Oregon Administrative Rules
Chapter 150 - DEPARTMENT OF REVENUE
Division 308 - ASSESSMENT OF PROPERTY FOR TAXATION
Section 150-308-0260 - Industrial Property Valuation for Tax Purposes
Universal Citation: OR Admin Rules 150-308-0260
Current through Register Vol. 63, No. 9, September 1, 2024
(1) For the purposes of this rule, the following words and phrases have the following meaning:
(a) A "unit of property" is the item,
structure, plant, or integrated complex as it physically exists on the
assessment date.
(b) "Real
property" means the real estate (physical land and appurtenances including
structures, and machinery and equipment erected upon the land or attached to
the land or structures) and all interests, benefits, and rights inherent in the
ownership of the physical real estate.
(c) "Highest and best use" means the
reasonably probable use of vacant land or an improved property that is legally
permissible, physically possible, financially feasible, and maximally
productive, which results in the highest real market value.
(2) If the highest and best use of the unit of property is an operating plant or an operating integrated complex, the real market value will be considered to be a "going concern." The going concern concept recognizes that the value of an assembled and operational group of assets usually exceeds the value of an identical group of assets that are separate or not operational.
(3) Methods and Procedures for Determining the Real Market Value of Industrial Property:
(a) For the valuation of industrial
property all three approaches to value (sales comparison, cost, and income),
must be considered. For a particular property, it may be that all three
approaches cannot be applied, however, each must be investigated for its merit
in each specific appraisal.
(b)
The market value of a unit of property must not be determined from the market
price of its component parts, such as wood, glass, concrete, furnaces,
elevators, machines, conveyors, etc., each priced separately as an item of
property, without regard to its being integrated into the total unit.
(c) In utilizing the sales
comparison approach only actual market transactions of property comparable to
the subject, or adjusted to be comparable, will be used. All transactions
utilized in the sales comparison approach must be verified to ensure they
reflect arms-length transactions. When non-typical market conditions of sale
are involved in a transaction (duress, death, foreclosure, bankruptcy,
liquidation, interrelated corporations or persons, etc.) the transaction will
not be used in the sales comparison approach unless market-based adjustments
can be made for the non-typical market condition.
(A) Properties utilized in the sales
comparison approach, although not necessarily identical, at the very least must
be similar in many respects. Adjustments must be made for differences in
location, product, production capacity, and all other factors that may affect
value. Excessively large adjustments or an excessive number of adjustments is
an indication that the properties are not comparable.
(B) When utilizing the sales comparison
approach, the appraiser must take into consideration difference between the
subject and the comparable properties for physical condition, functional
obsolescence and economic obsolescence. Adjustments must be made for
differences between the subject and comparable properties for factors such as
physical condition, functional deficiencies, operating efficiency, and economic
obsolescence. If the properties are functionally or economically equivalent,
verification of the equivalency must be included in the appraisal.
(f) Sales for the disposal of
properties through auction, liquidation or scrap sales are indicators of market
value only when on the assessment date such disposal of the subject property is
imminent, or has actually taken place.
(g) The cost approach may utilize either the
reproduction, replacement, or the used equipment technique. It is acceptable to
use trended historical cost to estimate the reproduction cost new. The value
estimate must include all costs required to assemble and construct the unit of
property.
(h) When using the
income approach, the income from the operation of the property may be utilized
for industrial properties and other properties that are not typically leased or
rented. When the income from the property's operation is used, the unit of
property must be valued as a going concern. In utilizing the income approach
for the valuation of industrial properties, the discounted cash flow technique
is one of the appropriate methods to derive a value estimate. Consideration in
the discounted cash flow technique is given to items such as the anticipated
future free cash flow available to both, the debt and equity holders; inventory
valuation methods, intangible assets, income taxes, net working capital,
capital reinvestment, etc. When utilizing the discounted cash flow technique,
the capitalization or discount rate must be derived in accordance with OAR
150-308.205-(C).
(i) Determining
the highest and best use for the unit of property is necessary for establishing
real market value. This determination of highest and best use may include,
among others, all possible uses that might result from retaining, altering or
ceasing the integrated nature of the unit of property.
(4) For machinery and equipment, in all the approaches to value, if the highest and best use is continued operation, adjustments must be made to account for the cost of integrating the machinery and equipment into the total unit of the property. These costs include, but are not limited to, freight, installation, wiring, piping and foundation costs.
(5) Basic information for an appraisal. Basic data and procedures in making appraisals normally include the following when applicable:
(a) Location of
property by tax codes and tax lot numbers;
(b) Map or sketch of land owned and layout of
plant;
(c) Inventory of physical
plant;
(d) Reproduction or
replacement cost computations, as applicable;
(e) Analysis of depreciation;
(f) Analysis of economics as they affect
valuation;
(g) Analysis of sales
data, when applicable;
(h) Field
inspection;
(i) Research and
familiarization with typical properties of the industry;
(j) Annual reports to stockholders;
(k) Fixed assets schedules;
(l) Income statements;
(m) Such other data that may affect value.
(6) Basic information for an appraisal utilizing the industrial property return. Basic data for an appraisal utilizing the industrial property return normally includes the following:
(a) Report of additions;
(b) Report of retirements;
(c) Knowledge of miscellaneous
technical and economic conditions that affect value;
(d) Trending factors:
(A) Separate factors for yard improvements,
buildings, and equipment classified as real property must be developed.
(B) The development of the factors
must use data published by the United States Department of Labor, the Oregon
Building Construction Trades Council, and other sources the Department of
Revenue deems to be reliable indicators of property value over time.
(C) Data developed by physical inspection
together with appraising a segment of the total property or making a general
review of the total value under certain circumstances may supplement the data
utilized in (A) above.
(e) Depreciation allowances;
(f) Real market value for prior year.
(7) This rule is effective January 1, 2016.
Stat. Auth.: ORS 305.100
Stats. Implemented: ORS 308.205
Disclaimer: These regulations may not be the most recent version. Oregon may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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