BEFORE THE STATE TAX COMMISSION
OF UTAH
_____________________________________
XXXXX
Petitioner, )
v. ) INFORMAL DECISION
PROPERTY TAX
DIVISION OF THE ) Appeal No. 87-0567
UTAH STATE TAX
COMMISSION, )
Respondent. )
_____________________________________
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 $$$$$ and the value of the minerals to be $$$$$ for a total value of
$$$$$. For the well described as
RU-18-1AE, Petitioner estimated the personal property to be $$$$$ and the
mineral value to be $$$$$ for a total of $$$$$. The total value of both wells as of the lien date is $$$$$,
rounded to $$$$$. This is the value
which should be agreed upon between a willing buyer and a willing seller as of
the lien date. Petitioner noted that the subject property actually did sell in
XXXXX for $$$$$. Market conditions have
not changed between XXXXX. Respondent
valued the subject property at $$$$$ as of XXXXX. Respondent valued the personal property as a going concern and it
determined the taxable value of the underground oil and gas rights to be 400%
of the preceding year's proceeds less applicable exempt federal, state, and
Indian royalties and windfall profits tax.
Respondent stated that it has valued the subject property in accordance
with Tax Commission Rule R884-10P-1 for the pump, heater-treater, valves and
gauges. Respondent used the XXXXX flat
well rates for XXXXX pumping wells to value the oil and gas equipment.
Respondent used the XXXXX Table of Percent of Remaining Value from Original
Cost, column 8. The latter table was
for property not included in the flatwell rate table. Respondent stated that Petitioner's discounted cash flow analysis
is unreliable. Petitioner has done two
discounted cash flow analyses for this appeal and they differ by $$$$$.
FINDINGS
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
Chairman Commissioner
Joe B.
Pacheco G.
Blaine Davis
Commissioner Commissioner