2023 Arizona Revised Statutes › Title 42 - Taxation › § 42-14204 - Computing valuation of pipelines; definitions

42-14204.
Computing valuation of pipelines;  definitions
A. The valuation of pipeline property that is subject to valuation for tax purposes shall be determined in the manner prescribed by this section.
B. The value of construction work in progress equals eighty-five percent of the amount spent and entered on the taxpayer's accounting records as of December 31 of the preceding calendar year as construction work in progress.
C. The value of materials and supplies equals the total cost of materials and supplies as of December 31 of the preceding calendar year.
D. The value of gas stored underground equals the total cost of gas stored underground as of December 31 of the preceding calendar year.
E. The value of noncapitalized leased operating property shall be determined by applying to the original cost of the noncapitalized leased operating property the ratio derived from dividing the preliminary system value by the original cost of the plant.
F. The department shall determine the valuation of a pipeline as follows:
1. Determine the base value.
2. Compute the value change factor.
3. Multiply the values in paragraphs 1 and 2 of this subsection to compute the preliminary system value. If the value change factor does not apply,  the preliminary system value is the system net book value of plant in service as of December 31 immediately preceding the current year.
4. Add the value of construction work in progress,  materials and supplies,  noncapitalized leased operating property and gas stored underground to the preliminary system value.
5. Compute the allocation factor.
6. Multiply the sum computed pursuant to paragraph 4 of this subsection by the allocation factor.
G. All terms and applications of terms shall be interpreted as nearly as possible,  under the circumstances,  according to the federal energy regulatory commission uniform system of accounts for pipelines in effect on January 1,  1989.
H. For the purposes of this section:
1. " Allocation factor"  means the factor used to assign a portion of the system value to this state and is computed by dividing the total Arizona original cost of plant in service,  materials and supplies,  construction work in progress,  noncapitalized leased operating property and gas stored underground as of December 31 of the preceding calendar year by the corresponding total system original cost as of December 31 of the preceding calendar year.
2. " Asset change factor"  means dividing the system net book value of plant in service as of December 31 immediately preceding the current valuation year by the system net book value of plant in service as of December 31 immediately preceding the prior valuation year. If the denominator is zero,  the asset change factor does not apply.
3. " Base value"  means the final full cash value of the system plant in service in the preceding valuation year. If the property was not subject to property valuation in this state in the preceding valuation year,  the value is the net book value of plant in service plus the value of construction work in progress,  materials and supplies,  noncapitalized leased operating property and gas stored underground. If ownership changes,  the base value shall be transferred to the new owner. If one of the circumstances described in section 42-14205 applies,  the base value shall be adjusted.
4. " Capitalization rate"  means the sum of the year-end thirty-year treasury bond rate plus 6.8 percent.
5. " Change in capitalization rate"  means dividing the current year capitalization rate by the previous year capitalization rate.
6. " Change in earnings before interest and taxes"  means dividing the average earnings before interest and income taxes for the three years immediately preceding the current valuation year by the average earnings before interest and income taxes for the three years immediately preceding the previous valuation year. If less than four years of earnings data are available,  this factor does not apply. If four years of earnings data are available and a major plant addition or retirement occurs,  for the valuation year after the addition or retirement occurs,  this ratio shall be derived by dividing the earnings before interest and income taxes for the year immediately preceding the current valuation year by the earnings before interest and income taxes for the year immediately preceding the previous valuation year.
7. " Construction work in progress"  means the total of the balances of work orders for plant in process of construction on the last day of the preceding calendar year.
8. " Gas stored underground"  means the noncurrent portion of the cost of recoverable gas that is purchased or produced by the utility,  that is stored in depleted or partially depleted gas or oil fields or other underground reservoirs and that is not held to meet the service requirements of the utility's customers.
9. " Income change factor"  means dividing the change in earnings before interest and taxes by the change in the capitalization rate. If the change in earnings before interest and taxes does not apply,  the income change factor does not apply.
10. " Major plant addition or retirement"  means an addition or retirement of plant in the year preceding the current valuation year that results in an increase or decrease of at least twenty percent of the original cost of plant in service.
11. " Noncapitalized leased operating property"  means property that is subject to an agreement that transfers the use of property to the lessee during the term of the lease and that is not capitalized on the lessee's balance sheet.
12. " Preliminary system value"  means the base value multiplied by the value change factor.
13. " System net book value of plant"  means the original cost of the system plant in service minus the related accumulated provision for depreciation.
14. " System value"  means the sum of the system value of plant in service,  construction work in progress,  materials and supplies,  noncapitalized leased property and gas stored underground.
15. " Value change factor"  means the average of the income change factor and the asset change factor. If the income change factor does not apply,  the value change factor is the asset change factor. If the asset change factor does not apply,  the value change factor does not apply.