Effectively Managing Property Taxes for Telecommunication Towers

By Toby Reese

Volume 1

The wireless communications industry as we know it today continues along its evolutionary path. Demand for better services, strong competition, and advances in technology create constant change within the industry. This change continuously impacts the wireless industry's underlying asset base, which in turn has a direct affect on the industry's property tax liability. Telecommunication towers are core assets in today's wireless communications industry. Due to the dramatic growth in tower sites needed to meet the demands of the wireless industry, the property tax treatment of towers has become a subject of increased importance. Whether owned by wireless service providers or tower aggregators, the final property tax liability for a tower or group of towers depends on the following:

Jurisdiction

Across the country, the treatment of telecommunication towers can vary from one jurisdiction to the next, making it imperative to understand each jurisdiction's compliance policies. Some states centrally assess both wireless carriers (all assets, including towers) and tower aggregators; other states centrally assess wireless carriers, but require tower companies to locally assess; and others require both wireless carriers and tower companies to assess their property locally.

Classification

A number of states and local assessment jurisdictions consider towers to be personal property, while others treat towers as real estate improvements or structures. In some areas, classification depends on the ownership of the underlying land if the land is owned by the tower owner, the tower is real estate; if the land is leased, the tower is considered personal property.

Valuation methods

Each of the three generally accepted approaches to value (cost, income, sales comparison) can be used to determine the value of telecommunication towers for property tax purposes. Each approach has its own merits and should be considered in conjunction with the information available. When utilizing the sales comparison approach or market approach, care must be taken to ensure the data used is relevant to the subject property. Likewise, when using the income approach, it is imperative that the capitalization rate adequately reflects the appropriate level of risk, and matches the income to be capitalized. In comparison, the cost approach, specifically replacement cost new less depreciation, is often deemed the most reliable indicator of value since the information required is known and available. A working knowledge of different assessment jurisdictions, insight into the classification of towers, and an understanding of the strengths and weaknesses associated with each valuation approach will result in the effective management of tower-related property taxes.

Currently, Rash & Associates provides property tax management services to a number of leading communication companies, representing over 12,000 cell sites. Our experience in the communications industry positions us to ensure that a company's telecommunication towers receive fair and equitable property tax treatment. If you have any questions or would like to receive more information on Rash & Associates, please feel free to contact us at (800) 399-7950.

Please contact Rash & Associates for more information.