Louisiana Administrative Code › Title 61 - REVENUE AND TAXATION › Part V - Ad Valorem Taxation › Chapter 3 - Real and Personal Property › Section V-301 - Definitions

Current through Register Vol. 50, No. 6, June 20, 2024
Composite Multiplier
-a factor obtained by
				  multiplying the cost index for the base year times percent good.
Depreciation
-loss in value of an object,
				  relative to its replacement cost new, reproduction cost new, or original cost,
				  whatever the cause of the loss in value. Depreciation is sometimes subdivided
				  into three types: physical deterioration (wear and tear), functional
				  obsolescence (suboptimal design in light of current technologies or tastes),
				  and economic obsolescence (poor location or radically diminished demand for the
				  product.
Economic Life
-the normal useful life of the
				  property as experienced by a particular business or industry.
External (Economic) Obsolescence
-the loss of
				  appraisal value (relative to the cost of replacing a property with property of
				  equal utility) resulting from causes outside the property that suffers the
				  loss. Usually locational in nature in the depreciation of real estate, it is
				  more commonly marketwide in personal property, and is generally considered to
				  be economically infeasible to cure.
Effective Age of a Property
-its age compared
				  with other properties performing like functions. It is the actual age less the
				  age which has been taken off by face-lifting, structural reconstruction,
				  removal of functional inadequacies, modernization of equipment, etc. It is an
				  age which reflects a true remaining life for the property, taking into account
				  the typical life expectancy of buildings or equipment of its class and usage.
				  It is a matter of judgment, taking all factors into consideration.
Extended Life Expectancy
-the increased life
				  expectancy due to seasoning and proven ability to exist. Just as a person will
				  have a total normal life expectancy at birth which increases as he grows older,
				  so it is with structures and equipment.
Fair Market Value
-the price for property
				  which would be agreed upon between a willing and informed buyer and a willing
				  and informed seller under usual and ordinary circumstances; it shall be the
				  highest price estimated in terms of money which property will bring if exposed
				  for sale on the open market with reasonable time allowed to find a purchaser
				  who is buying with knowledge of all the uses and purposes to which the property
				  is best adopted and for which it can be legally used.
Functional Obsolescence
-loss in value due to
				  lack of utility or desirability of part or all the property, inherent to the
				  improvement or equipment. Thus a new structure or piece of equipment may suffer
				  functional obsolescence.
Inventory
-raw materials, work in process,
				  finished goods or supplies.
Non-Operating
or
Non-Utility
				  Property
-property owned by a public service company used for purposes
				  other than the normal operation of that public service company. See
				  §2901 for further details.
Obsolescence
-a decrease in the value of a
				  property occasioned solely by shifts in demand from properties of this type to
				  other types of property and/or to personal services. Some of the principal
				  causes of obsolescence are:
1. changes in the esthetic arts;
2. changes in the industrial arts, such as new inventions and
				  new processes;
3. legislative enactments;
4. change in consumer demand for products that results in
				  inadequacy or overadequacy;
5. migration of markets that results in misplacement of the
				  property.
Percent Good
-equals 100 percent less the
				  percentage of cost represented by depreciation. It is the present value of the
				  structure or equipment at the time of appraisal, divided by its replacement
				  cost.
Physical Depreciation
-loss in value due to
				  physical deterioration.
Reconciliation
-the final step in the
				  valuation process wherein consideration is given to the relative strengths and
				  weaknesses of the three approaches to value, the nature of the property
				  appraised, and the quantity and quality of available data in formation of an
				  overall opinion of value (either a single point estimate or a range of value).
				  Also termed "correlation" in some texts.
Remaining Life
-the normal remaining life
				  expectation. It is the length of time the structure or equipment may be
				  expected to continue to perform its function economically.
Rules and Regulations of the Tax
				  Commission
-guidelines and procedures adopted which establish criteria
				  to be applied uniformly in determining fair market value, use value and/or
				  assessed value as stated in the Section applicable to a particular type or
				  class of property.
Taxpayer
-as used in the Tax Commission's
				  Rules and Regulations, the terms "taxpayer" and "property owner" are
				  interchangeable and mean the individual(s) and/or entity(ies) who own the
				  property and/or is responsible for payment of property taxes.
Three Approaches to Value
-
1. Market Approach: when using the market approach, the
				  assessor shall estimate the value of property based on sales of comparable
				  property in an arm's length transaction under usual and ordinary circumstances.
				  It can be used when there is an active market in property similar in type,
				  quality and condition;
a. Allocation of the purchase price by the purchaser among
				  items purchased in a single sale or among elements of a single property does
				  not prove the fair market value of that item or element;
2. Cost Approach: in the absence of an active market,
				  yielding comparable and reliable data, which can be used in determining market
				  value, use of the cost approach as provided herein is the best approach;
3. Income Approach: when using the income approach, net
				  income is capitalized at an appropriate rate to determine its value. In
				  assessment of tangible personal property, it is suitable for assessing items
				  which are commonly leased, or the income from which is subject to government
				  regulation or items the income from which can otherwise be reliably identified.
				  The income approach is generally unreliable in assessing other personal
				  property.
AUTHORITY NOTE:
				  Promulgated in accordance with
				  R.S.
				  47:1837,
				  R.S.
				  47:1853 and
				  R.S.
				  47:2323.