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H.B. 87







Sponsor: Gordon E. Snow

             7      This act modifies the Property Tax Act to provide definitions and to address the property
             8      tax assessment of low-income housing tax credits and low-income housing covenants.
             9      This act makes technical changes. This act provides an effective date and provides for
             10      retrospective operation.
             11      This act affects sections of Utah Code Annotated 1953 as follows:
             12      AMENDS:
             13          59-2-102, as last amended by Chapters 196 and 240, Laws of Utah 2002
             14      ENACTS:
             15          59-2-301.3, Utah Code Annotated 1953
             16      Be it enacted by the Legislature of the state of Utah:
             17          Section 1. Section 59-2-102 is amended to read:
             18           59-2-102. Definitions.
             19          As used in this chapter and title:
             20          (1) "Aerial applicator" means aircraft or rotorcraft used exclusively for the purpose of
             21      engaging in dispensing activities directly affecting agriculture or horticulture with an
             22      airworthiness certificate from the Federal Aviation Administration certifying the aircraft or
             23      rotorcraft's use for agricultural and pest control purposes.
             24          (2) "Air charter service" means an air carrier operation which requires the customer to
             25      hire an entire aircraft rather than book passage in whatever capacity is available on a scheduled
             26      trip.
             27          (3) "Air contract service" means an air carrier operation available only to customers

             28      who engage the services of the carrier through a contractual agreement and excess capacity on
             29      any trip and is not available to the public at large.
             30          (4) "Aircraft" is as defined in Section 72-10-102 .
             31          (5) "Airline" means any air carrier operating interstate routes on a scheduled basis
             32      which offers to fly passengers or cargo on the basis of available capacity on regularly scheduled
             33      routes.
             34          (6) "Assessment roll" means a permanent record of the assessment of property as
             35      assessed by the county assessor and the commission and may be maintained manually or as a
             36      computerized file as a consolidated record or as multiple records by type, classification, or
             37      categories.
             38          (7) "Certified revenue levy" means a property tax levy that provides the same amount
             39      of ad valorem property tax revenue as was collected for the prior year, plus new growth, but
             40      exclusive of revenue from collections from redemptions, interest, and penalties.
             41          (8) "County-assessed commercial vehicle" means:
             42          (a) any commercial vehicle, trailer, or semitrailer which is not apportioned under
             43      Section 41-1a-301 and is not operated interstate to transport the vehicle owner's goods or
             44      property in furtherance of the owner's commercial enterprise;
             45          (b) any passenger vehicle owned by a business and used by its employees for
             46      transportation as a company car or vanpool vehicle; and
             47          (c) vehicles which are:
             48          (i) especially constructed for towing or wrecking, and which are not otherwise used to
             49      transport goods, merchandise, or people for compensation;
             50          (ii) used or licensed as taxicabs or limousines;
             51          (iii) used as rental passenger cars, travel trailers, or motor homes;
             52          (iv) used or licensed in this state for use as ambulances or hearses;
             53          (v) especially designed and used for garbage and rubbish collection; or
             54          (vi) used exclusively to transport students or their instructors to or from any private,
             55      public, or religious school or school activities.
             56          (9) (a) Except as provided in Subsection (9)(b), for purposes of Section 59-2-801 ,
             57      "designated tax area" means a tax area created by the overlapping boundaries of only the
             58      following taxing entities:

             59          (i) a county; and
             60          (ii) a school district.
             61          (b) Notwithstanding Subsection (9)(a), "designated tax area" includes a tax area created
             62      by the overlapping boundaries of:
             63          (i) the taxing entities described in Subsection (9)(a); and
             64          (ii) (A) a city or town if the boundaries of the school district under Subsection (9)(a)
             65      and the boundaries of the city or town are identical; or
             66          (B) a special service district if the boundaries of the school district under Subsection
             67      (9)(a) are located entirely within the special service district.
             68          (10) "Eligible judgment" means a final and unappealable judgment or order under
             69      Section 59-2-1330 :
             70          (a) that became a final and unappealable judgment or order no more than 14 months
             71      prior to the day on which the notice required by Subsection 59-2-919 (4) is required to be
             72      mailed; and
             73          (b) for which a taxing entity's share of the final and unappealable judgment or order is
             74      greater than or equal to the lesser of:
             75          (i) $5,000; or
             76          (ii) 2.5% of the total ad valorem property taxes collected by the taxing entity in the
             77      previous fiscal year.
             78          (11) (a) "Escaped property" means any property, whether personal, land, or any
             79      improvements to the property, subject to taxation and is:
             80          (i) inadvertently omitted from the tax rolls, assigned to the incorrect parcel, or assessed
             81      to the wrong taxpayer by the assessing authority;
             82          (ii) undervalued or omitted from the tax rolls because of the failure of the taxpayer to
             83      comply with the reporting requirements of this chapter; or
             84          (iii) undervalued because of errors made by the assessing authority based upon
             85      incomplete or erroneous information furnished by the taxpayer.
             86          (b) Property which is undervalued because of the use of a different valuation
             87      methodology or because of a different application of the same valuation methodology is not
             88      "escaped property."
             89          (12) "Fair market value" means the amount at which property would change hands

             90      between a willing buyer and a willing seller, neither being under any compulsion to buy or sell
             91      and both having reasonable knowledge of the relevant facts. For purposes of taxation, "fair
             92      market value" shall be determined using the current zoning laws applicable to the property in
             93      question, except in cases where there is a reasonable probability of a change in the zoning laws
             94      affecting that property in the tax year in question and the change would have an appreciable
             95      influence upon the value.
             96          (13) "Farm machinery and equipment," for purposes of the exemption provided under
             97      Section 59-2-1101 , means tractors, milking equipment and storage and cooling facilities, feed
             98      handling equipment, irrigation equipment, harvesters, choppers, grain drills and planters, tillage
             99      tools, scales, combines, spreaders, sprayers, haying equipment, and any other machinery or
             100      equipment used primarily for agricultural purposes; but does not include vehicles required to be
             101      registered with the Motor Vehicle Division or vehicles or other equipment used for business
             102      purposes other than farming.
             103          (14) "Geothermal fluid" means water in any form at temperatures greater than 120
             104      degrees centigrade naturally present in a geothermal system.
             105          (15) "Geothermal resource" means:
             106          (a) the natural heat of the earth at temperatures greater than 120 degrees centigrade;
             107      and
             108          (b) the energy, in whatever form, including pressure, present in, resulting from, created
             109      by, or which may be extracted from that natural heat, directly or through a material medium.
             110          (16) "Improvements" includes all buildings, structures, fixtures, fences, and
             111      improvements erected upon or affixed to the land, whether the title has been acquired to the
             112      land or not.
             113          (17) "Intangible property" means:
             114          (a) [means] property that is capable of private ownership separate from tangible
             115      property[; and (b) includes:], including:
             116          (i) moneys;
             117          (ii) credits;
             118          (iii) bonds;
             119          (iv) stocks;
             120          (v) representative property;

             121          (vi) franchises;
             122          (vii) licenses;
             123          (viii) trade names;
             124          (ix) copyrights; and
             125          (x) patents[.]; or
             126          (b) a low-income housing tax credit.
             127          (18) "Low-income housing tax credit" means:
             128          (a) a federal low-income housing tax credit under Section 42, Internal Revenue Code;
             129      or
             130          (b) a low-income housing tax credit under:
             131          (i) Section 59-7-607 ; or
             132          (ii) Section 59-10-129 .
             133          [(18)] (19) "Metalliferous minerals" includes gold, silver, copper, lead, zinc, and
             134      uranium.
             135          [(19)] (20) "Mine" means a natural deposit of either metalliferous or nonmetalliferous
             136      valuable mineral.
             137          [(20)] (21) "Mining" means the process of producing, extracting, leaching, evaporating,
             138      or otherwise removing a mineral from a mine.
             139          [(21)] (22) (a) "Mobile flight equipment" means tangible personal property that is:
             140          (i) owned or operated by an:
             141          (A) air charter service;
             142          (B) air contract service; or
             143          (C) airline; and
             144          (ii) (A) capable of flight;
             145          (B) attached to an aircraft that is capable of flight; or
             146          (C) contained in an aircraft that is capable of flight if the tangible personal property is
             147      intended to be used:
             148          (I) during multiple flights;
             149          (II) during a takeoff, flight, or landing; and
             150          (III) as a service provided by an air charter service, air contract service, or airline.
             151          (b) (i) "Mobile flight equipment" does not include a spare part other than a spare

             152      engine that is rotated:
             153          (A) at regular intervals; and
             154          (B) with an engine that is attached to the aircraft.
             155          (ii) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,
             156      the commission may make rules defining the term "regular intervals."
             157          [(22)] (23) "Nonmetalliferous minerals" includes, but is not limited to, oil, gas, coal,
             158      salts, sand, rock, gravel, and all carboniferous materials.
             159          [(23)] (24) "Personal property" includes:
             160          (a) every class of property as defined in Subsection [(24)] (25) which is the subject of
             161      ownership and not included within the meaning of the terms "real estate" and "improvements";
             162          (b) gas and water mains and pipes laid in roads, streets, or alleys;
             163          (c) bridges and ferries; and
             164          (d) livestock which, for the purposes of the exemption provided under Section
             165      59-2-1112 , means all domestic animals, honeybees, poultry, fur-bearing animals, and fish.
             166          [(24)] (25) (a) "Property" means property that is subject to assessment and taxation
             167      according to its value.
             168          (b) "Property" does not include intangible property as defined in this section.
             169          [(25)] (26) "Public utility," for purposes of this chapter, means the operating property
             170      of a railroad, gas corporation, oil or gas transportation or pipeline company, coal slurry pipeline
             171      company, electrical corporation, telephone corporation, sewerage corporation, or heat
             172      corporation where the company performs the service for, or delivers the commodity to, the
             173      public generally or companies serving the public generally, or in the case of a gas corporation
             174      or an electrical corporation, where the gas or electricity is sold or furnished to any member or
             175      consumers within the state for domestic, commercial, or industrial use. Public utility also
             176      means the operating property of any entity or person defined under Section 54-2-1 except water
             177      corporations.
             178          [(26)] (27) "Real estate" or "real property" includes:
             179          (a) the possession of, claim to, ownership of, or right to the possession of land;
             180          (b) all mines, minerals, and quarries in and under the land, all timber belonging to
             181      individuals or corporations growing or being on the lands of this state or the United States, and
             182      all rights and privileges appertaining to these; and

             183          (c) improvements.
             184          [(27)] (28) "Residential property," for the purposes of the reductions and adjustments
             185      under this chapter, means any property used for residential purposes as a primary residence. It
             186      does not include property used for transient residential use or condominiums used in rental
             187      pools.
             188          [(28)] (29) For purposes of Subsection 59-2-801 (1)(e), "route miles" means the number
             189      of miles calculated by the commission that is:
             190          (a) measured in a straight line by the commission; and
             191          (b) equal to the distance between a geographical location that begins or ends:
             192          (i) at a boundary of the state; and
             193          (ii) where an aircraft:
             194          (A) takes off; or
             195          (B) lands.
             196          [(29)] (30) (a) "State-assessed commercial vehicle" means:
             197          (i) any commercial vehicle, trailer, or semitrailer which operates interstate or intrastate
             198      to transport passengers, freight, merchandise, or other property for hire; or
             199          (ii) any commercial vehicle, trailer, or semitrailer which operates interstate and
             200      transports the vehicle owner's goods or property in furtherance of the owner's commercial
             201      enterprise.
             202          (b) "State-assessed commercial vehicle" does not include vehicles used for hire which
             203      are specified in Subsection (8)(c) as county-assessed commercial vehicles.
             204          [(30)] (31) "Taxable value" means fair market value less any applicable reduction
             205      allowed for residential property under Section 59-2-103 .
             206          [(31)] (32) "Tax area" means a geographic area created by the overlapping boundaries
             207      of one or more taxing entities.
             208          [(32)] (33) "Taxing entity" means any county, city, town, school district, special taxing
             209      district, or any other political subdivision of the state with the authority to levy a tax on
             210      property.
             211          [(33)] (34) "Tax roll" means a permanent record of the taxes charged on property, as
             212      extended on the assessment roll and may be maintained on the same record or records as the
             213      assessment roll or may be maintained on a separate record properly indexed to the assessment

             214      roll. It includes tax books, tax lists, and other similar materials.
             215          Section 2. Section 59-2-301.3 is enacted to read:
             216          59-2-301.3. Definitions -- Assessment of real property subject to a low-income
             217      housing covenant.
             218          (1) As used in this section:
             219          (a) "low-income housing covenant" means an agreement:
             220          (i) between:
             221          (A) the Utah Housing Corporation; and
             222          (B) an owner of real property upon which residential housing is located; and
             223          (ii) in which the owner described in Subsection (1)(a)(i)(B) agrees to limit the amount
             224      of rent that a renter may be charged for the residential housing; and
             225          (b) "residential housing" means housing that:
             226          (i) is used:
             227          (A) for residential purposes; and
             228          (B) as a primary residence; and
             229          (ii) is rental property.
             230          (2) In assessing the fair market value of real property that is subject to a low-income
             231      housing covenant, a county assessor shall include as part of the assessment any effects the
             232      low-income housing covenant may have on the fair market value of the real property.
             233          Section 3. Effective date.
             234          Section 59-2-102 takes effect on January 1, 2004.
             235          Section 4. Retrospective operation.
             236          Section 59-2-301.3 has retrospective operation to January 1, 2003 .

Legislative Review Note
    as of 1-16-03 3:54 PM

This legislation amends the definition of intangible property to include a low-income housing
tax credit. Utah Constitution Article XIII, Section 2 addresses the taxation of tangible property
and intangible property. With respect to tangible property, the Utah Constitution generally
provides that tangible property shall be assessed and taxed at a "uniform and equal rate." Utah
Constitution Article XIII, Section 2 permits the exemption of intangible property from the
property tax under certain circumstances, and statute provides for such a property tax
exemption. It is unclear whether a court would determine that a low-income housing tax credit
constitutes tangible property or intangible property. If a court finds that a low-income housing
tax credit constitutes tangible property, the court may conclude that the constitutional
requirement that tangible property be assessed and taxed at a "uniform and equal rate"
precludes a low-income housing tax credit from being exempted from taxation while other
tangible property is taxable. However, if a court finds that a low-income housing tax credit
constitutes intangible property, the court would likely uphold the Legislature's action to amend
the definition of intangible property to include a low-income housing tax credit and conclude
that a low-income housing tax credit is exempt from property taxes.

Office of Legislative Research and General Counsel

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