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S.F. No. 1636 - Eliminating Personal Property Tax on Electric Generation, Transmission and Distribution Lines, and Substation Systems; Instituting New Valuation Method; Authorizing Replacement Aid; Repealing Exemptions (as proposed to be amended by A-3 DE amendment)
 
Author: Senator Rod Skoe
 
Prepared By: Eric S. Silvia, Senate Counsel (651/296-1771)
 
Date: April 21, 2016



 

S.F. 1636 eliminates the personal property tax on electric generation, transmission and distribution lines, and substation systems, institutes a new valuation method, and authorizes replacement aid. In addition, facility-specific statutory exemptions from personal property tax are repealed as is the sliding scale market value exclusion. All sections are effective beginning with assessment year 2017 and thereafter.

Section 1. Commission approval. Removes a cross-reference to the sliding scale market value exclusion relating to the Public Utility Commission’s authority to approve an electric service agreement between a public utility and customer.

Section 2. Definitions. Specifies that the definition of “high-efficiency distributed generation” means a distributed energy facility that has a minimum efficiency of 40 percent, as calculated under Minnesota Statutes 2014, section 272.0211, subdivision 1.

Section 3. Mandate. Deletes a cross-reference to a facility-specific property tax exemption.

Section 4. Personal property; exceptions. Eliminates the personal property tax on personal property that is part of an electric generating, transmission, or distribution system.

Section 5. Personal property used for pollution control. Provides that the real or personal property of an electric generation, transmission, distribution, and substation system is not eligible for the pollution control exemption.

Section 6. Electric generation machinery; valuation. Establishes a new method of valuing the personal property of all electric generation, transmission and distribution lines, and substation systems.

Subd. 1. Definitions.  Definitions are provided for each type of system, and rates are provided for generation, capacity and transmission lines. An adjustment mechanism for these rates is provided in Subd. 1a.

Subd. 2. Tax base. The commissioner of revenue shall annually calculate the electric generation tax base. The tax base of an electric generation system is equal to the sum of: (1) its nameplate capacity multiplied by its generation capacity rate; (2) the average of its electric energy production as reported to the commissioner of revenue for the immediately preceding five years, multiplied by its generation rate; and (3) its spent fuel tax base. Electric generation systems with a capacity of one megawatt or less is exempt from the tax imposed.

The transmission line tax base shall be equal to the number of miles of electric transmission lines located within the taxing jurisdiction, multiplied by the electric transmission line rate. The distribution line tax base is equal to customer count, multiplied by (…….), and the substation tax base is equal to the capacity of the substation, multiplied by (…….).

Subd. 3. Generating systems; size. The total capacity of an electric generating system shall be determined by combining all generating of each fuel type within each facility.

Subd. 4. Reports. An owner of an electric generating system, substation, and transmission and distribution lines must file an annual report with the commissioner of revenue detailing: (1) the amount of electricity produced by each generator in the previous calendar year as reported to the United States Energy Information Administration; (2) the location, length, and capacity of all transmission and distribution lines; and (3) the location and capacity of all electric substations.  Penalty provisions are provided if an owner fails to file the required report.

Subd. 5. Notification to counties. The commissioner of revenue shall annually notify the counties where the generating, transmission, distribution, and substation system is located of the electric tax base and the tax base multiplied by two to be added to the jurisdiction’s net tax capacity.

Subd. 6. Omitted or undervalued property. Allows the commissioner of revenue to determine the tax base for property that was either omitted or determined to have been undervalued. The authority of the commissioner of revenue is limited to the immediately preceding five years.

Section 7. Class 3. Strikes references to personal property of an electric generation, transmission and distributions systems in the commercial-industrial property tax classification.

Section 8. Computation. Includes a reference to the new valuation method for purposes of the Department of Revenue’s annual assessment/sales ratio study.

Section 9. Listing and assessment where situated. Provides that the nonoperating property and operating real property that is part of an electric generation system shall be listed and assessed by the local or county assessor.

Section 10. Electric generation, transmission, distribution, and substation replacement aid. Authorizes replacement aid to home rule charter or statutory cities, counties or towns. For aids payable in 2018 only, aid equals: (1) the net tax capacity of all personal property of electric generation, transmission, and distribution lines, and substation systems as determined for assessment year 2016 multiplied by the 2017 tax rate; minus (2) the net tax capacity in 2017 of all eligible personal property under the new valuation method, multiplied by the 2018 tax rate.

For aids payable in 2019 and thereafter, if the electric generation, transmission, distribution, and substation tax base is reduced by more than 10 percent as compared to the previous year, and the reduction is more than 5 percent of the local unit’s total tax base, aid equals the difference between the prior assessment year multiplied by the current local rate, and the assessment year two years prior multiplied by the prior year local tax rate, plus any aid received in previous year.

If the tax base is not reduced by more than 10 percent as compared to the previous year and the reduction is not more than 5 percent of the local unit’s total electric generation, transmission, distribution, and substation tax base, aid equals: (1) 95 percent of the prior year’s aid; minus: (2) the difference between the prior assessment year multiplied by the current year local tax rate and the assessment two years prior multiplied by the prior year local tax rate for the electric generation, transmission, distribution, and substation tax base.

The commissioner shall compute the aid and certify the amount of aid payable in the following year. Aid shall be paid at the same time and in the same manner as LGA and CPA. An amount sufficient to pay replacement aid under this section is annually appropriated from the general fund.

Section 11. Repealer. Repeals certain facility-specific statutory exemptions from personal property tax and the sliding scale market value exclusion.

 
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