La. Admin. Code tit. 61 § V-2501

Current through Register Vol. 50, No. 11, November 20, 2024

Section V-2501 - Guidelines for Ascertaining the Fair Market Value of Office Furniture and Equipment, Machinery and Equipment and Other Assets Used In General Business Activity

A. When the information necessary to use the market and income approaches to value is generally not available, the fair market value of office furniture and equipment, machinery and equipment and other assets used in general business activity can generally best be estimated by the cost approach with consideration of information provided by property owners on annual LAT 5 forms, written and verbal description of valuation factors impacting the property, and other sources. This approach allows the assessors across the State of Louisiana to fairly and uniformly assess business and industrial personal property, while, at the same time, allowing each assessor the discretion that is necessary to accommodate modernization, face lifting of equipment, and obsolescence. However, when market and/or income data is presented or reasonably available, all of the three approaches to value with reliable data should be considered to determine the reconciled fair market value of the assessed property.

B. The following data is required to use the cost approach to value:

1. total acquisition costs of equipment (including freight, installation, taxes and fees, as well as, date of purchase) indexed to adjust the cost for the effects of inflation;

i acquisition costs can alternatively be determined using market data and/or through a study of current market conditions when actual costs are not available;

2. the average expected economic life of the equipment;

3. a typical depreciation schedule for the equipment; and

4. information to determine external (economic) and/or functional obsolescence, if any.

C. The assessor should obtain from the taxpayer the acquisition cost of the equipment, the actual age of the equipment, and any information that may reflect on the average economic life and fair market value of the equipment. These regulations, as adopted by the Louisiana Tax Commission, contain guidelines for average economic life, typical depreciation schedules and cost indices.

D. The procedure for establishing the fair market value of business and industrial personal property with the cost approach to value (excluding oil and gas properties, drilling rigs, inventories and leased equipment), includes these steps:

1. classify the personal property according to the classifications listed in Table 2503.A, or a different economic life supported by reliable evidence;

2. the classification table will refer the assessor to the correct composite multiplier column in Table 2503.D. The composite multiplier is a composite of the cost index and the percent good, which shall be updated annually by the LTC in order to comply with uniform assessment of personal property in this chapter;

3. select the correct composite multiplier from this table, based on the actual age of the equipment. For example, the age 1 composite multiplier applies to personal property purchased the year prior to the year it is being assessed (two years back for Orleans) and so on for the other ages;

4. multiply the composite multiplier times the acquisition cost by year of the equipment. The result is the reproduction cost new less physical depreciation (RCNLPD) of the equipment;

5. in the year in which the personal property has reached its minimum percent good, the applicable composite multiplier in use at that time is "frozen". For the assessment years that follow, the RCNLD value does not change until the personal property is permanently taken out of service. An exception to this rule applies when the property has been reconditioned to extend its remaining economic life.

6. determine the amount of other forms of depreciation, when present:

a. functional obsolescence as defined in §301;

b. onomic (external) obsolescence as defined in §301;

7. deduct functional and/or economic (external) obsolescence from RCNLPD. The result is the fair market value of the equipment.

E. Nothing in this Section prohibits a taxpayer/property owner from arguing and submitting evidence that the tables contained in this Chapter fail to achieve fair market value in a particular appeal. A taxpayer/property owner has the burden to prove that a deviation from the tables contained in this Chapter is necessary to achieve fair market value.

La. Admin. Code tit. 61, § V-2501

Promulgated by the Department of Revenue and Taxation, Tax Commission, LR 8:102 (February 1982), amended LR 10:943 (November 1984), LR 12:36 (January 1986), LR 15:1097 (December 1989), LR 16:1063 (December 1990), LR 17:1213 (December 1991), LR 19:212 (February 1993), amended by the Department of Revenue, Tax Commission, LR 31:719 (March 2005), LR 33:495 (March 2007), LR 34:685 (April 2008), LR 35:500 (March 2009), Amended by the Department of Revenue, Tax Commission, LR 42749 (5/1/2016), Amended LR 47469 (4/1/2021), Amended LR 481527 (6/1/2022), Amended LR 491061 (6/1/2023).

AUTHORITY NOTE: Promulgated in accordance with R.S. 47:2323.