A.R.S. tit. 42 ch. 14 — Arizona Revised Statutes Title 42 Chapter 14 — Valuation Of Centrally Assessed Property

42-14001. Properties subject to valuation by the department; limitation on valuation increases A. The department shall determine the valuation of the properties described in this chapter. B. The limitations on increases in valuation prescribed by article IX, section 18, Constitution of Arizona, and by chapter 13, article 7 of this title apply to valuations determined by the department under this chapter except as provided by section 42-13304. 42-14002. Notice of preliminary valuation; hearing A. On or before June 15 the department shall notify owners of property that is valued by the department of the department's determination of the preliminary full cash value of the property. B. On or before July 15 the property owner may file a written application to appear before the department and be heard concerning the value determined. 42-14003. Information considered in determining valuation; notice of determination A. In determining valuation under this chapter the department shall consider all additional information including information that is presented in an appeal and information that is otherwise available. B. The department shall notify the property owner of the final full cash value on or before August 31. 42-14004. Change of valuation After the department determines the valuation of any property but before it transmits the valuation to the appropriate assessing authority, the department, on the property owner's written application or on its own motion, may change the valuation to properly reflect the property's full cash value. The department shall immediately send by mail or by e-mail a copy of the change to the property owner. 42-14005. Appeal from valuation determined by department A property owner who is not satisfied with the valuation of the owner's property as determined by the department may appeal: 1. To the state board of equalization pursuant to section 42-16158. 2. Directly to superior court pursuant to section 42-16204. 42-14006. Signatures for documents; alternative methods A. The department may prescribe by administrative rule alternative methods for signing, subscribing or verifying any report or statement required to be filed with the department pursuant to this article that have the same validity and consequence as the actual signature or written declaration of the taxpayer or other person required to sign, subscribe or verify the return, statement or other document. B. While the department is adopting a rule prescribing alternative methods for signing, subscribing or verifying any report or statement required to be filed with the department pursuant to this article, the director, by tax ruling, may waive the requirement of a signature for a particular type or class of any report or statement required to be filed with the department pursuant to this article. For the purposes of this subsection, "tax ruling" has the same meaning prescribed in section 42-2052. 42-14051. Annual determination of valuation The department shall annually determine, in the manner prescribed by this article, the valuation of: 1. Producing mines. 2. Personal property used on producing mines. 3. Improvements to producing mines. 4. Mills and smelters that are operated in conjunction with producing mines. 5. Closed mines as provided by section 42-14054. 42-14052. Annual report for determining valuation; failure to file; penalty; forfeiture of appeal rights A. On or before April 1 of each year each company that is valued pursuant to this article shall file a report with the department, under oath, stating the information that the department requires to enable it to make a valuation of the company. B. On written request and for good cause shown, the director may extend the time for filing the report required by this section. C. If a company fails to file the report on or before April 1 of the valuation year, or the extended due date if an extension is granted, the department shall: 1. Estimate the value of the property based on one hundred five per cent of the preceding year's full cash value or on any information that is available to the department. 2. Also assess a penalty in the amount of the lesser of: (a) One-half of one per cent of the value that is estimated by the department. (b) One hundred dollars per day for each day the company fails to file the report beyond the due date. D. If the report is not filed by May 20 of the valuation year, the company forfeits its right to appeal the valuation and classification pursuant to section 42-14005. 42-14053. Determining and reporting valuation of producing mines and mining property A. On or before August 31 of each year, the department shall find the full cash value of: 1. Patented and unpatented producing mines. 2. Personal property used on producing mines. 3. Improvements to producing mines. 4. Mills and smelters that are operated in conjunction with producing mines. B. On or before November 30 of each year, the department shall transmit the valuations of these properties in each taxing district to the respective county assessors. C. The valuations required by this section are the values determined as of January 1 of the valuation year. 42-14054. Determining and reporting valuation of closed mines A. On or before August 31 of each year, the department shall find the full cash value of all patented and unpatented mines that were producing mines on the first Monday in January of any of the three preceding years but that are no longer producing mines. B. On or before November 30 of each year, the department shall transmit the valuations of these properties in each taxing district to the respective county assessors. C. The valuation required by this section is the value determined as of January 1 of the valuation year. D. The department shall value nonproducing mines for a period of three valuation years after the last valuation year in which it was valued as a producing mine. 42-14101. Definitions In this article, unless the context otherwise requires: 1. "Gas" means: (a) Natural gas, including casinghead gas. (b) All other hydrocarbons that are not defined as oil by this section. (c) Helium and other nonhydrocarbon substances of a gaseous nature. 2. "Geothermal resource" has the same meaning prescribed in section 27-651. 3. "Gross production" means all oil, gas or geothermal resources that are produced and saved except: (a) Any interest of the United States or this state or of any other person or entity that is exempt under the laws of the United States or the constitution or laws of this state in any oil, gas or geothermal resources or in the proceeds of oil, gas or geothermal resources. (b) Oil, gas or geothermal resources that are used in producing operations or for repressuring or recycling purposes to develop and operate the producer's interests in oil, gas or geothermal resource wells in this state. 4. "Gross yield" means the amount for which the gross production is sold in the immediate vicinity of the well or, if not sold on the property, the field or posted price or representative market price at the well of oil, gas or geothermal resources that are transported from the property. 5. "Oil" means crude petroleum oil and other hydrocarbons regardless of gravity that are produced at the well in liquid form by ordinary production methods and that are not the result of condensation of gas after it leaves the reservoir. 6. "Produced", "producing" or "production" means any taking of oil or gas from any land in this state that is under the state's jurisdiction. 7. "Producer" means a person who owns, controls or leases, either as lessor or lessee, or who has any other interest in oil, gas or geothermal resource lands or oil, gas or geothermal resource wells on January 1 of each year if any person produced any oil, gas or geothermal resource in any manner from the lands or wells during the preceding calendar year. Producer includes any person who owns any royalty or other interest in any oil, gas or geothermal resources, or its value, whether produced by that person or by another person on that person's behalf, either by lease, contract or otherwise. 42-14102. Annual determination of valuation The department shall annually determine the valuation of all producing oil, gas and geothermal resource interests in this state in the manner prescribed by this article. 42-14103. Annual report for determining valuation; violation; classification A. On or before April 1 of each year each producer shall make and file with the department a return showing the producer's gross production and gross yield from each of the producer's producing properties for the immediately preceding calendar year. On request and for good cause the department may grant a thirty day extension of time for filing the report. B. The report shall show the county in which the production took place and the description of the property from which the oil, gas or geothermal resource was produced. C. The producer or the producer's authorized representative shall verify the report. D. A producer who knowingly fails to file the report prescribed by this section or who knowingly files a false report is guilty of a class 2 misdemeanor. 42-14104. Determining and reporting valuation A. On or before November 30 of each year the department shall transmit to the respective county assessors the valuation of the oil, gas or geothermal resource interests of each producer for each of the producer's properties in the county as of January 1 of the valuation year. B. The valuation required by this section is the value determined as of January 1 of the valuation year. C. After determining the valuation of any producing oil, gas or geothermal resource interest and before certifying the valuation to the county, the department, on the producer's application or on its own motion, may change the valuation to properly reflect the gross yield from the oil, gas or geothermal resource interest. 42-14105. Basis for valuing producing oil, gas and geothermal resource interests A. Producing oil, gas and geothermal resource interests shall be valued for tax purposes at the amount of the gross yield for the preceding calendar year. The gross yield is the valuation of the oil, gas or geothermal resource interests of the lands from which the oil, gas or geothermal resource is produced as of January 1 of the following year. B. This valuation does not affect the valuation of property other than producing oil, gas or geothermal resource interests. C. Notwithstanding any other law, the basis of valuation prescribed by this section is in lieu of any other method of valuing oil, gas or geothermal resource interests and the oil, gas and geothermal resource deposits for ad valorem tax purposes. 42-14106. Separate listing, assessment and taxation If producing oil, gas and geothermal resource interests are owned by a person other than the owner of the land, they shall be listed, the valuation shall be determined and the interests shall be taxed individually as separate parcels of real estate separate from the land. 42-14151. Annual determination of valuation; definition A. The department shall annually determine the valuation, in the manner prescribed by this article, of all property, owned or leased, and used by taxpayers in the following businesses: 1. Operation of a natural gas distribution system. 2. Operation of a water utility system. 3. Operation of a sewer system or wastewater treatment facility. 4. Operation of an electric generation facility. 5. Operation of an electric transmission or distribution system or an energy storage system. B. For the purposes of this article, "generation of electricity" means the process of taking a source of energy, including coal, natural gas, oil, nuclear fuel or renewable sources and converting the energy into electricity to be delivered to customers through a transmission and distribution system. 42-14152. Annual report for determining valuation; failure to file; penalty; forfeiture of appeal rights A. Except as provided by section 42-14155, on or before April 1 of each year, each company that is valued pursuant to this article shall file a report with the department, under oath, stating the information that the department requires to enable it to make a valuation of the property. On or before February 1 of each year, the department shall send by mail or by e-mail to each company the forms for filing the report. B. On written request and for good cause shown, the director may extend the time for filing the report required by this section. C. If a company fails to file the report on or before April 1 of the valuation year, or the extended due date if an extension is granted, the department shall: 1. Estimate the value of the property based on one hundred five percent of the preceding year's full cash value or on any information that is available to the department. 2. Also assess a penalty in the amount of the lesser of: (a) One-half of one percent of the value that is estimated by the department. (b) One hundred dollars per day for each day the company fails to file the report beyond the due date. D. If the report is not filed by May 20 of the valuation year, the company forfeits its right to appeal the valuation and classification pursuant to section 42-14005. 42-14153. Determining and reporting valuation A. On or before August 31 of each year the department shall find the full cash value of the property of each property that is listed in section 42-14151 and that operates in this state. B. On or before November 30 the department shall transmit to the respective county assessors: 1. The valuations of these properties in each taxing district. 2. An estimate of the net valuation of properties that are subject to voluntary contributions pursuant to section 48-242. The taxing jurisdiction shall use the estimate to estimate the amount of voluntary contributions to be received for the purpose of finalizing budget and property tax levies pursuant to chapter 17 of this title. C. The valuations required by this section are the values determined as of January 1 of the valuation year. 42-14154. Computing valuation of electric transmission, electric distribution, gas distribution, combination gas and electric transmission and distribution, and transmission and distribution cooperative property; definitions A. The valuation of all electric transmission, electric distribution, gas distribution, combination gas and electric transmission and distribution, and transmission and distribution cooperative property that is subject to valuation for tax purposes shall be determined in the manner prescribed by this section except for: 1. The property of member-owned nonprofit electric distribution cooperatives. 2. Renewable energy equipment that is valued pursuant to section 42-14155. B. Electric transmission, electric distribution, gas distribution, combination gas and electric transmission and distribution, and transmission and distribution cooperative property shall be valued as follows: 1. The department shall determine the original plant in service cost. 2. The original plant in service cost shall then be reduced by: (a) The related accumulated provision for depreciation. (b) The reduction in value caused by a state or federal governmental order prohibiting total or partial physical use of electric transmission, electric distribution, gas distribution, combination gas and electric transmission and distribution, and transmission and distribution cooperative property for periods of more than six months. Any reductions in value caused by a total or partial prohibition of the physical use of the property shall not exceed the cost of the restricted property less accumulated depreciation. 3. The department shall not value contributions in aid of construction. C. The value of construction work in progress is fifty per cent of the amount spent and entered on the taxpayer's accounting records as of December 31 of the preceding calendar year as construction work in progress. D. The value of materials and supplies is the total cost of such property as of December 31 of the preceding calendar year. E. The value of environmental protection facilities that are required by law is fifty per cent of the depreciated cost of the facilities. F. All terms and applications of terms shall be interpreted according to the federal energy regulatory commission uniform system of accounts for electric and gas utilities in effect on January 1, 1989. G. For the purposes of this section, unless the context otherwise requires: 1. "Construction work in progress" means the total of the balances of work orders for an electric transmission, electric distribution, gas distribution, combination gas and electric transmission and distribution, and transmission and distribution cooperative plant in process of construction on December 31 of the preceding calendar year, exclusive of land rights and licensed vehicles. 2. "Depreciation" means straight line depreciation over the useful life of the item of property. 3. "Distribution cooperative" means a member-owned nonprofit electric distribution cooperative corporation that is organized under or becomes subject to title 10, chapter 19, article 2 or title 10, chapters 24 through 40. 4. "Electric transmission, electric distribution, gas distribution, combination gas and electric transmission and distribution, and transmission and distribution cooperative property" means plant, construction work in progress, materials and supplies and environmental protection facilities. 5. "Environmental protection facilities" means the acquisition or construction cost of any building, structure, equipment, facility or improvement that is designed and constructed solely to control, reduce, prevent or abate: (a) Discharges or releases into the environment of gaseous, liquid or solid substances, heat or noise. (b) Any other adverse impact of an activity on the environment. 6. "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. 7. "Original plant in service cost" means the actual cost of acquiring or constructing property including additions, retirements, adjustments and transfers, but without deducting related accumulated provision for depreciation, amortization or other purposes. 8. "Plant" means all property that is situated in this state and that is used or useful for the transmission or distribution of electric power or distribution of natural gas. Plant does not include land rights, materials and supplies and licensed vehicles. 9. "Transmission cooperative" means a member-owned nonprofit electric transmission cooperative corporation that is organized under or becomes subject to title 10, chapter 19, article 4. 42-14155. Valuation of renewable energy and storage equipment; definitions A. Through December 31, 2040, the department shall determine the full cash value of taxable renewable energy and storage equipment in the manner prescribed by this section. B. The full cash value of renewable energy and storage equipment is twenty percent of the depreciated cost of the equipment. Depreciated cost shall be determined by deducting depreciation from taxable original cost. Depreciation shall not exceed ninety percent of the adjusted original cost. C. For the purposes of this section, all energy storage equipment, both colocated with renewable energy and stand-alone energy storage equipment, qualifies for valuation pursuant to this section. D. For the purposes of this section: 1. "Depreciation" means straight-line depreciation over the useful life, as adopted by the department, of the item of property. 2. "Electric utility scale" means a person that is engaged in a business activity described in section 42-5063, subsection A or such person's equipment or wholesale electricity suppliers. 3. "Energy storage" means commercially available technology for electric utility scale that is capable of absorbing energy, storing energy for a period of time and thereafter dispatching the energy and that uses mechanical, chemical or thermal processes to store energy. 4. "Original cost" means the actual cost, without trending, of acquiring or constructing property, including additions, retirements, adjustments and transfers. 5. "Renewable energy and storage equipment" means electric generation facilities, electric transmission, electric distribution, energy storage, gas distribution or combination gas and electric transmission and distribution and transmission and distribution cooperative property that is located in this state, that is used or useful for generating, storing, transmitting or distributing electric power, energy or fuel derived from solar, wind or other nonpetroleum renewable sources not intended for self-consumption, including materials and supplies and construction work in progress, but excluding licensed vehicles and property valued under sections 42-14154 and 42-14156. 6. "Taxable original cost" means the original cost reduced by the value of any investment tax credits, production tax credits or cash grants in lieu of investment tax credits applicable to the taxable renewable energy and storage equipment. 42-14156. Computing valuation of electric generation facilities; definitions A. The valuation of electric generation facilities referred to in section 42-14151, subsection A, paragraph 4 shall be determined as follows: 1. The value of land used in operating the facility shall be the cost to the current owner as of December 31 of the preceding calendar year. 2. The valuation of real property improvements used in operating the facility is the cost multiplied by valuation factors prescribed by tables adopted by the department. 3. The valuation of personal property used in operating the facility is the cost multiplied by the valuation factors as prescribed by tables adopted by the department, adjusted as follows: (a) For the first year of assessment, the department shall use thirty-five per cent of the scheduled depreciated value. (b) For the second year of assessment, the department shall use fifty-one per cent of the scheduled depreciated value. (c) For the third year of assessment, the department shall use sixty-seven per cent of the scheduled depreciated value. (d) For the fourth year of assessment, the department shall use eighty-three per cent of the scheduled depreciated value. (e) For the fifth and subsequent years of assessment, the department shall use the scheduled depreciated value as prescribed in the department’s guidelines. 4. In addition to the computation prescribed in paragraphs 2 and 3 of this subsection, the taxpayer may submit documentation showing the need for, and the department shall consider, an additional adjustment to recognize obsolescence using standard appraisal methods and techniques. 5. The valuation prescribed in paragraph 2 of this subsection shall not reduce the valuation below ten per cent of the cost of the real property improvements. The valuation prescribed in paragraph 3 of this subsection shall not reduce the valuation below ten per cent of the cost of the personal property. 6. The following apply in determining cost for the purposes of this subsection: (a) "Cost" means the cost of constructing the property or acquiring the property in an arm's length transaction. (b) The cost of personal property is the invoice cost of the personal property, the cost of transporting the property to the facility site and the cost of labor to install the property, plus any transaction privilege or use taxes paid. (c) The cost of leased property is the lessor's cost of the property, except that in the case of a lease financing transaction, the cost is the actual cost of construction based on the invoice cost similar to any other type of financing. (d) In the case of a facility that is acquired from another taxpayer: (i) If, after the acquisition, the buyer has possession of the cost information, the valuation of the facility shall continue based on the seller's cost as if there were no change in ownership, except for land as provided in subsection A, paragraph 1. (ii) If, after the acquisition, the buyer does not possess the cost information, the acquisition cost in an arm's length transaction shall be used. (e) For generation facilities that were in service before January 1, 2001, costs incurred before January 1, 2002 shall be computed in accordance with section 42-14158. For these facilities, all costs incurred on or after January 1, 2002 shall be reported in accordance with subdivisions (a) through (d) of this paragraph. 7. The department shall not value personal property construction work in progress until the property is first placed in commercial service. For the purposes of this paragraph, "commercial service" means: (a) For machinery and equipment used in the generation of electricity being valued and placed on the tax roll for the first time, the official assumption of operation and ownership of the machinery and equipment from the contractor by the plant operator. (b) For machinery and equipment added to existing electric generation facilities, that the construction work has progressed to a sufficient degree for the machinery and equipment to be useful for the purpose for which it is being constructed. (c) For machinery and equipment related to self-constructed facilities, that the construction work has progressed to a sufficient degree for the machinery and equipment to be useful for the purpose for which it is being constructed. B. For the purposes of this section: 1. "Electric generation facility" means all land, buildings and personal property that is situated in this state and that is used or useful for the generation of electric power. 2. "Personal property" means all tangible property except for land and real property improvements as defined in this section. Personal property includes foundations or supports for the machinery or apparatus for which they are provided, including water cooling towers. 3. "Real property improvements" means buildings, including administration buildings, maintenance warehouses and guard shacks, water retention ponds, sewage treatment ponds, reservoirs, sidewalks, drives, curbs, parking lots, tunnels, duct banks, canals, fencing and landscaping. 42-14157. Allocation of electric transmission, distribution and generation values among taxing jurisdictions; definition A. The value of property computed under sections 42-14154, 42-14156 and 42-14159 shall be allocated among the various taxing jurisdictions as follows: 1. Combine the values for plant in service and materials and supplies pursuant to section 42-14154 or 42-14159 with the value of electric generation facilities pursuant to section 42-14156 for the owner or the combined group. 2. Combine the original plant in service costs and materials and supplies pursuant to section 42-14154 or 42-14159 with the original cost of generation plant facilities pursuant to section 42-14156 for the owner or the combined group. 3. Allocate the value determined under paragraph 1 of this subsection among the respective taxing jurisdictions in proportion to the original cost determined under paragraph 2 of this subsection. B. The unit value of environmental protection facilities under section 42-14154 or 42-14159 shall be allocated among the various taxing jurisdictions in proportion to the original cost of the environmental protection facilities of the owner or the combined group in the respective taxing jurisdiction. C. Construction work in progress determined under sections 42-14154, 42-14156 and 42-14159 shall be allocated among the various taxing jurisdictions on a situs basis separately from the unit value of environmental protection facilities. D. The unit value of renewable energy equipment determined under section 42-14155 shall be allocated among the various taxing jurisdictions in proportion to the original cost of the renewable energy equipment of the owner or the combined group in the respective taxing jurisdiction. E. For the purposes of this section, "combined group" means all corporations and other entities that are at least eighty per cent owned or controlled by a common parent entity, determined by reference to voting shares. 42-14158. Existing generation facilities; computing adjusted original cost; computing full cash value; definitions A. To achieve equity in the full cash values of existing and new electric generation facilities, the department shall compute adjusted original costs for existing generation facilities in lieu of actual cost for use in determining the full cash values in accordance with section 42-14156. Adjusted original costs shall be used to determine full cash values for existing generation facilities for tax year 2004 and subsequent years. Retirements of property in service before January 1, 2002 shall be deducted based on the percentage of adjusted original cost to actual original cost for each vintage year. For any property added to an existing generation facility on or after January 1, 2002, or for an electric generation facility placed in service on or after January 1, 2001, cost shall be determined in accordance with the provisions of section 42-14156. B. To compute the adjusted original cost of property placed in service before January 1, 2002 for existing generation facilities, the department shall: 1. Determine the full cash value ratio. 2. Determine the original cost by vintage year for 2001 and all prior years. 3. Multiply the original costs for real property improvements and personal property by vintage year by the full cash value ratio to reflect the tax year 2003 full cash value by vintage year. 4. Divide the full cash value by vintage year as calculated in paragraph 3 of this subsection of real property improvements and personal property by the valuation factors reflected in the department’s valuation tables as prescribed in section 42-14156, without phase-in adjustments prescribed in section 42-14156, subsection A, paragraph 3. C. For the purposes of this section: 1. "Existing generation facility" means the property of an electric generation facility that was valued by the department as of January 1, 2001. It does not include any property added to the facility after January 1, 2002. 2. "Full cash value ratio" means the full cash value of the existing generation facility for tax year 2003, excluding the value of land associated with the facility, renewable energy equipment and materials and supplies as of December 31, 2001, divided by the total original cost, excluding the cost of land associated with the facility, renewable energy equipment and materials and supplies for the facility as of December 31, 2001. 3. "Original cost" means the actual cost of acquiring or constructing property, including additions, retirements, adjustments and transfers. 4. "Vintage year" means the first year of depreciation of the asset reflected on the owner’s balance sheet. 42-14159. Computing valuation of distribution cooperatives; standard market value factor; definitions A. The department shall determine the valuation of the electric distribution and transmission property of a distribution cooperative as defined in section 42-14154 that is operating in this state as follows: 1. Compute the value of the property pursuant to section 42-14154, subsection B. 2. Multiply the value computed under paragraph 1 of this subsection by the standard market value factor determined under subsection E of this section. B. The value of construction work in progress is fifty per cent of the amount spent and entered on the taxpayer's accounting records as of December 31 of the preceding calendar year as construction work in progress. C. The value of materials and supplies is the total cost of this property as of December 31 of the preceding calendar year. D. The value of environmental protection facilities that are required by law is fifty per cent of the depreciated cost of the facilities. E. The standard market value factor shall be determined as follows: 1. Using the most recent publicly available data obtained from annual reports produced by the federal energy regulatory commission or the publicly available data filed with the securities and exchange commission on form 10-k for each investor-owned electric utility operating in this state, calculate the following standard factors for each investor-owned electric utility: (a) Megawatt hours sold to ultimate customers per ultimate customer. (b) Megawatt hours sold to ultimate customers per net dollar invested in distribution plant. (c) Megawatt hours sold to ultimate customers per dollar of operating and maintenance expense. (d) Megawatt hours sold to ultimate customers per dollar of distribution operating and maintenance expense. (e) The number of ultimate customers per net dollar invested in distribution plant. (f) The number of ultimate customers per mile of distribution line. 2. Determine the average of each of the six standard factors under paragraph 1 of this subsection for the investor-owned electric utilities operating in this state as follows: (a) For each factor, add the values obtained for that factor for all investor-owned electric utilities operating in this state. (b) Divide the sum obtained under subdivision (a) of this paragraph for each factor by the number of investor-owned electric utilities operating in this state that were included in the calculation under subdivision (a) of this paragraph for that factor. 3. Using information obtained from the most recent report filed with the department under section 42-14152, calculate each of the standard factors under paragraph 1 of this subsection for the distribution cooperative. 4. Divide each of the six standard factors for the distribution cooperative calculated under paragraph 3 of this subsection by the corresponding average standard factors calculated under paragraph 2 of this subsection. 5. Add the six ratios calculated pursuant to paragraph 4 of this subsection, and divide that sum by six. The quotient is the standard market value factor. F. For the purposes of this section: 1. "Distribution line" means a line that is capable of transporting voltage of 69,000 volts or less and that is employed between the primary source of power supply and delivery to a customer. 2. "Distribution plant" means all property that is situated in this state and that is used or useful for the distribution of electric power except land rights, materials and supplies, and licensed vehicles. 3. "Investor-owned electric utility" means a business organization that provides electric power production and distribution, is regarded as a utility and is managed as a private enterprise rather than a function of a government or as a utility cooperative. 42-14201. Annual determination of valuation The department shall annually determine, in the manner prescribed by this article, the valuation of pipelines that operate in this state. 42-14202. Annual report for determining valuation; failure to file; penalty; forfeiture of appeal rights A. On or before April 1 of each year each company that is valued pursuant to this article shall file a report with the department, under oath, stating the information that the department requires to enable it to make a valuation of the company. B. On written request and for good cause shown, the director may extend the time for filing the report required by this section. C. If a company fails to file the report on or before April 1 of the valuation year, or the extended due date if an extension is granted, the department shall: 1. Estimate the value of the property based on one hundred five per cent of the preceding year's full cash value or on any information that is available to the department. 2. Also assess a penalty in the amount of the lesser of: (a) One-half of one per cent of the value that is estimated by the department. (b) One hundred dollars per day for each day the company fails to file the report beyond the due date. D. If the report is not filed by May 20 of the valuation year, the company forfeits its right to appeal the valuation and classification pursuant to section 42-14005. 42-14203. Determining and reporting valuation A. On or before August 31 of each year, the department shall find the full cash value of the property of each pipeline that operates in this state. B. The valuation required by this section is the value determined as of January 1 of the valuation year. C. On or before November 30 of each year, the department shall transmit the locations, descriptions and valuations to the respective county assessors. 42-14204. Computing valuation of pipelines; definitions A. The valuation of pipeline property that is subject to valuation for tax purposes shall be determined in the manner prescribed by this section. B. The value of construction work in progress equals eighty-five percent of the amount spent and entered on the taxpayer's accounting records as of December 31 of the preceding calendar year as construction work in progress. C. The value of materials and supplies equals the total cost of materials and supplies as of December 31 of the preceding calendar year. D. The value of gas stored underground equals the total cost of gas stored underground as of December 31 of the preceding calendar year. E. The value of noncapitalized leased operating property shall be determined by applying to the original cost of the noncapitalized leased operating property the ratio derived from dividing the preliminary system value by the original cost of the plant. F. The department shall determine the valuation of a pipeline as follows: 1. Determine the base value. 2. Compute the value change factor. 3. Multiply the values in paragraphs 1 and 2 of this subsection to compute the preliminary system value. If the value change factor does not apply, the preliminary system value is the system net book value of plant in service as of December 31 immediately preceding the current year. 4. Add the value of construction work in progress, materials and supplies, noncapitalized leased operating property and gas stored underground to the preliminary system value. 5. Compute the allocation factor. 6. Multiply the sum computed pursuant to paragraph 4 of this subsection by the allocation factor. G. All terms and applications of terms shall be interpreted as nearly as possible, under the circumstances, according to the federal energy regulatory commission uniform system of accounts for pipelines in effect on January 1, 1989. H. For the purposes of this section: 1. "Allocation factor" means the factor used to assign a portion of the system value to this state and is computed by dividing the total Arizona original cost of plant in service, materials and supplies, construction work in progress, noncapitalized leased operating property and gas stored underground as of December 31 of the preceding calendar year by the corresponding total system original cost as of December 31 of the preceding calendar year. 2. "Asset change factor" means dividing the system net book value of plant in service as of December 31 immediately preceding the current valuation year by the system net book value of plant in service as of December 31 immediately preceding the prior valuation year. If the denominator is zero, the asset change factor does not apply. 3. "Base value" means the final full cash value of the system plant in service in the preceding valuation year. If the property was not subject to property valuation in this state in the preceding valuation year, the value is the net book value of plant in service plus the value of construction work in progress, materials and supplies, noncapitalized leased operating property and gas stored underground. If ownership changes, the base value shall be transferred to the new owner. If one of the circumstances described in section 42-14205 applies, the base value shall be adjusted. 4. "Capitalization rate" means the sum of the year-end thirty-year treasury bond rate plus 6.8 percent. 5. "Change in capitalization rate" means dividing the current year capitalization rate by the previous year capitalization rate. 6. "Change in earnings before interest and taxes" means dividing the average earnings before interest and income taxes for the three years immediately preceding the current valuation year by the average earnings before interest and income taxes for the three years immediately preceding the previous valuation year. If less than four years of earnings data are available, this factor does not apply. If four years of earnings data are available and a major plant addition or retirement occurs, for the valuation year after the addition or retirement occurs, this ratio shall be derived by dividing the earnings before interest and income taxes for the year immediately preceding the current valuation year by the earnings before interest and income taxes for the year immediately preceding the previous valuation year. 7. "Construction work in progress" means the total of the balances of work orders for plant in process of construction on the last day of the preceding calendar year. 8. "Gas stored underground" means the noncurrent portion of the cost of recoverable gas that is purchased or produced by the utility, that is stored in depleted or partially depleted gas or oil fields or other underground reservoirs and that is not held to meet the service requirements of the utility's customers. 9. "Income change factor" means dividing the change in earnings before interest and taxes by the change in the capitalization rate. If the change in earnings before interest and taxes does not apply, the income change factor does not apply. 10. "Major plant addition or retirement" means an addition or retirement of plant in the year preceding the current valuation year that results in an increase or decrease of at least twenty percent of the original cost of plant in service. 11. "Noncapitalized leased operating property" means property that is subject to an agreement that transfers the use of property to the lessee during the term of the lease and that is not capitalized on the lessee's balance sheet. 12. "Preliminary system value" means the base value multiplied by the value change factor. 13. "System net book value of plant" means the original cost of the system plant in service minus the related accumulated provision for depreciation. 14. "System value" means the sum of the system value of plant in service, construction work in progress, materials and supplies, noncapitalized leased property and gas stored underground. 15. "Value change factor" means the average of the income change factor and the asset change factor. If the income change factor does not apply, the value change factor is the asset change factor. If the asset change factor does not apply, the value change factor does not apply. 42-14205. Adjustments to base value to reflect market value To accurately assess ongoing business operations, income and property, the department shall adjust the base value used to determine the full cash value of pipeline property as necessary to reflect changed circumstances. The circumstances that require adjustments to the base value are as follows: 1. There is a final ruling by a court of competent jurisdiction in this state that the full cash value of a pipeline in this state using the method prescribed by section 42-14204 is more than the market value of the pipeline property using standard appraisal methods and techniques. In such cases, the final full cash value of the system plant in service determined by the court for the most recent tax year involved in any such tax appeal is the base value for the subsequent tax year, and the department shall adjust all valuations for future years pursuant to section 42-14204. 2. There is an agreement between a pipeline company and the department that is the result of a pending tax appeal, in which the parties enter into a binding stipulation, approved by a court of competent jurisdiction, to adjust the full cash value of the system plant in service as of a specific valuation date. In such cases, the department shall adjust the base value as set forth in the stipulation. 3. There is an agreement between a pipeline company and the department to correct an error in the calculation of the full cash value of the system plant in service for a pipeline that operates in this state. In such cases, the department shall adjust the base value as set forth in the agreement. Any agreement to adjust the base value to correct such an error shall be in writing and signed by the director and an officer of the pipeline company before the base value is adjusted. 42-14251. Definitions In this article, unless the context otherwise requires: 1. "Air commerce" means the scheduled transportation by aircraft of persons or property for hire in interstate, intrastate or international transportation. 2. "Aircraft" means any device that is used or designed for navigation or flight through the air. 3. "Aircraft time" means the number of minutes in the preceding calendar year in which flight property was in the possession of an airline company. 4. "Airline company" means any person who directly or indirectly undertakes to engage in the business of scheduled air commerce. 5. "Fleet type" means aircraft type and model. 6. "Flight property" means all airline company aircraft of the types used in this state except aircraft that are permanently removed from operations. 7. "Operating", "operations" or "operated" means regularly scheduled aircraft landings or takeoffs. 8. "Original cost" means the capitalized acquisition cost to the original purchaser from the manufacturer of airframes and engines plus substantial modifications. If the acquisition cost cannot be determined, original cost means the manufacturer's original list price for the model, type and year plus substantial modifications. 9. "Person" means any individual, corporation, firm, partnership, company or association and includes a guardian, trustee, executor, administrator, receiver or conservator or any person who acts in a fiduciary capacity. 10. "Small flight property" means all airline company aircraft of the types that are used in this state, not permanently removed from operations, with a maximum passenger capacity of less than fifty-six seats and a maximum payload capacity of less than eighteen thousand pounds. 11. "State ground time" means the number of minutes that flight property is considered to be on the ground in this state during the preceding calendar year and is computed by multiplying the number of departures of flight property in this state during the preceding calendar year by forty-five. 12. "System ground time" means the number of minutes that flight property is on the ground systemwide during the preceding calendar year and is computed by subtracting the number of revenue and nonrevenue airborne minutes of all flight property during the preceding calendar year from aircraft time. 42-14252. Annual determination of valuation The valuation of flight property and small flight property of airline companies operating in this state shall be determined annually by the department in the manner prescribed by this article. 42-14253. Annual report for purposes of determining valuation; failure to file; penalty; forfeiture of appeal rights A. On or before April 1 of each year each company that operates in air commerce in this state shall file a report with the department under oath stating specifically the information prescribed by the department to allow it to determine the valuation required by this article. The department shall consider the information in the report in determining the valuation under this article, but that information is not conclusive. B. On written request and for good cause shown, the director may extend the time for filing the report required by this section. C. If a company that operates in air commerce fails to file the report on or before April 1 of the valuation year, or the extended due date if an extension is granted, the department shall: 1. Estimate the value of the property based on one hundred five per cent of the preceding year's full cash value or on any information that is available to the department. 2. Also assess a penalty in the amount of the lesser of: (a) One-half of one per cent of the value that is estimated by the department. (b) One hundred dollars per day for each day the company fails to file the report beyond the due date. D. If the report is not filed by May 20 of the valuation year, the company forfeits its right to appeal the valuation and classification pursuant to section 42-14005. 42-14254. Determination of value A. On or before August 31 the department shall determine the full cash value of all flight property that is operated in this state in air commerce by each airline company. The full cash value is the value determined as of January 1 of the valuation year. B. The department shall: 1. Determine the valuation of flight property by fleet type. 2. Determine the valuation of each fleet type by the original cost less depreciation. 3. Compute depreciation using fifteen year straight line depreciation to salvage value. Salvage value is: (a) Ten per cent of original cost of aircraft that are out of production. (b) Twenty-five per cent of original cost of aircraft that are being manufactured as of January of the valuation year. 4. Allow additional obsolescence if supported by market evidence. C. Small flight property that is operated in this state in air commerce shall be valued at thirty per cent of its original cost less depreciation and additional allowed obsolescence. D. The department shall determine the valuation that is apportioned to this state of each fleet type as the proportion of the total valuation determined on the basis of the total of the following percentages: 1. Fifty per cent of the percentage that the total state ground time during the preceding calendar year is of the total system ground time during the preceding calendar year. 2. Fifty per cent of the percentage that the total mileage scheduled within this state of the fleet type on flights operated in this state during the preceding calendar year is of the total mileage scheduled within and without this state of the fleet type during the preceding calendar year. 42-14255. Assessment, levy and collection of tax; limitation on small airline company tax A. The department shall annually: 1. Enter in its records the full cash value as determined under this article of the flight property of the airline companies in this state. 2. Assess the property as provided by sections 42-12005 and 42-15005. 3. Levy a tax against the values so determined and assessed at a rate that equals the sum of the average rates for primary and secondary property taxes in the taxing jurisdictions in this state for the current year. 4. Collect the taxes according to the schedules prescribed by section 42-18052. 5. Deposit, pursuant to sections 35-146 and 35-147, the tax revenues in the state aviation fund. B. The tax imposed by this section is in lieu of all other ad valorem taxes on the flight property of airline companies in this state. C. Delinquent taxes bear interest at the rate determined pursuant to section 42-1123. D. The full cash values that are used for tax purposes pursuant to subsection A of this section are a matter of public record and are not confidential information under chapter 2, article 1 of this title. 42-14256. Administrative review and appeal An airline company may apply for administrative review and appeal of any determination under this article pursuant to article 1 of this chapter. 42-14257. Debt; lien The tax imposed by this article: 1. Is a debt of the airline company. 2. May be collected by an action instituted and prosecuted by the attorney general on the director's request. 3. Is a lien pursuant to section 42-17154 against the assessed flight property. 4. Is also a lien against all other property of the taxpayer under section 42-1151. 42-14301. Definitions In this article, unless the context otherwise requires: 1. "Entire receipts" means, as applied to a private car company operating partly in and partly outside this state, all earnings on business beginning and ending in this state, and a proportion based on the proportion of mileage in this state to the entire mileage over which the business is done, of earnings on all trans-state and interstate business passing through, into or out of this state. 2. "Private car company" means a person who is engaged in the business of operating, furnishing or leasing cars, whether or not owned by the person and regardless of what name is applied to the cars, to be used for transporting or accommodating persons or freight over railroad lines that are located wholly or partially in this state and that are not owned, leased or operated by that person. 42-14302. Situs and valuation of cars for tax purposes A car that is described in section 42-14301, paragraph 2 and that is used exclusively in this state or that is used partly in and partly outside this state: 1. Has a situs in this state for purposes of taxation. 2. Is subject to valuation under this article. 42-14303. Annual statement On or before April 1 each private car company shall file an annual statement with the department. The statement shall be in a form prescribed and furnished by the department and under the oath of a company officer who is designated by the company. The statement shall contain: 1. The name and nature of the business of the company, whether the company is an individual, association or corporation and under the laws of which state or country it is organized. 2. The location of its principal office. 3. The names and mailing addresses of the company's president, secretary, auditor, treasurer, superintendent and general manager and the officer designated by the company. 4. The entire receipts including all amounts that were earned or charged, whether or not actually received, for business done by the company in this state for the preceding calendar year. 5. The proportion of its entire receipts for business transacted in this state in connection with other persons for the year. 6. The total mileage made by the rolling stock of the company over railroads in this state and in other states during the same period. 7. The total miles of railroad in and outside this state over which the company's rolling stock has been run during the same period. 8. The average number of miles traveled by the cars of each class of cars during the year. 9. The number of cars necessary for the mileage traveled in this state, under circumstances that ordinarily attend the use of cars, and if different classes of cars are used by the company, of each class of cars. 10. The full cash value on that date of the cars necessary to provide for mileage to be reported as required by this article. 11. The real and personal property owned by the company that is subject to taxation in this state and the location and full cash value of the property in the county or municipality where it is located. 12. Such other facts and information as the department requires. 42-14304. Failure to make annual statement; penalty; action for recovery; false or fraudulent statement; classification A. If a private car company knowingly fails or refuses to file the statement required by this article, the department shall assess a penalty in the amount of the lesser of: (a) One-half of one per cent of the value that is estimated by the department. (b) One hundred dollars per day for each day the company fails to file the statement after April 1. B. On the request of the director, the attorney general shall institute an action in the name of this state to recover the penalty. C. If a private car company fails or refuses to make the statement or to furnish the department with the information it requests, the department shall obtain the information in another manner. D. A person who makes a false or fraudulent statement with the intent to defeat or evade assessment is guilty of a class 2 misdemeanor. 42-14305. Determination of valuation A. On or before June 15 of each year, the department shall determine the full cash value of the company's property in this state whether it is used in intrastate or interstate business. That value constitutes the full cash value of the property of the private car company in this state for that year. B. The valuation required by this section is the value determined as of January 1 of the valuation year. C. The department shall immediately transmit the valuation to the private car company by first class mail or by e-mail. 42-14306. Administrative review of valuation A. On or before July 15 of each year, a private car company may request in writing that the department review its valuation. The department shall rule on any review of valuation on or before August 31 and shall notify the private car company of its ruling by first class mail or e-mail. B. Representing a taxpayer before the department or appearing on a taxpayer's behalf is not considered to be the practice of law. 42-14307. Appeals A. On or before October 1 a private car company may appeal the department's valuation of its property to the state board of equalization as provided by section 42-16158. The state board shall immediately notify the department of the appeal. B. The state board shall decide all private car company appeals on or before October 31. C. A private car company may also apply for administrative review and appeal of any determination under this article pursuant to article 1 of this chapter. 42-14308. Assessment, levy and collection of tax A. The department shall annually: 1. Enter in its records the full cash value of each private car company in this state as determined under this article. 2. Assess the property as provided by sections 42-12005 and 42-15005. 3. Levy a tax against the values so determined and assessed at a rate that equals the sum of the average rates for primary and secondary property taxes in the taxing jurisdictions in this state for the current year. 4. Collect the taxes that are: (a) Due and payable on the following October 1. (b) Delinquent after the following November 1. 5. Deposit, pursuant to sections 35-146 and 35-147, the tax revenues in the state general fund. B. The tax imposed by this section is in lieu of all other taxes on the property and business of private car companies in this state except for the annual license tax and registration fee. C. Delinquent taxes bear interest at the rate determined pursuant to section 42-1123 for each subsequent month in which the tax remains unpaid. D. The full cash values that are used for tax purposes pursuant to subsection A of this section are a matter of public record and are not confidential information under chapter 2, article 1 of this title. 42-14309. Debt; lien The tax imposed by this article: 1. Is a debt of the private car company. 2. May be collected by an action instituted and prosecuted by the attorney general on the director's request. 3. Is a lien pursuant to section 42-17154 against the private car property. 4. Is also a lien against all other property of the taxpayer under section 42-1151. 42-14351. Annual determi