FOCUS ON PROPERTY TAX VALUATION INSIGHTS
Topical Editor for This Issue: Pamela J. Garland
Property Tax Valuation Insights
Economic Obsolescence is an Essential Procedure of a Cost Approach Valuation of Industrial or Commercial Properties
Robert F. Reilly and Robert P. Schweihs
The cost approach is often used in the property tax valuation of special purpose properties, fully integrated manufacturing/processing facilities, and centrally assessed (e.g., public utility) unitary taxpayers. The identification and quantification of economic obsolescence is an important procedure in any cost approach valuation analysis. Nonetheless, some property tax assessors resist recognizing economic obsolescence as a generally accepted cost approach allowance. Some assessors assert that a cost less physical depreciation calculation encompasses all forms of obsolescence. Other assessors propose alternative objections to the recognition of economic obsolescence. This discussion addresses many common assessor objections to the recognition of economic obsolescence. And this discussion introduces several methods that may be used to analyze economic obsolescence in property tax valuations
Issues Regarding the Direct Use of Stock Price and Price/Earnings Data in the Unit Valuation of Centrally Assessed Taxpayers
Pamela J. Garland and Mark L. Zyla
Taxing authorities use the unit valuation concept (in contrast to the summation valuation concept) to value the operating assets of centrally assessed taxpayers, such as railroads, airlines, electric utilities, telecom companies, and interstate pipelines. Taxing authorities also use the unit valuation concept to value the operating assets of some locally assessed taxpayers, such as water and waste water companies, cellular telephone providers, cable TV companies, and petroleum and natural gas refineries. In their unit valuation analyses, many assessors use "comparable company" stock prices and price/earnings multiples in the direct capitalization method and in the stock and debt method. This discussion explains the conceptual and
practical problems associated with the direct use of public company stock market data in
the valuation of taxpayer operating assets.
The Valuation of Water Utility Operating Assets for Property Taxation Purposes
Maria K. Kramme
Water utility operating assets are a textbook example of special purpose assets. In addition, water utilities are subject to unique regulatory and financial influences. This discussion introduces some of the industry-specific factors that affect the valuation of water utility operating assets. And, this discussion focuses on how analysts should consider these factors in the selection and application of valuation approaches and methods for property taxation valuation purposes.
Property Tax Intangible Asset Valuation Insights
Intellectual Property Considerations in Pharmaceutical Industry Processing/Manufacturing Plant Valuations
Robert F. Reilly
Pharmaceutical industry facilities are typically complex, special purpose, and functionally integrated. Accordingly, these facilities are often appraised as a single income-producing property for property taxation purposes. When the pharmaceutical taxpayer operating assets are valued as a part of a single functional unit, the valuation often includes the value increments associated with intellectual property. This is often the case (to varying degrees) regardless of which income approach, sales comparison approach, or cost approach methods are used. This discussion explains the importance of intellectual property to pharmaceutical industry property and/or business valuations. In particular, this discussion focuses on the impact of current trends in intellectual property licensing in the pharmaceutical industry.
Willamette Management Associates Discount for Lack of Voting Rights Study for Estate Planning/Estate Tax Valuations
Timothy J. Meinhart
The nonvoting common stock of a closely held or family-owned corporation is often the subject of a gift tax, estate tax, or estate planning valuation. The most common procedure in the analysis of nonvoting stock is: (1) to value the subject stock as if it was voting stock and then (2) to adjust that initial value indication for a discount for lack of voting rights (DLVR). Willamette Management Associates analysts recently conducted a study of empirical capital market data in order to quantify this DLVR. This discussion (1) summarizes this DLVR study and (2) explains the implications of this DLVR study to estate planning/estate tax valuations.
Valuation of the Assembled Workforce Intangible Asset for Property Taxation Purposes
Pamela J. Garland and David M. Chiang
Most industrial and commercial organizations recognize their employees-and other forms of human capital-as a valuable intangible asset. Recognizing the value of a company's assembled workforce is not a new concept. Companies often analyze the value of their human capital intellectual property (e.g., an assembled workforce) for a variety of transactional, financing, accounting, taxation, and litigation purposes. This discussion describes and illustrates the valuation of a typical taxpayer company's trained and assembled workforce intangible asset.
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Book Review of Willamette Management Associates The Handbook of Business Valuation and Intellectual Property Analysis
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