BOISE – Idaho’s state Tax Commission refused Tuesday to extend a big property tax break to operators of railroad tracks, pipelines, cell towers and underground tanks, despite the urging of a roomful of officials from those firms.
Had the commission acceded to the request from the companies, all other taxpayers in the counties where their property is located would have had to pay more to make up for the break.
“Realize, as we play with those pieces, we start moving who pays what,” said Tax Commissioner Rich Jackson.
Idaho lawmakers this year passed a $20 million partial exemption of business personal property from local property taxes, by exempting the first $100,000 of each taxpayer’s personal property in each Idaho county from the tax. But the Legislature didn’t specify where the line fell dividing personal from real property. So the Tax Commission, working through a committee that met all summer, drafted two rules to draw that line – and the railroads, pipelines and cell towers were classified as real property, ineligible for the new break.
“What’s interesting is until the $100,000 exemption took place, it really didn’t matter – and now all of a sudden it matters what’s real and what’s personal,” said Tax Commissioner Ken Roberts.
Rick Smith, an attorney with Hawley Troxell representing Northwest Pipeline, Century Link, and AT&T, told the commission, “I believe the rule is flawed. … I don’t think those six items of property are properly characterized as real property.”
The six: Cell towers, underground storage tanks, poles and towers, signposts, pipelines and conduit, and railroad track.
“Real property includes improvements, structures and fixtures,” Smith said. “I just don’t believe that railroad tracks is an improvement to real property. And it’s not a structure.” That would make it a fixture, he said, but it’s not a fixture that’s integral to the main purpose of the real estate, like an irrigation system for a farm.
Jackson countered, “The railroad has a railroad system to function as a railroad. The telephone company has a series of assets to function as a telephone company. Cell towers are the same thing. … So I can’t quite make the distinction that you are.”
Gerry White of Union Pacific Railroad called the proposed new rules “discriminatory” toward railroads.
A Micron Technology official questioned the definition of “fixtures,” and an Idaho Power representative urged the commission to reject the new rules, prompting commissioners to note that some rule must be enacted to implement the new law.
Tax Commissioner David Langhorst, a former Democratic state senator from Boise, said, “I think they made good arguments, the taxpayers today.” But he said the rules take a conservative approach. “And if the Legislature really did intend for this to be more liberally applied or a broader exemption created, then they can affirm that.”
County assessors from across the state backed the new rules, saying they’ll provided needed consistency.
Roberts, a former GOP state representative from Donnelly, said the Legislature should have indicated where it wanted the line to fall between real and personal property, but it didn’t.
“Void of that direction … somebody has to make a decision about what and where that line is,” he said. “I’m sad to say that this decision has kind of found its way to the Tax Commission. … If we get it wrong, the Legislature, who are the policy setters in the state of Idaho when it comes to tax policy, can change it.”
The Legislature authorized state funds to reimburse counties for the lost revenue from the new tax break, but only at 2013 levels. If the new rules, which take effect in 2014, had exempted the additional classes of property, that wouldn’t have generated any additional state reimbursement. Instead, it would have forced a tax shift, requiring all other local taxpayers in the county to pay more to make up the difference.