Third Substitute H.B. 54

Senator Wayne L. Niederhauser proposes the following substitute bill:

1 PROPERTY TAX ASSESSMENT REVISIONS
2 2008 GENERAL SESSION
3 STATE OF UTAH
4 Chief Sponsor: Wayne A. Harper
5 Senate Sponsor: Wayne L. Niederhauser
6
7 LONG TITLE
8 General Description:
9 This bill amends provisions in the Property Tax Act relating to the real property
10 appraisal requirements for county assessors.
11 Highlighted Provisions:
12 This bill:
13 . defines terms;
14 . requires a county assessor of a first or second class county to use a computer
15 assisted mass appraisal system to conduct its annual update of property values;
16 . requires a county assessor to maintain a record of the last property review date for
17 each parcel of real property located within the county assessor's county on the
18 county's computer system;
19 . requires a county assessor to prepare a five-year plan to comply with the statutory
20 property review requirements;
21 . requires a county assessor to create and update a database with sales and property
22 characteristic information;
23 . requires a county assessor to include the last property review date for a parcel of
24 property on the property owner's tax notice;
25 . provides a penalty if a county assessor fails to comply with statutory property

26 review requirements;
27 . requires a county assessor to report certain information to the Tax Commission;
28 . requires the Tax Commission to report certain information to the Revenue and
29 Taxation Interim Committee; and
30 . makes technical changes.
31 Monies Appropriated in this Bill:
32 None
33 Other Special Clauses:
34 This bill takes effect on January 1, 2009.
35 This bill coordinates with H.B. 186, Property Tax -- Assessment and Collection
36 Amendments, by changing technical cross references.
37 Utah Code Sections Affected:
38 AMENDS:
39 59-2-102, as last amended by Laws of Utah 2007, Chapters 107, 234, and 329
40 59-2-303.1, as last amended by Laws of Utah 1995, Chapter 271
41 59-2-505, as last amended by Laws of Utah 2003, Chapter 208
42 59-2-906.2, as last amended by Laws of Utah 2005, Chapter 195
43 59-2-918.5, as last amended by Laws of Utah 2000, Chapter 61
44 59-2-918.6, as enacted by Laws of Utah 2007, Chapter 297
45 59-2-919, as last amended by Laws of Utah 2006, Chapters 26 and 104
46 59-2-1004, as last amended by Laws of Utah 2001, Chapter 106
47 59-2-1330, as last amended by Laws of Utah 2002, Chapters 196 and 240
48 ENACTS:
49 59-2-919.1, Utah Code Annotated 1953
50
51 Be it enacted by the Legislature of the state of Utah:
52 Section 1. Section 59-2-102 is amended to read:
53 59-2-102. Definitions.
54 As used in this chapter and title:
55 (1) "Aerial applicator" means aircraft or rotorcraft used exclusively for the purpose of
56 engaging in dispensing activities directly affecting agriculture or horticulture with an

57 airworthiness certificate from the Federal Aviation Administration certifying the aircraft or
58 rotorcraft's use for agricultural and pest control purposes.
59 (2) "Air charter service" means an air carrier operation which requires the customer to
60 hire an entire aircraft rather than book passage in whatever capacity is available on a scheduled
61 trip.
62 (3) "Air contract service" means an air carrier operation available only to customers
63 who engage the services of the carrier through a contractual agreement and excess capacity on
64 any trip and is not available to the public at large.
65 (4) "Aircraft" is as defined in Section 72-10-102 .
66 (5) "Airline" means any air carrier operating interstate routes on a scheduled basis
67 which offers to fly passengers or cargo on the basis of available capacity on regularly scheduled
68 routes.
69 (6) "Assessment roll" means a permanent record of the assessment of property as
70 assessed by the county assessor and the commission and may be maintained manually or as a
71 computerized file as a consolidated record or as multiple records by type, classification, or
72 categories.
73 (7) (a) "Certified revenue levy" means a property tax levy that provides the same
74 amount of ad valorem property tax revenue as was collected for the prior year, plus new
75 growth, but exclusive of revenue from collections from redemptions, interest, and penalties.
76 (b) For purposes of this Subsection (7), "ad valorem property tax revenue" does not
77 include property tax revenue received by a taxing entity from personal property that is:
78 (i) assessed by a county assessor in accordance with Part 3, County Assessment; and
79 (ii) semiconductor manufacturing equipment.
80 (8) "County-assessed commercial vehicle" means:
81 (a) any commercial vehicle, trailer, or semitrailer which is not apportioned under
82 Section 41-1a-301 and is not operated interstate to transport the vehicle owner's goods or
83 property in furtherance of the owner's commercial enterprise;
84 (b) any passenger vehicle owned by a business and used by its employees for
85 transportation as a company car or vanpool vehicle; and
86 (c) vehicles which are:
87 (i) especially constructed for towing or wrecking, and which are not otherwise used to

88 transport goods, merchandise, or people for compensation;
89 (ii) used or licensed as taxicabs or limousines;
90 (iii) used as rental passenger cars, travel trailers, or motor homes;
91 (iv) used or licensed in this state for use as ambulances or hearses;
92 (v) especially designed and used for garbage and rubbish collection; or
93 (vi) used exclusively to transport students or their instructors to or from any private,
94 public, or religious school or school activities.
95 (9) (a) Except as provided in Subsection (9)(b), for purposes of Section 59-2-801 ,
96 "designated tax area" means a tax area created by the overlapping boundaries of only the
97 following taxing entities:
98 (i) a county; and
99 (ii) a school district.
100 (b) Notwithstanding Subsection (9)(a), "designated tax area" includes a tax area created
101 by the overlapping boundaries of:
102 (i) the taxing entities described in Subsection (9)(a); and
103 (ii) (A) a city or town if the boundaries of the school district under Subsection (9)(a)
104 and the boundaries of the city or town are identical; or
105 (B) a special service district if the boundaries of the school district under Subsection
106 (9)(a) are located entirely within the special service district.
107 (10) "Eligible judgment" means a final and unappealable judgment or order under
108 Section 59-2-1330 :
109 (a) that became a final and unappealable judgment or order no more than 14 months
110 prior to the day on which the notice required by [Subsection 59-2-919 (4)] Section 59-2-919.1 is
111 required to be mailed; and
112 (b) for which a taxing entity's share of the final and unappealable judgment or order is
113 greater than or equal to the lesser of:
114 (i) $5,000; or
115 (ii) 2.5% of the total ad valorem property taxes collected by the taxing entity in the
116 previous fiscal year.
117 (11) (a) "Escaped property" means any property, whether personal, land, or any
118 improvements to the property, subject to taxation and is:

119 (i) inadvertently omitted from the tax rolls, assigned to the incorrect parcel, or assessed
120 to the wrong taxpayer by the assessing authority;
121 (ii) undervalued or omitted from the tax rolls because of the failure of the taxpayer to
122 comply with the reporting requirements of this chapter; or
123 (iii) undervalued because of errors made by the assessing authority based upon
124 incomplete or erroneous information furnished by the taxpayer.
125 (b) Property which is undervalued because of the use of a different valuation
126 methodology or because of a different application of the same valuation methodology is not
127 "escaped property."
128 (12) "Fair market value" means the amount at which property would change hands
129 between a willing buyer and a willing seller, neither being under any compulsion to buy or sell
130 and both having reasonable knowledge of the relevant facts. For purposes of taxation, "fair
131 market value" shall be determined using the current zoning laws applicable to the property in
132 question, except in cases where there is a reasonable probability of a change in the zoning laws
133 affecting that property in the tax year in question and the change would have an appreciable
134 influence upon the value.
135 (13) "Farm machinery and equipment," for purposes of the exemption provided under
136 Section 59-2-1101 , means tractors, milking equipment and storage and cooling facilities, feed
137 handling equipment, irrigation equipment, harvesters, choppers, grain drills and planters, tillage
138 tools, scales, combines, spreaders, sprayers, haying equipment, and any other machinery or
139 equipment used primarily for agricultural purposes; but does not include vehicles required to be
140 registered with the Motor Vehicle Division or vehicles or other equipment used for business
141 purposes other than farming.
142 (14) "Geothermal fluid" means water in any form at temperatures greater than 120
143 degrees centigrade naturally present in a geothermal system.
144 (15) "Geothermal resource" means:
145 (a) the natural heat of the earth at temperatures greater than 120 degrees centigrade;
146 and
147 (b) the energy, in whatever form, including pressure, present in, resulting from, created
148 by, or which may be extracted from that natural heat, directly or through a material medium.
149 (16) (a) "Goodwill" means:

150 (i) acquired goodwill that is reported as goodwill on the books and records:
151 (A) of a taxpayer; and
152 (B) that are maintained for financial reporting purposes; or
153 (ii) the ability of a business to:
154 (A) generate income:
155 (I) that exceeds a normal rate of return on assets; and
156 (II) resulting from a factor described in Subsection (16)(b); or
157 (B) obtain an economic or competitive advantage resulting from a factor described in
158 Subsection (16)(b).
159 (b) The following factors apply to Subsection (16)(a)(ii):
160 (i) superior management skills;
161 (ii) reputation;
162 (iii) customer relationships;
163 (iv) patronage; or
164 (v) a factor similar to Subsections (16)(b)(i) through (iv).
165 (c) "Goodwill" does not include:
166 (i) the intangible property described in Subsection (20)(a) or (b);
167 (ii) locational attributes of real property, including:
168 (A) zoning;
169 (B) location;
170 (C) view;
171 (D) a geographic feature;
172 (E) an easement;
173 (F) a covenant;
174 (G) proximity to raw materials;
175 (H) the condition of surrounding property; or
176 (I) proximity to markets;
177 (iii) value attributable to the identification of an improvement to real property,
178 including:
179 (A) reputation of the designer, builder, or architect of the improvement;
180 (B) a name given to, or associated with, the improvement; or

181 (C) the historic significance of an improvement; or
182 (iv) the enhancement or assemblage value specifically attributable to the interrelation
183 of the existing tangible property in place working together as a unit.
184 (17) "Governing body" means:
185 (a) for a county, city, or town, the legislative body of the county, city, or town;
186 (b) for a local district under Title 17B, Limited Purpose Local Government Entities -
187 Local Districts, the local district's board of trustees;
188 (c) for a school district, the local board of education; or
189 (d) for a special service district under Title 17A, Chapter 2, Part 13, Utah Special
190 Service District Act:
191 (i) the legislative body of the county or municipality that created the special service
192 district, to the extent that the county or municipal legislative body has not delegated authority
193 to an administrative control board established under Section 17A-2-1326 ; or
194 (ii) the administrative control board, to the extent that the county or municipal
195 legislative body has delegated authority to an administrative control board established under
196 Section 17A-2-1326 .
197 (18) (a) For purposes of Section 59-2-103 :
198 (i) "household" means the association of persons who live in the same dwelling,
199 sharing its furnishings, facilities, accommodations, and expenses; and
200 (ii) "household" includes married individuals, who are not legally separated, that have
201 established domiciles at separate locations within the state.
202 (b) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
203 commission may make rules defining the term "domicile."
204 (19) (a) Except as provided in Subsection (19)(c), "improvement" means a building,
205 structure, fixture, fence, or other item that is permanently attached to land, regardless of
206 whether the title has been acquired to the land, if:
207 (i) (A) attachment to land is essential to the operation or use of the item; and
208 (B) the manner of attachment to land suggests that the item will remain attached to the
209 land in the same place over the useful life of the item; or
210 (ii) removal of the item would:
211 (A) cause substantial damage to the item; or

212 (B) require substantial alteration or repair of a structure to which the item is attached.
213 (b) "Improvement" includes:
214 (i) an accessory to an item described in Subsection (19)(a) if the accessory is:
215 (A) essential to the operation of the item described in Subsection (19)(a); and
216 (B) installed solely to serve the operation of the item described in Subsection (19)(a);
217 and
218 (ii) an item described in Subsection (19)(a) that:
219 (A) is temporarily detached from the land for repairs; and
220 (B) remains located on the land.
221 (c) Notwithstanding Subsections (19)(a) and (b), "improvement" does not include:
222 (i) an item considered to be personal property pursuant to rules made in accordance
223 with Section 59-2-107 ;
224 (ii) a moveable item that is attached to land:
225 (A) for stability only; or
226 (B) for an obvious temporary purpose;
227 (iii) (A) manufacturing equipment and machinery; or
228 (B) essential accessories to manufacturing equipment and machinery;
229 (iv) an item attached to the land in a manner that facilitates removal without substantial
230 damage to:
231 (A) the land; or
232 (B) the item; or
233 (v) a transportable factory-built housing unit as defined in Section 59-2-1502 if that
234 transportable factory-built housing unit is considered to be personal property under Section
235 59-2-1503 .
236 (20) "Intangible property" means:
237 (a) property that is capable of private ownership separate from tangible property,
238 including:
239 (i) moneys;
240 (ii) credits;
241 (iii) bonds;
242 (iv) stocks;

243 (v) representative property;
244 (vi) franchises;
245 (vii) licenses;
246 (viii) trade names;
247 (ix) copyrights; and
248 (x) patents;
249 (b) a low-income housing tax credit; or
250 (c) goodwill.
251 (21) "Low-income housing tax credit" means:
252 (a) a federal low-income housing tax credit under Section 42, Internal Revenue Code;
253 or
254 (b) a low-income housing tax credit under:
255 (i) Section 59-7-607 ; or
256 (ii) Section 59-10-1010 .
257 (22) "Metalliferous minerals" includes gold, silver, copper, lead, zinc, and uranium.
258 (23) "Mine" means a natural deposit of either metalliferous or nonmetalliferous
259 valuable mineral.
260 (24) "Mining" means the process of producing, extracting, leaching, evaporating, or
261 otherwise removing a mineral from a mine.
262 (25) (a) "Mobile flight equipment" means tangible personal property that is:
263 (i) owned or operated by an:
264 (A) air charter service;
265 (B) air contract service; or
266 (C) airline; and
267 (ii) (A) capable of flight;
268 (B) attached to an aircraft that is capable of flight; or
269 (C) contained in an aircraft that is capable of flight if the tangible personal property is
270 intended to be used:
271 (I) during multiple flights;
272 (II) during a takeoff, flight, or landing; and
273 (III) as a service provided by an air charter service, air contract service, or airline.

274 (b) (i) "Mobile flight equipment" does not include a spare part other than a spare
275 engine that is rotated:
276 (A) at regular intervals; and
277 (B) with an engine that is attached to the aircraft.
278 (ii) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,
279 the commission may make rules defining the term "regular intervals."
280 (26) "Nonmetalliferous minerals" includes, but is not limited to, oil, gas, coal, salts,
281 sand, rock, gravel, and all carboniferous materials.
282 (27) "Personal property" includes:
283 (a) every class of property as defined in Subsection (28) which is the subject of
284 ownership and not included within the meaning of the terms "real estate" and "improvements";
285 (b) gas and water mains and pipes laid in roads, streets, or alleys;
286 (c) bridges and ferries;
287 (d) livestock which, for the purposes of the exemption provided under Section
288 59-2-1112 , means all domestic animals, honeybees, poultry, fur-bearing animals, and fish; and
289 (e) outdoor advertising structures as defined in Section 72-7-502 .
290 (28) (a) "Property" means property that is subject to assessment and taxation according
291 to its value.
292 (b) "Property" does not include intangible property as defined in this section.
293 (29) "Public utility," for purposes of this chapter, means the operating property of a
294 railroad, gas corporation, oil or gas transportation or pipeline company, coal slurry pipeline
295 company, electrical corporation, telephone corporation, sewerage corporation, or heat
296 corporation where the company performs the service for, or delivers the commodity to, the
297 public generally or companies serving the public generally, or in the case of a gas corporation
298 or an electrical corporation, where the gas or electricity is sold or furnished to any member or
299 consumers within the state for domestic, commercial, or industrial use. Public utility also
300 means the operating property of any entity or person defined under Section 54-2-1 except water
301 corporations.
302 (30) "Real estate" or "real property" includes:
303 (a) the possession of, claim to, ownership of, or right to the possession of land;
304 (b) all mines, minerals, and quarries in and under the land, all timber belonging to

305 individuals or corporations growing or being on the lands of this state or the United States, and
306 all rights and privileges appertaining to these; and
307 (c) improvements.
308 (31) "Residential property," for the purposes of the reductions and adjustments under
309 this chapter, means any property used for residential purposes as a primary residence. It does
310 not include property used for transient residential use or condominiums used in rental pools.
311 (32) For purposes of Subsection 59-2-801 (1)(e), "route miles" means the number of
312 miles calculated by the commission that is:
313 (a) measured in a straight line by the commission; and
314 (b) equal to the distance between a geographical location that begins or ends:
315 (i) at a boundary of the state; and
316 (ii) where an aircraft:
317 (A) takes off; or
318 (B) lands.
319 (33) (a) "State-assessed commercial vehicle" means:
320 (i) any commercial vehicle, trailer, or semitrailer which operates interstate or intrastate
321 to transport passengers, freight, merchandise, or other property for hire; or
322 (ii) any commercial vehicle, trailer, or semitrailer which operates interstate and
323 transports the vehicle owner's goods or property in furtherance of the owner's commercial
324 enterprise.
325 (b) "State-assessed commercial vehicle" does not include vehicles used for hire which
326 are specified in Subsection (8)(c) as county-assessed commercial vehicles.
327 (34) "Taxable value" means fair market value less any applicable reduction allowed for
328 residential property under Section 59-2-103 .
329 (35) "Tax area" means a geographic area created by the overlapping boundaries of one
330 or more taxing entities.
331 (36) "Taxing entity" means any county, city, town, school district, special taxing
332 district, local district under Title 17B, Limited Purpose Local Government Entities - Local
333 Districts, or other political subdivision of the state with the authority to levy a tax on property.
334 (37) "Tax roll" means a permanent record of the taxes charged on property, as extended
335 on the assessment roll and may be maintained on the same record or records as the assessment

336 roll or may be maintained on a separate record properly indexed to the assessment roll. It
337 includes tax books, tax lists, and other similar materials.
338 Section 2. Section 59-2-303.1 is amended to read:
339 59-2-303.1. Mandatory cyclical appraisals.
340 (1) For purposes of this section:
341 (a) "Corrective action" includes:
342 (i) factoring pursuant to Section 59-2-704 ;
343 (ii) notifying the state auditor that the county failed to comply with the requirements of
344 this section; or
345 (iii) filing a petition for a court order requiring a county to take action.
346 (b) "Mass appraisal system" means a computer assisted mass appraisal system that:
347 (i) a county assessor uses to value real property; and
348 (ii) includes at least the following system features:
349 (A) has the ability to update all parcels of real property located within the county each
350 year;
351 (B) can be programmed with specialized criteria;
352 (C) provides uniform and equal treatment of parcels within the same class of real
353 property throughout the county; and
354 (D) annually updates all parcels of residential real property within the county using
355 accepted valuation methodologies as determined by rule.
356 (c) "Property review date" means the date a county assessor completes a detailed
357 review of the property characteristics of a parcel of real property in accordance with Subsection
358 (3)(a).
359 [(1) Beginning January 1, 1994, each] (2) (a) The county assessor shall annually
360 update property values of property as provided in Section 59-2-301 based on a systematic
361 review of current market data. [In addition,]
362 (b) The county assessor of a county of the first or second class shall conduct the annual
363 update described in Subsection (2)(a) by using a mass appraisal system on or before the
364 following:
365 (i) for a county of the first class, January 1, 2009; and
366 (ii) for a county of the second class, January 1, 2011.

367 (c) The county assessor and the commission shall jointly certify that the county's mass
368 appraisal system meets the requirements:
369 (i) described in Subsection (1)(b); and
370 (ii) of the commission.
371 (3) (a) In addition to the requirements in Subsection (2), the county assessor shall
372 complete a detailed review of property characteristics for each property at least once every five
373 years.
374 (b) The county assessor shall maintain on the county's computer system, a record of the
375 last property review date for each parcel of real property located within the county assessor's
376 county.
377 (4) (a) The commission shall take corrective action if the commission determines that:
378 (i) a county assessor has not satisfactorily followed the current mass appraisal
379 standards, as provided by law;
380 (ii) the sales-assessment ratio, coefficients of dispersion, or other statistical measures
381 of appraisal performance related to the studies required by Section 59-2-704 are not within the
382 standards provided by law; or
383 (iii) the county assessor has failed to comply with the requirements of [Subsection (1)]
384 this section.
385 [(b) For purposes of this section, "corrective action" includes:]
386 [(i) factoring pursuant to Section 59-2-704 ;]
387 [(ii) notifying the state auditor that the county failed to comply with the requirements
388 of this section; or]
389 [(iii) filing a petition for a court order requiring a county to take action.]
39