After Public Chapter 490 reclassified Tennessee's modern market telecommunications providers, who reappraises their property and on what schedule?

Plain-English summary

The Comptroller asked the AG to clarify the post-Public Chapter 490 framework for valuing the property of "modern market telecommunications providers" (incumbent local exchange telephone companies that elected market regulation under Tenn. Code Ann. § 65-5-109, telephone cooperatives, and nongovernmental entities providing competitive local exchange or VoIP services).

Two answers:

Who reappraises? The Comptroller of the Treasury. Even though Public Chapter 490 reclassifies the operating property of these providers from public-utility status (55% assessment ratio) to commercial-and-industrial status (40% real property, 30% personal property), the Act explicitly assigns assessment responsibility to the Comptroller. Section 6 says the assessments "must be set by the comptroller of the treasury in accordance with" Tenn. Code Ann. § 67-5-1302(a). Section 8 says "all assessing and updating of operating properties of modern market telecommunications providers must be done by the comptroller of the treasury in accordance with" Tenn. Code Ann. §§ 67-5-1301 to -1334. The Comptroller also continues to assess nonoperating property under § 67-5-1302(a), (c).

When? Same schedule as before. Operating properties are reappraised annually. Localized and nonoperating real property gets reappraised in each county during that county's reappraisal year. Tenn. Code Ann. § 67-5-1601(h), as amended by Public Chapter 490, just inserted the new "modern market telecommunications providers" term; the schedule did not change.

Currency note

This opinion was issued in 2017. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule mentioned here.

Background and statutory framework

The pre-Public Chapter 490 setup. Telephone companies were classified as public utilities, with their operating property assessed at the 55% rate. Tenn. Code Ann. § 67-5-1302(a)(1). The Comptroller of the Treasury, not local assessors, did the appraisal.

Public Chapter 490 (2017). Created the new "modern market telecommunications providers" subclass. Includes incumbent local exchange telephone companies that have elected market regulation under § 65-5-109, telephone cooperatives organized under § 65-29-102, and nongovernmental entities limited to providing competitive local exchange telephone service or VoIP. The operating property of these providers is now assessed at the rate applicable to commercial and industrial property of the same type: 40% for real property under § 67-5-801(a)(2), 30% for personal property under § 67-5-901(a)(2).

The Comptroller stays in charge. Sections 6 and 8 of the Act expressly assign assessment to the Comptroller. The reclassification changed the rate, not the assessor. § 67-5-1301(a) and § 67-5-1302(a), (c) continue to cover both operating and nonoperating property.

The schedule. § 67-5-1601(h) sets reappraisal cycles. Operating property gets annual reappraisal (consistent with the centralized assessment of network telecom assets, which change frequently). Localized and nonoperating real property gets reappraised on the host county's reappraisal cycle (most counties have a 4-, 5-, or 6-year cycle). Public Chapter 490 amended § 67-5-1601(h) only to add the new "modern market telecommunications providers" term; the underlying schedule structure is unchanged.

Common questions

Q: Who appraises a modern market telecom's network operating property after Public Chapter 490?
A: The Comptroller of the Treasury, just as before. The rate changed but the assessor did not.

Q: At what rate is operating property assessed?
A: At commercial and industrial rates: 40% for real property under § 67-5-801(a)(2), 30% for personal property under § 67-5-901(a)(2). The old 55% public-utility rate no longer applies.

Q: How often is operating property reappraised?
A: Annually. § 67-5-1601(h) preserves the annual cycle for operating telecom property even under the new classification.

Q: What about localized and nonoperating property?
A: That is reappraised during the host county's regular reappraisal cycle, the same as other commercial property in that county.

Q: Did anything change about how local assessors handle these companies?
A: No. Local assessors did not appraise these companies' operating property before Public Chapter 490 and do not after. The Comptroller does the work centrally.

Citations and references

Statutes:

• Tenn. Code Ann. § 65-5-109 (market regulation)
• Tenn. Code Ann. § 65-29-102 (telephone cooperatives)
• Tenn. Code Ann. § 67-5-1301(a)
• Tenn. Code Ann. § 67-5-1302(a)(1), (c)
• Tenn. Code Ann. §§ 67-5-1301 to -1334
• Tenn. Code Ann. § 67-5-1601(h)
• Tenn. Code Ann. § 67-5-801(a)(2)
• Tenn. Code Ann. § 67-5-901(a)(2)
• 2017 Tenn. Pub. Acts ch. 490
• Tenn. Const. art. II, § 28

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2017/op17-034.pdf

Original opinion text

Opinion No. 17-34
Reappraisal of Nonoperating Properties of Modern Market Telecommunications Providers

Question 1
After Public Chapter 490 becomes effective, who will be responsible for reappraising modern market telecommunications providers?

Opinion 1
The Comptroller of the Treasury will continue to be responsible for reappraising the properties of these telecommunications providers.

Question 2
When must the reappraisal of modern market telecommunications providers be done?

Opinion 2
The reappraisal schedule for the telecommunications providers' properties will remain the same. Their localized and nonoperating real property will be updated in each county during that county's reappraisal year. Their operating properties will be assessed and updated annually.

ANALYSIS

Public Chapter 490 creates a new sub-classification of taxpayers known as "modern market telecommunications providers." 2017 Tenn. Pub. Acts ch. 490, § 1. The sub-classification includes incumbent local exchange telephone companies that elect market regulation pursuant to Tenn. Code Ann. § 65-5-109, telephone cooperatives organized pursuant to Tenn. Code Ann. § 65-29-102, and nongovernmental entities whose business activities are limited to providing competitive local exchange telephone services or interconnected voice over internet protocol services. Id. Many if not all of these companies previously were classified as public utilities, and their operating property was assessed at the applicable 55% rate. Tenn. Code Ann. § 67-5-1302(a)(1). Public Chapter 490, which is now in effect, provides that the operating property of the modern market telecommunications providers will be assessed "at the rate applicable to commercial and industrial property of the same type." 2017 Tenn. Pub. Acts ch. 490, § 5. Industrial and commercial real property is assessed at 40% of its value, Tenn. Code Ann. § 67-5-801(a)(2), while industrial and commercial tangible personal property is assessed at 30% of its value, Tenn. Code Ann. § 67-5-901(a)(2). See also Tenn. Const. art. II, § 28.

Although the operating property used by modern market telecommunications providers is no longer classified as public utility property, the responsibility for appraising and assessing this property remains with the Comptroller of the Treasury. Public Chapter 490 contemplates that the assessments of property of modern market telecommunications providers will be "set by the comptroller of the treasury in accordance with" Tenn. Code Ann. § 67-5-1302(a). 2017 Tenn. Pub. Acts ch. 490, § 6. And it specifically requires that "[a]ll assessing and updating of operating properties of . . . modern market telecommunications providers must be done by the comptroller of the treasury in accordance with" Tenn. Code Ann. §§ 67-5-1301 to -1334. 2017 Tenn. Pub. Acts ch. 490, § 8. The Comptroller is responsible for assessing both the operating property and the nonoperating property of these companies. Tenn. Code Ann. §§ 67-5-1301(a) & 67-5-1302(a), (c).

Public Chapter 490 did not change the reappraisal schedule for these companies. Under both the previous law and Public Chapter 490, the localized and nonoperating real property of these telecommunications providers should be updated in each county during that county's reappraisal year. 2017 Tenn. Pub. Acts ch. 490, § 8. Their operating properties, on the other hand, should be assessed and updated annually. Id. This same reappraisal schedule is described in the most recent version of Tenn. Code Ann. § 67-5-1601(h). Public Chapter 490's amendment to that statute merely inserted the term "modern market telecommunications providers" where appropriate. It did not change the usual schedule by which the Comptroller reappraises the telecommunications providers' property.

HERBERT H. SLATERY III
Attorney General and Reporter

ANDRÉE SOPHIA BLUMSTEIN
Solicitor General

MARY ELLEN KNACK
Senior Counsel

Requested by:
The Honorable Justin P. Wilson
Comptroller of the Treasury
State Capitol
Nashville, TN 37243-9034