Indiana Administrative Code
Title 50 - DEPARTMENT OF LOCAL GOVERNMENT FINANCE
Article 5.1 - PUBLIC UTILITY ASSESSMENT
Rule 11 - Obsolescence
Section 11-2 - Examples
Current through September 18, 2024
Authority: IC 6-1.1-8-42; IC 6-1.1-31-1
Affected: IC 6-1.1-8-26
Sec. 2.
Examples of abnormal obsolescence include the following:
(1) An example of an unforeseen change in market value would be a government ban on the sale of a drug or chemical due to a new discovery or determination, which may cause that item or the production equipment used to produce it to be abnormally obsolete. A specific example of this would be cyclamate. In this case, the property used to produce it may be eligible for abnormal obsolescence, while the inventory (cyclamate) should be valued at the lower of cost or market as provided in 50 IAC 4.2-5-7.
(2) Abnormal obsolescence due to exceptional technological obsolescence should be recognized to the extent that it causes the subject property to be incapable of use for current production or adaptation to a different use. The invention of a newer, more productive piece of equipment, which would produce a better quality item, or utilization of state of the art technology that produces more efficiently at a lower cost of production, does not cause an older, currently used asset to be considered abnormally obsolete. If the asset is still capable of performing the function for which it was acquired and is producing both on and before the assessment date, no adjustment shall be allowed. The use of historical cost, short useful life, and accelerated federal tax depreciation result in an equitable assessment on the property in question.
(3) Abnormal obsolescence due to catastrophe should be recognized to the extent that it has a direct effect on the value of a particular item. Property that has been destroyed or damaged by catastrophe as of the assessment date would qualify for such an adjustment. A chemical or production process which, due to an irreparable malfunction, emits a toxic gas or deadly chemical into the outside atmosphere would qualify for such an adjustment to the extent the property is incapable of use.
(4) A government order to shut down certain production equipment due to improper emission levels may result in abnormal obsolescence if the cost to cure the delinquent equipment results in incurable obsolescence, that is, the cost-to-cure exceeds the contribution or increase in value of the impaired item or the impairment cannot be corrected.
