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Not since Nora Harris has the Pulaski County collector had reason to hold on to a protested tax payment.
Nearly a decade after the litigious anti-tax advocate from Little Rock paid her roughly $800 property tax bill under protest, another Arkansas taxpayer — the phone company AT&T — is doing the same.
Unlike Harris, who ultimately took her claim to the Arkansas Supreme Court (and lost), the phone company is appealing to the state Public Service Commission — the state agency that assesses the value of utilities’ property for tax purposes. And the phone company’s tab is a lot more than Harris’ $800.
The AT&T appeal affects not just Pulaski County, but all but three counties in the state, according to the commission.
The company says its appeal has little impact on funding for schools, cities and other tax recipients. But the dispute leaves a portion — exactly 6.5 percent, according to company calculations — of the company’s large tax bill in limbo for the foreseeable future. No hearing date has been set.
Exactly how much was the company’s original property tax? An AT&T spokesman won’t say, citing “competitive reasons and other reasons.”
But he will say that the company is one of the state’s largest taxpayers, with an $85 million bill for state and local taxes — including property and sales taxes statewide — in 2004.
The portion of the tax AT&T is protesting will sit in separate escrow accounts in 72 Arkansas counties until the dispute is settled.
The appeal was filed last July. “We really have not made a great deal of progress in this docket,” said Sarah Bradshaw, tax director for the Public Service Commission. An administrative law judge has been assigned to the case and attorneys have been working out scheduling conflicts, she said.
It’s common for utilities to negotiate the value of their assets before tax bills are finalized. In 2002 and 2003 AT&T, then SBC, made similar appeals to the Arkansas commission. Both were settled before bills were sent, a company spokesman said.
“We have very few appeals actually filed here,” Bradshaw said. “Part of it is, our tax rates are low. [Utilities will] appeal in other states because they’re paying more taxes there. You don’t spend money appealing if you don’t feel like you can get back the cost of that effort.”
The last appeal that called for counties to escrow tax dollars involved a gas pipeline company and a few counties in the Ozarks in the late 1990s. Many Arkansas counties had never dealt with a protested bill like AT&T’s before, and several collectors began consulting law books.
AT&T is making similar appeals in at least three other former SBC states — Kansas, Missouri and Oklahoma.
Generally, these disputes hinge on the phone company’s argument that assessments for the hard line phone service should not be going up as its value goes down thanks to cell phones and cable internet. (It’s worth noting that this argument has potential application for other phone companies should it be successful.)
Each state has a different assessment and appeal process.
In Missouri, an AT&T spokesman said a yet-to-be resolved appeal of the company’s 2005 assessment was the first of its kind in that state.
In Oklahoma, the company has protested assessments every year since 2002.
“We think they’re inflated,” said Oklahoma AT&T spokesman Andy Morgan.
“Our business was declining, but the tax valuations continued to go up. … We’re not opposed to paying our fair share, but we are a business. We have to prove ourselves financially year after year.”
When the company’s 2004 appeal was settled in April, $10.2 million was cut from the original $42.7 million tax bill, and another $13.1 million held in escrow was sent to schools and counties.
A year later, the 2005 assessment of the company’s property value was about a half-billion dollars higher than 2004. So the company is appealing again.
“We continue to go back and say ‘That’s ridiculous,’” Morgan said. “This telephone business is on the decline. Every wireline telephone company in the world has been declining in the last few years. A lot of people have cut the cord.”
In Kansas, where an appeal on the 2005 tax bill began 11 months ago, no protested payments of AT&T’s nearly $41 million bill are being withheld.
“They pay the full amount and the counties go out and spend the full amount,” said Floyd Rumsey, a supervisor of the public utilities section of the Kansas Department of Revenue.
Arkansas AT&T spokesman Ted Wagnon said one reason for the Arkansas appeal is rooted in a comparison to Kansas. Kansas has 14 percent more access or phone lines than in Arkansas, he said. But the company’s assessed value in Kansas — about $13 billion, according to Rumsey — is lower than it is in Arkansas.
Among other things, utility assessments are typically based on the company’s value in a specific state as compared to the value of the company as a whole. Bradshaw said that despite the decline of the overall company’s value, “that doesn’t mean [valuation in] Arkansas has gone down.”
The Arkansas Public Service Commission wouldn’t release the company’s assessed valuation in Arkansas, citing a protective order filed by AT&T in the appeal.
Wagnon said the withholding of the protested funds will have little, if any, effect on the schools, cities and counties that typically receive tax money almost as quickly as it is booked in by county collectors.
So far, only one of four mandatory installment payments has come due for AT&T. Their entire 2005 bill isn’t owed until October.
The protested 6.5 percent of that first installment payment doesn’t add up to much, Wagnon said. For Pulaski County’s $3.2 million 2005 bill, for example, about $53,000 has been escrowed so far.
“Practically speaking, that small a portion shouldn’t have much of an effect on local governments,” Wagnon said.
But as the appeal continues and installment payments add up for the county’s second-highest utility bill, Pulaski County Treasurer-Collector Debra Buckner is concerned.
“Any dollar amount that impacts the school budgets and has the potential to grow and impact them even more is of concern,” she said. “If a trend is established that the values are deemed to have been too high, then taxes go down. … With 91 Public Service Commission clients in Pulaski County alone, we’ll watch this lawsuit very closely.”
Collectors, the Public Service Commission and AT&T are all hoping for a swift resolution. But no one knows exactly what to expect.
“A start-to-finish appeal could take up to five years,” Bradshaw estimated. “It can take less time, it can take more time.”
Until then, someone will be earning interest.
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