18-125-801 Me. Code R. § 09

Current through 2024-51, December 18, 2024

Section 125-801-09 - Property value and factor

The assessor may require taxpayers to provide information on tax returns on property value and factor. The property factor also may be used in appropriate circumstances in determining an apportionment variation, as provided under 36 M.R.S. §5211(17). The property factor is a fraction, the numerator of which is the average value of the taxpayer's real and tangible personal property owned or rented and used in Maine during the tax period, and the denominator of which is the average value of all the taxpayer's real and tangible personal property owned or rented and used during the tax period.

A.Real and tangible personal property. The term "real and tangible personal property" includes land, buildings, machinery, stocks of goods, equipment, and other real and tangible personal property but does not include coin or currency.

B.Property used during the taxable year. Property is included in the property factor if it is actually used or is available for use or capable of being used during the tax period by the taxpayer. Property held in reserve or standby facilities or property held as a reserve source of materials must be included in the factor. For example, a plant temporarily idle or raw material reserves not currently being processed are includable in the factor. Property or equipment under construction during the tax period (except inventoriable goods in process) must be excluded from the factor until such property is actually used by the taxpayer. If the property is partially used by the taxpayer while under construction, the value of the property to the extent used must be included in the property factor. Property used by the taxpayer must remain in the property factor until its permanent withdrawal is established by an identifiable event such as its sale or the lapse of an extended period of time (normally, five years) during which the property is held for sale.

C.Property in transit; mobile property. Property in transit between locations of the taxpayer to which it belongs is considered to be located at the destination for purposes of the property factor. Property in transit between a buyer and seller that is included by a taxpayer in the denominator of its property factor in accordance with its regular accounting practices must be included in the numerator according to the state of destination. The value of mobile or movable property, such as construction equipment, trucks or leased electronic equipment, that is located both within and without this State during the taxable year, is determined for purposes of the numerator of the property factor on the basis of total time within Maine during the taxable year. Automobiles assigned to traveling employees are included in the numerator of the factor of the state to which the employee's compensation is assigned under the payroll factor.

D.Valuation of owned property. Property owned by the taxpayer is valued at its original cost. "Original cost" means the basis of the property for federal income tax purposes (prior to any federal adjustments) at the time of acquisition by the taxpayer and adjusted by subsequent capital additions or improvements thereto and partial disposition thereof, by reason of sale, exchange, abandonment, etc. However, capitalized intangible drilling and development costs are included in the factor whether or not they have been expensed for either federal or state tax purposes. If the original cost cannot be ascertained, the property must be included in the factor at its fair market value as of the date of its acquisition by the taxpayer.

Generally, the average value of all property owned by the taxpayer is determined by averaging the values at the beginning and ending of the tax period. However, the assessor may require or allow averaging of monthly values if substantial fluctuations in the values of the property exist during the taxable year or if property is acquired after the beginning of the taxable year or disposed of before the end of the taxable year.

E.Valuation of rented property. Property rented by the taxpayer is valued at 8 times the net annual rental rate. Subrentals are not deducted.

If property is used at no charge or rented for a rate other than a reasonable market rate, the property must be included in the property factor on the basis of a reasonable market rental rate.

The "annual rental rate" is the amount paid as rent for the property for a twelve-month period. When property is rented for less than a twelve-month period, the net rent paid for the actual period of rental constitutes the "annual rental rate" for the tax period.

However, when a taxpayer has rented property for a term of 12 or more months and the current tax period covers a period of less than 12 months, the net rent paid for the short tax period must be annualized. If the rental term is for less than 12 months, the rent must not be annualized beyond its term. Rent will not be annualized because of the uncertain duration when the rental term is on a month-to-month basis.

"Rent" is the actual sum of money or other consideration payable, directly or indirectly, by the taxpayer or for its benefit for the use of the property and includes:

(1) Any amount payable for the use of real or tangible personal property, or any part thereof, whether designated as a fixed sum of money or as a percentage of sales, profits or otherwise;

(2) Any amount payable as additional rent or in lieu of rents, such as interest, taxes, insurance, repairs or any other items required to be paid by the terms of the lease or other arrangement but does not include amounts paid as service charges, such as utilities, janitor services, etc. If a payment includes rent and other charges unsegregated, the amount of rent must be determined by consideration of the relative values of the rent and the other items.

"Rent" does not include incidental day-to-day expenses such as hotel or motel accommodations, daily rental of automobiles, etc. "Rent" does not include royalties based on extraction of natural resources, whether represented by delivery or purchase. For this purpose, a royalty includes any consideration conveyed or credited to a holder of an interest in property that constitutes a sharing of current or future production of natural resources from such property, irrespective of the method of payment or how such consideration may be characterized, whether as a royalty, advance royalty, rental or otherwise.

Leasehold improvements are treated as property owned by the taxpayer regardless of whether the taxpayer is entitled to remove the improvements or of whether the improvements revert to the lessor upon expiration of the lease.

18-125 C.M.R. ch. 801, § 09