Utility taxes: Court softens the tax blow

Carlton County got some “not catastrophic” news regarding how much the county and other taxing authorities within it will need to repay utility companies for overcharging in tax assessments as various utility lawsuits make their way through Minnesota Tax Court.

Earlier this month, the Tax Court raised its previous May 2018 valuation of the Enbridge oil pipeline corridor for assessments in 2012, 2013 and 2014. Instead of the previous valuation of $3.42 billion, the court now set the value of the Enbridge pipeline system at $4.73 billion. The new figure is still far below the state’s previous valuation.

That still leaves the various counties, school districts, townships and other taxing entities — including the state — on the hook to pay back the difference between what they collected in taxes from Enbridge during those years and what the tax court determined should have been collected.

Carlton County Assessor Kyle Holmes said it wasn’t a great ruling, “but as good as we could have hoped for given the circumstances and the initial ruling from May of 2018.”

“We will still owe refund dollars back, but not at the catastrophic amount we were anticipating following the original May 2018 ruling,” he said.

Unlike most properties which are valued by the county assessor’s office, the state sets the market value for utility companies such as power companies, pipelines and railroads. Enbridge claims that it’s been systematically overtaxed because the Revenue Department overvalued its property. The pipeline company claims it is owed at least $50 million in refunds since 2012.

Although DOR sets the market value, the various local government entities collect and spend the taxes, and therefore must pay back any excess as determined by the courts.

Holmes explained that the Minnesota Supreme Court sent the May 2018 decision back to the Tax Court and required the court to value the property on both income and cost, giving both approaches equal weight, something the tax court had previously said it wasn’t required to do, which led to the change in valuation in that case.

Carlton and many other affected Minnesota counties have asked the state legislature to help entities pay back the utilities, since it was the state that overvalued the utility properties, but the legislature has not acted over the past three years.

“One of the more encouraging things I heard when testifying in the legislature last year was an idea presented by Senator Tom Bakk about trying to provide some transition aid for the local jurisdictions for when the values were cut (if they were cut),” Holmes said, explaining that transition aid could help entities get by until other new construction value comes into play, the new Enbridge Line 3 pipeline, for example. Holmes said State Rep. Mike Sundin has sponsored bills in the legislature to try to help ease the burden on taxpayers for the paybacks. None of them have gone to a vote.

“When we show them real people’s taxes going up 20-30 percent due to no fault of their own, we may get their attention,” Holmes said.

Holmes said Enbridge or the Department of Revenue could still appeal the latest tax court decision, dragging the case on even longer.