SENATE BILL 874
48th legislature - STATE OF NEW MEXICO - first session, 2007
INTRODUCED BY
Carlos R. Cisneros
FOR THE REVENUE STABILIZATION AND TAX POLICY COMMITTEE
AN ACT
RELATING TO TAXATION; PROVIDING FOR AND PERMITTING THE ELECTION OF ALTERNATIVE METHODS OF VALUATION OF PROPERTY USED FOR THE GENERATION, TRANSMISSION OR DISTRIBUTION OF ELECTRIC POWER OR ENERGY.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
Section 1. Section 7-36-29 NMSA 1978 (being Laws 1975, Chapter 165, Section 10) is amended to read:
"7-36-29. SPECIAL METHOD OF VALUATION--PROPERTY USED FOR THE GENERATION, TRANSMISSION OR DISTRIBUTION OF [ELECTRICAL] ELECTRIC POWER OR ENERGY.--
A. All property used for the generation, transmission or distribution of [electrical] electric power or energy subject to valuation for property taxation purposes shall be valued in accordance with the provisions of this section.
B. As used in this section:
[(3)] (1) "construction work in progress" means the total of the balances of work orders for an electric plant in process of construction on the last day of the
preceding calendar year exclusive of land, land rights and licensed vehicles;
[(1)] (2) "depreciation" means straight line depreciation over the useful life of the item of property;
(3) "economic obsolescence" means, with respect to valuation for property taxation purposes, the loss in value caused by unfavorable economic influences or factors outside of the property; "economic obsolescence" is the loss in value in addition to a loss in value attributable to physical depreciation;
[(2)] (4) "electric plant" means all property situated in this state used or useful for the generation, transmission or distribution of electric power or energy, but does not include land, land rights, general buildings and improvements, construction work in progress, materials and supplies and licensed vehicles;
(5) "functional obsolescence" means, with respect to valuation for property taxation purposes, the loss in value caused by functional inadequacies or deficiencies caused by factors within the property; "functional obsolescence" is the loss in value in addition to a loss in value attributable to physical depreciation;
[(4)] (6) "general buildings and improvements" means buildings of the nature of offices, residential housing, warehouses, shops and associated improvements in general use by the taxpayer and not directly associated with generation, transmission or distribution of [electrical] electric power or energy;
[(5)] (7) "materials and supplies" means the cost, including sales, use and excise taxes, and transportation costs to point of delivery in this state, less purchases and trade discounts, of all unapplied material and supplies on hand in this state as of December 31 of the preceding calendar year;
[(6)] (8) "other justifiable factors" includes, but is not limited to, functional obsolescence and economic obsolescence, such as the limitation upon the use of the property based upon the available reserves committed to the property; and
[(7)] (9) "tangible property cost" means the actual cost of acquisition or construction of property, including additions, retirements, adjustments and transfers, but without deduction of related accumulated provision for depreciation, amortization or other purposes.
C. Each taxpayer having property subject to valuation pursuant to this section shall elect to have that property valued by the department in accordance with either Subsection D or H of this section. The election shall be effective for subsequent property tax years unless prior permission of the secretary is obtained to change the election for good cause shown. A taxpayer shall not seek permission to change an election unless the prior election has been effective for at least three consecutive property tax years. The secretary shall find that good cause exists to change the election upon a showing satisfactory to the secretary by the taxpayer that:
(1) the net result of all amendments to the property tax statutes and rules with effective dates commencing within the property tax year has a substantial adverse effect on the valuation for property tax purposes under the alternative elected for the property for that year relative to what the valuation for property tax purposes would have been under the other alternative in the absence of the amendments;
(2) the net result of all changes in law or circumstances, but excluding acquisition or sale of property subject to valuation pursuant to this section, including changes that do not affect property tax liability, occurring within the property tax year has a substantial adverse effect on the valuation for property tax purposes under the alternative elected for the property for that year relative to what the valuation for property tax purposes for the property
would have been under the other alternative in absence of the changes; and
(3) changes in property tax statutes or regulations that are effective prior to the property tax year have a substantial adverse effect on the valuation for property tax purposes under the alternative elected for the property relative to what the valuation for property tax purposes would have been under the other alternative.
[C.] D. An electric plant valued under this subsection shall be valued as follows:
(1) the department shall determine the tangible property cost of the electric plant;
(2) such tangible property cost shall then be reduced by the related accumulated provision for depreciation and any other justifiable factors; and
(3) notwithstanding the foregoing determination of value for property taxation purposes, the value for property taxation purposes of an electric plant shall not be less than twenty percent of the tangible property cost of the electric plant.
[D.] E. The value of construction work in progress shall be fifty percent of the amount expended and entered upon the accounting records of the taxpayer as of December 31 of the preceding calendar year as construction work in progress.
[E.] F. The value of materials and supplies shall be the tangible property cost for [such] the property as of December 31 of the preceding calendar year.
[F.] G. Each item of property having a taxable situs in the state and valued under this section shall have its net taxable value allocated to the governmental units in which the property is located.
H. An electric plant valued under this subsection shall be valued applying the unit rule of appraisal using the following components, as appropriate:
(1) capitalization of earnings;
(2) market value of stock and debt; and
(3) cost less depreciation, economic obsolescence and functional obsolescence.
I. A claim for the deduction of economic obsolescence or functional obsolescence pursuant to this section shall contain a requested obsolescence factor along with a brief statement of the facts upon which the claim is made, together with documentation to support the claim.
J. If a taxpayer has not established a claim for economic obsolescence or functional obsolescence in accordance with rules adopted by the department, the department shall notify the taxpayer in writing of the reasons for its determination and specify the information that the department requires for a claim for economic obsolescence or functional obsolescence. The department shall provide that notice in sufficient time to permit the taxpayer to establish a claim for economic obsolescence or functional obsolescence in accordance with department rules before the department issues a valuation notice to the taxpayer.
[G.] K. The department shall adopt [regulations under Section 72-31-88 NMSA 1953] rules to implement the provisions of this section."
Section 2. APPLICABILITY.--The provisions of this act apply to the 2007 and subsequent property tax years.
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