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Idaho Tax Commission refuses property tax break extension

Wed., Nov. 20, 2013, midnight

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,” Tax Commissioner Rich Jackson said.

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,” Tax Commissioner Ken Roberts said.

Rick Smith, an attorney with Hawley Troxell representing Northwest Pipeline, CenturyLink 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 tracks.

“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.

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 taxpayers in the county to pay more to make up the difference.

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