BEFORE THE UTAH STATE TAX
COMMISSION
_____________________________________
XXXXX
Petitioner, : FINDINGS OF FACT,
: CONCLUSIONS
OF LAW
: AND FINAL
DECISION
PROPERTY TAX
DIVISION OF THE : Appeal No. 87-0599
UTAH STATE TAX COMMISSION, :
Respondent. :
_____________________________________
STATEMENT OF CASE
This
matter came before the Utah State Tax Commission for a formal hearing on the
XXXXX. James E. Harward, Hearing
Officer, heard the matter for and in behalf of the Tax Commission. XXXXX appeared representing the
Respondent. XXXXX was present
representing the Petitioner. Based on
the recommendation of the Presiding Officer and the facts and evidence
presented at the hearing, the Tax Commission makes its:
FINDINGS OF FACT
1.
The tax in question is property tax.
2.
The period in question is XXXXX.
3.
The subject property is known as XXXXX, Federal #XXXXX.
4.
The subject well began producing in XXXXX.
5.
Typically, gas wells such as the subject property decline 8% to 20% a
year. This particular well declined 87%
the first year of production. In XXXXX
the subject well produced XXXXX cubic feet of gas. In XXXXX it produced XXXXX cubic feet.
CONCLUSIONS OF LAW
1.
The Tax Commission is required to administer and supervise the tax laws of the
State of Utah, Utah Code Ann. §59-1-210(5).
2.
Rule R884-10P provides the formula for determining the valuation of property
such as the subject property for any given tax year. The rule provides "the taxable value of the underground gas
rights shall be 400% of the proceeds from the sales of gas production from each
such property during the calendar year prior to the date of assessment, less
applicable exempt Federal, State, and premium royalties."
DECISION AND ORDER
In
the facts before the Tax Commission, the Petitioner's value for the XXXXX tax
year was based upon the production for the XXXXX year. During XXXXX, the subject property produced
approximately XXXXX cubic feet of gas.
In XXXXX, production drastically fell off. Eventually, in XXXXX the well was capped. The Petitioner argues that the value for the
well for XXXXX is substantially reduced and therefore should be reflected in
the market value used for computation for tax purposes. To best examine Petitioner's argument, the
Tax Commission first reviewed the assessment for the XXXXX tax year during
which this large volume of production was made. In XXXXX, the taxable value was determined by taking the
production for XXXXX and multiplying that by four. In XXXXX, the production was very small due to the fact that the
well did not even come into production until XXXXX. Thus, the taxable value for XXXXX was substantially lower than
the actual value of the subject property.
This is the inherent problem with the formula used in the rule. However, this problem was recognized by the
Tax Commission in that the last year of production the valuation problem would
be equalized. For XXXXX the taxable
value of the subject property was substantially lower than its actual value. For XXXXX when the production dropped off,
the value was substantially higher.
Taking the two years into consideration with the way the rule operates,
the values equalize over the period of production. Despite this lagtime created by the application of the rule as
promulgated by the Tax Commission, no other alternative method was presented by
the Petitioner which would justify any other valuation method for the tax year
XXXXX or for any other tax year.
Therefore, the Petitioner's request is denied. The assessment of the Respondent is affirmed. It is so ordered.
DATED
this 21 day of June, 1989.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
R. H. Hansen G.
Blaine Davis
Chairman Commissioner
Joe B.
Pacheco Roger
O. Tew
Commissioner Commissioner