Controversy over the assessments on public utility property in Tennessee has kept the courts busy in recent years.

In the most recent case, several Tennessee municipalities filed a petition in the state Court of Appeals challenging 1998 assessments. Specifically, the municipalities challenged an order of the state board of equalization which granted a 15 percent reduction in personal property assessments to public taxpayers, including motor carriers, railroads, and airlines doing business in Tennessee. The Court recently reversed the board’s decision regarding certain noncarrier public utilities.

Federal laws specifically prohibit discriminatory taxation against carriers moving in interstate commerce. Discrimination against motor carriers, airlines, and railroads in the taxation of personal property is prohibited by the Motor Carrier Act of 1980, the Railroad revitalization Regulatory Reform Act of 1976, and the Airport and Airway Improvement act of 1982.

In Tennessee, public utility personal property is centrally assessed by the Office of the Comptroller. Other commercial and industrial property is locally assessed according to depreciation schedules provided for under state law.

In 1991 and 1992, several railroads and airlines filed suit in Tennessee alleging that their tangible personal property was being centrally assessed by the state Comptroller at 100 percent of its value, while locally assessed commercial and industrial property was being assessed at less than 100 percent of its value.

Resolution of those lawsuits resulted in a 15 percent reduction in the personal property evaluation for the railroads and airlines for Tax Year 1998. The Equalization Board also granted the 15 percent reduction to railroads, airlines, and motor carriers who were not involved in the litigation. BellSouth later entered into a settlement agreement granting a 15 percent reduction in personal property valuations.

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