98-054
Response
August 4, 1998
REQUEST
LETTER
RE.
Advisory Opinion
Dear
Honorable Commissioners:
During a recent personal property
appeal an adjustment to market value
for taxation purposes was allowed by the COUNTY based upon the petitioner's reliance
on a federal accounting standard.
I have not chosen to go forward with
an appeal to you concerning this matter. However, I
am
seeking clarification concerning the specific application of the standard used.
I also have a
general
question as to whether the use of an income approach is an acceptable method
for use
in
determination of market value for taxable personal property.
Specifically, can I as an Assessor
allow an adjustment pursuant to the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No.121. Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets disposed of
("SFAS No.121"), as a basis for granting abnormal obsolescence under Tax Commission Administrative Rule
884-24p-33(B)(3)?
Further, if it were to be found that
an adjustment can be made downward should I not
then
be asking all taxpayers for income information in order to see if an increase
in value of
taxable
personal property were warranted?
If I need to clarify any of this
please feel free to call. My direct line is #####. I apologize that I do not have a copy of "SFAS No.121".
Cordially,
NAME
NAME
August 21, 1998
Utah State Tax Commission
Attn: Commissioners
210 North 1950 West
Salt Lake City, Utah 84134
Re: Request for Advisory
Opinion
of
August 4, 1998
Dear Honorable
Commissioners:
I would like to append my
request of August 4th with an additional question.
Is it appropriate for an impairment
charge to be used to justify a lower valuation for real estate or improvements
of this matter.
Cordially,
NAME
September
29, 1998
NAME
RE: Obsolescence
for Personal Property Using the Income Approach
Dear NAME,
We
have received your request for an advisory opinion concerning the use of
personal property depreciation schedules as found in Utah Admin. Code
R884-24P-33 and whether a taxpayer may present income information to support a
value lower than that reached by these schedules. We have also received your second request asking if a similar
“impairment” charge can be used as evidence to lower real property values. Let us address these issues separately.
Personal
Property. You have asked if a
taxpayer can generally use income information to challenge the depreciation
schedules of Rule R884-24P-33? The
answer is no. The personal property depreciation schedules should generally be
used to value and tax personal property in Utah. Nevertheless, Subsection B.3. of that rule does allow the county
assessor to “deviate from the schedules when warranted by specific conditions
affecting an item of personal property.”
The rule further states that deviations from a schedule for an entire
class of property is not allowed without written approval of the Utah State Tax
Commission (“Commission”). From this,
the Commission believes it is the exception where a valuation method other than
applying the depreciation schedules should be used to value personal property,
yet also believes that exceptions do exist depending upon the particular
circumstances surrounding an item of personal property.
Specifically,
you ask if an assessor may deviate from the depreciation schedules and
recognize an impairment adjustment determined using the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No.121 (“SFAS
121"), which accounts for the impairment of long-lived assets? The answer depends upon the factual situation
that surrounds an item of personal property and any evidence submitted to
support the calculation of the impairment adjustment. While the Commission believes that deviation from the
depreciation schedules should be the exception, it also finds it conceivable
that an impairment adjustment determined using SFAS 121 may produce a more
accurate estimation of fair market value for a particular item than the
standard depreciation schedule. How
the Commission would decide in an individual case would depend upon the
evidence submitted.
Real
Property. You
next ask if it is appropriate to use an impairment charge to lower the
NAME ADVISORY OPINION
SEPTMEBER 29, 1998
PAGE TWO
valuation for real estate or
improvements. It is generally
recognized that the income approach is one of the valuation methods an assessor
may use to determine the fair market value of real property. Whether the impairment charge is one of the
factors the assessor should use in the income approach calculation would again
depend upon the
factual situation that surrounds the real property and any evidence submitted
to support the calculation of the impairment adjustment. Without receiving evidence concerning these
facts, the Commission cannot determine if the impairment charge should be used
to adjust the real property value.
Please
contact us if you have any other questions.
For
the Commission,
Joe
B. Pacheco, CPA
Commissioner
^^