Property Tax Update

Most ITA members received preliminary assessments for property taxes on September 1^st.

We have been advised that the new assessments continue to assess personal property and inside equipment. However, the new assessments do include some changes from last year’s assessments – the "adjustment factor” is no longer used; the equity rate has been increased; deferred taxes were eliminated from the cap rate formula; and the equity to debt ratio was standardized at 85/15.

On August 26^th, ITA has published a Special Report analyzing the August ruling by Polk County Judge Novak in favor of Qwest in its claim that Qwest’s property consisting of inside plant -- switches and related central office equipment -- is "similarly situated” to the nearly identical property of IXCs and wireless providers and it is unconstitutional to assess Qwest for that property but not IXCs or wireless providers.

In light of Judge Novak’s ruling, and the September 1^st preliminary assessment letter, ITA members have asked their accountants and ITA whether they need to respond to this preliminary assessment.

ITA’s recommendation is this –

· ITA will notify the Department of Revenue that all (or most) ITA members are likely to file formal protests regarding the constitutional issue of assessing personal property. Each company will be responsible for filing its own formal protest, and ITA will provide additional guidance well in advance of the November 14^th deadline to do so. If the constitutional issue of taxing personal property is your only reason for protesting your assessment, you need not take action until after the October 15^th final assessment is distributed.

· If any LEC has a problem or question or concern with any other calculations or methodologies in their preliminary assessments, ITA urges you to either coordinate with your accountants or notify the Department of your request to gather more information and conduct an informal meeting.

Here is some more explanation of the Department of Revenue’s procedures for appeal/protest:

According to the letter accompanying the Department of Revenue’s preliminary assessment on September 1^st, a taxpayer has 10 days to request an informal meeting to discuss their preliminary assessments. Because September 10^th falls on a Saturday, the deadline for the informal response is Monday, September 12, 2011. The Department of Revenue will then conduct informal meetings to attempt to resolve any issues prior to distributing the final assessment on October 15^th.

If the Department receives no informal response from the taxpayer in early September, it will issue a final assessment on October 15^th that is unchanged from the preliminary assessment. Taxpayers who request a meeting by the September 12^th deadline have the opportunity to discuss their concerns with the Department in the hopes of impacting the final assessment figures.

With respect to the constitutional issue of taxing personal property, ITA will provide the notification to the Department on behalf of all ITA members. Therefore, ITA suggests that individual members need not raise the constitutional issue with the Department during the informal process. This recommendation is based on discussions with both ITA’s General Counsel and accountants.

While ITA will bring the constitutional issue to the Department of Revenue, ITA will not be able to handle or impact individual assessment questions that do not address the constitutional issues.

We have been advised that Kiesling Associates conducts property tax consultation for the vast majority of ITA members, and that Kiesling has already obtained the underlying calculations for their clients. Please contact your accountant for assistance on specific property tax assessment appeals or protests.

Taxpayers then have until November 14^th (30 days after October 15^th) to file a formal protest. Taxpayers may file a formal protest whether or not they filed the informal response in September. Additionally, taxpayers may request the underlying calculations used to determine the property tax assessments at any time, and are not bound by the September 12^th deadline for requesting that information.