Cellular phone comparison

Wyoming: Property tax: Cellular phone companies' assets centrally assessed

The Wyoming Supreme Court has affirmed that several providers of cellular telephone service in Wyoming were telephone companies under the unambiguous language of the statutes, and that therefore for purposes of Wyoming property tax their assets were subject to state assessment by the Department of Revenue (DOR) instead of assessment at the county level. However, with respect to the valuation itself, the state supreme court, though largely concurring with the methodology approved in earlier decisions by the State Board of Equalization (SBOE), remanded the case to that board for further consideration, specifically with regard to the issue of flotation rate adjustment.

Despite the fact that there is no statutory definition of "telephone company," the state supreme court found that the meaning of the statutes is clear and unambiguous on this point, noting that cellular services and traditional telephone services are often used interchangeably in today's society. SBOE's distinction between cellular companies and purveyors of pagers in Wyoming was justified, even though there are other states that have decided that cellular companies such as these should not be centrally assessed as telephone companies.

Because during the tax years in question the taxpayers received a rate of return greater than the capitalization rate for the cellular industry, the DOR had made an "economic enhancement adjustment," which increased the net book value of the taxpayers' assets by the same ratio in which the actual rate of return exceeded the industry capitalization rate. While the taxpayers attributed this difference to intangible assets (FCC licenses and customer bases), which were supposed to be exempt from property taxation, the state supreme court found that the taxpayers failed to present evidence that the value of the intangible property could be, or had been, identified or separated, which was a necessary condition to the exemption. Neither the DOR nor the SBOE could be said to be arbitrary or capricious in its position on this issue. Any constitutional argument that the DOR's valuation did not meet the mandate of Art. 15, [sec]11 of the Wyoming Constitution for rational and uniform taxation, in comparison with the treatment of cable television companies and Internet service providers, might be more suitable to the legislative forum than a court of law. Moreover, the state supreme court remarked that in the future the careful and timely furnishing of evidence regarding the value of a party's intangible property might take care of the primary inequity perceived in the present system.

The state supreme court agreed with the taxpayers that the DOR and SBOE had no authority to require that intangible property, in order to be exempt, must not be integral or necessary to the business.

Finding that the taxpayers were entitled to include flotation costs in the capitalization rate calculation, even though they had failed to raise the issue in their original submissions, the state supreme court ruled that the SBOE's rejection of such an adjustment was arbitrary and capricious, and it remanded the case to the SBOE to determine whether the inclusion of a flotation adjustment might result in a substantial change to the valuation of the taxpayers' assets. (Airtouch Communications, Inc., Wyoming Supreme Court, No. 02-129, September 12, 2003.)