First Regular Session Seventieth General Assembly STATE OF COLORADO INTRODUCED LLS NO. 15-0858.02 Ed DeCecco x4216 SENATE BILL 15-230 SENATE SPONSORSHIP Scheffel, HOUSE SPONSORSHIP Williams, Senate Committees House Committees Finance A BILL FOR AN ACT Concerning the method by which the property tax administrator determines a telephone company's valuation for property tax purposes. Bill Summary (Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://www.leg.state.co.us/billsummaries.) Currently, all intangible personal property that is locally assessed is exempt from property tax. The Colorado supreme court has held that this exemption does not apply to a public utility, which includes a telephone company, that is centrally valued by the property tax administrator (administrator). The bill prohibits the administrator from considering a percentage of a telephone company's intangible personal property when determining the value of the company. The exemption starts at 20% of the value of the intangibles for the 2015 property tax year, and it increases by 20% a property tax year until all of the intangibles are excluded. For all property tax years when intangible personal property is fully exempt, the administrator is required to consider the value of tangible property derived from the cost approach to appraisal to be the maximum value of a telephone company as a unit. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. Legislative declaration. (1) The general assembly hereby finds and declares that: (a) For purposes of the property tax, a telephone company is centrally valued by the property tax administrator and the administrator is required to consider the value of the company's intangible personal property when determining its unit value; (b) Therefore, this intangible personal property is subject to the property tax; (c) A cable company that offers telephone service to its customers is locally assessed by a county assessor on most of its property used to provide telephone service, and most of the company's intangible personal property is exempt from the property tax; and (d) This unequal tax treatment creates a substantial competitive advantage within the state for cable companies over telephone companies. (2) Now, therefore, the intended purpose of the tax expenditure created in this act is to equalize the property tax treatment of intangible personal property for all companies that provide telephone service in the state. SECTION 2. In Colorado Revised Statutes, 39-4-102, amend (1) (b) and (2); and add (1.3) as follows: 39-4-102. Valuation of public utilities. (1) The administrator shall determine the actual value of the operating property and plant of each public utility as a unit, giving consideration to the following factors and assigning such weight to each of such factors as in the administrator's judgment will secure a just value of such public utility as a unit: (b) Its intangibles, such as special privileges, franchises, contract rights and obligations, and rights-of-way; except that: (I) Licenses granted by the federal communications commission to a wireless carrier, as defined in section 29-11-101, C.R.S., shall not be considered, nor shall the value of such licenses be reflected, in the administrator's valuation of the carrier's tangible property; and (II) For the valuation of a telephone company, the property tax administrator shall not consider, under this paragraph (b) or as part of any other factor in this subsection (1), the following percentages of a telephone company's intangible personal property: (A) For the property tax year commencing on January 1, 2015, twenty percent of the value of the intangible personal property; (B) For the property tax year commencing on January 1, 2016, forty percent of the value of the intangible personal property; (C) For the property tax year commencing on January 1, 2017, sixty percent of the value of the intangible personal property; (D) For the property tax year commencing on January 1, 2018, eighty percent of the value of the intangible personal property; and (E) For any property tax year commencing on or after January 1, 2019, any of the intangible personal property. (1.3) (a) As used in subparagraph (II) of paragraph (b) of subsection (1) of this section, "intangible personal property" includes goodwill, software, and other intangible personal property specified in section 197 (d) of the federal "Internal Revenue Code of 1986", as amended, but excludes licenses specified in subparagraph (I) of paragraph (b) of subsection (1) of this section. (b) For any property tax year commencing on or after January 1, 2019, when valuing a telephone company, the administrator shall consider the value of the tangible property derived from the cost approach to appraisal to be the maximum value of the telephone company as a unit. (2) If, in the judgment of the administrator, the books and records of any public utility accurately reflect its tangible property; its intangibles, if included; and its earnings within this state during the most recent five-year period, the administrator may determine from such books and records the actual value of its property and plant within this state and need not determine the entire value of its property and plant both within and without this state. SECTION 3. Act subject to petition - effective date. This act takes effect at 12:01 a.m. on the day following the expiration of the ninety-day period after final adjournment of the general assembly (August 5, 2015, if adjournment sine die is on May 6, 2015); except that, if a referendum petition is filed pursuant to section 1 (3) of article V of the state constitution against this act or an item, section, or part of this act within such period, then the act, item, section, or part will not take effect unless approved by the people at the general election to be held in November 2016 and, in such case, will take effect on the date of the official declaration of the vote thereon by the governor.