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STATE OF OKLAHOMA
1st Session of the 58th Legislature (2021)
SENATE BILL 906 By: Murdock
AS INTRODUCED
An Act relating to ad valorem tax; amending 68 O.S.
2011, Section 2817, as last amend ed by Section 1,
Chapter 176, O.S.L. 2016 (68 O.S. Supp. 2020, Section
2817), which relates to valuatio n and assessment;
providing for depreciation of specified inventory of
persons engaged in selling building materials; and
providing an effective date .
BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
SECTION 1. AMENDATORY 68 O.S. 2011, Section 2817, as
last amended by Section 1, Chapter 176, O.S.L. 201 6 (68 O.S. Supp.
2020, Section 2817), is amended to read as fo llows:
Section 2817. A. All taxable personal prop erty, except
intangible personal property, personal property exempt from ad
valorem taxation, or household personal property, shall be listed
and assessed each year at its fair cash value, estimated at the
price it would bring at a fair voluntary sale, as of January 1.
The fair cash value of household personal property shall be
valued at ten percent (10%) of the appraised value of the
improvement to the residential real property within which such
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personal property is located as of January 1 each year. The
assessment of household personal property as provided by this
section may be altered by the taxpayer listing such property at its
actual fair cash value. For purposes of establishing the value of
household personal property, pursuant to the requirement of Section
8 of Article X of the Oklahoma Constitution, the percentage of value
prescribed by this section for the household personal property sh all
be presumed to consti tute the fair cash value of the perso nal
property.
All unmanufactured farm products shal l be assessed and valued as
of the preceding May 31. Every person, firm, company, association,
or corporation, in making the assessment, shall assess all
unmanufactured farm products owned by the person, firm, company,
association or corporation on the pr eceding May 31, at its fair cash
value on that date instead of January 1.
Stocks of goods, wares and merchandise shall be assessed at the
value of the average amount on hand during the preceding year, or
the average amount on hand during the part of the pr eceding year the
stock of goods, wares or merchandise was at its January 1 location.
Provided, persons primarily engaged in selling lumber and other
building materials, including cement and concrete, exce pt for home
centers classified under Industry No. 4 44110 of the North American
Industrial Classification Systems (NAICS) Manual, shall be assessed
at the average value of the inventory on hand a s of January 1 of
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each year and the value of the inventory on hand as of December 31
of the same year; provided, if any inventory on hand has been
assessed in the preceding calendar year, such inventory shall be
considered stagnant and the value of such in ventory shall be
depreciated by fifty percent (50%) for purposes of the current year
assessment.
B. All taxable real property shall be assessed annually as of
January 1, at its fair cash value, estimated at the price it would
bring at a fair voluntary sa le for:
1. The highest and best use for which the property was actually
used during the preceding calendar year; or
2. The highest and best use for which the property was last
classified for use if not actually used during the preceding
calendar year.
When improvements upon resid ential real property are divided by
a taxing jurisdiction line, those improvements shall be valued and
assessed in the taxing jurisdiction in which the physical majority
of those improvements are located.
The Ad Valorem Division o f the Oklahoma Tax Commiss ion shall be
responsible for the prom ulgation of rules which shall be followed by
each county assessor of the state, for the purposes of providing for
the equitable use valuation of locally assessed real property in
this state. Agricultural land and nonre sidential improvements
necessary or convenient for agricultural purposes shall be assess ed
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for ad valorem taxation based upon the highest and best use for
which the property was actually used, or was previously classified
for use, during the calendar year next preceding January 1 on which
the assessment is made.
C. The use value of agricultu ral land shall be based on the
income capitalization approach using cash rent. The rental income
shall be calculated using the direct capital ization method based
upon factors including, but not limited to :
1. Soil types, as depicted on soil maps publishe d by the
Natural Resources Conservation Service of the United States
Department of Agriculture;
2. Soil productivity indices approved by the Ad Valorem
Division of the Tax Commission;
3. The specific agr icultural purpose of the soil based on use
categories approved by the Ad Valorem Division of the Tax
Commission; and
4. A capitalization rate to be determined annually by the Ad
Valorem Division of the Tax Commission b ased on the sum of the
average first mortgage interest rate charged by the Federal Land
Bank for the immediately preceding five (5) years, weighted with the
prevailing rate or rates for additional loans or equity, and the
effective tax rate.
The final use value will be calculated using the so il
productivity indices and the agricultural use cl assification as
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defined by rules promulgated by the State Board of Equalization.
This subsection shall not be construed in a manner which is
inconsistent with the duti es, powers and authority of the Board as
to valuation of the counties as fixed and defin ed by Section 21 of
Article X of the Oklahoma Constitution.
However, in calculating the use value of buffer strips as
defined in Section 2817. 2 of this title, exclusive consideration
shall be based only on income from production agriculture from such
buffer strips, not including federal or state subsidies, when valued
as required by subsection C of Section 2817.2 of this title.
D. The use value of nonresidential improve ments on agricultural
land shall be based on the cost approach to value estimation using
currently updated cost manuals published by the Marshall and Swift
Company or similar cost manuals approved by the Ad Valorem Division
of the Tax Commission. The use value estimates for the
nonresidential improvements shall take obsolescence and deprecia tion
into consideration in addition to necessary adjustments for local
variations in the cost of labor and materials. This section shall
not be construed in a manner w hich is inconsistent with the duties,
powers and authority of the Board as to equalizati on of valuation of
the counties as determined and defined by Section 21 of Article X of
the Oklahoma Constitution.
The use value of facilities used for poultry producti on shall be
determined according to t he following procedures:
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1. The Ad Valorem Divisio n of the Tax Commission is hereby
directed to develop a standard system of valuation of both real and
personal property of such facilities, wh ich shall be used by all
county assessors in this state, under which valuation based on the
following shall be pre sumed to be the fair cash value of the
property:
a. for real property, a ten -year depreciation schedule,
at the end of which the residual valu e is twenty
percent (20%) of the value of the facility during i ts
first year of operation, and
b. for personal property, a five-year depreciation
schedule, at the end of which the residual value is
zero;
2. Such facilities shall be valued only in comparis on to other
facilities used exclusively for poultry production. Such a facility
which is no longer used for poult ry production shall be deemed to
have no productive use;
3. During the first year such a facility is placed on the tax
rolls, its fair cash v alue shall be presumed to be the lesser of the
actual purchase price or the actual documented cost of construction ;
and
4. For the purpose of determining the valuation of
nonresidential improvements used for poultry production, the
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provisions of this subs ection shall be applicable and such
improvements shall not be c onsidered to be commercial property.
E. The value of investment in property used exclusively by an
oil refinery that is used wholly as a facility, device or method for
the desulphurization of gasoline or diesel fuel as defined in
Section 2817.3 of this ti tle shall not be included in the
capitalization used in the determination of fair market value of
such oil refinery if such property would qualify as exempt property
pursuant to Section 2902 of this title, whether or no t an
application for such exemption i s made by an otherwise qualifying
manufacturing concern owning the property described by Section
2817.3 of this title.
F. The use value of a lot in any platted addition or a
subdivision in a city, town or county zoned for residential,
commercial, industri al or other use shall be deemed to be the fair
cash value of the underlying tract of land platted, divided by the
number of lots contained in the platted addition or subdivision
until the lot shall have been conveyed to a bona fide purchaser or
the lot with building or buildings located thereon shall have been
occupied other than as a sales office by the owner thereof, or shall
have been leased, whichever event shall first occur. One who
purchases a lot for the purposes of constructing and selling a
building on such lot shall not be deemed to be a bona fid e purchaser
for purposes of this section. However, if the lot is held for a
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period longer than two (2) years before construction, then the
assessor may consider the lo t to have been conveyed to a bona fid e
purchaser. The cost of any land or improvements to any real
property required to be dedicated to public use , including, but not
limited to, streets, curbs, gutters, sidewalks, storm or sanit ary
sewers, utilities, det ention or retention ponds, easements, parks or
reserves shall not be utilized by the cou nty assessor in the
valuation of any real property for assessment purposes.
G. The transfer of real property without a change in its use
classification shall not requi re a reassessment thereof based
exclusively upon the sale value of the property. Howeve r, if the
county assessor determines:
1. That by reason of the transfer of a property there is a
change in the actual use or classification o f the property; or
2. That by reason of the amount of the sale s consideration it
is obvious that the use classifi cation prior to the transfer of the
property is not commensurate with and would not justify the amount
of the sales consideration of the prope rty;
then the assessor sha ll, in either event, reassess the pro perty for
the new use classification for which the property is being used, or,
the highest and best use classification for which the property may,
by reason of the transfer, be classified for u se.
H. When the term “fair cash value” or the language “fair cash
value, estimated at the price it would bring at a fair voluntary
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sale” is used in the Ad Valorem Tax Code, in connection with and in
relation to the assessment of real property, it is defin ed to mean
and shall be given the meaning ascribed and assigned to it in this
section and when the term or languag e is used in the Code in
connection with the assessment of personal property it shall be
given its ordinary or literal meaning.
I. Where any real property is zoned for a use by a proper
zoning authority, and the use of the property has not been changed,
the use and not zoning shall determine assessment. Any reassessment
required shall be effective January 1 following the change in use.
Taxable real property need not b e listed annually with the county
assessor.
J. If any real property shall become taxabl e after January 1 of
any year, the county assessor shall assess the same and place it
upon the tax rolls for the next ensuing year. When any building is
constructed upon land after January 1 of any year, the value of the
building shall be added by the cou nty assessor to the assessed
valuation of the land upon which the building is constructed at the
fair cash value thereof for the next ensuing year. However, after
the building has been completed it shall be deemed to have a value
for assessment purposes o f the fair cash value of the materials used
in such building only, until the building and the land on which the
building is located shall have been conveyed to a bona f ide
purchaser or shall have been occu pied or used for any purpose other
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than as a sales office by the owner thereof, or shall have been
leased, whichever event shall first occur. The county assessor
shall continue to assess the b uilding based upon the fai r market
value of the materials used therein until the building and land upon
which the building is located shall have been conveyed to a bona
fide purchaser or is occupied or used for any purpose other than as
a sales office by the owner thereof, or is le ased, whichever event
shall first occur.
K. In the event improvements on land or person al property
located therein or thereon are destroyed or partially destroyed, or
the land itself is impaired or partially impaired by fire,
lightning, storm, winds, floo dwaters, overflow of streams or other
cause (all such destruction or impairments being r eferred to herein
as “damage”) during any year, the county assessor shall determine
the amount of damage and shall reassess the property for t hat year
at the fair cash value of the property, taking into ac count the
actual loss of functional use of the prop erty occasioned by such
damage. The assessor shall make the appropriate value adjustments
to the property for that tax year up to the time at which the
assessor publishes the “Assessor’s Report to the Excise Board” as
required by subsection D of Section 2 867 of this title. After such
time, adjustments can be made only by the county board of tax roll
corrections and only after the assessor has certified the tax roll
for that year. The board secretary shal l notify property owners in
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advance of the time and place at which the value adjustment to their
property will be heard by the board. The board of tax roll
corrections is authorized only to ap prove or reject the value
adjustment submitted by the county as sessor.
L. All taxable personal property used in t he exploration of
oil, natural gas, or other minerals , including drilling equipment
and rigs, shall be assessed annually at the value set fort h in the
first Hadco International monthly bulletin published f or the tax
year, using the appropriate depth rating assigned to the drawworks
by its manufacturer and the actual condition of the rig.
M. The value of taxable tangible personal property used i n
commercial disposal syst ems of waste materials from the produ ction
of oil and gas shall not include any contract rights or leases for
the use of such systems nor any value associated with the wellbore
or non-recoverable down-hole material, including casing.
SECTION 2. This act shall become effective January 1, 2022.
58-1-866 QD 1/21/2021 4:37:19 PM