Minnesota taxes panel reviews proposal to tax utilities, railroads and pipelines on gross operating revenue

The Minnesota Senate Taxes Committee on Jan. 16 heard a Department of Revenue proposal to replace the state’s current property-valuation process for utilities, pipelines and railroads with a tax based on companies’ gross operating revenues.

Department of Revenue Property Tax Director John Kloxien told the committee the idea is “really, quite simple: it’s the gross operating revenues times an allocation factor times a rate,” and said the department would ask the Legislature to set the rate.

The idea is framed as a response to repeated appeals and litigation over state valuations of multi-jurisdictional utility property. Under current practice the department determines a statewide valuation, certifies parcel values to counties, and those values are subject to administrative appeal and often litigation. Kloxien and Commissioner Paul Marquardt said the volume of appeals and the discretionary inputs in the current rule-driven appraisal process make results unpredictable for local governments and taxpayers.

Kloxien described the existing appraisal steps: valuing the company as a system unit, apportioning value to Minnesota, removing locally assessed or nonoperating property,…