Arizona 55th Legislature - 1st Regular Session Status: In Committee 1 R cosponsors

SB 1111 — centrally assessed property; valuation; pipelines.

Last action — DP

  1. ✓
    Introduced
  2. 2
    In Committee
  3. 3
    Passed Senate
  4. 4
    Passed House
  5. 5
    To Executive
  6. 6
    Enacted

This bill died with 55th Legislature - 1st Regular Session. It reached “In Committee” and never advanced before the session ended, so it can no longer move — a new version would have to be reintroduced in the current session.

This bill is no longer active — its legislative session has ended, so there is no live prognosis. It would have to be reintroduced in the current session to move again.

Bill Text

What changed in the latest version

69 added · 69 removed

Plain-language change summary

The latest version of SB 1111 added clarifications and definitions for how pipeline property should be valued for tax purposes in Arizona. These changes aim to provide clear guidelines on calculating the value of construction work, materials, and gas storage related to pipelines. This matters because it helps ensure a fairer and more transparent valuation process, which could impact tax revenues and how businesses are assessed.

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SB1111 - 551R - I Ver       REFERENCE TITLE:
SB1111 - 551R - S Ver       Senate Engrossed   REFERENCE TITLE:
        State of Arizona Senate Fifty-fifth Legislature First Regular Session     SB 1111   Introduced by Senator Mesnard     AN ACT   amending section 42‑14204, Arizona Revised Statutes;
        State of Arizona Senate Fifty-fifth Legislature First Regular Session     SENATE BILL 1111       AN ACT   amending section 42-14204, Arizona Revised Statutes;
amending title 42, chapter 14, article 5, Arizona Revised Statutes, by adding section 42‑14205;
amending title 42, chapter 14, article 5, Arizona Revised Statutes, by adding section 42-14205;
Section 1.  Section 42-14204, Arizona Revised Statutes, is amended to read:
Section 1.
START_STATUTE42-14204.  Computing valuation of pipelines;
Section 42-14204, Arizona Revised Statutes, is amended to read:
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.
START_STATUTE42-14204.
B.  The value of construction work in progress equals eighty‑five per cent 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.
Computing valuation of pipelines;
C.  The value of materials and supplies equals the total cost of materials and supplies as of December 31 of the preceding calendar year.
definitions A.
D.  The value of gas stored underground equals the total cost of gas stored underground as of December 31 of the preceding calendar year.
The valuation of pipeline property that is subject to valuation for tax purposes shall be determined in the manner prescribed by this section.
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.
B.
F.  The department shall determine the valuation of a pipeline as follows:
The value of construction work in progress equals eighty-five per cent 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.
1.  Determine the base value.
C.
2.  Compute the value change factor.
The value of materials and supplies equals the total cost of materials and supplies as of December 31 of the preceding calendar year.
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.
D.
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.
The value of gas stored underground equals the total cost of gas stored underground as of December 31 of the preceding calendar year.
5.  Compute the allocation factor.
E.
6.  Multiply the sum computed pursuant to paragraph 4 of this subsection by the allocation factor.
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.
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.
F.
H.  In For the purposes of this section, unless the context otherwise requires:
The department shall determine the valuation of a pipeline as follows:
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.
1.
2.  The "Asset change factor" is computed by 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.
Determine the base value.
3.  The "Base value" is 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.
2.
If one of the circumstances described in section 42‑14205 applies, the base value shall be adjusted.
Compute the value change factor.
4.  The "Capitalization rate" is means the sum of the year‑end thirty year thirty-year treasury bond rate plus 6.8 per cent percent.
3.
5.  The "Change in capitalization rate" is computed by means dividing the current year capitalization rate by the previous year capitalization rate.
Multiply the values in paragraphs 1 and 2 of this subsection to compute the preliminary system value.
6.  The "Change in earnings before interest and taxes" is computed by 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.
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.
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.
4.
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.
Add the value of construction work in progress, materials and supplies, noncapitalized leased operating property and gas stored underground to the preliminary system value.
9.  The "Income change factor" is computed by means dividing the change in earnings before interest and taxes by the change in the capitalization rate.
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.
In For the purposes of this section, unless the context otherwise requires:
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.
The "Asset change factor" is computed by 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.
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If the denominator is zero, the asset change factor does not apply.
3.
The "Base value" is 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.
The "Capitalization rate" is means the sum of the year-end thirty year thirty-year treasury bond rate plus 6.8 per cent percent.
5.
The "Change in capitalization rate" is computed by means dividing the current year capitalization rate by the previous year capitalization rate.
6.
The "Change in earnings before interest and taxes" is computed by 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.
The "Income change factor" is computed by means dividing the change in earnings before interest and taxes by the change in the capitalization rate.
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 per cent percent of the original cost of plant in service.
10.
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.
"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 per cent percent of the original cost of plant in service.
12.  "Preliminary system value" means the base value multiplied by the value change factor.
11.
13.  "System net book value of plant" means the original cost of the system plant in service less minus the related accumulated provision for depreciation.
"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.
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.
12.
15.  The "Value change factor" is 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.
"Preliminary system value" means the base value multiplied by the value change factor.
END_STATUTE Sec. 2.  Title 42, chapter 14, article 5, Arizona Revised Statutes, is amended by adding section 42-14205, to read:
13.
START_STATUTE42-14205.  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:
"System net book value of plant" means the original cost of the system plant in service less minus the related accumulated provision for depreciation.
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.
14.
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.
"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.
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.
15.
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.
The "Value change factor" is means the average of the income change factor and the asset change factor.
END_STATUTE Sec. 3.  Retroactivity This act applies retroactively to tax years beginning from and after December 31, 2015.
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.
END_STATUTE Sec. 2.
Title 42, chapter 14, article 5, Arizona Revised Statutes, is amended by adding section 42-14205, to read:
START_STATUTE42-14205.
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.
END_STATUTE Sec. 3.
Retroactivity This act applies retroactively to tax years beginning from and after December 31, 2015.
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Action History

  1. DP

  2. Senate Second Reading

  3. Senate First Reading

Sponsors

Sponsorship breakdown

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1 sponsors · 0 co-sponsors · 92 not signed on

Sponsors (1)

Co-sponsors (0)

None.

Not signed on (92)

92 members have not signed on to this bill.

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"Not signed on" means a member has not sponsored or co-sponsored this bill — it does not imply opposition. Members flagged Voted No have a recorded No vote on this bill.

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Frequently asked questions

Who sponsors SB 1111?
SB 1111 is sponsored by J.D. Mesnard (Republican).
What is the current status of SB 1111?
This bill died with 55th Legislature - 1st Regular Session. It reached “In Committee” and never advanced before the session ended, so it can no longer move — a new version would have to be reintroduced in the current session.
Where can I track SB 1111?
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