Idaho Supreme Court rules for utility in tax fight
Published: December 26,2012
A divided Idaho Supreme Court has sided with PacifiCorp in the utility’s tax fight against the state that officials say will likely shift millions worth of assessments to other classes of property owners.
Justices issued their 3-2 ruling Dec. 24 after months of deliberations, with the majority concluding a 2010 state court judge’s decision in favor of PacifiCorp “was not clearly erroneous and was supported by substantial and competent evidence.”
In addition to PacifiCorp, whose unit Rocky Mountain Power operates in Idaho, the outcome will also likely effect past tax bills of Idaho Power Co., which has also challenged its assessments in recent years.
At stake is about $11.6 million in disputed payments to counties that now may have to be returned to the utilities.
In their 32-page decision, a majority of justices decided the Idaho State Tax Commission’s chance to dispute the reliability of PacifiCorp’s expert witness testimony about the value of its properties – and the resulting tax bill – had come and gone when its lawyers failed to raise the issue when the case was heard two years ago in 4th District Court in Ada County.
“If evidence is incompetent, it is the opponent’s obligation to object to that evidence when offered for admission,” Justice Warren Jones wrote. “This court will not consider objections to the admission of evidence that are not preserved in the record and that are raised for the first time on appeal.”
Justices Daniel Eismann and Joel Horton sided with Jones on the decision.
In Idaho, operating properties such as power lines, gas pipelines and railroads are assessed centrally by the Tax Commission as a single unit – not separately by each county like real property.
This dispute centered on competing methods for determining the value of a utility’s properties.
With PacifiCorp prevailing, Ada County could have to repay $1.8 million and Bannock County may have to come up with nearly $1 million for the utilities, according to State Tax Commission estimates.
Smaller counties also face obligations: $328,000 for Oneida County and $414,000 for Payette County, home of the Idaho Power’s new Langley Gulch gas plant.
Idaho Association of Counties executive director Dan Chadwick said Dec. 26 that the counties have a couple of options: They could either issue a refund to utilities, or they could issue a credit against their future tax obligations, to make up what they owe.
Either way, other taxpayers will have to make up the difference.
Chadwick said he believes the decision does leave the Tax Commission the opportunity to challenge PacifiCorp’s aggressive method of valuing its properties in the future, as long as it does so in a timely fashion.
Chadwick said the dissenting opinion, from Chief Justice Roger Burdick and Justice Jim Jones, offers a roadmap.
They “left the door open for future discussion of this issue,” Chadwick said.
Citing precedents set in similar cases including in Montana, Burdick and Jones concluded PacifiCorp had failed to prove it was entitled to a nearly 21 percent reduction in the taxable value of its property, under the approach it took to reduce its tax bill in Idaho.
“I would hold, as have our sister states in similar circumstances, that PacifiCorp has failed to carry its burden of establishing entitlement to an additional deduction,” Jim Jones wrote. “I would reverse the district court’s holding adopting PacifiCorp’s cost valuation.”
Liz Rodosovich, a Tax Commission spokeswoman, said officials weren’t immediately available for comment.
PacifiCorp spokesman Jeff Hymas also didn’t immediately return a phone call seeking comment.
But the utility has said any tax savings its Rocky Mountain Power unit in southeastern Idaho reaps from the Supreme Court decision would be passed on to electricity ratepayers.
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