Tangible Personal Property

Reference Number: CTAS-1472

Tangible personal property is classified according to its use and assessed as a percentage of its value as follows:

Public Utility—55 percent
Industrial and Commercial—30 percent
All Other Tangible Personal Property—5 percent

Tangible personal property not in use is classified according to its immediate most suitable economic use, which is determined after considering the following factors: immediate past use, if any; nature of the property; classification of the real property upon which it is located; normal use of the property; ownership; and any other factors relevant to a determination of the immediate most suitable economic use of the property.¹

All property is subject to taxation.²However, the legislature has determined that non-business tangible personal property is assumed to have no value, and a tax is not imposed on this property.³The no-value presumption for non-business personal property has been upheld, based on the fact that the tax produces little revenue in relation to its administration costs, as well as the long-standing rule that the legislature may choose the method of valuation as well as whether the tax itself has any practical value.⁴

Most industrial and commercial tangible personal property is valued and assessed by the county taxing authorities in the counties where the owners of such property do business.⁵Pursuant to T.C.A. § 67-5-901, et seq., industrial and commercial taxpayers must annually file a schedule on which they list the tangible personal property they use in their businesses. Section 67-5-903(f) contains a schedule of allowable rates of depreciation for commercial and industrial tangible personal property.⁶The constitutionality of § 67-5-903(f) has been upheld.⁷Pursuant to T.C.A. § 67-5-1509(a), the State Board of Equalization must, by order or rule, direct that commercial and industrial tangible personal property assessments be equalized using the appraisal ratios adopted by the state board for each county. However, such equalization is available only to taxpayers who have filed the reporting schedule required by law. The constitutionality of T.C.A. § 67-5-1509(a) has also been upheld.⁸

Public utility and common carrier property is centrally assessed annually by the Comptroller of the Treasury.⁹Pursuant to T.C.A. § 67-5-1302(b)(1), the assessments of public utility property shall be adjusted, where necessary, to equalize the values of public utility property to the prevailing level of value of property in each jurisdiction. The constitutionality of § 67-5-1302(b)(1) has been upheld.¹⁰“The authority to adjust the appraised values of public utility property to achieve equalization with industrial and commercial property is found in § 67-5-1509(b). This statute provides: (b) Equalization may be made by the board or commission, as the case may be, by reducing or increasing the appraised values of properties within any taxing jurisdiction, or any part thereof, in such manner as is determined by the state board of equalization will enable the board or commission to justly and equitably equalize assessments in accordance with law.”¹¹Since 1997, the Board of Equalization has ordered a 15 percent reduction in the assessed value of centrally assessed tangible personal property in order to bring it to the same level of assessment as locally assessed tangible personal property.¹²

¹T.C.A. § 67-5-901(a).

²Tenn. Const., art. II, § 28.

³T.C.A. § 67-5-901(a)(3)(A).

⁴Sherwood v. Clary, 734 S.W.2d 318, 320-21 (Tenn. 1987); citing, Lehnhausen v. Lake Shore Auto Parts, 410 U.S. 356 (1973). For prior law, see Op. Tenn. Atty. Gen. 86-80 (April 3, 1986); Op. Tenn. Atty. Gen. 84-273 (September 27, 1984).

⁵T.C.A. §§ 67-5-102, 67-5-103.

⁶In re All Assessments, 58 S.W.3d 95, 96 (Tenn. 2000).

⁷In re All Assessments, 67 S.W.3d 805, 816-820 (Tenn.Ct.App. 2001), perm. appeal denied, (Tenn. 2002).

⁸Williamson County v. Tennessee State Board of Equalization, 86 S.W.3d 216 (Tenn.Ct.App. 2002).

⁹T.C.A. § 67-5-1301.

¹⁰In re All Assessments, 67 S.W.3d 805, 820-821 (Tenn.Ct.App. 2001), perm. appeal denied, (Tenn. 2002).

¹¹In re All Assessments, 58 S.W.3d 95, 101 (Tenn. 2000). See also Louisville & N.R.R. v. Public Serv. Comm’n, 249 F.Supp. 894 (M.D. Tenn. 1966), aff'd, 389 F.2d 247 (6th Cir. 1968) ("L & N I"); Louisville & N.R.R. v. Public Serv. Comm’n, 493 F.Supp. 162 (M.D. Tenn. 1978), aff'd, 631 F.2d 426 (6th Cir. 1980), cert. denied, 450 U.S. 959, 101 S.Ct. 1418 (1981) ("L & N II").

¹²ANR Pipeline Co. v. Tennessee Board of Equalization, 2002 WL 31840689, *1 (Tenn.Ct.App. 2002) perm. app. denied (Tenn. 2003).