Current through Bulletin 2024-18, September 15, 2024
(1) Definitions:
(a) "Utah fair market value" means the fair
market value of that portion of the property of a project entity located within
Utah upon which the fee in lieu of ad valorem property tax may be
calculated.
(b) "Fee" means the
annual fee in lieu of ad valorem property tax payable by a project entity
pursuant to Section
11-13-302.
(c) "Energy supplier" means an entity that
purchases any capacity, service or other benefit of a project to provide
electrical service.
(d) "Exempt
energy supplier" means an energy supplier whose tangible property is exempted
by Article XIII, Sec. 3 of the Constitution of Utah from the payment of ad
valorem property tax.
(e) "Optimum
operating capacity" means the capacity at which a project is capable of
operating on a sustained basis taking into account its design, actual operating
history, maintenance requirements, and similar information from comparable
projects, if any. The determination of the projected and actual optimum
operating capacities of a project shall recognize that projects are not
normally operated on a sustained basis at 100 percent of their designed or
actual capacities and that the optimum level for operating a project on a
sustained basis may vary from project to project.
(f) "Property" means any electric generating
facilities, transmission facilities, distribution facilities, fuel facilities,
fuel transportation facilities, water facilities, land, water or other existing
facilities or tangible property owned by a project entity and required for the
project which, if owned by an entity required to pay ad valorem property taxes,
would be subject to assessment for ad valorem tax purposes.
(g) "Sold," for the purpose of interpreting
Subsection (4), means the first sale of the capacity, service, or other benefit
produced by the project without regard to any subsequent sale, resale, or
lay-off of that capacity, service, or other benefit.
(h) "Taxing jurisdiction" means a political
subdivision of this state in which any portion of the project is
located.
(i) All definitions
contained in Section
11-13-103
apply to this rule.
(2)
The Tax Commission shall determine the fair market value of the property of
each project entity. Fair market value shall be based upon standard appraisal
theory and shall be determined by correlating estimates derived from the income
and cost approaches to value described below.
(a) The income approach to value requires the
imputation of an income stream and a capitalization rate. The income stream may
be based on recognized indicators such as average income, weighted income,
trended income, present value of future income streams, performance ratios, and
discounted cash flows. The imputation of income stream and capitalization rate
shall be derived from the data of other similarly situated companies.
Similarity shall be based on factors such as location, fuel mix, customer mix,
size and bond ratings. Estimates may also be imputed from industry data
generally. Income data from similarly situated companies will be adjusted to
reflect differences in governmental regulatory and tax policies.
(b) The cost approach to value shall consist
of the total of the property's net book value of the project's property. This
total shall then be adjusted for obsolescence if any.
(c) In addition to, and not in lieu of, any
adjustments for obsolescence made pursuant to Subsection (2)(b), a phase-in
adjustment shall be made to the assessed valuation of any new project or
expansion of an existing project on which construction commenced by a project
entity after January 1, 1989 as follows:
(i)
During the period the new project or expansion is valued as construction work
in process, its assessed valuation shall be multiplied by the percentage
calculated by dividing its projected production as of the projected date of
completion of construction by its projected optimum operating capacity as of
that date.
(ii) Once the new
project or expansion ceases to be valued as construction work in progress, its
assessed valuation shall be multiplied by the percentage calculated by dividing
its actual production by its actual optimum operating capacity. After the new
project or expansion has sustained actual production at its optimum operating
capacity during any tax year, this percentage shall be deemed to be 100 percent
for the remainder of its useful life.
(3) If portions of the property of the
project entity are located in states in addition to Utah and those states do
not apply a unit valuation approach to that property, the fair market value of
the property allocable to Utah shall be determined by computing the cost
approach to value on the basis of the net book value of the property located in
Utah and imputing an estimated income stream based solely on the value of the
Utah property as computed under the cost approach. The correlated value so
determined shall be the Utah fair market value of the property.
(4) Before fixing and apportioning the Utah
fair market value of the property to the respective taxing jurisdictions in
which the property, or a portion thereof is located, the Utah fair market value
of the property shall be reduced by the percentage of the capacity, service, or
other benefit sold by the project entity to exempt energy suppliers.
(5) For purposes of calculating the amount of
the fee payable under Section
11-13-302(3),
the percentage of the project that is used to produce the capacity, service or
other benefit sold shall be deemed to be 100 percent, subject to adjustments
provided by this rule, from the date the project is determined to be
commercially operational.
(6) In
computing its tax rate pursuant to the formula specified in Section
59-2-924(2),
each taxing jurisdiction in which the project property is located shall add to
the amount of its budgeted property tax revenues the amount of any credit due
to the project entity that year under Section
11-13-302(3),
and shall divide the result by the sum of the taxable value of all property
taxed, including the value of the project property apportioned to the
jurisdiction, and further adjusted pursuant to the requirements of Section
59-2-924.
(7) Subsections (2)(a) and (2)(b) are
retroactive to the lien date of January 1, 1984. Subsection (2)(c) is effective
as of the lien date of January 1, 1989. The remainder of this rule is
retroactive to the lien date of January 1, 1988.
