CALIFORNIA said income from the sale of power by an out-of-state electricity supplier to a California purchaser is earned for tax purposes outside California.

California taxes any company doing business in the state on the portion of its income that is considered from California sources. A three-factor formula determines how much of the company’s income is attributable to California sources. The first two factors are the ratio of the company’s California property to its overall property and California payroll to its overall payroll. The third factor is the ratio of the company’s sales in California to its overall sales.

PacifiCorp — an out-of-state supplier of power — sold wholesale power to California utilities. It argued the electricity sold into California is “not tangible personal property” for purposes of calculating the sales factor and that it had no sales attributable to sources in California as a result. The State Board of Equalization agreed with PacifiCorp. A written opinion explaining the board’s reasoning is expected this summer.

LOUISIANA confirmed that independent power plants are subject to property taxes at a lower rate than power plants that supply power directly to retail customers.

“Public service property,” or property that is owned by a company that is “primarily engaged in the business of manufacturing, generating, supplying . . . electricity for light, heat, or power to consumers” is centrally assessed by the state for property tax purposes at a rate of 25% of the property’s fair market value. Other property is assessed locally at 15% of fair market value.

The Louisiana Tax Commission told Cleco Corporation that its Evangeline power plant that supplies power to the wholesale market should be assessed at the higher rate. Cleco prevailed through three successive courts in challenging the tax commission. The state supreme court held ultimately in April that the Evangeline plant should be assessed locally at the lower rate. The court said this result does not violate a provision in the Louisiana constitution that requires uniform taxation of property in the same class because facilities that sell power to consumers and facilities that sell power at wholesale “are in two different classes.”

NEW YORK is considering awarding local taxing districts broader authority to waive property taxes on power plants and to enter instead into so-called PILOT agreements.

“PILOT” stands for “payment in lieu of taxes.” The power plant owner would negotiate how much to pay in place of normal property taxes. Bills granting this authority are awaiting committee action in both houses of the New York legislature. Property taxes would be waived not only on the power plant, but also on the site and intertie with the grid. However, the waiver would not extend to transmission lines. Under a PILOT agreement, the taxing district collects annually the amount specified in the agreement rather than the amount annually determined based on the market value of the facility. Advocates of the bills say this will reduce the volatility in property taxes collected from power plants whose values may fluctuate greatly from year to year.

Keith Martin