AD VALOREM PROPERTY TAX DISPUTE (BROADBAND COMMUNICATIONS)

The Montana District Court found in favor of our client in a complex ad valorem property tax dispute with the Montana Department of Revenue (“DOR”).  We were asked to explain Generally Accepted Accounting Principles (“GAAP”), business valuation theory, and the business of broadband communications to the District Court.  The Court reversed the Department of Revenue’s assessment of millions of dollars in back taxes, and the Department of Revenue’s method change that would have increased annual ad valorem taxes by several hundred percent.  Issues included Taxation Classification (cable television versus telecommunications), business valuation methods, DOR audit findings,  exclusion of customer relationships from Intangible Personal Property, and the propriety of accounting for multiple lines of business and bundled services.  Mr. Barton testified regarding GAAP, cost accounting, allocation and apportionment of revenues and expenses among lines of business, the causal relationship between business activity and accounting for that activity, and the fact that customer relationships are Intangible Personal Property in both GAAP and valuation theory and practice.  Mr. Duree testified regarding our review of the client’s methods of allocation and apportionment, as well as our determination that the client’s methods of accounting followed “the science” of the business.  We reviewed and compared management and independent expert engineering analysis of our client’s capital assets and services to determine that costs, revenues, and expenses had been appropriately reported to the DOR.  We applied the concepts of Activity Based Costing to document that our client’s historic methods, as used to report capital assets and operations to the DOR, caused past ad valorem taxes to be overstated and certainly not understated as asserted by the DOR.  Our training and experience working with technical experts as well as our training, knowledge and experience in accounting, auditing and valuation services were all employed in this case.

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