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S.B. 198 Enrolled

             1     

PROPERTY TAX - INTANGIBLE PROPERTY

             2     
2006 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Chief Sponsor: Curtis S. Bramble

             5     
House Sponsor: Wayne A. Harper

             6      Cosponsors:Howard A. StephensonJohn L. Valentine              7     
             8      LONG TITLE
             9      General Description:
             10          This bill amends the Property Tax Act to address the definition of intangible property
             11      and to define related terms.
             12      Highlighted Provisions:
             13          This bill:
             14          .    defines "goodwill";
             15          .    defines "intangible property" to include goodwill; and
             16          .    makes technical changes.
             17      Monies Appropriated in this Bill:
             18          None
             19      Other Special Clauses:
             20          This bill has retrospective operation to January 1, 2006.
             21      Utah Code Sections Affected:
             22      AMENDS:
             23          59-2-102, as last amended by Chapters 162, 243, 281 and 303, Laws of Utah 2004
             24     
             25      Be it enacted by the Legislature of the state of Utah:
             26          Section 1. Section 59-2-102 is amended to read:
             27           59-2-102. Definitions.
             28          As used in this chapter and title:
             29          (1) "Aerial applicator" means aircraft or rotorcraft used exclusively for the purpose of


             30      engaging in dispensing activities directly affecting agriculture or horticulture with an
             31      airworthiness certificate from the Federal Aviation Administration certifying the aircraft or
             32      rotorcraft's use for agricultural and pest control purposes.
             33          (2) "Air charter service" means an air carrier operation which requires the customer to
             34      hire an entire aircraft rather than book passage in whatever capacity is available on a scheduled
             35      trip.
             36          (3) "Air contract service" means an air carrier operation available only to customers
             37      who engage the services of the carrier through a contractual agreement and excess capacity on
             38      any trip and is not available to the public at large.
             39          (4) "Aircraft" is as defined in Section 72-10-102 .
             40          (5) "Airline" means any air carrier operating interstate routes on a scheduled basis
             41      which offers to fly passengers or cargo on the basis of available capacity on regularly scheduled
             42      routes.
             43          (6) "Assessment roll" means a permanent record of the assessment of property as
             44      assessed by the county assessor and the commission and may be maintained manually or as a
             45      computerized file as a consolidated record or as multiple records by type, classification, or
             46      categories.
             47          (7) "Certified revenue levy" means a property tax levy that provides the same amount
             48      of ad valorem property tax revenue as was collected for the prior year, plus new growth, but
             49      exclusive of revenue from collections from redemptions, interest, and penalties.
             50          (8) "County-assessed commercial vehicle" means:
             51          (a) any commercial vehicle, trailer, or semitrailer which is not apportioned under
             52      Section 41-1a-301 and is not operated interstate to transport the vehicle owner's goods or
             53      property in furtherance of the owner's commercial enterprise;
             54          (b) any passenger vehicle owned by a business and used by its employees for
             55      transportation as a company car or vanpool vehicle; and
             56          (c) vehicles which are:
             57          (i) especially constructed for towing or wrecking, and which are not otherwise used to


             58      transport goods, merchandise, or people for compensation;
             59          (ii) used or licensed as taxicabs or limousines;
             60          (iii) used as rental passenger cars, travel trailers, or motor homes;
             61          (iv) used or licensed in this state for use as ambulances or hearses;
             62          (v) especially designed and used for garbage and rubbish collection; or
             63          (vi) used exclusively to transport students or their instructors to or from any private,
             64      public, or religious school or school activities.
             65          (9) (a) Except as provided in Subsection (9)(b), for purposes of Section 59-2-801 ,
             66      "designated tax area" means a tax area created by the overlapping boundaries of only the
             67      following taxing entities:
             68          (i) a county; and
             69          (ii) a school district.
             70          (b) Notwithstanding Subsection (9)(a), "designated tax area" includes a tax area created
             71      by the overlapping boundaries of:
             72          (i) the taxing entities described in Subsection (9)(a); and
             73          (ii) (A) a city or town if the boundaries of the school district under Subsection (9)(a)
             74      and the boundaries of the city or town are identical; or
             75          (B) a special service district if the boundaries of the school district under Subsection
             76      (9)(a) are located entirely within the special service district.
             77          (10) "Eligible judgment" means a final and unappealable judgment or order under
             78      Section 59-2-1330 :
             79          (a) that became a final and unappealable judgment or order no more than 14 months
             80      prior to the day on which the notice required by Subsection 59-2-919 (4) is required to be
             81      mailed; and
             82          (b) for which a taxing entity's share of the final and unappealable judgment or order is
             83      greater than or equal to the lesser of:
             84          (i) $5,000; or
             85          (ii) 2.5% of the total ad valorem property taxes collected by the taxing entity in the


             86      previous fiscal year.
             87          (11) (a) "Escaped property" means any property, whether personal, land, or any
             88      improvements to the property, subject to taxation and is:
             89          (i) inadvertently omitted from the tax rolls, assigned to the incorrect parcel, or assessed
             90      to the wrong taxpayer by the assessing authority;
             91          (ii) undervalued or omitted from the tax rolls because of the failure of the taxpayer to
             92      comply with the reporting requirements of this chapter; or
             93          (iii) undervalued because of errors made by the assessing authority based upon
             94      incomplete or erroneous information furnished by the taxpayer.
             95          (b) Property which is undervalued because of the use of a different valuation
             96      methodology or because of a different application of the same valuation methodology is not
             97      "escaped property."
             98          (12) "Fair market value" means the amount at which property would change hands
             99      between a willing buyer and a willing seller, neither being under any compulsion to buy or sell
             100      and both having reasonable knowledge of the relevant facts. For purposes of taxation, "fair
             101      market value" shall be determined using the current zoning laws applicable to the property in
             102      question, except in cases where there is a reasonable probability of a change in the zoning laws
             103      affecting that property in the tax year in question and the change would have an appreciable
             104      influence upon the value.
             105          (13) "Farm machinery and equipment," for purposes of the exemption provided under
             106      Section 59-2-1101 , means tractors, milking equipment and storage and cooling facilities, feed
             107      handling equipment, irrigation equipment, harvesters, choppers, grain drills and planters, tillage
             108      tools, scales, combines, spreaders, sprayers, haying equipment, and any other machinery or
             109      equipment used primarily for agricultural purposes; but does not include vehicles required to be
             110      registered with the Motor Vehicle Division or vehicles or other equipment used for business
             111      purposes other than farming.
             112          (14) "Geothermal fluid" means water in any form at temperatures greater than 120
             113      degrees centigrade naturally present in a geothermal system.


             114          (15) "Geothermal resource" means:
             115          (a) the natural heat of the earth at temperatures greater than 120 degrees centigrade;
             116      and
             117          (b) the energy, in whatever form, including pressure, present in, resulting from, created
             118      by, or which may be extracted from that natural heat, directly or through a material medium.
             119          (16) (a) "Goodwill" means:
             120          (i) acquired goodwill that is reported as goodwill on the books and records:
             121          (A) of a taxpayer; and
             122          (B) that are maintained for financial reporting purposes; or
             123          (ii) the ability of a business to:
             124          (A) generate income that exceeds a normal rate of return on assets; or
             125          (B) obtain an economic or competitive advantage resulting from:
             126          (I) superior management skills;
             127          (II) reputation;
             128          (III) customer relationships;
             129          (IV) patronage; or
             130          (V) a factor similar to Subsections (16)(a)(ii)(B)(I) through (IV).
             131          (b) "Goodwill" does not include:
             132          (i) the intangible property described in Subsection (19)(a) or (b);
             133          (ii) locational attributes of real property, including:
             134          (A) zoning;
             135          (B) location;
             136          (C) view;
             137          (D) a geographic feature;
             138          (E) an easement;
             139          (F) a covenant;
             140          (G) proximity to raw materials;
             141          (H) the condition of surrounding property; or


             142          (I) proximity to markets;
             143          (iii) value attributable to the identification of an improvement to real property,
             144      including:
             145          (A) reputation of the designer, builder, or architect of the improvement;
             146          (B) a name given to, or associated with, the improvement; or
             147          (C) the historic significance of an improvement; or
             148          (iv) the enhancement or assemblage value specifically attributable to the interrelation
             149      of the existing tangible property in place working together as a unit.
             150          [(16)] (17) (a) For purposes of Section 59-2-103 :
             151          (i) "household" means the association of persons who live in the same dwelling,
             152      sharing its furnishings, facilities, accommodations, and expenses; and
             153          (ii) "household" includes married individuals, who are not legally separated, that have
             154      established domiciles at separate locations within the state.
             155          (b) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             156      commission may make rules defining the term "domicile."
             157          [(17)] (18) (a) Except as provided in Subsection [(17)] (18)(c), "improvement" means a
             158      building, structure, fixture, fence, or other item that is permanently attached to land, regardless
             159      of whether the title has been acquired to the land, if:
             160          (i) (A) attachment to land is essential to the operation or use of the item; and
             161          (B) the manner of attachment to land suggests that the item will remain attached to the
             162      land in the same place over the useful life of the item; or
             163          (ii) removal of the item would:
             164          (A) cause substantial damage to the item; or
             165          (B) require substantial alteration or repair of a structure to which the item is attached.
             166          (b) "Improvement" includes:
             167          (i) an accessory to an item described in Subsection [(17)] (18)(a) if the accessory is:
             168          (A) essential to the operation of the item described in Subsection [(17)] (18)(a); and
             169          (B) installed solely to serve the operation of the item described in Subsection [(17)]


             170      (18)(a); and
             171          (ii) an item described in Subsection [(17)] (18)(a) that:
             172          (A) is temporarily detached from the land for repairs; and
             173          (B) remains located on the land.
             174          (c) Notwithstanding Subsections [(17)] (18)(a) and (b), "improvement" does not
             175      include:
             176          (i) an item considered to be personal property pursuant to rules made in accordance
             177      with Section 59-2-107 ;
             178          (ii) a moveable item that is attached to land:
             179          (A) for stability only; or
             180          (B) for an obvious temporary purpose;
             181          (iii) (A) manufacturing equipment and machinery; or
             182          (B) essential accessories to manufacturing equipment and machinery; [or]
             183          (iv) an item attached to the land in a manner that facilitates removal without substantial
             184      damage to:
             185          (A) the land; or
             186          (B) the item; or
             187          (v) a transportable factory-built housing unit as defined in Section 59-2-1502 if that
             188      transportable factory-built housing unit is considered to be personal property under Section
             189      59-2-1503 .
             190          [(18)] (19) "Intangible property" means:
             191          (a) property that is capable of private ownership separate from tangible property,
             192      including:
             193          (i) moneys;
             194          (ii) credits;
             195          (iii) bonds;
             196          (iv) stocks;
             197          (v) representative property;


             198          (vi) franchises;
             199          (vii) licenses;
             200          (viii) trade names;
             201          (ix) copyrights; and
             202          (x) patents; [or]
             203          (b) a low-income housing tax credit[.]; or
             204          (c) goodwill.
             205          [(19)] (20) "Low-income housing tax credit" means:
             206          (a) a federal low-income housing tax credit under Section 42, Internal Revenue Code;
             207      or
             208          (b) a low-income housing tax credit under:
             209          (i) Section 59-7-607 ; or
             210          (ii) Section 59-10-129 .
             211          [(20)] (21) "Metalliferous minerals" includes gold, silver, copper, lead, zinc, and
             212      uranium.
             213          [(21)] (22) "Mine" means a natural deposit of either metalliferous or nonmetalliferous
             214      valuable mineral.
             215          [(22)] (23) "Mining" means the process of producing, extracting, leaching, evaporating,
             216      or otherwise removing a mineral from a mine.
             217          [(23)] (24) (a) "Mobile flight equipment" means tangible personal property that is:
             218          (i) owned or operated by an:
             219          (A) air charter service;
             220          (B) air contract service; or
             221          (C) airline; and
             222          (ii) (A) capable of flight;
             223          (B) attached to an aircraft that is capable of flight; or
             224          (C) contained in an aircraft that is capable of flight if the tangible personal property is
             225      intended to be used:


             226          (I) during multiple flights;
             227          (II) during a takeoff, flight, or landing; and
             228          (III) as a service provided by an air charter service, air contract service, or airline.
             229          (b) (i) "Mobile flight equipment" does not include a spare part other than a spare
             230      engine that is rotated:
             231          (A) at regular intervals; and
             232          (B) with an engine that is attached to the aircraft.
             233          (ii) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,
             234      the commission may make rules defining the term "regular intervals."
             235          [(24)] (25) "Nonmetalliferous minerals" includes, but is not limited to, oil, gas, coal,
             236      salts, sand, rock, gravel, and all carboniferous materials.
             237          [(25)] (26) "Personal property" includes:
             238          (a) every class of property as defined in Subsection [(26)] (27) which is the subject of
             239      ownership and not included within the meaning of the terms "real estate" and "improvements";
             240          (b) gas and water mains and pipes laid in roads, streets, or alleys;
             241          (c) bridges and ferries;
             242          (d) livestock which, for the purposes of the exemption provided under Section
             243      59-2-1112 , means all domestic animals, honeybees, poultry, fur-bearing animals, and fish; and
             244          (e) outdoor advertising structures as defined in Section 72-7-502 .
             245          [(26)] (27) (a) "Property" means property that is subject to assessment and taxation
             246      according to its value.
             247          (b) "Property" does not include intangible property as defined in this section.
             248          [(27)] (28) "Public utility," for purposes of this chapter, means the operating property
             249      of a railroad, gas corporation, oil or gas transportation or pipeline company, coal slurry pipeline
             250      company, electrical corporation, telephone corporation, sewerage corporation, or heat
             251      corporation where the company performs the service for, or delivers the commodity to, the
             252      public generally or companies serving the public generally, or in the case of a gas corporation
             253      or an electrical corporation, where the gas or electricity is sold or furnished to any member or


             254      consumers within the state for domestic, commercial, or industrial use. Public utility also
             255      means the operating property of any entity or person defined under Section 54-2-1 except water
             256      corporations.
             257          [(28)] (29) "Real estate" or "real property" includes:
             258          (a) the possession of, claim to, ownership of, or right to the possession of land;
             259          (b) all mines, minerals, and quarries in and under the land, all timber belonging to
             260      individuals or corporations growing or being on the lands of this state or the United States, and
             261      all rights and privileges appertaining to these; and
             262          (c) improvements.
             263          [(29)] (30) "Residential property," for the purposes of the reductions and adjustments
             264      under this chapter, means any property used for residential purposes as a primary residence. It
             265      does not include property used for transient residential use or condominiums used in rental
             266      pools.
             267          [(30)] (31) For purposes of Subsection 59-2-801 (1)(e), "route miles" means the number
             268      of miles calculated by the commission that is:
             269          (a) measured in a straight line by the commission; and
             270          (b) equal to the distance between a geographical location that begins or ends:
             271          (i) at a boundary of the state; and
             272          (ii) where an aircraft:
             273          (A) takes off; or
             274          (B) lands.
             275          [(31)] (32) (a) "State-assessed commercial vehicle" means:
             276          (i) any commercial vehicle, trailer, or semitrailer which operates interstate or intrastate
             277      to transport passengers, freight, merchandise, or other property for hire; or
             278          (ii) any commercial vehicle, trailer, or semitrailer which operates interstate and
             279      transports the vehicle owner's goods or property in furtherance of the owner's commercial
             280      enterprise.
             281          (b) "State-assessed commercial vehicle" does not include vehicles used for hire which


             282      are specified in Subsection (8)(c) as county-assessed commercial vehicles.
             283          [(32)] (33) "Taxable value" means fair market value less any applicable reduction
             284      allowed for residential property under Section 59-2-103 .
             285          [(33)] (34) "Tax area" means a geographic area created by the overlapping boundaries
             286      of one or more taxing entities.
             287          [(34)] (35) "Taxing entity" means any county, city, town, school district, special taxing
             288      district, or any other political subdivision of the state with the authority to levy a tax on
             289      property.
             290          [(35)] (36) "Tax roll" means a permanent record of the taxes charged on property, as
             291      extended on the assessment roll and may be maintained on the same record or records as the
             292      assessment roll or may be maintained on a separate record properly indexed to the assessment
             293      roll. It includes tax books, tax lists, and other similar materials.
             294          Section 2. Retrospective operation.
             295          This bill has retrospective operation to January 1, 2006.


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