Assessing High-Tech Equipment and the Software Inside: What's Assessible and What's Not?
In California, taxpayers are required to report to assessors the value acquisition cost of equipment as if there were no computer programs except "basic operational" programs included, and then provide the documentation of the reported costs. As a result there is a growing, multi-billion dollar dispute over whether "embedded" software might actually be application software, which is excluded from assessment in California. Additionally, taxpayers and assessors are faced with the challenge of determining the cost and value of equipment that is not commonly sold in the manner prescribed by the law. With an exponential growth in the variety of equipment that requires special software to operate as sold, how California manages this issue will have national implications.
The speakers include Silicon Valley Assessor Larry Stone, who has represented Santa Clara County for over twnety years and is a past president of the California Assessors' Association. He will be joined by Dr. Marilyn Wolf, the Rhesa "Ray" S. Farmer Distinguished Chair and Georgia Research Alliance Eminent Scholar at the Georgia Institute of Technology. Dr. Wolf will discuss the written findings of her research on embedded software within the context of California's 1972 law, which exempts certain software from assessment. The panel will discuss strategies other states have devised to tax, or exclude from taxation, software.
In 2010, California's property taxes generated nearly $50 billion in revenue. Public K-12 education receives approximately 52 percent of each property tax dollar generated. Business personal property tax accounted for approximately $3 billion of that tax revenue. Based on recently received business personal property tax assessment appeals, and the lack of definite direction, the potential loss of revenue to California's cities, counties, special districts and K-12 education could exceed $1.35 billion...and as California goes, so goes the nation!
Goals of the Presentation:
- Understand how and why California manages the assessment of equipment that has software associated with it.
- Learn about how other states manage these types of assessments.
- Introduction to different approaches for valuing these types of high-technology equipment.
- Provide greater insights about modern equipment, their technical components and what makes them tick.
The 36th Annual IAAO Legal Seminar is scheduled for December 10-11 at the Hyatt Regency Boston. The IAAO Legal Seminar offers the unique perspective of members who are primarily involved in legal issues. The seminar presents substantive and procedural developments in law that affect assessments and valuation. 
