ADMINISTRATIVE NOTICE 9411 SUBJECT: Property Tax -- State Tax Commissioner's Policy Statement for Sales Analysis of Reserve Coal Properties Pursuant to CSR § 110-1I-4.1.9.2. On July 26, 1992 the Department of Tax and Revenue filed Legislative Regulation CSR§
110-1I-1 et seq., relating to the appraisal of producing and reserve coal properties. This notice will address the sales analysis for reserve coal properties conducted by the State Tax Commissioner pursuant to CSR §
1101I4.1.9.2. DISCUSSION Legislative Regulation CSR § 110-1I-4.1.9.2 requires reserve coal properties to be valued considering a review of sales reflecting arms-length, willing buyer-willing seller transactions and the market conditions in the region wherein the property is located. The regulations further require coal reserve values to be established as the product of the reserve acres multiplied by the regional reserve value per acre for the region in which the property is located. The regional value per acre for reserves is required to be established annually by the Tax Commissioner after review of recorded willing buyer-willing seller arms-length coal property sales. The following is a brief discussion of the sales analysis conducted by the Tax Commissioner and the resulting regional values per acre used in appraising reserve coal properties for Tax Year 1994. RESERVE REGIONS Legislative Regulation CSR § 110-1I-4.1.9.2.c requires that counties containing mineable coal seams shall be grouped into five (5) regions based on type of coal seams, location, ownership patterns, mining activity, and sales prices of reserves. The counties contained in each region are listed in CSR §§
1101I4.1.9.2.c.1 through 4.1.9.2.c.5. SALES ANALYSIS BY REGION Legislative Regulations require that the source of information for sales analysis is to be "... recorded willing buyer-willing seller arms-length coal property sales ..." (see CSR §
1101I4.1.9.2.b). To this end the Department receives and reviews sales listing forms or such other alternative forms required to be filed with the Department under provisions of West Virginia Code § 1122-6 (see Exhibit I attached). Coal sales listed on these forms are inspected comparing typical price per acre data for the region with price per acre for the sales transaction. If the sale appears to be a statistical outlier it is not used. These outliers are sales that, for whatever reason, have price per acre values that are outside of a reasonable range, when compared to those sales that are typically transacted in the region. The remaining sales are entered to a sales listing system and a report by county is generated. Each region, except Region 2, thus developed contains in excess of 150 sales for use in estimating typical regional reserve rates. Data from Region 2 indicates that few sales have occurred in these non-producing counties over the past 5 to 8 years. Thus, the Department has relied upon sales in these non-producing counties that occurred in the late 1970's to mid 1980's in estimating a regional reserve rate for Region 2. The sales report thus generated is reviewed for the following. 1. Components of Sale a. Multiple seams b. Other minerals c. Surface d. Improvements 2. Buyer/Seller Relationship a. Parent/subsidiary b. Family relations (father, son etc.) c. Leaseholder/owner 3. Location a. Near active property b. Gas well locations or storage c. Geology (faults or other geological problems) 4. Market a. Purchaser only party in area (no competition) b. Activity in area (leasing, mining, prospecting) 5. Miscellaneous Once the sales have been subjected to the above validity tests, sales that appear to be arms-length are used to generate measures of central tendency. In this regard, three different measures are developed to provide guidance in selecting the price per acre that best typifies the most probable selling price per acre for each region. First the Department develops a weighted arithmetic mean of sales--giving the more recent sales greater weighting. Second, an arithmetic mean of the sales is developed by dividing the aggregate of the sale prices by the aggregate acres transferred. Third, a straight average of the annual arithmetic means is developed. These measures of central tendency are published by region in the Department's preliminary variables report required under provisions of CSR § 110-1I-4.1.9.2.b and after a fifteen (15) day public comment period the regional values per acre are filed in final form on or before July 1 of each year. Attached as Exhibit II are the final variables for Tax Year 1994. For more information concerning the regional per acre values for reserve coal properties consult CSR § 110-1I-1 et seq. or contact the Department of Tax and Revenue at telephone number (304)
558-3940. James H. Paige III Secretary Department of Tax and Revenue Issued: January 10, 1994 Department of Tax and Revenue Property Tax Division P. O. Box 2389 Charleston, WV 25328-2389 Operator on Duty 8:30 am - 4:00 pm Monday through Friday Phone: (304) 558-3940 FAX: (304) 558-2324