Phone companies won a property tax case in Florida and lost another in Wyoming

Phone companies won a property tax case in Florida and lost another in Wyoming | Norton Rose Fulbright

October 01, 2003 | By Keith Martin in Washington, DC
PHONE COMPANIES won a property tax case in Florida and lost another in Wyoming. The cases have implications for companies in other newly deregulated industries.

Florida limits counties from collecting property taxes on intangible property. Only the state can do so. Counties are limited to collecting such taxes on tangible assets.

Sarasota County used two methods to value GTE’s property in the county and then averaged the two. One method was to use the depreciated cost of its tangible assets in the county. The other was to discount the income it earned. A Florida appeals court said in late August that while this approach might have worked before deregulation — since the income a phone company could charge was a function of its “rate base,” or investment in tangible assets — after deregulation, the income reflected the value of all the assets of the phone company — both tangible and intangible. This was not allowed. The case is GTE Florida v. Todora.

In the other case, Wyoming assesses “telephone companies” at the state level using a  “unitary method” under which the state assigns a value to the entire company as a going concern as opposed to trying to add up the value of each individual asset used by the company. This has the effect of roping in the value of intangible assets. Intangible assets are not supposed to be subject to property taxes.

Four cellular telephone companies protested that — as in Florida — the state’s valuation method may work for the traditional telephone companies that charge regulated rates, but not for the unregulated companies. The state supreme court acknowledged the inequity, but challenged the state legislature to give the tax department clearer direction if it did not like what was happening.

In the meantime, the Wyoming court said the burden is on the cellular companies to prove how much “identifiable and separable” value their intangible assets have. It said that burden was not met in this case. The case is Airtouch et al. v. Department of Revenue. The court released its decision in mid-September.

Keith Martin