Document Number
11-201
Tax Type
Corporation Income Tax
Property Tax
Description
Statement of Assessed Values for Local Tax Purposes for Railroads and Interstate Pipeline Transmission Companies
Topic
Assessment
Local Taxes Discussion
Property Subject to Tax
Date Issued
12-12-2011


December 12, 2011






Re: § 58.1-2670 Application - Public Service Corporations
Taxpayer: *****
Locality: *****
Real Property Tax of Public Service Corporations

Dear *****:

This final determination is issued upon the application for correction filed by ***** (the "Taxpayer") with the Department of Taxation.

The Taxpayer appeals the Department's adjustment of the Statement of Assessed Values for Local Tax Purposes for Railroads and Interstate Pipeline Transmission Companies (the "Statement of Assessed Values") filed by the Taxpayer for the 2008 through 2010 tax years.

Virginia Code § 58.1-2670 authorizes the Department to issue determinations on company or governmental entity appeals regarding the value or assessment of tax resulting from a valuation of property made by the Department. The Department is empowered to correct the! valuation or assessment.

The following determination is based on the facts presented to the Department summarized below. The Code of Virginia sections cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site.

FACT


The Taxpayer owned a railroad line (the "Line") that ran between the ***** (City A) and the ***** (City B). The Taxpayer filed a notice of exemption to discontinue service for the Line in 2004 with the United States Surface Transportation Board (STB). During the 2008 through 2010 tax years, the Line was not in use. In fact, various intersections of the Line were paved over in both City A and City B.

An interest in the Line was transferred to City A in December 2007, but the Taxpayer retained an easement to allow freight common carriers to perform freight common carrier service. In September 2010, the Taxpayer filed a notice of consummation of abandonment with the STB and the remainder of the Line, including the easement, was transferred to City B.

After being contacted by City B, the Department reviewed the operational status of the Line for the 2008 through 2010 tax years. In December 2010, the Department's Railroad and Pipeline Appraisal Unit (RPAU) sent a memorandum to the various localities over which the railroad ran amending the Statement of Assessed Values to classify the Line as nonoperating property during the years 2008 through 2010 tax years.

The Taxpayer appeals the adjustments to the Statement of Assessed Values, contending the Department lacked the authority to amend the Statement of Assessed Values and the Line was operating property until its abandonment.

ANALYSIS


Virginia Code § 58.1-2653 requires that each railroad annually report its real and tangible personal property, including property used for common carrier purposes, to the Department. Based on reports, the Department determines which property is part of the operating unit of the railroads and which is nonoperating. See Va. Code § 58.1­-3201. The Department notifies each affected locality of its determination of a railroad's nonoperating property. Under Va. Code § 58.1-3202, a local assessing authority is charged with valuing nonoperating railroad property within its jurisdiction.

Amendment of Statement of Assessed Values

Virginia Code § 58.1-3201 permits any railroad, county, town or magisterial district to request a review of a Statement of Assessed Values made by a railroad. Such review is conducted by the Department.

The Taxpayer contends the Department lacked the authority to amend the Statement of Assessed Values because it was not amended pursuant to a request by a railroad or locality. The Department initiated the review because of an inquiry by City B. City 13 questioned the actual date of the conveyance of the Line and provided copies of the quitclaim deeds to the Department. As a result of this information, the Department revised the Statement of Assessed Values.

In this case, City B did not make its request in writing. The statutory language is silent as to the method for submitting such a request. Because the evidence shows that City B contacted the RPAU concerning the Taxpayer's Line, City B's request will be considered valid.

Classification of Railroad Property

The Taxpayer asserts that all real and tangible personal property of the Line remained as operating property until the property was abandoned in September 2010. It avers that the Line remained part of the Taxpayer's operating unit and was eligible for use as a common carrier even through it was not actually in use. The RPAU found that the Line was properly classified as nonoperating property because it had not been in use for years and portions of the Line had been paved over.

Pursuant to Va. Code § 58.1-3201, the Department is required to designate which items or portion of a railroad's property is used in an "operating unit of the railroads" or is "nonoperating (noncarrier) property based on "the meaning of such terms in the Interstate Commerce Commission's Uniform System of Accounts." The STB, formerly the Interstate Commerce Commission, Uniform System of Accounts, Title 49 of the Code of Federal Regulations (CFR) §§ 1200 through 1219, does not define "operating unit of the railroads" or "nonoperating property." However, pursuant to 49 CFR 1201(ii), "rail transportation property" is comprised of "all property and other assets, irrespective of ownership, that comprise the entire operating unit devoted to reap transportation service."

Property is retired when it has been removed, sold, abandoned, destroyed, or which for any cause has been permanently withdrawn from service. See 49 CFR 1201(ii). The Taxpayer petitioned the STB to discontinue service of the Line in November 2004, and transferred the Line to City A in December 2007, but reserved an easement to allow freight common carrier service if needed. The Taxpayer did not release all claims to the Line until the remainder of the Line was transferred to City B and a notice abandonment was filed with the STB in September 2010.

DETERMINATION


Although the Taxpayer did not use the Line during the tax years at issue, it retained the right to do so. As such, the Department cannot conclude that the Line was permanently withdrawn from service until September 2010. Accordingly, I find that the Line should properly be classified as property that is part of an operating unit for purposes of local property taxation for the 2007 through 2010 tax years. I am remanding this case to RPAU to amend the Statement of Assessed Values in accordance with this determination.

Further, in order to avoid any confusion in the future, the Department will require any party making a request for review or redetermination under Va. Code § 58.1-3201 to submit such request in writing. The written request should be submitted to the Department of Taxation, Railroad and Pipeline Appraisal Unit, P.O. Box 565, Richmond, Virginia 23218.

In addition, the party making the request will provide a copy of the request to the affected party. As this policy would apply in this case, City B would have been required to provide a copy of its request to the Taxpayer. Likewise, if the Taxpayer had made the request, it would have been required to provide a copy to City A and City B because the Line ran through both localities.

If you have any questions regarding this determination, you may call ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
                • Sincerely,


                • Craig M. Burns
                  Tax Commissioner



AR/1-4660132270.B

Rulings of the Tax Commissioner

Last Updated 08/25/2014 16:46