tax Commission is hereby affirmed.
DATED this 23 day of February, 1988.
BY ORDER OF THE STATE TAX COMMISSION OF UTAH.
R. H. Hansen Roger O. Tew
Joe B. Pacheco G. Blaine Davis