Or. Admin. R. 150-308-0260 - Industrial Property Valuation for Tax Purposes

Current through Register Vol. 61, No. 4, April 1, 2022

(1) For the purposes of this rule, the following words and phrases have the following meaning:
(a) A "unit of property" is the item, structure, plant, or integrated complex as it physically exists on the assessment date.
(b) "Real property" means the real estate (physical land and appurtenances including structures, and machinery and equipment erected upon the land or attached to the land or structures) and all interests, benefits, and rights inherent in the ownership of the physical real estate.
(c) "Highest and best use" means the reasonably probable use of vacant land or an improved property that is legally permissible, physically possible, financially feasible, and maximally productive, which results in the highest real market value.
(2) If the highest and best use of the unit of property is an operating plant or an operating integrated complex, the real market value will be considered to be a "going concern." The going concern concept recognizes that the value of an assembled and operational group of assets usually exceeds the value of an identical group of assets that are separate or not operational.
(3) Methods and Procedures for Determining the Real Market Value of Industrial Property:
(a) For the valuation of industrial property all three approaches to value (sales comparison, cost, and income), must be considered. For a particular property, it may be that all three approaches cannot be applied, however, each must be investigated for its merit in each specific appraisal.
(b) The market value of a unit of property must not be determined from the market price of its component parts, such as wood, glass, concrete, furnaces, elevators, machines, conveyors, etc., each priced separately as an item of property, without regard to its being integrated into the total unit.
(c) In utilizing the sales comparison approach only actual market transactions of property comparable to the subject, or adjusted to be comparable, will be used. All transactions utilized in the sales comparison approach must be verified to ensure they reflect arms-length transactions. When non-typical market conditions of sale are involved in a transaction (duress, death, foreclosure, bankruptcy, liquidation, interrelated corporations or persons, etc.) the transaction will not be used in the sales comparison approach unless market-based adjustments can be made for the non-typical market condition.
(A) Properties utilized in the sales comparison approach, although not necessarily identical, at the very least must be similar in many respects. Adjustments must be made for differences in location, product, production capacity, and all other factors that may affect value. Excessively large adjustments or an excessive number of adjustments is an indication that the properties are not comparable.
(B) When utilizing the sales comparison approach, the appraiser must take into consideration difference between the subject and the comparable properties for physical condition, functional obsolescence and economic obsolescence. Adjustments must be made for differences between the subject and comparable properties for factors such as physical condition, functional deficiencies, operating efficiency, and economic obsolescence. If the properties are functionally or economically equivalent, verification of the equivalency must be included in the appraisal.
(f) Sales for the disposal of properties through auction, liquidation or scrap sales are indicators of market value only when on the assessment date such disposal of the subject property is imminent, or has actually taken place.
(g) The cost approach may utilize either the reproduction, replacement, or the used equipment technique. It is acceptable to use trended historical cost to estimate the reproduction cost new. The value estimate must include all costs required to assemble and construct the unit of property.
(h) When using the income approach, the income from the operation of the property may be utilized for industrial properties and other properties that are not typically leased or rented. When the income from the property's operation is used, the unit of property must be valued as a going concern. In utilizing the income approach for the valuation of industrial properties, the discounted cash flow technique is one of the appropriate methods to derive a value estimate. Consideration in the discounted cash flow technique is given to items such as the anticipated future free cash flow available to both, the debt and equity holders; inventory valuation methods, intangible assets, income taxes, net working capital, capital reinvestment, etc. When utilizing the discounted cash flow technique, the capitalization or discount rate must be derived in accordance with OAR 150-308.205-(C).
(i) Determining the highest and best use for the unit of property is necessary for establishing real market value. This determination of highest and best use may include, among others, all possible uses that might result from retaining, altering or ceasing the integrated nature of the unit of property.
(4) For machinery and equipment, in all the approaches to value, if the highest and best use is continued operation, adjustments must be made to account for the cost of integrating the machinery and equipment into the total unit of the property. These costs include, but are not limited to, freight, installation, wiring, piping and foundation costs.
(5) Basic information for an appraisal. Basic data and procedures in making appraisals normally include the following when applicable:
(a) Location of property by tax codes and tax lot numbers;
(b) Map or sketch of land owned and layout of plant;
(c) Inventory of physical plant;
(d) Reproduction or replacement cost computations, as applicable;
(e) Analysis of depreciation;
(f) Analysis of economics as they affect valuation;
(g) Analysis of sales data, when applicable;
(h) Field inspection;
(i) Research and familiarization with typical properties of the industry;
(j) Annual reports to stockholders;
(k) Fixed assets schedules;
(l) Income statements;
(m) Such other data that may affect value.
(6) Basic information for an appraisal utilizing the industrial property return. Basic data for an appraisal utilizing the industrial property return normally includes the following:
(a) Report of additions;
(b) Report of retirements;
(c) Knowledge of miscellaneous technical and economic conditions that affect value;
(d) Trending factors:
(A) Separate factors for yard improvements, buildings, and equipment classified as real property must be developed.
(B) The development of the factors must use data published by the United States Department of Labor, the Oregon Building Construction Trades Council, and other sources the Department of Revenue deems to be reliable indicators of property value over time.
(C) Data developed by physical inspection together with appraising a segment of the total property or making a general review of the total value under certain circumstances may supplement the data utilized in (A) above.
(e) Depreciation allowances;
(f) Real market value for prior year.
(7) This rule is effective January 1, 2016.

Notes

Or. Admin. R. 150-308-0260
RD 9-1989, f. 12-18-89, cert. ef. 12-31-89; RD 8-1991, f. 12-30-91, cert. ef. 12-31-91; REV 12-2004, f. 12-29-04, cert. ef. 12-31-04; REV 4-2015, f. 12-23-15, cert. ef. 1-1-16; Renumbered from 150-308.205-(D), REV 57-2016, f. 8-13-16, cert. ef. 9/1/2016

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 308.205

The following state regulations pages link to this page.



State regulations are updated quarterly; we currently have two versions available. Below is a comparison between our most recent version and the prior quarterly release. More comparison features will be added as we have more versions to compare.