Oregon Administrative Rules › Chapter 150 - DEPARTMENT OF REVENUE › Division 308 - ASSESSMENT OF PROPERTY FOR TAXATION › Section 150-308-0150 - Net Capitalized Additions

Current through Register Vol. 63, No. 7, July 1, 2024
(1) Definitions:
(a) For purposes of centrally-assessed
			 property, the term "improvements" means changes in the value of property (as
			 defined in 1997 OR Law Ch. 541, Sect. (7)(1)(b)) as the result of new
			 construction, reconstruction, major additions, remodeling, renovation,
			 rehabilitation or acquisition of property except on-going maintenance and
			 repair. "Improvements" are measured by changes in Oregon net capitalized
			 additions as defined below.
(b) The
			 term "capitalized" refers to company expenditures for certain assets with a
			 useful life typically extending beyond one year. These assets are aggregated in
			 fixed asset accounts subject to annual depreciation charges, rather than repair
			 and maintenance expense accounts. Examples include acquisitions of or changes
			 to buildings, equipment, and personal property such as furniture and
			 fixtures.
(c) The term "net
			 additions" means the difference between the aggregate costs of Oregon assets in
			 the prior and current years. For the 1997-98 implementation year, additions
			 include the change from the 1995-96 base year. In all subsequent years,
			 additions include the change from the prior year.
(d) The term "net capitalized additions"
			 means "net additions" as calculated using capitalized costs in the company's
			 annual reports.
Examples:
(A) For the
			 current year, a new transformer is added for $100,000 and there are no
			 retirements. The net addition is $100,000.
(B) A seven-year old transformer with a
			 ten-year life expectancy (net book value of $30,000) is retired from service
			 and replaced by a new transformer (cost $100,000). The net addition is $70,000,
			 reflecting the additional 7 years' life expectancy. (The remaining $30,000 is
			 considered maintenance).
(C) Same
			 as (B) above, except that the new transformer is added to the existing number
			 of transformers. No other transformers are retired; however, $30,000 of other
			 capitalized equipment is retired. The net addition is still $70,000.
Typical fixed asset accounting procedures provide for annual
				removal of retired assets. Using successive years' account totals to determine
				maximum assessed value will result in a netting of retirements against true
				improvements.
(D) Same as
			 (B) above, except that no new transformer is added. The net capitalized
			 addition is $0, since there have been no improvements.
(E) If the change in Oregon assets can only
			 be determined by an allocation of system additions, then these changes shall be
			 allocated to Oregon in the same manner as other company property.
(F) In the case of mobile property, additions
			 shall also include the change in presence in the state as measured by the
			 change in allocation factors.
(e) The term "ongoing maintenance and repair"
			 means expenditures which the company has elected to record as an expense in
			 repair and maintenance accounts rather than aggregate in a fixed asset account
			 as described (1)(b). Items may be expensed because the useful life of the
			 expenditures does not extend over one year, or because their associated dollar
			 amounts are too small to qualify as a capital asset under company
			 capitalization threshold guidelines. Typical examples include spare parts and
			 maintenance supplies.
Example: A private car company maintains a capitalization
				threshold for its equipment accounts of $2000. The company frequently makes
				purchases of spare parts for its repair shops. One of these was a bulk purchase
				of miscellaneous car bearings for $1000, and the company expensed this item.
				The company also decided to upgrade half of its fleet with a $20,000 investment
				in specialized bearings which would allow the cars to travel at significantly
				higher speeds. This investment was capitalized. The expenditure of $1000 would
				be considered "ongoing maintenance and repair." The expenditure of $20,000
				would be considered an "improvement." The fact that each expenditure is for
				bearings is not controlling.