Bill Text For HB2777 - Senate Floor Version

 1|                        SENATE FLOOR VERSION                           |
  |                            April 6, 2021                              |
 2|                             AS AMENDED                                |
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 3|ENGROSSED HOUSE                                                        |
  |BILL NO. 2777                        By: Pfeiffer of the House         |
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  |                                         and                           |
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  |                                         Montgomery of the Senate      |
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 7|                                                                       |
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 8|       [ revenue and taxation - providing for determination            |
  |       of values with respect to wind power assets -                   |
 9|       effective date ]                                                |
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10|                                                                       |
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11|BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:                  |
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12|    SECTION 1.     AMENDATORY     68 O.S. 2011, Section 2817, as       |
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13|last amended by Section 1, Chapter 176, O.S.L. 2016 (68 O.S. Supp.     |
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14|2020, Section 2817), is amended to read as follows:                    |
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15|    Section 2817.  A.  All taxable personal property, except           |
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16|intangible personal property, personal property exempt from ad         |
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17|valorem taxation, or household personal property, shall be listed      |
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18|and assessed each year at its fair cash value, estimated at the        |
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19|price it would bring at a fair voluntary sale, as of January 1.        |
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20|    The fair cash value of household personal property shall be        |
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21|valued at ten percent (10%) of the appraised value of the              |
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22|improvement to the residential real property within which such         |
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23|personal property is located as of January 1 each year.  The           |
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24|assessment of household personal property as provided by this          |
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arsid7292897 SENATE FLOOR VERSION - HB2777 SFLR                    Page 1
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 1|section may be altered by the taxpayer listing such property at its    |
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 2|actual fair cash value.  For purposes of establishing the value of     |
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 3|household personal property, pursuant to the requirement of Section    |
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 4|8 of Article X of the Oklahoma Constitution, the percentage of value   |
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 5|prescribed by this section for the household personal property shall   |
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 6|be presumed to constitute the fair cash value of the personal          |
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 7|property.                                                              |
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 8|    All unmanufactured farm products shall be assessed and valued as   |
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 9|of the preceding May 31.  Every person, firm, company, association,    |
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10|or corporation, in making the assessment, shall assess all             |
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11|unmanufactured farm products owned by the person, firm, company,       |
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12|association or corporation on the preceding May 31, at its fair cash   |
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13|value on that date instead of January 1.                               |
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14|    Stocks of goods, wares and merchandise shall be assessed at the    |
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15|value of the average amount on hand during the preceding year, or      |
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16|the average amount on hand during the part of the preceding year the   |
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17|stock of goods, wares or merchandise was at its January 1 location.    |
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18|Provided, persons primarily engaged in selling lumber and other        |
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19|building materials, including cement and concrete, except for home     |
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20|centers classified under Industry No. 444110 of the North American     |
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21|Industrial Industry Classification Systems System (NAICS) Manual,      |
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22|shall be assessed at the average value of the inventory on hand as     |
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23|of January 1 of each year and the value of the inventory on hand as    |
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24|of December 31 of the same year.                                       |
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arsid7292897 SENATE FLOOR VERSION - HB2777 SFLR                    Page 2
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 1|    B.  All taxable real property shall be assessed annually as of     |
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 2|January 1, at its fair cash value, estimated at the price it would     |
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 3|bring at a fair voluntary sale for:                                    |
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 4|    1.  The highest and best use for which the property was actually   |
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 5|used during the preceding calendar year; or                            |
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 6|    2.  The highest and best use for which the property was last       |
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 7|classified for use if not actually used during the preceding           |
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 8|calendar year.                                                         |
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 9|    When improvements upon residential real property are divided by    |
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10|a taxing jurisdiction line, those improvements shall be valued and     |
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11|assessed in the taxing jurisdiction in which the physical majority     |
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12|of those improvements are located.                                     |
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13|    The Ad Valorem Division of the Oklahoma Tax Commission shall be    |
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14|responsible for the promulgation of rules which shall be followed by   |
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15|each county assessor of the state, for the purposes of providing for   |
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16|the equitable use valuation of locally assessed real property in       |
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17|this state.  Agricultural land and nonresidential improvements         |
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18|necessary or convenient for agricultural purposes shall be assessed    |
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19|for ad valorem taxation based upon the highest and best use for        |
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20|which the property was actually used, or was previously classified     |
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21|for use, during the calendar year next preceding January 1 on which    |
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22|the assessment is made.                                                |
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23|    C.  The use value of agricultural land shall be based on the       |
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24|income capitalization approach using cash rent.  The rental income     |
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arsid7292897 SENATE FLOOR VERSION - HB2777 SFLR                    Page 3
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 1|shall be calculated using the direct capitalization method based       |
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 2|upon factors including, but not limited to:                            |
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 3|    1.  Soil types, as depicted on soil maps published by the          |
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 4|Natural Resources Conservation Service of the United States            |
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 5|Department of Agriculture;                                             |
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 6|    2.  Soil productivity indices approved by the Ad Valorem           |
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 7|Division of the Tax Commission;                                        |
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 8|    3.  The specific agricultural purpose of the soil based on use     |
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 9|categories approved by the Ad Valorem Division of the Tax              |
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10|Commission; and                                                        |
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11|    4.  A capitalization rate to be determined annually by the Ad      |
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12|Valorem Division of the Tax Commission based on the sum of the         |
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13|average first mortgage interest rate charged by the Federal Land       |
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14|Bank for the immediately preceding five (5) years, weighted with the   |
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15|prevailing rate or rates for additional loans or equity, and the       |
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16|effective tax rate.                                                    |
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17|    The final use value will be calculated using the soil              |
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18|productivity indices and the agricultural use classification as        |
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19|defined by rules promulgated by the State Board of Equalization.       |
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20|This subsection shall not be construed in a manner which is            |
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21|inconsistent with the duties, powers and authority of the Board as     |
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22|to valuation of the counties as fixed and defined by Section 21 of     |
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23|Article X of the Oklahoma Constitution.                                |
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arsid7292897 SENATE FLOOR VERSION - HB2777 SFLR                    Page 4
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 1|    However, in calculating the use value of buffer strips as          |
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 2|defined in Section 2817.2 of this title, exclusive consideration       |
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 3|shall be based only on income from production agriculture from such    |
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 4|buffer strips, not including federal or state subsidies, when valued   |
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 5|as required by subsection C of Section 2817.2 of this title.           |
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 6|    D.  The use value of nonresidential improvements on agricultural   |
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 7|land shall be based on the cost approach to value estimation using     |
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 8|currently updated cost manuals published by the Marshall and Swift     |
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 9|Company or similar cost manuals approved by the Ad Valorem Division    |
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10|of the Tax Commission.  The use value estimates for the                |
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11|nonresidential improvements shall take obsolescence and depreciation   |
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12|into consideration in addition to necessary adjustments for local      |
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13|variations in the cost of labor and materials.  This section shall     |
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14|not be construed in a manner which is inconsistent with the duties,    |
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15|powers and authority of the Board as to equalization of valuation of   |
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16|the counties as determined and defined by Section 21 of Article X of   |
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17|the Oklahoma Constitution.                                             |
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18|    The use value of facilities used for poultry production shall be   |
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19|determined according to the following procedures:                      |
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20|    1.  The Ad Valorem Division of the Tax Commission is hereby        |
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21|directed to develop a standard system of valuation of both real and    |
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22|personal property of such facilities, which shall be used by all       |
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23|county assessors in this state, under which valuation based on the     |
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arsid7292897 SENATE FLOOR VERSION - HB2777 SFLR                    Page 5
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 1|following shall be presumed to be the fair cash value of the           |
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 2|property:                                                              |
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 3|         a.   for real property, a ten-year depreciation schedule,     |
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 4|              at the end of which the residual value is twenty         |
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 5|              percent (20%) of the value of the facility during its    |
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 6|              first year of operation, and                             |
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 7|         b.   for personal property, a five-year depreciation          |
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 8|              schedule, at the end of which the residual value is      |
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 9|              zero;                                                    |
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10|    2.  Such facilities shall be valued only in comparison to other    |
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11|facilities used exclusively for poultry production.  Such a facility   |
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12|which is no longer used for poultry production shall be deemed to      |
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13|have no productive use;                                                |
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14|    3.  During the first year such a facility is placed on the tax     |
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15|rolls, its fair cash value shall be presumed to be the lesser of the   |
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16|actual purchase price or the actual documented cost of construction;   |
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17|and                                                                    |
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18|    4.  For the purpose of determining the valuation of                |
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19|nonresidential improvements used for poultry production, the           |
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20|provisions of this subsection shall be applicable and such             |
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21|improvements shall not be considered to be commercial property.        |
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22|    E.  The value of investment in property used exclusively by an     |
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23|oil refinery that is used wholly as a facility, device or method for   |
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24|the desulphurization of gasoline or diesel fuel as defined in          |
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arsid7292897 SENATE FLOOR VERSION - HB2777 SFLR                    Page 6
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 1|Section 2817.3 of this title shall not be included in the              |
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 2|capitalization used in the determination of fair market value of       |
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 3|such oil refinery if such property would qualify as exempt property    |
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 4|pursuant to Section 2902 of this title, whether or not an              |
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 5|application for such exemption is made by an otherwise qualifying      |
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 6|manufacturing concern owning the property described by Section         |
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 7|2817.3 of this title.                                                  |
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 8|    F.  The use value of a lot in any platted addition or a            |
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 9|subdivision in a city, town or county zoned for residential,           |
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10|commercial, industrial or other use shall be deemed to be the fair     |
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11|cash value of the underlying tract of land platted, divided by the     |
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12|number of lots contained in the platted addition or subdivision        |
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13|until the lot shall have been conveyed to a bona fide purchaser or     |
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14|the lot with building or buildings located thereon shall have been     |
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15|occupied other than as a sales office by the owner thereof, or shall   |
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16|have been leased, whichever event shall first occur.  One who          |
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17|purchases a lot for the purposes of constructing and selling a         |
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18|building on such lot shall not be deemed to be a bona fide purchaser   |
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19|for purposes of this section.  However, if the lot is held for a       |
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20|period longer than two (2) years before construction, then the         |
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21|assessor may consider the lot to have been conveyed to a bona fide     |
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22|purchaser.  The cost of any land or improvements to any real           |
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23|property required to be dedicated to public use, including, but not    |
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24|limited to, streets, curbs, gutters, sidewalks, storm or sanitary      |
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arsid7292897 SENATE FLOOR VERSION - HB2777 SFLR                    Page 7
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 1|sewers, utilities, detention or retention ponds, easements, parks or   |
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 2|reserves shall not be utilized by the county assessor in the           |
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 3|valuation of any real property for assessment purposes.                |
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 4|    G.  The transfer of real property without a change in its use      |
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 5|classification shall not require a reassessment thereof based          |
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 6|exclusively upon the sale value of the property.  However, if the      |
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 7|county assessor determines:                                            |
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 8|    1.  That by reason of the transfer of a property there is a        |
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 9|change in the actual use or classification of the property; or         |
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10|    2.  That by reason of the amount of the sales consideration it     |
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11|is obvious that the use classification prior to the transfer of the    |
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12|property is not commensurate with and would not justify the amount     |
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13|of the sales consideration of the property;                            |
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14|then the assessor shall, in either event, reassess the property for    |
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15|the new use classification for which the property is being used, or,   |
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16|the highest and best use classification for which the property may,    |
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17|by reason of the transfer, be classified for use.                      |
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18|    H.  When the term "fair cash value" or the language "fair cash     |
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19|value, estimated at the price it would bring at a fair voluntary       |
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20|sale" is used in the Ad Valorem Tax Code, in connection with and in    |
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21|relation to the assessment of real property, it is defined to mean     |
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22|and shall be given the meaning ascribed and assigned to it in this     |
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23|section and when the term or language is used in the Code in           |
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arsid7292897 SENATE FLOOR VERSION - HB2777 SFLR                    Page 8
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 1|connection with the assessment of personal property it shall be        |
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 2|given its ordinary or literal meaning.                                 |
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 3|    I.  Where any real property is zoned for a use by a proper         |
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 4|zoning authority, and the use of the property has not been changed,    |
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 5|the use and not zoning shall determine assessment.  Any reassessment   |
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 6|required shall be effective January 1 following the change in use.     |
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 7|Taxable real property need not be listed annually with the county      |
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 8|assessor.                                                              |
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 9|    J.  If any real property shall become taxable after January 1 of   |
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10|any year, the county assessor shall assess the same and place it       |
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11|upon the tax rolls for the next ensuing year.  When any building is    |
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12|constructed upon land after January 1 of any year, the value of the    |
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13|building shall be added by the county assessor to the assessed         |
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14|valuation of the land upon which the building is constructed at the    |
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15|fair cash value thereof for the next ensuing year.  However, after     |
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16|the building has been completed it shall be deemed to have a value     |
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17|for assessment purposes of the fair cash value of the materials used   |
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18|in such building only, until the building and the land on which the    |
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19|building is located shall have been conveyed to a bona fide            |
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20|purchaser or shall have been occupied or used for any purpose other    |
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21|than as a sales office by the owner thereof, or shall have been        |
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22|leased, whichever event shall first occur.  The county assessor        |
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23|shall continue to assess the building based upon the fair market       |
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24|value of the materials used therein until the building and land upon   |
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arsid7292897 SENATE FLOOR VERSION - HB2777 SFLR                    Page 9
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 1|which the building is located shall have been conveyed to a bona       |
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 2|fide purchaser or is occupied or used for any purpose other than as    |
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 3|a sales office by the owner thereof, or is leased, whichever event     |
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 4|shall first occur.                                                     |
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 5|    K.  In the event improvements on land or personal property         |
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 6|located therein or thereon are destroyed or partially destroyed, or    |
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 7|the land itself is impaired or partially impaired by fire,             |
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 8|lightning, storm, winds, floodwaters, overflow of streams or other     |
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 9|cause (all such destruction or impairments being referred to herein    |
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10|as "damage") during any year, the county assessor shall determine      |
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11|the amount of damage and shall reassess the property for that year     |
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12|at the fair cash value of the property, taking into account the        |
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13|actual loss of functional use of the property occasioned by such       |
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14|damage.  The assessor shall make the appropriate value adjustments     |
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15|to the property for that tax year up to the time at which the          |
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16|assessor publishes the "Assessor's Report to the Excise Board" as      |
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17|required by subsection D of Section 2867 of this title.  After such    |
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18|time, adjustments can be made only by the county board of tax roll     |
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19|corrections and only after the assessor has certified the tax roll     |
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20|for that year.  The board secretary shall notify property owners in    |
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21|advance of the time and place at which the value adjustment to their   |
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22|property will be heard by the board.  The board of tax roll            |
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23|corrections is authorized only to approve or reject the value          |
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24|adjustment submitted by the county assessor.                           |
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arsid7292897 SENATE FLOOR VERSION - HB2777 SFLR                    Page 10
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 1|    L.  All taxable personal property used in the exploration of       |
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 2|oil, natural gas, or other minerals, including drilling equipment      |
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 3|and rigs, shall be assessed annually at the value set forth in the     |
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 4|first Hadco International monthly bulletin published for the tax       |
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 5|year, using the appropriate depth rating assigned to the drawworks     |
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 6|by its manufacturer and the actual condition of the rig.               |
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 7|    M.  The value of taxable tangible personal property used in        |
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 8|commercial disposal systems of waste materials from the production     |
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 9|of oil and gas shall not include any contract rights or leases for     |
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10|the use of such systems nor any value associated with the wellbore     |
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11|or non-recoverable down-hole material, including casing.               |
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12|    N.  A county assessor shall use current market price information   |
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13|to establish a fair cash value for real property and personal          |
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14|property owned by any entity engaged in the production of electric     |
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15|energy by means of wind as described by Industry No. 221115 of the     |
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16|North American Industry Classification System (NAICS) Manual, latest   |
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17|revision, which may include:                                           |
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18|    1.  Current market price information available through the         |
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19|Southwest Power Pool on the applicable January 1 date or specific to   |
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20|the point of delivery of the facility's energy deliveries and          |
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21|generation profile to the market; or                                   |
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22|    2.  Data published by the Oklahoma Tax Commission for various      |
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23|approaches to value.                                                   |
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24|                                                                       |
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arsid7292897 SENATE FLOOR VERSION - HB2777 SFLR                    Page 11
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 1|    SECTION 2.  This act shall become effective January 1, 2022.       |
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 2|COMMITTEE REPORT BY: COMMITTEE ON FINANCE                              |
  |April 6, 2021 - DO PASS AS AMENDED                                     |
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arsid7292897 SENATE FLOOR VERSION - HB2777 SFLR                    Page 12
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