We base Railroad Property Tax on the market value of a railroad company's operating property in Minnesota.
The Minnesota Department of Revenue estimates and certifies the market value. The counties use the market value to calculate, bill, and collect the taxes from the companies.
Watch our Utility, Pipeline, and Railroad Valuation webinar for a detailed overview of the process.
field_block:node:page:field_paragraphRailroad companies doing business in Minnesota.
You need to file two documents:
Note: You must have an e-Services account to file your railroad operating property records. Contact us at sa.property@state.mn.us if you do not have one or you are having trouble filing through this system.
The Railroad Operating Property Records are due annually by December 1 of the year before the assessment (Filed through Minnesota e-Services).
The Railroad Market Value Report is due annually by March 31 of the assessment year (Filed by email, sent to sa.property@state.mn.us).
We may grant a filing extension up to 15 days for good cause for the Railroad Market Value Report. For information about extensions, see extension request instructions.
We send property record reports to companies to report changes of operating and nonoperating railroad property for the assessment.
Deadline for companies to complete property record reports.
We send updates of operating and nonoperating railroad property to counties.
Deadline for companies to submit the Railroad Market Value Report.
We complete and send valuations to companies.
We send Railroad Equalized Orders to county auditors and assessors.
We send railroad value corrections to counties.
We issue clerical corrections of railroad property values.
Railroad operating property is all property owned or used on a regular and continual basis by a railroad company in the performance of railroad transportation services, including without limitation: franchises, rights-of-way, bridges, trestles, shops, docks, wharves, buildings, and structures.
Examples of operating property: railroad track, track materials, and land needed for the track, buildings and structures, bridges and office space used for dispatching trains .
The department has exclusive primary jurisdiction to determine what is operating property and what is nonoperating property. If a county believes the department is assessing property as operating property that should be locally assessed as nonoperating property, the county should contact the section and the section will begin the formal determination process.
We follow these steps:
The market value is the value of the entire company’s property, functioning as a single unit. We consider all approaches of value to determine their validity relating to the specific property being valued.
Cost approach: Based on the principal of substitution, a buyer will not pay more for a property than the cost of a satisfactory replacement.
To calculate this, we take the restated cost and subtract depreciation of the railroad system. We then add the restated cost of current construction work and a deduction for obsolescence.
Income approach: Converts future anticipated income into present value, based on the assumption that investors will buy and sell property for its future expected income potential. This conversion process is called capitalization.
To calculate this, we:
The table shows an example of the Band of Investment method:
| Capital Structure | X | Market Rate | = | Weighted Rate | |
|---|---|---|---|---|---|
| Debt | 50% | X | 10% | = | 5% |
| Equity | 50% | X | 12% | = | 6% |
| Combined Rate | = | 11% |
Stock and debt indicator approach: Adds a company’s debt to the worth of its stock to establish its property value. We use the stock and debt approach for railroads that are publicly traded. Conceptually, the total value of a company’s assets is equal to the total value of its liabilities and stockholder’s equity.
We allocate a railroad’s unit value to Minnesota based equally on the following information:
We remove locally-assessed property, such as buildings used for general office functions, and exempt property, such as office equipment.
After we determine the taxable Minnesota portion of the unit value, we distribute it among the various counties and taxing districts where the company operates.
We use operating land, miles of track, and railroad operating structures to apportion the taxable portion of the unit value to each of these counties and taxing districts.
The apportioned value to each parcel includes the value of land.
We apply equalization, if necessary. If a county's commercial/industrial sales ratio is out of compliance, we apply an equalization factor to the apportioned values within that county. We do not apply equalization if the county's sales ratio is above 95% and below 105%.