Copyright (c) 1995 The University of Tulsa
Tulsa Law Journal
Comment: UNIT VALUATION: OKLAHOMA'S ILLEGAL TAX ON INTANGIBLE PROPERTY
31 Tulsa L.J. 367
Bruce A. Fowler
A hypothetical public utility, railroad, or similar company, is purchased by an unrelated third party for $ 5 billion. The price is perplexing because all normal valuation techniques value the company to be worth only $ 4 billion. In fact, State X has valued the property at $ 4 billion for ad valorem tax purposes. So would the sale of the company for $ 1 billion over its calculated worth permit the State to increase its taxable value?
The problem with such a potential increase in the assessed value, from the perspective of many public utility companies and railroads, is that the value in excess of assessed value does not represent worth attributable to either real or tangible personal property which is subject to ad valorem taxes. Instead, the $ 1 billion represents value attributable to the company's intangible property such as customer lists, assembled workforce, long-term contracts, computer software, and goodwill, all of which are normally exempt from property taxes. In fact, the $ 4 million assessed value determined by State X may already include value from these intangible assets since it was computed using the unit valuation method.
This hypothetical is not far from reality in the State of Oklahoma. Public service companies and various transportation companies in the State, which are subject to centralized assessment based on unit valuation, are effectively assessed property taxes on their intangible assets. The tax that results is not only ...
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