ASSESSORS' HANDBOOK SECTION 504
ASSESSMENT OF
PERSONAL PROPERTY AND
FIXTURES
OCTOBER 2002
By: Dr. Hohl Fransis
T HE INSIDER ' S GUI DE TO PLAGI ARI SM S CI ENTI FI C PLAGI ARI SM - A PROBLEM AS
SERI OUS AS FRAUD-HAS NOT RECEIVED ALL THE ATTENTION IT DESERVES.
Summary.
Why do we find video calls so draining? In part, it's because they force us to focus more intently on
conversations in order to absorb information. They also require us to stare directly at a screen for
minutes at a time without any visual or mental break, which is tiring. To make video calls less
exhausting for yourself, try using a few research-based tips.
First, avoid multitasking. It may be tempting to get other work done on a video call, but switching
between tasks can cost you as much as 40% of your productive time. The next time you're on a
video chat, close any tabs or programs that might distract you, put your phone away, and stay
present. Second, take mini-breaks during longer calls by minimizing the video, moving it to behind
your open applications, or just looking away from your computer now and then. Finally, check your
calendar for the next few days to see if there are any conversations you could have over Slack or
email instead. Especially in situations where you're communicating with people outside of your
organization, don't feel obligated to send a Zoom link. Often, a phone call is more appropriate.. So,
how can struggling scientists increase their chances of securing their share of financial resources in
these tough times? Publish, of course!
What? You don't have the resources to do the experiments? Don't worry! A little creative writing
might be all you need to sail through the financial crisis. Here's how: use a solid paper as your base;
carry out a parallel set of experiments in your favorite model; tweak the data so that the numbers are
not identical but remain realistic; and, when you're ready to write it all up, paraphrase the original
paper ad libitum.
Last, submit your new manuscript to a modest journal in the hopes that the authors of the paper you
used as 'inspiration' won't notice your 'tribute' to their work-even though imitation is supposed to
be the sincerest form of flattery, their approval of your 'reworking' of their paper cannot be
guaranteed. If all goes well, getting a couple of these manuscripts under your belt might make all
the difference when you apply for that elusive grant.
In these difficult times, we've made a number of our coronavirus articles free for all readers.
To get all of HBR's content delivered to your inbox, sign up for the Daily Alert newsletter.
If you're finding that you're more exhausted at the end of your workday than you used to be,
you're not alone. Over the past few weeks, mentions of "Zoom fatigue" have popped up more and
more on social media, and Google searches for the same phrase have steadily increased since early
March.
Why do we find video calls so draining? There are a few reasons.
In part, it's because they force us to focus more intently on conversations in order to absorb
information. Think of it this way: When you're sitting in a conference room, you can rely on
whispered side exchanges to catch you up if you get distracted or answer quick, clarifying
questions. During a video call, however, it's impossible to do this unless you use the private chat
feature or awkwardly try to find a moment to unmute and ask a colleague to repeat themselves.
Read more about
A Guide to the Virtual Meeting
The problem isn't helped by the fact that video calls make it easier than ever to lose focus. We've all
done it: decided that, why yes, we absolutely can listen intently, check our email, text a friend, and
post a smiley face on Slack within the same 30 seconds. Except, of course, we don't end up doing
much listening at all when we're distracted. For many of us, the work-from-home situation adds fuel
to the fire. We're no longer just dialing into one or two virtual meetings. We're also continuously
finding polite new ways to ask our loved ones not to disturb us, or tuning them out as they army
crawl across the floor to grab their headphones off the dining table. For those who don't have a
private space to work, it is especially challenging.
Further Reading
Coronavirus: Leadership and Recovery: The Insights You Need
Finally, "Zoom fatigue" stems from how we process information over video. On a video call the
only way to show we're paying attention is to look at the camera. But, in real life, how often do you
stand within three feet of a colleague and stare at their face? Probably never. This is because having
to engage in a "constant gaze" makes us uncomfortable - and tired. In person, we are able to use
our peripheral vision to glance out the window or look at others in the room. On a video call,
because we are all sitting in different homes, if we turn to look out the window, we worry it might
seem like we're not paying attention. Not to mention, most of us are also staring at a small window
of ourselves, making us hyperaware of every wrinkle and expression (and how it might be
interpreted). Without the visual breaks we need to refocus, our brains grow fatigued.
If this all sounds like bad news, don't despair. We have five research-based tips that can help make
video calls less exhausting.
[ 1 ]
Avoid multitasking.
It's easy to think that you can use the opportunity to do more in less time, but research shows that
trying to do multiple things at once cuts into performance. Because you have to turn certain parts of
your brain off and on for different types of work, switching between tasks can cost you as much as
40% of your productive time. Researchers at Stanford found that people who multitask can't
remember things as well as their more singularly focused peers. The next time you're on a video
chat, close any tabs or programs that might distract you (e.g., your in-box or Slack), put your phone
away, and stay present. We know it's tempting, but try to remind yourself that the Slack message
you just got can wait 15 minutes, and that you'll be able to craft a better response when you're not
also on a video chat.
[ 2 ]
Build in breaks.
Take mini-breaks from video during longer calls by minimizing the window, moving it to behind
your open applications, or just looking away from your computer completely for a few seconds now
and then. We're all more used to being on video now (and to the stressors that come with nonstop
face time). Your colleagues probably understand more than you think - it is possible to listen
without staring at the screen for a full 30 minutes. This is not an invitation to start doing something
else, but to let your eyes rest for a moment. For days when you can't avoid back-to-back calls,
consider making meetings 25 or 50 minutes (instead of the standard half-hour and hour) to give
yourself enough time in between to get up and move around for a bit. If you are on an hour-long
video call, make it OK for people to turn off their cameras for parts of the call.
[ 3 ]
Reduce onscreen stimuli.
Research shows that when you're on video, you tend to spend the most time gazing at your own
face. This can be easily avoided by hiding yourself from view. Still, onscreen distractions go far
beyond yourself. You may be surprised to learn that on video, we not only focus on other people's
faces, but on their backgrounds as well. If you're on a call with five people, you may feel like you're
in five different rooms at once. You can see their furniture, plants, and wallpaper. You might even
strain to see what books they have on their shelves. The brain has to process all of these visual
environmental cues at the same time. To combat mental fatigue, encourage people to use plain
backgrounds (e.g., a poster of a peaceful beach scene), or agree as a group to have everyone who is
not talking turn off their video.
[ 4 ]
Make virtual social events opt-in.
After a long day of back-to-back video calls, it's normal to feel drained, particularly if you're an
introvert. That's why virtual social sessions should be kept opt-in, meaning whoever owns the event
makes it explicit that people are welcome, but not obligated, to join. You might also consider
appointing a facilitator if you're expecting a large group. This person can open by asking a question,
and then make it clear in what
order people should speak, so that everyone gets to hear from one another and the group doesn't
start talking all at once. It's easy to get overwhelmed if we don't know what's expected of us, or if
we're constantly trying to figure out when we should or should not chime in.
[ 5 ]
Switch to phone calls or email.
Check your calendar for the next few days to see if there are any conversations you could have over
Slack or email instead. If 4 PM rolls around and you're Zoomed-out but have an upcoming one-onone, ask the person to switch to a phone call or suggest picking up the conversation later so that you
can both recharge. Try something like, "I'd love a break from video calls. Do you mind if we do this
over the phone?" Most likely the other person will be relieved by the switch, too.
For external calls, avoid defaulting to video, especially if you don't know each other well. Many
people now feel a tendency to treat video as the default for all communication. In situations where
you're communicating with people outside of your organization (clients, vendors, networking,
etc.) - conversations for which you used to rely on phone calls - you may feel obligated to send
out a Zoom link instead. But a video call is fairly intimate and can even feel invasive in some
situations. For example, if you're asked to do a career advice call and you don't know the person
you're talking to, sticking to phone is often a safer choice. If your client FaceTimes you with no
warning, it's OK to decline and suggest a call instead.
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Some of these tips might be hard to follow at first (especially that one about resisting the urge to
tab-surf during your next Zoom call). But taking these steps can help you prevent feeling so
exhausted at the thought of another video chat. It's tiring enough trying to adapt to this new normal.
Make video calls a little easier for yourself.
If our content helps you to contend with coronavirus and other challenges, please consider
subscribing to HBR. A subscription purchase is the best way to support the creation of these
resources.
Read more on Business communication or related topics Meeting management and Stress
management
Does this strategy work? Unfortunately, all too often it does, even though many eyes examine every
paper before it ends up on a printed page. And when scrutiny identifies cases of poten- tial
plagiarism, serious corrective action doesn't always take place. Consider a recent report (Science
323, 1293-1294, 2009) in which software tools and manual comparison helped identify cases of
suspected plagiarism. When the authors of 163 suspicious studies were contacted, about 30%
disavowed misconduct, and over 20% of coauthors claimed no involvement in writing the papers.
Journals' responses aren't necessarily better. Not long ago, we learned that a recent paper in another
journal (which we will call Journal B) looked a lot like a Nature Medicine article from six years
ago. Upon side-by-side comparison, we found that the experimen- tal design and organization of the
new paper, including many of the figures and much of the text, closely resembled those of our
original report, yet our article wasn't even among the references.
Our authors asked us to get involved after receiving a rather unsatisfactory explanation from the
authors of the new report. When we approached them, they acknowledged that the papers were
indeed similar, but claimed that they had not read our paper prior to initiating their project. Given
the extraordinary similarity between the two manuscripts and their virtually identical conclud- ing
statements, this assertion was, to say the least, unexpected.
But even more unexpected was that Journal B did not seem to be in a hurry to get to the bottom of
the problem. Thus, our authors got no response from Journal B when they contacted it. And when
we informed Journal B's editors of the similarities, their response at times was along the lines of
"Please keep us informed of the progress of your investigation"-seemingly forgetting that the
troublesome paper had appeared in their own journal.
To its credit, Journal B ultimately carried out its own investiga- tion and retracted the work; but
why was the process so tortuous? Setting aside the obvious fact that nobody welcomes accusations
of plagiarism or having to retract a paper, we must acknowledge that plagiarism can be much more
subtle than, say, data fabrication and therefore much harder to prove.
Think, for example, about how many different ways there are to describe a standard method or the
basic function of a given protein. Think about the number of times you have encountered the phrase
"These results suggest that X is critical for Y and open new avenues for the treatment of Z." In fact,
cliches like this one account for a good number of cases of plagiarism and what has been referred to
as 'self- plagiarism'-taking parts of your own pre- vious papers to put together the newest one. Some
scientists might not even regard these examples as misconduct.
Another complicating factor is language. For scientists whose native language is not English, it can
be tempting to 'lift' entire passages from other works because it's simply too difficult for them to
effectively organize sophisticated scientific thoughts in another language.
A third factor to consider is the process of paraphrasing. At what point does rephrasing someone's
idea become plagiarism? Moreover, crediting someone by citing their work does not provide a
bulletproof defense against accusations of plagiarism. Unless you use quotation marks to emphasize
that you're quoting someone, you could easily end up in the hot seat.
Journals have a vested interest in protecting their rights over what they publish. It is therefore not
surprising that online tools, such as iThenticate, designed to spot similarities between an input text
and the published literature, are becoming popular among publishers. But as with every other type
of scientific misconduct, it is ultimately the community that needs to set appropriate stan- dards and
penalties to fight plagiarism.
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ARTICLE DEFINITIONS OF TERMS USED IN THE AGREEMENT
"PROJECT RESULT(S)" means any results (including opinions,
knowledge, research results/findings, and reports) that are created, acquired, or
otherwise obtained in the course of and/or as a result of the ENTRUSTED
PROJECT.
"including" means including, but not limited to.
ARTICLE 1 DETAILS OF ENTRUSTMENT
The research scope, schedule, organization, and spending plan of the ENTRUSTED PROJECT are
described in the attached "Entrusted Project Research Plan" (the "RESEARCH PLAN").
ENTRUSTEE must execute the ENTRUSTED PROJECT in accordance with the RESEARCH PLAN
specified in Article 2.1. To the extent the RESEARCH PLAN is modified according to Article 10,
ENTRUSTEE must execute the ENTRUSTED PROJECT in accordance with the modified RESEARCH
PLAN.
Instructions
COMPLIANCE WITH ALL APPLICABLE LAWS
ENTRUSTEE agrees and warrants that ENTRUSTEE will comply with all applicable civil, criminal,
state, and federal laws and regulations in relation to this AGREEMENT, the ENTRUSTED PROJECT,
and the RESEARCH PLAN, including those identified below. If ENTRUSTEE violates any of 12.1(1)(4), ENTRUSTEE must pay an amount calculated by multiplying 10/100 to the ENTRUSTED
EXPENDITURE to ENTRUSTOR as a penalty upon ENTRUSTOR's request by the due date directed
by the ENTRUSTOR.ENTRUSTEE's warranty obligations must survive expiration of this
AGREEMENT.
All antimonopoly or antitrust rules, regulations, and laws of Japan and the United States. All export
control rules, regulations, and laws of Japan and the United States.
All anti-corruption rules, regulations, and laws of Japan and the United States, including anti-bid rigging
and anti-bribery rules, regulations and laws of Japan and the United States, such as the U.S. Foreign
Corrupt Practices Act.
All rules, regulations, and laws regarding criminal organizations or enterprises, including U.S. antiracketeering and anti-criminal enterprise laws. In addition, ENTRUSTEE warrants that ENTRUSTEE
will not have any relationship with illegal entities, such as organized crime groups, gangs, or the Mafia.
If ENTRUSTEE violates any of Article 12.1(1)-(4), ENTRUSTOR can terminate the AGREEMENT.
ENTRUSTEE cannot be exempt from the penalty specified in Article 12.1 on the grounds of the
fulfillment of the AGREEMENT.
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IN WITNESS WHEREOF, the PARTIES, on their own behalf, have caused their duly authorized
officers to execute the AGREEMENT, on the dates below indicated.
Introductory Paragraph
But another question at this point can easily go begging in the rush to advocate reflective practice in
education, which is to do with whether teachers and school leaders actually possess the necessary
thinking skills to undertake it successfully. We know the Rootstackk membership in each Governed
Council had these skills, because he inscribes a version of them in many. But, what about teachers and
school leaders? The discourse analysis and phenomenological enquiry. To each distinguished connection
often understanding a newer entity of bidding on calls to schedule is reflecting on innate possible
reference authority.
P AGE TITLES
The electricity generated by coal and gas each year from 1980 to 2014 was sourced from The Shift
Project Data Portal, Historical Electricity Generation Statistics [47]. Data for 2015 is not yet published;
the trend from 2013 to 2014 was projected to 2015.
377 Associated Language
General
Prefer language codes over language terms, using codes from the MARC Code List for Languages
available at:
Use subfield $l (Language term) only to provide information not available in the MARC Code List for
Languages. Encode multiple languages for a person or corporate body only if more than one language is
used for publication, communication, etc.
Optionally, record an ISO 639-3 language code (or codes) in an additional 377 field. This practice is
especially recommended when an ISO 639-3 code will identify a language more specifically than the
MARC code does. For more information, see the PCC Guidelines for the Use of ISO 639-3 Language
Codes in MARC Records: https://www.loc.gov/aba/pcc/scs/documents/ISO-639-3-guidelines.pdf
Subfield $2 - Source of the code
Subfield $2 is not required when the MARC Code List for Languages is used as the language
source code (second indicator value "#"). NACO institutions may supply an additional 377 field from
another language code list by using second indicator value "7," with subfield $2 containing a code for a
language source list taken from the list of MARC-registered language lists in Language
For example:
(ISO 639-3 code for Achi (acr); assigned a collective code (myn) for Mayan languages in the MARC
Code List for Languages)
Appendix B: Notes
1 'Learning curve' and 'learning rate' are used throughout this paper because they are more widely used
and recognised than the arguably more appropriate term 'experience curve'.
L EARNI NG RATES
Costs are in 2010 US dollars as per Lovering et al. [14].
This paper presents evidence of the disruption of a transition from fossil fuels to nuclear power, and
finds the benefits forgone as a consequence are substantial. Learning rates are presented for nuclear
power in seven countries, comprising 58% of all power reactors ever built globally. Learning rates and
deployment rates changed in the late-1960s and 1970s from rapidly falling costs and accelerating
deployment to rapidly rising costs and stalled deployment. Historical nuclear global capacity, electricity
generation and overnight construction costs are compared with the counterfactual that pre-disruption
learning and deployment rates had continued to 2015. Had the early rates continued, nuclear power
could now be around 10% of its current cost. The additional nuclear power could have substituted for
69,000-186,000 TWh of coal and gas generation, thereby avoiding up to 9.5 million deaths and 174 Gt
CO2 emissions. In 2015 alone, nuclear power could have replaced up to 100% of coal-generated and
76% of gas-generated electricity, thereby avoiding up to 540,000 deaths and 11 Gt CO2. Rapid progress
was achieved in the past and could be again, with appropriate policies. Research is needed to identify
impediments to progress, and policy is needed to remove them.
2.2. Deployment rate projections
To calculate the OCC of nuclear power in 2015 requires a projection of what the cumulative global
capacity of construction starts would have been. Similarly, to calculate the extra electricity that would
have been generated at the higher deployment rates, and the deaths and emissions that could have been
avoided, requires a projection of what the global capacity of operating reactors would have been. This
projection assumes that, if not for the disruption, the construction period would have been five years 5
and the capacity of power uprates and of reactors permanently shut down each year would have been
unchanged from the actual. Three deployment rate scenarios were analysed: the actual historical rate and
two projections of early historical rates.
Actual - This is the actual historical deployment from 1954 to 2015. The cumulative global capacity of
construction starts was 486 GW in 2013 [14]; 11 GW was added in 2014 and 2015, making the total 497
GW in 2015. The actual global capacity in operation in 2015 was 383
GW [22] 6.
Linear - The capacity of commercial operation starts peaked at 40 GW in 1985 and averaged 30 GW
per year from 1984 to 1986 [22]. The capacity in commercial operation in 1985 was 253 GW [26]. The
Linear scenario assumes that commercial operation starts continued at 30 GW per year from 1985 to
2015, and the capacity of power uprates and reactors permanently shutdown each year was as per the
historical data. (See Appendix A for further explanation of the calculation method and data sources.)
Accelerating - From 1954 to 1976, the capacity of construction starts was accelerating, then slowed in
1976 (i.e. about 5 to 10 years after the reversal points, which was when OCC started to increase rapidly).
If the OCC had continued to reduce at the pre-reversal learning rates, it was assumed the deployment
rate also would have continued (all else being equal). A defensible
The Linear and Accelerating scenarios are used to estimate the extra electricity that would have been supplied each year by nuclear
power from 1985 to 2015 (for the Linear) and from 1980 to 2015 (for the Accelerating) scenarios.
Click here to expand...
0. 3. Results and Discussion
3.1. Learning rates
Figure 2 has a chart for each of the seven countries and one for all seven combined; trendlines were fitted to the data points before
and after the trend reversal points. The equation for each trendline is shown on the charts.
assumption is that the rate continued at that prevailing from 1960 to 1976. A polynomial function was
fitted to the data points for 1960 to 1976 and projected to 2015. The cumulative global capacity of
commercial operation starts was estimated by subtracting five years (for the assumed average
construction duration) from the cumulative global capacity of construction starts and subtracting the
actual capacity of reactors permanently shut down. (See Appendix A for further explanation).
Electronic copy available at:
Figure 2: OCC (2010 US$/kW) plotted against cumulative global capacity (GW) of nuclear power
reactors, based on construction start dates; regression lines fitted to points before and after trend
reversals.
Electronic copy available at:
To compare trends for the seven countries, Figure 3 shows all the regression lines. Japan and France had
the fastest pre-reversal learning rate; South Korea had a similar rate since it started building reactors in
1972, although it started from a high OCC after the reversal and initial rapid cost escalation in the other
countries.
Figure 3: Regression lines for seven countries: OCC plotted against cumulative global capacity of
construction starts.
Table 1 lists the learning rates for both periods in each country for both the cumulative global and the
cumulative country capacity. The sixth column is the reversal point for each country. The last column is
the projected OCC at 497 GW cumulative global capacity if the pre-reversal learning rates had
continued.
Table 1: Learning rates for pre-reversal and post-reversal, reversal point and projected overnight
construction cost at 497 GW cumulative global capacity of construction starts.
Country
US 23%
CA 27% F
R 34%
DE 28%
JP 35%
IN 7%
UKRAINE
All 24%
Post-reversal Reversal Global Country point, GW
Electronic copy available at:
Learning rates are affected by the growth of cumulative capacity both globally and locally. Following
Lovering et al., cumulative global capacity was used as the reference. Figure 4 plots the learning rates
against the time span of the construction starts for each period in each country.
Figure 4: Learning rates pre- and post-reversal points vs time span of construction starts.
Table 1 and Figure 4 show that, before the reversal, OCC learning rates were 23% in the US, 27% to
35% in the other countries except India (where it was 7%), and 24% for all countries combined. At the
reversal, learning rates changed abruptly and became negative
(-94% in the US, -82% in Germany, -23% to -56% in the other countries, except in South Korea, and 23% for all seven countries);
South Korea started building nuclear power plants after the initial rapid cost-escalation period, achieving
a 33% learning rate since 1972. The fact that fast learning rates existed up to about 1970, and in South
Korea since, suggests they could be achieved again 9.
The US's post-reversal learning rate was the worst of the seven countries. The reversal occurred two to
four years later in the other countries and the real cost increase was not as severe as in the US. This
suggests the US may have negatively influenced the development of nuclear power in all seven
countries (and probably all countries). It also shows that technology learning and transition rates can
change quickly and disrupt progress, in this case delaying progress for about half a century so far.
3.2. Deployment rates and projections to 2015
Figure 5 shows the annual global capacity of construction starts 10 and commercial operation starts from
1954 to 2015 [22]. The capacity of construction starts was accelerating until about 1970, peaked in
1976, then stalled. The annual capacity of commercial operation starts peaked in 1985, averaged 30 GW
per year from 1984 to 1986, then declined rapidly and has not recovered. IAEA
Electronic copy available at:
[40] shows grid connections peaked at 31 GW per year in 1984 and 1985 and declined rapidly thereafter.
Figure 5: Annual global capacity of construction starts and commercial operation starts, 1954-2015.
Figure 6 shows cumulative global capacity of construction starts and commercial operations starts
plotted against time (top panel), and projections of what they would have been in 2015 if the early
deployment rates had continued (bottom panel).
Electronic copy available at:
Figure 6 (top): Cumulative global capacity of construction starts and of commercial operation starts
(sorted by construction start date). (Bottom): Cumulative global capacity of construction starts (red and
green data points); accelerating projection of 1960-1976 data points (dotted green line); Linear and
Accelerating projections of capacity in commercial operation (dashed pink and green lines).
Table 2 summarises the cumulative global capacity of actual and projected construction starts and the capacity in commercial operation
at the end of 2015 for each scenario.
Table 2: Actual and projected cumulative global capacity of construction starts and global capacity in commercial operation in 2015 for
the three scenarios.
Deployment rate scenario Actual
Linear Accelerating
Construction starts (GW) 497
1,246 2,941
Commercial operation (GW) 383
1,096 2,366
The Linear and Accelerating projections of cumulative global capacity by 2015 in Table 2 represent scenarios calculated on the basis of
the stated deployment rate assumptions. The increases in projected cumulative global capacity by 2015 compared with Actual are large.
It is useful to compare these scenarios with projections made in the 1970s. For example, the Accelerating deployment rate projects a
global nuclear capacity of 1,152 GW by 2000. The Workshop on Alternative Energy Strategies (WAES) [12], projected global nuclear
Main Financial
1,400,000.00
1,200,000.00
1,000,000.00
USD (thousands)
800,000.00
600,000.00
400,000.00
200,000.00
0.00
-200,000.00
-400,000.00
-600,000.00
Total revenues (Thousand)
Gross profit (Thousand)
Net income (loss) (Thousand)
Cash Flow
2,000,000.00
USD (thousands)
1,500,000.00
1,000,000.00
500,000.00
0.00
-500,000.00
-1,000,000.00
1,500,00
0.00
Net cash provided by operating activities (Thousand) Net cash provided by (used in) investing activities (Thousand)
increase (decrease) in cash and cash equivalents (Thousa
Net cash provided by (used in) financing activities (Thousand) Net
Asset Composition
USD (thousands)
6,000,000.00
5,000,000.00
4,000,000.00
3,000,000.00
2,000,000.00
1,000,000.00
0.00
Total current assets (Thousand)
(Thousand)
Property and equipment net (Thousand)
Deferred tax assets (Thousand)
Goodwill (Thousand)
Intangible assets net (Thousand)
Other non-current assets
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S
O
For Version 2.2 Final [7Sept2017] B
O
L
Gary L. Cutler
(cutlergl@gmail.com).
H
For updates Vincent
B. Coen
o
(vbcoen@gmail.com).
h
l
Twenty-First Meeting of the
IMF Committee on Balance of Payments Statistics Washington D.C,
BPM5-to-BPM6 Conversion Matrix
Also, Annex A to BOPCOM-08/10A:
BPM6 Implementation Plan, and Plans for Preparing a Compilation Guide
PREPARED BY THE STATISTICS DEPARTMENT INTERNATIONAL MONETARY FUND
Comments and Explanatory Notes to the Conversion Matrix
* For the BOP and IIP, the conversion matrix matches the standard components and additional details of BPM5 to the standard components and
selected other items of BPM6 ; see:
- BPM5 Balance of Payments: Standard Components, p. 43 - 48;
- BPM5 Tables 7 and 8, Balance of Payments: Standard Components and Additional Detail;
- BPM5 International Investment Position: Standard Components, p. 108 - 111;
- BPM5 Table 9, International Investment Position: Standard Components and Additional Detail;
- BPM6 Appendix 9 Standard Components and Selected Other Items.
* The Comments column of the conversion matrix provides further explanation and information regarding the changes between BPM5 and BPM6 . To
enhance clarity, the titles of BPM5 standard components are shown in italics in the comments.
* The conversion matrix follows the Standard Components and Selected Other Items of BPM6 . In a number of cases the order of the BPM5 items has
been adjusted to facilitate the linking.
* In the conversion matrix, the corresponding items of BPM5 and BPM6 are linked via arrows. To reduce confusion, in cases where non-related arrows
cross, different fonts have been selected for the crossing arrows.
* In cases where the BPM5 item is broken down in BPM6 , split arrows are used to link all new items to the old one. Split arrows are also used when
BPM6 shows not only the original BPM5 item, but also an 'of which' item thereof that was not included in BPM5 . For the sake of clarity, in those cases
different fonts are used to distinguish the 'of which' item.
* This conversion matrix should be printed on Legal size paper (14 x 8.5 inches) or A4 format.
2
C ONVERSI ON MATRIX1
1.
In November 2007, IMF staff proposed the preparation of a conversion matrix,
mapping standard components and selected other items from BPM5 to BPM6, to facilitate compilers in
converting balance of payments and IIP data. Committee members endorsed the proposal, and its
usefulness was confirmed in the regional outreach seminars, where a number of participants remarked
that the implementation of BPM6 will partly depend on their receiving clear guidance from the
conversion matrix.
2.
Apart from mapping BPM5 to BPM6, the conversion matrix provides comments on
changes in treatment and clarifications introduced in BPM6 Standard Components and Selected Other
Items. No distinction between significant and less significant changes is made, because the importance
of specific changes in methodologies will differ among economies. The comments section of the matrix
should enable compilers to identify where underlying items and/or concepts may have changed, even in
the circumstance where the title for an item has not changed. In BPM6, the item goods, for instance,
includes certain items previously included in travel, goods for merchanting, etc.
3.
The conversion matrix is presented for the balance of payments and IIP accounts. An
introductory page gives further explanations on the lay-out, fonts, etc., of items in the matrix. In view of
the large amount of information included in the file, the document should be printed on Legal size paper
(14 x 8.5 inches) or A4 format.
4.
The preparation of the matrix entailed a substantial amount of work, and depended
on resolution of all major methodological changes, and so it was not possible to disseminate it well in
advance of the forthcoming Committee meeting. Committee members are invited to give their
preliminary views on the matrix during the meeting, e.g., whether the arrows linking BPM5 and BPM6
are helpful, suggest improvements to layout, etc. Also, we would welcome Committee members’
feedback on the comment section of the conversion matrix, e.g., whether the comments are clear and
comprehensive. Committee members are invited to provide more detailed and comprehensive
comments on the matrix until the end of January 2009.
I S S U E S F O R T H E COMMITTEE
•
Committee members are invited to give their preliminary views on the usefulness of the
conversion matrix, and to provide more comprehensive comments by the end of January 2009.
1
Mark van Wersch and Cornelia Hammer are the main authors of the conversion matrix.
REQUEST FOR EMERGENCY DISCLOSURE OF ATLASSIAN CUSTOMER INFORMATION
Please complete the form below in detail to assist Atlassian in evaluating whether to
disclose customer information pursuant to 18 U.S.C. § 2702(b)(8) and § 2702(c)(4) and
send this form to lawenforcement@atlassian.com.
Requesting Law Enforcement Agency
Agency Name
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Phone Number
Requesting Officer
Officer Name
Title/Rank/Badge ID
Email Address
Phone Number
The undersigned law enforcement official hereby requests that Atlassian voluntarily disclose the customer
information requested below based upon the provisions of 18 U.S.C. § 2702.
Specifically, the undersigned hereby represents that there is an emergency involving danger of death or
serious physical injury to a person that requires disclosure without delay of information relating to the
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The undersigned law enforcement official provides the following information to assist Atlassian in forming a
good faith belief that disclosure of the customer information requested is warranted.
1. What is the nature of the emergency
involving death or serious physical
injury?
2. Whose death or serious physical injury
is
threatened?
3. What is the imminent nature of the
threat? Please provide information that
suggests there is a specific deadline before
which it is necessary to receive the
requested information and/or that
suggests there is a specific deadline on
which the act stated in response to
Question 1 will occur
(e.g., tonight, tomorrow at noon).
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requesting from Atlassian? Please identify
the relevant Atlassian products and
accounts (by name, address, email
address,
etc.).
5. Please explain how the information you
are requesting will assist in averting the
specified emergency.
The undersigned affirms that this request is
made solely as a result of an emergency
involving danger of death or serious physical
injury to a person; that this emergency
requires disclosure without delay of the
information sought above; and that the
information sought relates to the emergency.
ATTESTATION
Signature of Requesting Officer
Date
The undersigned affirms that the information
shall not be obtained, shared, or
disseminated for any unlawful or harmful
purpose.
U PDATE INFORMATION
DCM
2006
Updat
e
Numb
er 4 Table of
Action/Change TOC
Title
Contents
Revised to reflect this update.
M6 [new]
Session
Recommended
Defaults and Preferences in the LC ILS
Cataloging Module
New DCM M6 presents LC policies on setting session defaults
and preferences in the LC ILS cataloging module. It provides
background and indicates settings recommended or required in
LC. DCM M6 supersedes former Bibliographic Workflow
Training Document #1, which is being withdrawn. Suggestions
to CPSO for improving new DCM M6 are invited.
Revised yellow pages are listed below with a summary of the
changes in content.
Introduction - Revised to reflect LC’s June 1, 2006 series policy
, to give information for the LC CIP partners, and to clarify
LC’s music cataloging practice for name/title headings.
Z1
Authority Records
Name Series
The following sections have been revised to reflect LC’s June 1,
2006 series policy: MARC 21 Fields Used in Serial Records;
008/32; 008/33; 008/39; 010; 016 ; 022; 050;
X00; 1XX; 4XX; 5XX; 64X; 640; 642; 643;
644; 645; 646; 667.
670 - Revised to reflect LC’s June 1, 2006 series policy and to
clarify that catalogers may use the phrase “title not given” when
a title is not provided in the work being cataloged as appropriate.
Descriptive Cataloging Manual
Update Information
Page1 2006 Update Number 4
November 2006
U PDATE I NFORMATI ON 2006 U PDATE N UMBER 4
DCM
Title
Action/Change
The following sections have been revised to reflect LC’s June 1, 2006 series policy: 675; 7XX; 952; 953;
Appendix for LC Staff.
For the convenience of having an up-to-date version of DCM Z1 in one place, all sections of the yellow
pages have been included in this update.
MARC 21
authority format
LC Guidelines
changes in content.
Revised blue pages are listed below with a summary of the
Introduction - Revised to reflect LC’s June 1, 2006 series policy and to indicate that not all
the pages have been revised.
The following sections have been revised to reflect LC’s June 1, 2006 series policy:
008/12, 008/13, 022, 050, 640, 641, 642, 643,
644, 645, 646.
Update Information Page 2
Manual 2006 Update Number 4
November 2006
Descriptive Cataloging
DESCRIPTIVE CATALOGING MANUAL
Page 1
rev. November 2006
Table of Contents
HISTORICAL NOTE ON DESCRIPTIVE CATALOGING
.................................................................................................................................................................... A
1
WEEKLY HOURS REPORT
.................................................................................................................................................................... A
2
TERMINOLOGY
.................................................................................................................................................................... B
4
CATALOGING BASICS (DESCRIPTIVE CATALOGING ASPECT)
.................................................................................................................................................................... B
5
Appendix 1:
Workflows
Appendix 2:
Records
Instructions for Using the STARS Slip Appendix 3:
Appendix 4:
Searching
Appendix 5:
Appendix 6:
Guidelines for Language Codes; Government Publication Codes
Nonroman Scripts/Data
Appendix 7:
New Input
Appendix 8:
Collections Management Information in Bibliographic Records
REFERRING/FORWARDING
B6
In-Process
CATALOGER'S NOTES (952 FIELD) (MONOGRAPHS)
.................................................................................................................................................................... B
9
MINIMAL LEVEL CATALOGING – MONOGRAPHS
.................................................................................................................................................................. B1
0
DESCRIPTIVE CATALOGING MANUAL
Page 2
rev. November 2006
Table ofPROCEDURES
Contents
MINIMAL LEVEL CATALOGING – MONOGRAPHS – BASIC
.................................................................................................................................................................. B1
1
MINIMAL LEVEL CATALOGING – SERIALS
.................................................................................................................................................................. B1
2
COPY CATALOGING MANUAL
.................................................................................................................................................................. B1
3
PROCEDURES FOR CATALOGING RARE MATERIALS
.................................................................................................................................................................. B1
4
MINIATURE BOOKS
.................................................................................................................................................................. B1
5
CORE LEVEL CATALOGING
.................................................................................................................................................................. B1
6
Appendix 1:
Summary of Priorities and Cataloging Levels
Appendix 2:
Catalog Records)
Data Elements Constituting LC Core Level Cataloging—Books (Roman
Appendix 3:
(JACKPHY Catalog Records)
Data Elements Constituting LC Core Level Cataloging—Books
Appendix 4:
Manuscript Music
Data Elements Constituting LC Core Level Cataloging—Printed and
Appendix 5:
Music Sound Recordings
Data Elements Constituting LC Core Level Cataloging—Music and Non-
DESCRIPTIVE CATALOGING MANUAL
Page 3
rev. November 2006
of BOOK
Contents
COPY-SPECIFIC DATA ELEMENTS: GENERAL ANDTable
RARE
CATALOGING
.................................................................................................................................................................. B1
7
DESCRIPTIVE CATALOGING MANUAL
Page 4
rev. November 2006
Table of Contents
BOOKS WITH ACCOMPANYING ELECTRONIC RESOURCES
.................................................................................................................................................................. B1
8
DRAFT INTERIM GUIDELINES FOR CATALOGING ELECTRONIC RESOURCES
.................................................................................................................................................................. B1
9
BOOKS AND SCORES WITH ACCOMPANYING SOUND RECORDINGS
.................................................................................................................................................................. B2
0
BOOKS WITH ACCOMPANYING VIDEORECORDINGS
.................................................................................................................................................................. B2
1
CATALOGING PRIORITIES AND LEVELS OF CATALOGING
.................................................................................................................................................................... C
1
LCCN RESTRUCTURING TO ACCOMMODATE CENTURY CHANGE [DESKTOP]
.................................................................................................................................................................... C
3
ISSUES RELATED TO THE PHYSICAL CONDITION OF AN ITEM
.................................................................................................................................................................... C
5
PROVIDING GUIDELINES FOR DIVIDING LARGE UNBOUND OR SOFTBOUND VOLUMES BEFORE
BINDING
.................................................................................................................................................................... C
6
RECORDS FOR SELECTION DECISION; RECORDS RETAINED FOR AUDIT TRAIL; SURPLUS
COPIES
DESCRIPTIVE CATALOGING MANUAL
Page 5
rev. November 2006
Table of Contents
....................................................................................................................................................................
C
7
PROCEDURES APPLICABLE TO MATERIALS STORED AT FT. MEADE
.................................................................................................................................................................... C
8
MULTIPART ITEMS AND ADDED VOLUMES
.................................................................................................................................................................. C1
2
RECORD/CATALOG MAINTENANCE (BIBLIOGRAPHIC RECORDS)
.................................................................................................................................................................. C1
3
[replaced by DCM M3 in February 2006]
COLLECTION-LEVEL CATALOGING
.................................................................................................................................................................. C1
4
CANCELING BIBLIOGRAPHIC RECORDS [Draft]
.................................................................................................................................................................. C1
5
[replaced by DCM M3 in February 2006]
THE LC LOCAL BIBLIOGRAPHIC RECORD AND LOCAL DATA FIELDS--CONCISE
VERSION
.................................................................................................................................................................. C1
6
BOOKS ISSUED IN FASCICLES
.................................................................................................................................................................. C1
7
DESCRIPTIVE CATALOGING MANUAL
Page 6
rev. November 2006
Table of Contents
2A CATALOGING
.................................................................................................................................................................. C1
8
ANNOTATED CARDS FOR CHILDREN'S LITERATURE
.................................................................................................................................................................... D
6
REFERRAL FOR LANGUAGE EXPERTISE [Draft]
.................................................................................................................................................................... D
7
CATALOGING IN PUBLICATION PROCEDURES
.................................................................................................................................................................... D
8
Appendix 1: Scope of the CIP Program
Appendix 2: Selection Decision (“Do Not Acquire”)
DESCRIPTIVE CATALOGING MANUAL
Page 7
rev. November 2006
Table of Contents
Appendix 3: Guidelines for Including Tables of Contents in Bibliographic Records Appendix 4: Copyright
Acquisitions Division (CAD) Activities Under the ILS
PROCEDURES FOR HANDLING IMPERFECT COPIES
.................................................................................................................................................................. D2
2
DELETION OF INITIAL ARTICLES
.................................................................................................................................................................. D2
5
[replaced by Appendix E, AACR2 in 2002]
CATALOGING STREAMS/INITIAL BIBLIOGRAPHIC CONTROL
.................................................................................................................................................................... E
1
USING ALREADY EXISTING RECORDS FOR IBC
.................................................................................................................................................................... E
2
Appendix 1:
Guidelines for Using Z-Processor
Appendix 2:
Appendix 3:
Data Manipulations for Origcop for a CIP Record Upgraded Externally
Data Manipulations for Copycat
Appendix 4:
Origres
Data Manipulations for Pccadap Appendix 5:
Appendix 6:
Data Manipulations for Z-Processor Editions
Data Manipulations for
COPYRIGHT PAPERBACK COLLECTION
.................................................................................................................................................................... E
3
LINKING BIBLIOGRAPHIC RECORDS FOR MICROREPRODUCTIONS TO RECORDS
DESCRIPTIVE CATALOGING MANUAL
Page 8
rev. November 2006
Table of Contents
FOR ORIGINALS (MONOGRAPHS)
....................................................................................................................................................................M
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BIBLIOGRAPHIC AND AUTHORITY DATABASE MAINTENANCE IN THE LC ILS
....................................................................................................................................................................M
3
SERIAL VERSUS NON-SERIAL CATALOGING TREATMENT IN LC
....................................................................................................................................................................M
4
|
RECOMMENDED SESSION DEFAULTS AND PREFERENCES IN THE LC ILS CATALOGING
|
MODULE
M6
|
PREMARC FILE/PREMARC REPLACEMENT PROCESS (PRP)
.................................................................................................................................................................... S
1
NAME AND SERIES AUTHORITY RECORDS
.................................................................................................................................................................... Z
1
HEADINGS FOR CERTAIN ENTITIES
.................................................................................................................................................................. Z1
1
[replaced by Appendix 1, DCM Z1 in 2005]
ESCRIPTIVE CATALOGING M ANUAL
R E C O M M E N D E D S E S S I references
O N D E F A U L T Sin
A NLC
D PR
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R E N C E S I N T H E LC ILS C A T A L O G I N G M O D U L E
ILS
TABLE OF CONTENTS
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INTRODUCTION ................................................................................................... 2 m
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BACKGROUND................................................................................................... 2 r
M6.1
M6.2
M6.2.1
M6.2.2
S E T T I N G S E S S I O N D E F A U L T S A N D PREFERENCES ................................................. 2
M6.3
RECOMMENDED SETTINGS ............................................................................... 3
New document: Send suggestions for improving these guidelines to cpso@loc.gov.
M6.1
D
SUMMARY
DCM M6 presents LC policies on setting session defaults and preferences in the LC ILS cataloging
module. M6.2 provides background. M6.3 indicates settings recommended or required in LC.
DCM M6 supersedes former Bibliographic Workflow Training Document #1.
Note: It is most effective to consult DCM M6 with a cataloging session open and the Session Defaults and
Preferences dialog box displayed (see M6.2.2).
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M6.2
M6.2.1
INTRODUCTION
references in LC ILS Cataloging
BACKGROUND
Session defaults and preferences are choices for LC ILS cataloging module sessions that are set on
individual workstations. They reduce effort and help avoid errors by automatically prompting data, system
functions, and other variables that you use most often when you are cataloging.
Security parameters established in your profile by your LC system administrator determine some session
defaults. Signing on using your operator ID invokes those.
Use the instructions in M6.2.2 to set other preferences on your workstation. LC policies recommend or
require certain settings, as presented in M6.3.
Some defaults and preferences depend on factors in your work assignment, such as the specific cataloging
workflow and type of material. Change your settings as necessary to assist you in doing work with
different parameters (for example, copy cataloging, added copies, reference materials). It helps to
organize your work in order to avoid switching preferences constantly.
Note: The information here is current for Voyager 2003.1.1 (Unicode) in LC. If there has been any further
LC ILS system upgrade, consult CPSO for advice on changes in recommended cataloging session defaults
and preferences.
For more background information on cataloging defaults and preferences, see the Voyager With Unicode
Cataloging User’s Guide on the LC Integrated Library System Program’s home page
(http://www.loc.gov/staff/ils/Unicode/unicodedoc/VCA.pdf).
M6.2.2
S E T T I N G S E S S I O N D E F A U L T S A N D PREFERENCES
With an LC ILS cataloging module session open, view or change defaults and preferences by selecting
“Options / Preferences” from the menu bar. That opens the Session Defaults and Preferences dialog box.
Options within the dialog box are organized on different “tabs,” which are accessible by clicking the tab
labels at the top.
On each tab, input or change the settings by means of the mechanisms provided: select from a list, click an
option so that it is checked or not checked, or input data. Save selections by clicking “OK.” Close the
dialog box by clicking “Cancel” if there are no new settings or changes to save or if you do not want to
save selections that you made.
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Selections are stored when youreferences
exit the cataloging
module
session. Check the preferences on your
in LC ILS
Cataloging
workstation occasionally, however, to confirm they are what you need for your work, especially if you
share the same workstation with other staff members.
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M6.3
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RECOMMENDED
SETTINGS
references in LC
ILS Cataloging
TAB: Option
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Recommended, Required, or
Usual
Additional Information
G ENERAL :
Most ABA staff:
Holdings/Item
default location
c-General Collections/CMD
Select the location that holdings
and item records you create are
most likely to use. Select a
location other than GenColl if
your work usually serves that
location (for example, “c-Law
Library” for a law cataloger).
G ENERAL :
Call Number
Hierarchies
Most ABA staff (work with full LC
classification call numbers):
LCclass-050a&b
G ENERAL :
Most often:
Bibliographic
LCCNadd or LCCNmerge
Import/Replace
Profile
(Both now have the same result.)
Select the hierarchy for the kind
of call number most likely
present in your work. This is
necessary for the LC ILS to
copy call number data from the
bibliographic record into a
holdings record’s 852 field.
Only in special workflows:
SMCD special workflow for
which the profile was designed:
smcdONLYmerge
CIP verification workflow using
“Z-Processor CIP Ver version”
to search OCLC and import
upgraded CIP records:
CIP Ver Replace
G ENERAL :
Required always: ARLCCNadd
Authority
Import/Replace
Profile
G ENERAL :
Delete records
from work files
once saved to
Required always: Checked
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G ENERAL :
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Required always: Checked
Delete records
from import file
once saved to
database
G ENERAL : Add a
subfield ‘a’ to a
new field
Your individual preference
Note: Setting chosen affects
results of some macros.
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TAB: Option
G ENERAL :
Display MARC
Views
Recommended, Required, or
Usual
Additional Information
6
Your individual preference
maximized
VALIDAT IO N:
Required always:
Cataloging
formats
UnicodeLCMARC21
VALIDAT IO N:
Usually: Not checked
Exception: Change the
preference to “checked” and
thereby bypass MARC
validation only when you cannot
save a record because of a
MARC validation problem, you
cannot resolve the problem
without assistance, and that
assistance is not immediately
available. After you save the
problem record, reset the
preference right away to “not
checked.”
Required always: Not checked
“Not checked” assures only
MARC 21 Unicode characters
are saved to the database and
invalid characters generate error
messages.
Bypass MARC
Validation
VALIDAT IO N:
Bypass MARC21
Character set
validation
VALIDAT IO N: List
Your individual preference
all the errors /
Show errors one at
a time
VALIDAT IO N:
Bypass Authority
Control Validation
Only creating IBCRs, shelflisting,
end-stage processing: Checked
Otherwise: Not checked
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only valid MARC 21 tags,
indicators, and subfields are
saved to the database.
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Recommended:
Checked
Display All The
Headings
VALIDAT IO N:
Recommended:
Heading Types
Check all the heading types
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“Checked” causes the LC ILS
authority validation window to
display authority records that the
system validated as well as those
it did not, thereby making access
to the authority records easier.
Exception: Staff who do not
review subject access points
may leave “Subdivision” not
checked.
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TAB: Option
VALIDAT IO N:
Recommended, Required, or
Usual
Additional Information
Required always: Not checked
“Not checked” causes the LC
ILS to convert any precomposed Unicode “letter +
diacritic” combination
(introduced, for example, by
copying text from a Web page)
into the decomposed form, that
is, letter followed by combining
diacritic, which MARC 21
requires.
Bypass
Decomposition of
accented
characters for
MARC21
VALIDAT IO N:
8
[Do not input & do not change]
856 link servers
W ORK F LOW :
Your individual preference
Retain last search
W ORK F LOW :
Your individual preference
Automatic
truncation for non
keyword searches
W ORK F LOW :
Your individual preference
Display record
directly if search
results in only one
title
W ORK F LOW :
Creating IBC records: Checked
Always create a
holding when
adding holdings to
a bib (i.e., do not
show existing
Otherwise: Not checked
holdings first)
W ORK F LOW :
Display item
record directly if
item retrieve
Your individual preference
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doing a sequence of searches of
the same kind.
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item
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W ORK F LOW :
Recommended: Not checked
Sequence new
items at top
W ORK F LOW :
Sequence new eitems at top
[Disregard]
Reminder: Put any incorrectly
sequenced item records into
correct order by clicking “Get
Items” from the holdings record
display and using “Move before”
and “Move after.”
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TAB: Option
W ORK F LOW :
Recommended, Required, or
Usual
Additional Information
10
Required always: Checked
Check for
Duplicate Item
Barcodes
W ORK F LOW :
Recommended: Not checked
Suppress
confirmation
message upon
successful save
ITEM DEFAULTS :
Recommended:
Item Type
Type of item most likely in your
work
ITEM DEFAULTS :
Usually: In Process
Not suppressing confirmation
messages lets you know with
certainty whether your record
was saved to the database and
therefore reduces additional,
unnecessary “save” actions “just
to be sure.”
Select the type of item you are
most likely to process,
depending on your work
assignment.
Status
ITEM DEFAULTS :
Recommended: 0
Change number manually in item
records when you know which
copy you are processing.
Recommended: 1
Change number manually in item
records when necessary.
Copy
ITEM DEFAULTS :
Pieces
ITEM DEFAULTS :
[Leave blank]
Other Options
FOLDERS/FILES:
Recommended:
Templates
Specify Hldg template: c:\program
files\ voyagerunicode\
voyagertemplates\voyager original
defaults\hold.tem
Do not specify Bib and Auth
templates
P
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For each type of record, you can
only specify one template to be
used when you create a new
record. That is only practical if
you always use the same
template for that type of record
(usual for Hldg, unusual for Bib
and Auth).
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FOLDERS/FILES:
references in LC ILS Cataloging
Recommended:
Folders
Specify Template folder:
c:\program files\ voyagerunicode\
voyagertemplates\
Leave Work and Import folder
options blank
M
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Reminder: Generally, do not
specify or use special work
folders in the LC ILS; let the LC
ILS use its default work folder
during addition of new records
or modification of existing ones.
Using work folders other than
the default risks accidental
errors. Do not use an import
folder as a work folder in the LC
ILS.
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TAB: Option
FOLDERS/FILES:
Recommended, Required, or
Usual
Additional Information
[Disregard and leave blank]
Reminder: Do not use work
files
Work Files
12
in the LC ILS.
FOLDERS/FILES:
[Disregard and do not change]
Save to Local
File
MAPPING :
Required always:
Expected
MARC21 MARC-8 (non-
Character Set of
Unicode)
[Disregard and do not change]
MARC M apping
for OCR Data
C OLORS /F ONTS :
Your individual preference
Preset: White background
Your individual preference
Preset: Blue background
Your individual preference
Preset: Yellow background
Your individual preference
Preset: Orange background
Mark Views
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ESCRIPTIVE CATALOGING M ANUAL
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DESCRIPTIVE CATALOGING MANUAL
Z1: NAME AND SERIES AUTHORITY RECORDS
Prepared by the Cataloging Policy and Support Office
Library of Congress
DESCRIPTIVE CATALOGING MANUAL
Z1
CONTENTS
Introduction
OCLC Fixed Field Conversion Table RLIN Fixed Field Conversion Table MARC 21 Fields Used in Serial Records
008/11: Subject Heading System/Thesaurus 008/15: Heading Use-Subject Added Entry 008/32: Undifferentiated
Personal Name 008/33: Level of Establishment
008/39: Cataloging Source
010: Library of Congress Control Number
016: National Bibliographic Agency Control Number 022: International Standard Serial Number
035: System Control Number 040: Cataloging Source
042: Authentication Code
050: Library of Congress Call Number 053: LC Classification Number
X00: Personal Names -- Indicator Value for Multiple Surnames 1XX: Headings
4XX: See From Tracings 5XX: See Also From Tracings
64X: Series Treatment -- General Information
640: Series Dates of Publication and/or Volume Designation 642: Series Numbering Example
643: Series Place and Publisher/Issuing Body 644: Series Analysis Practice
645: Series Tracing Practice
646: Series Classification Practice
663/664: Complex See Also and See References 667: Nonpublic General Note
670: Source Data Found 675: Source Data Not Found
7XX: Heading Linking Entries
781: Subdivision Heading Linking Entry–Geographic Subdivision 952: Cataloger's Permanent Note
953: Local Staff Codes
958: Note -- Confidential Information 985: Record History
Appendix 1: Headings for Ambiguous Entities Appendix 2: Canadian Headings
Appendix for LC Staff (LC distribution only)
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Contents
1
DESCRIPTIVE CATALOGING MANUAL
Z1
INTRODUCTION
These instructions address the creation and update of name and series authority records.
They do not address subject authority records. For the purposes of this document, “authority record”
applies to both name and series authority records. “Authority file” applies only to the name and series
authority records which constitute the national authority file (NAF).
LC staff members and libraries participating in the Name Authority Cooperative (NACO) component of
the Program for Cooperative Cataloging (PCC) contribute records to the authority file. In addition to
being available online at LC, the authority file is available to NACO participants through the OCLC and
RLIN utilities.
In constructing headings/references and recording information, NACO participants and LC catalogers not
working in the LC Database may make use of all records on the file against which the searching and
cataloging is being done: OCLC, RLIN, etc. NACO participants may choose to use only LC records found
on the file being searched. For LC catalogers working in the LC Database, the file is the set of records
comprising the “LC database” (see 670 yellow pages). In this document, “database” refers to whatever
file is being used for searching and cataloging. At times, LC staff may need to consult the manual Official
Name Catalog (ONC).
Use this document (DCM Z1) in connection with AACR 2, Library of Congress Rule Interpretations
(LCRI), and other sections of the Descriptive Cataloging Manual (DCM). It supplements the MARC 21
Format for Authority Data and generally does not repeat information found in the format. Interfile the
pages of this document with the appropriate pages of the format; the pages of this introduction through the
pages “MARC 21 fields ...” can be filed after the introduction section in the format. The examples are
given in MARC 21 style; an exception is the use of a blank space before and after the delimiter/subfield
code combination. The symbol “#” represents a blank in an indicator position; the symbol “$” is used for
the delimiter.
This Introduction section covers the following topics:
C Name authority records (NARs)
C Series authority records (SARs)
C Additions and changes to authority records
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C NACO normalization
C Should an SAR be made?
C How many SARs should be made?
C Series statement appears only on ECIP data view at galley stage
*
C Priorities for series/multipart items
C Searching series
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Name authority records (NARs)
A name authority record has the following basic contents: 1) the authorized form of name chosen for
use in headings, 2) the sources for this form and for variant forms, and 3) the cross references leading
to the heading from variant forms or from related headings. Additional information may be recorded
in fixed fields and in note areas of the authority record. Control data and content designation are also
included for proper identification and manipulation of the data.
Generally, make a name authority record for any personal or corporate (including geographic) name
heading that may be used as a main or added entry heading, whether it is actually first used as (or as
part of) a main entry heading, a secondary entry (including a subject entry), or in certain cross
references (e.g., hierarchy 4XX references, 5XX references). NARs are not made for personal names
when the only clue to the person's identity is a nonalphabetic or nonnumeric device, or for entities that
may be used only as subject entries, e.g., topical subject headings, fictional characters, animals.
LC practice: For titles or name/titles, an authority record is required only when one or
more of the conditions listed below applies. Apply these criteria to each element of the full heading
(main title, language, part, etc.) and make a separate authority record for each element that meets the
criteria. Note: Authority records are not automatically created for each element of a uniform title
heading.
(1)
a reference must be traced on that authority record; or,
(2)
special research done to establish that heading must be recorded
(Note: In this context the LC manual Official Name Catalog is treated as a reference source; so
searches in that catalog should be recorded in the authority record); or,
(3)
the heading is needed for a related work added entry or subject
entry and the work is not represented by a bibliographic record in the LC database, or, for serials, by
a CONSER record in OCLC or RLIN. See specific guidelines in LCRI 21.30G for a related work added
entry; apply the same guidelines when a heading is needed for a subject entry; or,
(4)
special information needs to be recorded, e.g., citation title for a
law;
LC music cataloging practice: As of August 16, 1999, authority records are created for
ALL title and name/title headings. When a name/title see also reference needs to be made in
* accordance with LCRI 26.4B4, Conflicts, make an authority record for the name/title referred
* from if such a record had not been made in accordance with the above guidelines.
PCC practice: NACO participants may contribute name authority records for titles or name/titles
(other than series, see below) as needed for cataloging. Also consult LCRI 21.30G for specific
guidelines when a heading is needed for a related work added entry; apply the same guidelines when a
heading is needed for a subject entry.
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Series authority records (SARs)
LC series practice: As of June 1, 2006, LC does not create or update SARs
*
PCC series practice: The PCC Policy Committee has announced that the PCC series policy
*
remains unchanged.
*
A series-like phrase record also can be made to record information of general interest or application, e.g.,
the 1XX in the record is an imprint rather than a title.
A series authority record has the following basic contents: 1) type of series code (i.e., monographic series,
analyzable multipart item, a serial other than a monographic series, series- like phrase), 2) form of
heading, 3) series treatment (classification, analysis, and tracing), 4) series numbering, 5) an LC call
number, if classified as a collection, 6) place of publication and publisher/issuing body, 7) the source(s) on
which the form of series heading is based, 8) cross references leading to the heading from variant forms
and from/to related headings. Additional information may be recorded in fixed fields and in note areas of
the authority record. Control data and content designation are also included for proper identification and
manipulation of data.
Until 1983, series authority records created at LC, for the most part, reflected solely LC holdings and
practices. However, now the authority file is a national authority file that accommodates holdings and
practices of other institutions.
*
Series treatment information reflects institution-specific decisions. Therefore, the fields containing series
treatment information require the identification of institution(s) following that practice. Because series
treatment decisions in an institution can change, certain series treatment fields provide the means for
indicating variations in practice within an institution.
Additions and changes to authority records
Almost as common as the need for a new authority record is the need to alter an existing record. New
information can be received in various ways (e.g., new cataloging, investigation in response to a query)
and may be significant enough to add to the permanent authority record.
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Normally a new reference or a change in heading must be justified by the addition of new information to
the authority record. Many other types of data can be added to the authority record when judged useful
for proper identification.
Change an authority record when errors in headings or cross references are discovered. When the
published work for an item cataloged through the CIP program shows a change in the form of name of a
person, corporate body, uniform title, or series, change the authority record;
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add the published source after the CIP source in the 670 field to document the change. Changes in the
imprint date, choice of main entry, and changes in title proper do not require changes to authority records
created for CIP items.
*
Code uncoded headings for AACR2 at the first instance of use. Refer authority records for headings that
are totally invalid under AACR2 to the Cataloging Policy and Support Office (cpso@loc.gov).
*
NACO normalization
*
When a new authority record (or field) is added to the authority file, each heading is
computer edit designed to eliminate all but the essential characters of a heading-- this * process is
called normalization. All parties involved in the exchange of LC/NAF authority data * have agreed
to a specific set of rules for normalization, and these rules are posted at:
* com
* htt
*
The process of normalization removes all diacritics and most punctuation, and converts all letters to
uppercase and all modified letters to their unmodified equivalents. Subfield delimiters (but not subfield
codes) are retained in the normalized form. The normalized form of heading differs from the authorized
catalog form of the heading. For example:
Catalog form:
Ile-de-Montréal (Québec) Normalized form:
ILE DE MONTREAL QUEBEC
Only normalized forms of headings and references are compared in the check for uniqueness. Normalized
forms that match are considered duplicate headings or a see reference in conflict with an authorized
heading.
The only mark of punctuation that is retained during normalization is the first comma in subfield $a. This
exception means that the following two headings normalize to different forms:
Catalog form:
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Chung, Hui Normalized form:
CHUNG, HUI
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Catalog form:
Chung-hui Normalized form:
Z1
CHUNG HUI
To conform to the NACO standard, participants must adhere to the following policies:
Headings. Because headings that differ only in diacritics, marks of punctuation (except
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the first comma, as stated above), capitalization, or special characters normalize to the same form, they are
considered to conflict and must be further distinguished. If personal names cannot be distinguished, create
an undifferentiated personal name authority record. The heading can represent only one form of the name
(it does not matter which), but the 670 fields for each person should make it clear what the catalog entry
form should be, and that form, not necessarily the form in the 100 field, should be used in the entry on the
bibliographic records. For example:
1
0
0
1
#
$
a
K
u
,
Chun
4
0
0
1
#
$
a
G
u
,
Zhun
4
0
0
1
#
$
a
G
u
,
Qun
6
7
0
$a
[Editor of Hsia jih ti hui i]
6
7
0
$a
Lo, Y.L. Hsia jih ti hui i, 1977: $b t.p. (Ku
Chün)
$a
6
7
0
6
7
0
$a
[Joint author of Chung-kuo cheng fu k(uai chi
chih
tu]
P'an, H.L. Chung-kuo cheng fu k(uai chi chih tu,
1941: $b t.p. (Ku Chun)
Form of entry on bibliographic records for the first author: Ku, Chün. Form of entry on bibliographic
records for the second author: Ku, Chun.
See References. Do not trace a 4XX reference that normalizes to the same character string as an existing
authorized 1XX heading in the national authority file, including the heading in the record to which the
reference is made. This policy also applies to the optional linking references. If a linking reference and
the heading in the same record normalize to the same form, do not trace a 4XX linking reference. Instead,
give the old catalog heading in a 667 field preceded by the phrase: Old catalog heading:.
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100 0# $a Napoleon $b I, $c Emperor of the French, $d 1769- 1821
667
French, 1769-1821
$a Old catalog heading: Napoléon I, Emperor of the
not
400 0# $w nnaa $a Napoléon $b I, $c Emperor of the French,
$d 1769-1821
1
3
0
#
0
6
6
7
no
t
b
u
t
$
a
Archives of toxicology. $p Supplement
$
a
Old catalog heading: Archives of toxicology
:
Supplement
4
3
0
#
0
$
w
nnaa $a Archives of toxicology : $p
Supplement
1
5
1
#
#
$
a
Birmingham (Ala.)
4
5
1
#
#
$
w
nnaa $a Birmingham, Ala.
(This linking reference is permitted because the comma in the $a
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subfield makes the heading unique.)
110 2# $a United States Information Agency
410 1# $a United States. $b Information Agency
(This reference is permitted because the delimiter is retained in the normalized form and makes the
heading unique.)
Apply these guidelines to references on new authority records and to existing authority records when
making some other change to the record.
Should an SAR be made?
Series authority records should not be made for the following categories:
(1)
a republication that does not include the original series statement (see
“Republications” section in 64X yellow pages);
*
(2)
generally, a periodical (includes several separate articles by several
*
contributors, frequency of publication more often than annual, and usually has both numeric and
chronological designations) even if the issue in hand consists of a single contribution (e.g., a festschrift,
proceedings of a conference) or may have a special title giving the overall theme of the issue;
*
(3)
a hardcover (sometimes even softcover) edition of a selected issue of a
*
periodical;
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Several publishers (e.g., Haworth Press, Pergamon Press) publish separate editions, with special titles, of
selected issues of their periodicals. These editions are published in addition to the unbound issues
received by subscribers. The Library generally acquires the separate edition whether or not it subscribes
to the periodical.
Do not consider such a separate edition to be an integral part of the periodical; do not prepare an SAR.
Make a separate bibliographic record for it. Add a note explaining its relationship to the periodical, e.g.,
“Published also as v. 15, no. 2 of the Journal of children in contemporary society.” Give a related work
added entry for the periodical on the biblio- graphic record (cf. LCRI 21.30G).
It is not always clear, especially at CIP galley stage, whether the item in
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hand is an integral part of the periodical or a separate edition. Some publishers make clear statements,
e.g., saying the title “has also been published as [title of journal], v.
, no.
.” Others make ambiguous or misleading statements, e.g., saying that the edition is “Published as a special issue of the journal
, v. , no.
and supplied to
subscribers as part of their normal subscription.” The latter statement seems to indicate that the volume in
hand is the only one issued and constitutes an integral part of the periodical. If the information given in
the item is ambiguous, check the issue of the periodical or contact the publisher.
How many SARs should be made?
Because the entities represented by series authority records offer limitless possibilities for variation and
change, it is sometimes difficult to determine how many authority records should exist.
(1)
phrase changes?
How many authority records are made if the title or the series-like
Is the change in the series-like phrase or in the title proper of the monographic series/other serial a major
change or a minor change?
(Consult AACR2 21.2C, LCRI 21.2C.) If it is a major change, make a
*
new SAR. If it is a minor change, give a 670 citation and a 4XX reference for the different form.
Is a separate SAR made when the title of a multipart item changes? No; give the other title proper as a
4XX reference.
(2)
How many authority records are made if the volumes of a monographic
series are in different languages? Consult LCRI 1.6, 21.14, and 25.5C.
(3)
How many authority records are made if the same volumes in a series
are published separately by publishers in the same language in the United States and in another country
(e.g., England)? A separate SAR is made for the series from each publisher; if the titles of the series are
the same, add a LCRI 25.5B qualifier to the SAR made later.
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(4)
How many authority records are made if the volumes of a monographic
series switch from having numbers to lacking numbers and vice versa? Consult LCRI 1.6.
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(5)
How many authority records are made for main series and subseries?
Consult LCRI 1.6H and LCRI 1.6.
(6)
Has there been a change in responsibility (i.e., different person/body,
body's name changes, uniform title changes)? Consult 21.3B.
(7)
When reestablishing a series, is the apparent difference between the
“earlier” form of title and the current title due to different transcription practices? If so, make only one
SAR. Optionally, give the “earlier” form as a 4XX/667 old catalog heading (see 4XX yellow pages).
Possibilities include the following:
(a)
division results in a different title.
A change in the ALA/LC policy for romanization or word
130 #0 $a Makedonikë vivliothëkë
430 #0 $w nna $a Makedonikë bibliothëkë
(b)
The title is in a language containing a symbol or numeral
that under earlier rules was replaced by the corresponding word or words.
130 #0 $a Soldatenschicksale des 20.
Jahrhunderts als Geschichtsquellen
430 #0 $w nna $a Soldatenschicksale des zwanzigsten Jahrhunderts als Geschichtsquellen
(c)
under previous rules.
The title of the series was transcribed in truncated form
130 #0 $a Occasional papers of the California Academy of Sciences
410 2# $w nnaa $a California Academy of
Sciences, San Francisco. $t Occasional papers
(d)
The series title consists solely of the name of a corporate
body and the same form of the same series was under earlier rules considered to lack a title.
130 #0 $a Centre de recherches d'histoire ancienne (Series)
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410 2# $w nnaa $a Centre de recherches
Z1
d'histoire ancienne. $t Publication
(pre-AACR2 form of heading:
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Centre de recherches d'histoire ancienne.
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[Publication])
(e)
Evidence indicates that a word such as
Bibliotheca, Col- lection, Edice was always present as the first word of the title but was not
considered to constitute a part of the title proper.
(8)
How many series-like phrase heading SARs are made for the
same phrase used by different bodies?
There should be only one SAR. If an SAR already exists, use it as an undifferentiated phrase
record; delete from the existing heading any qualifier other than “(Series).”
If the heading on an undifferentiated phrase record consists of a combination of letters that is the
same as an acronym/initialism or name of a corporate body, use the qualifier “(Series).” If the
heading on an undifferentiated phrase record conflicts with the title of a serial (monographic
series or non-analyzable serial), add a qualifier to the heading for the serial on its bibliographic
record.
Give the 643 field as “Various places : various publishers.” Do not give a 667 for publisher
variations.
Include two 667 fields. The first should be either “Give phrase as a quoted note” or “Do not give
phrase as quoted note.” The second 667 should be the following: “Undifferentiated phrase
record: Covers all instances when this character string used by any publisher is considered to be
a series-like phrase; if character string is considered to be a series, separate SAR has been made.”
*
Series statement appears only on ECIP data view at galley stage (LC partner practice)
*
(1) Series is new to the Library.
*
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Return the ECIP data view to CIP Division with request that CIP return the data view
to publisher to “refresh” associated text file to include the series information.
*
(i) When revised copy is received, establish series according to regular partner
procedures.
*
(ii) If revised copy is not received within five to eight work days, the ECIP Data
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Application will be deleted automatically from ECIP system and publisher will be required
to
* resubmit in order to obtain CIP data for the item. Cancel any CIP record which may have
been * created in the partner database.
*
*
(2) Series is already represented by an SAR.
(a)
Series title on data view matches form of title in the SAR:
Transcribe the
* series statement without brackets in the bibliographic record.
Trace the series if appropriate
(b)
* according to regular partner procedures.
*
(c) Series title on ECIP data view is considered to be variant form of the title in
the SAR:
(i) Clarify the data with publisher, transcribe the series statement without
brackets, and trace the series if appropriate according to regular partner procedures.
*
(ii) Add reference(s) to the SAR for any valid variant form.
*
(d) Series title on ECIP data view might represent a title change or situation might
require a change in heading from that in the SAR:
*
(i)
Clarify the data with publisher and, if appropriate
according to regular * partner procedures, return the CIP data view to CIP Division with
request that CIP contact the
* publisher (see (1) above for procedures to follow).
*
(ii)
When information from publisher is received, follow
regular partner * procedures and either add information and reference(s) to the existing
SAR or create a new SAR * as appropriate.
*
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(iii)
If information is not received within five to eight work
days, the
* ECIP Data Application will be deleted automatically
from the ECIP system and the publisher
Z1
* wil
*
(3) Series is represented by analytic bibliographic records but there is no SAR: Create
*
SAR for series according to regular partner procedures.
*
*
Searching series
*
Searching is the most important step in series processing. You must determine whether your series is
already represented in the database; if not, you must know what other series are already in the database so
your series will “fit” and not conflict with headings on authority and bibliographic records (also see LCRI
25.5B).
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Remember that the bibliographic records in the database include series handled under different cataloging
codes. Some of the differences affecting series access are summarized below.
Choice of entry:
AACR 1 had a special rule for serials. Generic titles were entered under body. Titles containing name or
initialism of body were entered under body.
AACR 2 has no special rule for serials. Most are entered under title per 21.1C1.
Title truncated:
For a time AACR 1 eliminated from the series title the name or part of the name of the body. “Bulletin of
the Department of Education” became “Bulletin.” “Research Department study” became “Study.”
Space-hyphen-space:
Revised chapter 6 of AACR 1 specified that space-hyphen-space plus the body's name should be added to
generic titles to create titles proper. The body's name was given in the form found on the item (which
could change from one issue to the next). “Report - Department of Health” might be “Report - Virginia
Department of Health” on the next issue and “Report - Commonwealth of Virginia Department of Health”
on another issue. The form in the series added entry depended upon which issue was used when
establishing the heading.
Subseries:
AACR 1: If subseries title was “weak,” the subseries was entered
subordinately to the main series; if subseries title was “strong,” the subseries was entered independently.
AACR 2: If the main series and subseries are on the same source in the preliminaries, the subseries is
entered subordinately to the main series; it the main series and subseries aren't on the same source in the
preliminaries, the subseries is entered independently.
Also remember that series titles including initial articles appearing on pre-1979 records and in series
statements for untraced series (490 0) do not have the filing indicator set for
* the
including the initial article as well as a search without it.
*
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OCLC Leader/Fixed Field Conversion Table
OCLC
MARC 21: Name and Tag
Rec stat
Record status
Leader/05
Type
Type of record
Leader/06
Roman
Romanization scheme
008/07
Govt agn
Type of government agency
008/28
Series
Type of series
008/12
Ser num
Numbered/unnumbered series
008/13
Entered
Date entered on file
008/00-008/05
Upd status
Record update in process
008/31
Ref status
Reference evaluation
008/29
Auth status
Level of establishment
008/33
Auth/Ref
Kind of record
008/09
Name
Undifferentiated personal name
008/32
Enc lvl
Encoding level
Leader/17
Mod rec
Modified record
008/38
Subj
Subject heading system/thesaurus
008/11
Geo subd
Direct or indirect geographical subdivision
008/06
Subdiv tp
Type of subject subdivision
008/17
Source
Cataloging source
008/39
Name use
Heading use - main or added entry
008/14
1
Z1
DESCRIPTIVE CATALOGING MANUAL
Ser use
Heading use - series added entry
Rules
July 1999
Table
Descriptive cataloging rules
008/10
OCLC Fixed Field Conversion
1
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DESCRIPTIVE CATALOGING MANUAL
RLIN Leader/Fixed Field Conversion Table
As of May 2005 RLIN21 Authorities no longer uses mnemonics for MARC 21 Leader and 008 positions.
With the exception of the following three fields below, the MARC 21 fields with corresponding position
numbers and names are used.
RLIN
MARC 21: Name and Tag
ID
Record identifier/Control number
001
ST
Record status
N/A
VST
Authority record version status
N/A
1
DESCRIPTIVE CATALOGING MANUAL
May 2006
Table
Z1
RLIN Fixed Field Conversion
1
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DESCRIPTIVE CATALOGING MANUAL
MARC 21 F I E L D S U S E D I N S E R I A L RECORDS
LC series practice: As of June 1, 2006, LC does not create or update SARs
|
PCC series practice: The PCC Policy Committee has announced that the PCC series policy
| rem
Collected set serial bibliographic records for monographic series classified as a collection
by a CONSER participant may be considered a reference source by other PCC participants.
|
|
Below are explanations of some of the MARC 21 fields used primarily/only in serial bibliographic
records. For an explanation of fields not covered here, see the CONSER Editing Guide.)
F I E L D S W H I C H M A Y A F F E C T S E R I E S H E A D I N G O R TREATMENT
010 field (LC control number)
This field may contain a regular LC control number (usually without prefix) or a pseudo LC control
number (with “pseudo” prefix). If the record in the OCLC database used by an LC serials cataloger
already has a pseudo LC control number, as of May 1, 1999 it is not being replaced by a regular LC
control number lacking a prefix.
Listed below are the prefixes that now may be found in LC control numbers with an explanation of the use
of these prefixes before May 1, 1999.
ce prefix =
November 2006
Canadian bilingual publication, English language cataloging.
MARC 21
Fields Used in
Serial Records
1
DESCRIPTIVE CATALOGING MANUAL
Z1
cn prefix =
Unilingual Canadian publication, English language cataloging (also used
for unilingual French language cataloging, but records not in the LC Database).
sf prefix =
Records authenticated by LC for titles held by LC given less than full
cataloging: form card cataloging, minimal level cataloging, and other forms of cataloging for which no
serial printed card existed (e.g., monographic series classified separately).
sn prefix = Records authenticated by CONSER participants, National Serials Data Program (NSDP),
United States Newspaper Program (USNP), and the former New Serial Titles Section (NST). (Prior to
1984, “sn” control
November 2006
MARC 21
Fields Used in
Serial Records
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DESCRIPTIVE CATALOGING MANUAL
Z1
numbers were also assigned to LC minimal level cataloging records.)
042 field (Authentication agency code)
Records may have more than one code. If the record is an AACR 2 record and has been authenticated by
LC or LAC, the heading is usually accepted as the AACR 2 heading. (See also 1XX yellow pages.)
lc descriptive and subject elements verified by LC; all name and series headings are represented by
name/series authority records in the national authority file
lccopycat
Code lccopycat signifies that the Library of Congress has used another
organization's record as the basis for its cataloging. All headings have been checked against the relevant
authority file (except for series headings in records used after May 31, 2006 and except subject headings
not from Library of Congress Subject Headings).
lcd descriptive elements verified by LC or a CONSER participant; all name and series headings are
represented by name/series authority records in the national authority file or there are no headings
appropriate to the record
nlc
descriptive elements and headings verified by Library and Archives of Canada nsdp
ISSN
elements (e.g., ISSN, key title) verified by National Serials Data Program
(NSDP)
isds/c ISSN elements verified by ISSN Canada
nst
code used 1981-1984 for records selected for publication in New Serial Titles;
descriptive elements are only as accurate as reported by the NST reporting libraries; codes “lcd” and
“msc” used 1985-1993 for such records (LC's New Serial Titles Section abolished in 1993)
November 2006
MARC 21
Fields Used in
Serial Records
3
DESCRIPTIVE CATALOGING MANUAL
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msc
descriptive elements verified by NSDP, NST, the CONSER Minimal Level
Cataloging Section, or a CONSER participant including U.S. Newspaper Program participants; all name
and series headings are in AACR2 form but may not be represented by name/series authority records in
the national authority file. (Prior to fall 1989, this code was also used when there were no headings
appropriate to the record.)
premarc
code used for records converted to machine-readable form as part of LC
retrospective conversion (source records used are printed catalog cards
November 2006
MARC 21
Fields Used in
Serial Records
4
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DESCRIPTIVE CATALOGING MANUAL
taken from the LC general shelflist and other manual LC files, or OCLC records that have been
amalgamated with data from LC manual files); descriptive elements have not necessarily been verified or
reverified by LC but the authoritativeness of the headings is indicated by the additional presence of code
“lcd” or “msc”
xlc
not currently treated as a serial by LC; this code will appear only in combination
with other codes (e.g., “nsdp,” “nlc”) that indicate serial treatment by another authenticating agency.
[N.B.: An “x” preceding any of the agency-specific codes above indicates that the agency does not
currently treat the publication as a serial.]
050 field (Library of Congress Class/Call Number)
This field with second indicator of “0" may contain an LC call number, an LC shelf number, or other
indication of LC practice.
IN PROCESS
Call number not yet assigned (prior to 1990, PAR or REV PAR used)
CLASSED SEPARATELY
Monographic series classified separately in LC. (Prior to
1990, UNC used.)
UNCLASSED
Titles in LC which do not receive a call number, i.e. already
existing form card cataloging (e.g., for technical reports) or temporary cataloging. (Prior to 1990, UNC
was used.)
UNCLASSIFIED
Same as “UNCLASSED”
NOT IN LC
Cooperatively cataloged records for serials known not to be in LC
WMLC [no.]
Shelf number for non-microform materials represented by minimal
November 2006
MARC 21
Fields Used in
Serial Records
5
DESCRIPTIVE CATALOGING MANUAL
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level cataloging records MICROFILM [no.] Microfilm shelf number MICROFICHE [no.] Microfiche
shelf number
Newspaper
November 2006
Considered a newspaper within LC; may be followed by a
MARC 21
Fields Used in
Serial Records
6
Z1
DESCRIPTIVE CATALOGING MANUAL
Retention decision
Attrition, persistence, and retention are among the terms or labels common
in discussions about a troubling phenomenon in U.S. postsecondary education:
many more students enter colleges and universities than graduate
with degrees. Although the disparity between rates of initial enrollment and
rates of graduation exists for all student populations, the gap is greatest
among students who are African American, Hispanic, or Native American
(National Center for Education Statistics, 2002).
The problem of underrepresentation among those earning degrees is
particularly acute for Native American students (Benjamin, Chambers, and
Reiterman, 1993). Although precise retention data is difficult to obtain for
a number of reasons (Boyer, 1997b; Carney, 1999), estimates of attrition
rates for Native American students in higher education range from between
75 percent to 93 percent (Brown and Robinson Kurpius, 1997). For many
(though certainly not all) Native American students, leaving college prior
to completion of a degree signals delayed or foregone personal aspirations
and often diminished or deferred opportunities. But the departure of these
students also has a detrimental impact on their campus communities
because their absence diminishes the cross-cultural educational potential of
the learning and living environment for all.
November 2006
MARC 21
Fields Used in
Serial Records
7
DESCRIPTIVE CATALOGING MANUAL
Z1
CURRENT ISSUES ONLY Retention decision
F I E L D S S H O W I N G V A R I A N T A N D C H A N G E D TITLES
Information in the following fields is to be used only as an aid in interpreting data on records; it is not to
be used to justify 4XX/5XX references or establishment of new series headings when the variant/changed
titles are not found on analytic records or on the item in hand.
246 field (Varying form of title)
The indicators in this field are the same as in monograph records.
247 field (Former title or title variations)
Not used for AACR2 (except in records for electronic serials that do not retain their titles); used for title
changes on AACR 1 records before June 14, 1971, and for earlier titles in latest entry (ALA) cataloging
records.
580 field (Linking entry complexity note)
This field is used to describe the relationship between two entries when it cannot be stated simply with a
note generated by the 780/785 field.
November 2006
MARC 21
Fields Used in
Serial Records
8
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DESCRIPTIVE CATALOGING MANUAL
780 field (Preceding entry)
The second indicator in this field gives the exact relationship:
0
=
Continues
1
=
Continues in part
2
=
Supersedes
(not used for AACR
2)
3
=
Supersedes in part
(not used for AACR
2)
4=
Formed by the union of
5=
Absorbed
6=
Absorbed in part
7=
Separated from
November 2006
and
MARC 21
Fields Used in
Serial Records
9
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DESCRIPTIVE CATALOGING MANUAL
785 field (Succeeding entry)
The second indicator in this field gives the exact relationship:
0=
Continued by
1=
Continued in part by
2=
Superseded by
3=
Superseded in part by (not used for AACR 2)
4=
Absorbed by
5=
Absorbed in part by
6=
Split into
7=
Merged with
8=
Changed back to
(not used for AACR 2)
and
to form
O T H E R F I E L D S O F INTEREST
310 field (Current frequency)
If the frequency indicated is more often than annual, the series may actually be a periodical.
321 field (Former frequency)
November 2006
MARC 21
Fields Used in
Serial Records
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DESCRIPTIVE CATALOGING MANUAL
Z1
This field gives information about earlier/past frequencies of publication.
362 field (Dates of publication and volume designation)
This field gives information about first and/or last issues.
515 field (Numbering peculiarities note)
This field contains information on peculiarities/irregularities in numbering or pattern of publication.
550 field (Issuing body note)
This field shows variations in the issuing body.
November 2006
MARC 21
Fields Used in
Serial Records
11
DESCRIPTIVE CATALOGING MANUAL
008/11
Z1
S U B J E C T H E A D I N G SYSTEM/THESAURUS
Corporate headings for high government and religious officials
Assign value “n” (Not applicable) to name authority records for corporate headings representing the office
held for Heads of state, etc. (AACR2 rule 24.20B1), Heads of
| governments and of international intergovernmental bodies (AACR2 rule 24.20C), Religious
| officials (AACR2 rule 24.27B1), and Popes (AACR2 rule 24.27B2) when the name of the incumbent is
included as part of the heading. Also assign value “b” in 008/15 and make a 667
note indicating the form used in subject cataloging.
Examples of corporate headings not appropriate for use as subject headings:
United States. President (1953-1961 : Eisenhower) Iran. Shah (1941-1979 : Mohammed Reza Pahlavi)
Illinois. Governor (1973-1977 : Walker)
Catholic Church. Pope (1958-1963 : John XXIII)
Church of England. Diocese of London. Bishop (1675-1713 : Compton)
See also DCM Z1 008/15 and DCM Z1 667 section “NARs and subject usage.”
| Follow these guidelines for newly-created authority records. Correct existing records
when making any other change to the records.
August 2003
DESCRIPTIVE CATALOGING MANUAL
008/15
Z1
H E A D I N G U S E –S U B J E C T A D D E D ENTRY
Corporate headings for high government and religious officials
Background: For Heads of state, etc., Heads of governments and of international
| intergovernmental bodies, Religious officials, and Popes, descriptive catalogers may be requireda
corporate heading for the office as well as a personal name heading for the office holder. It is subject
cataloging policy to assign only the personal name heading, not the corporate heading, as a subject access
point. This policy was established for collocation purposes (cf. SCM
H 430). For example, the heading:
United States. President (1789-1979 : Washington)
may be used in descriptive cataloging as an access point, but in subject cataloging only the personal
heading:
Washington, George, 1732-1799 would be used as a subject access point.
Assign value “b” (Not appropriate) to name authority records for corporate headings representing the
office held for Heads of state, etc. (AACR2 rule 24.20B1), Heads of part of the heading. Also assign
value “n” in 008/11 and make a 667
note indicating the form used in subject cataloging.
Example:
August 2003
DESCRIPTIVE CATALOGING MANUAL
110 2# $a Catholic Church. $b Pope (1958-1963 : John XXIII) 008/11 = n
Z1
008/15 = b
667 ## $a SUBJECT USAGE: This heading is not valid for use as a subject. Works about
this person are entered
under John XXIII, Pope, 1881-1963.
August 2003
DESCRIPTIVE CATALOGING MANUAL
008/32
Z1
U N D I F F E R E N T I A T E D P E R S O N A L NAME
General
Assign value "b" if the heading is for a personal name and is to be used for more than one person
according to AACR 2 22.20. (See LCRI 22.17-22.20.) Do not change the 1XX field on an
undifferentiated name authority record.
From April 1988-mid-June 1990 LC policy for undifferentiated personal name authority records (formerly
called non-unique name authority records) was to list up to three persons. If the heading represented four
or more persons, the name authority record covered three persons and contained a 667 note "Record
covers additional persons." The current LC policy is to list each person the heading represents without
regard to the number of people using that name. Although the note "Record covers additional persons" has
been discontinued for new records, it should be retained when found on existing records.
When information is found to distinguish a person included on an undifferentiated name record, always
create a new name authority record for that person. Delete information pertaining to that person from the
undifferentiated name record. Add a 667 note on the new record to identify the LCCN of the authority
record on which information about that person had been recorded:
667
$a Formerly on undifferentiated name record: [LCCN of
undifferentiated name record]
When an undifferentiated personal name authority record is being revised to delete all but one name,
change value "b" to "a." Delete all of the other data applying to the name(s) being deleted from the
authority record. Also delete the bracketed caption for the one name remaining.
When an authority record for a single person is being revised to include another person, change the value
from "a" to "b."
November 2006
DESCRIPTIVE CATALOGING MANUAL
008/33
Z1
L E V E L O F ESTABLISHMENT
NARs
NACO participants and provisional (008/33 value “c”) records:
In addition to the basic condition for coding an authority record provisional, i.e., that the heading cannot be
formulated satisfactorily because of inadequate information, NACO participants may create provisional
records in the following exceptional situations:
(1)
If the contributing library does not have the language expertise
to establish the heading as a fully established authority record; this would include situations where the
library lacked adequate reference sources for research or where the cataloger was not confident of the
correct grammatical form of heading.
(2)
If the contributing library is unable, due to limited resources or
other constraints, to complete related authority work or to determine the appropriate reference
structure that is required for fully established headings.
In no case will NACO participants create provisional authority records for headings that conflict
(including normalization) with already established headings. The Cooperative Cataloging Team is
prepared to provide language expertise, etc., to NACO participants on request, so that such headings and
references can be fully established at the time they are contributed.
Questions about provisional authority records contributed by NACO participants should be referred to the
Cooperative Cataloging Team, which may refer them to the appropriate subject team.
BIBCO participants and provisional records:
November 2006
DESCRIPTIVE CATALOGING MANUAL
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BIBCO participants may not create provisional records in the two exceptional situations noted above for
NACO participants if the NARs being contributed by BIBCO libraries are in support of their BIBCO
bibliographic records, i.e., those records with “pcc” in 042.
LC/NACO participants and Preliminary (008/33 value “d”) records:
Preliminary authority records (008/33 value “d”) generally are the result of retrospective projects. LC
catalogers are expected to upgrade NARs coded preliminary when using the heading on a bibliographic
record. PCC catalogers are expected to routinely upgrade NARs coded preliminary when making other
modifications to the record. Because of this
November 2006
DESCRIPTIVE CATALOGING MANUAL
Z1
maintenance requirement, NACO participants are asked to contact the Cooperative Cataloging Team
before embarking on projects that may result in large numbers of NARs coded preliminary being added to
the NACO Authority File.
As needed, catalogers may upgrade NARs coded preliminary when working with earlier/later corporate
body headings although the heading(s) being upgraded is not used in the local bibliographic database.
Occasionally catalogers may need to create a new heading(s) without having an item in hand, e.g., for an
earlier or later name heading using information from reference sources, or a heading based on information
found in field 245 subfield “c” of biblio- graphic records when resolving NAR conflicts. Do not code
these occasional NARs as “prelimi- nary.”
SARs
LC series practice: As of June 1, 2006, LC does not create or update SARs
*
PCC series practice: The PCC Policy Committee has announced that the PCC series policy
*
remains unchanged.
*
Generally, do not use value “d” for series authority records; the series data elements should be viewed on
the publication when creating SARs. Upgrade a preliminary record to a full level record when you have
examined the publication.
November 2006
DESCRIPTIVE CATALOGING MANUAL
November 2006
Z1
DESCRIPTIVE CATALOGING MANUAL
010
Z1
L I B R A R Y O F C O N G R E S S C O N T R O L NUMBER
When one authority record is being deleted in favor of another authority record, give the LCCN of the
deleted record in subfield $z of the 010 field in the retained record. This action may result in a mixture of
old and new-structure LCCNs. When inputting the LCCN, follow the conventions appropriate to the
structure of that LCCN. Do not convert old-structure LCCNs to new-structure LCCNs, or vice versa. (See
DCM C3 for additional information.)
Examples:
[blank space = system-supplied space for clarity in display; “#” = space input by cataloger]
010
$a n##99001234# $z no#98222222# $z n##99500045#
[all LCCNs are old-structure]
010
$a nr2001040302 $z n#2001000888
[all LCCNs are new-structure]
010
$a n##99123456# $z n#2001123456
[LCCN in subfield $a is old-structure; LCCN in subfield $z is new- structure]
010
$a no2001333333 $z nb#99000123#
[LCCN in subfield $a is new-structure; LCCN in subfield $z is old- structure]
Do not “re-use” an LCCN. Once an authority record for a specific entity is created and an LCCN is
assigned to the record, do not change the data in that record to represent a DIFFERENT entity. For
November 2006
DESCRIPTIVE CATALOGING MANUAL
Z1
example, do not change an NAR for “Smith, John” to “Jones, Mary” (unless the person’s name has
changed).
When a duplicate authority record is identified, delete the record. Do NOT “fix up” the record by deleting
the 040 $d in the record and keying in all new fixed and variable fields so that the record “looks” new.
This action causes problems for LC, CDS, the bibliographic utilities, and other libraries’ systems.
November 2006
DESCRIPTIVE CATALOGING MANUAL
Z1
010 G U I D E L I N E S F O R L I B R A R Y O F C O N G R E S S STAFF:
Generation of Library of Congress Control Numbers (LCCNs) for name authority
records
Installing the application: Go to http://www.loc.gov/staff/catdir/installs/ and click on “Install” next to
“LCCN Generator for Name and Series Authorities.” This results in a window labeled “File Download.”
Click on “Open followed by clicking the “OK” button. The application is copied to the staff member’s PC
and an associated icon is put on the desktop to facilitate use of the application.
There is no need to write down the LCCN because it is automatically copied to the clipboard and is ready
to paste into an authority record. Initiate creation of the authority record. However this is done,
immediately paste the LCCN into field 010 to avoid accidentally erasing the LCCN from the clipboard by
using the clipboard for another purpose. Insure that field 010 exists and contains subfield $a. Paste the
LCCN in the 010 $a subfield; it will be properly structured according to the conventions of MARC 21for
LCCNs in field 010. (Note: pasting must be done
November 2006
DESCRIPTIVE CATALOGING MANUAL
Z1
within the Voyager screen; pasting into another application like Notepad may result in the LCCN not being
visible.)
CAUTION: It is critical that the “Authority Import/Replace Profile” under the “General” tab of the
“Session Defaults and Preferences” window under “Options --> Preferences” is set to “ARLCCNadd” to
avoid pasting the same LCCN into another authority record and saving more than one record with the
same LCCN.
November 2006
DESCRIPTIVE CATALOGING MANUAL
016
Z1
N A T I O N A L B I B L I O G R A P H I C A G E N C Y C O N T R O L NUMBER
LC series practice: As of June 1, 2006, LC does not create or update SARs
|
PCC series practice: The PCC Policy Committee has announced that the PCC series policy
|
remains unchanged.
|
This field may appear in authority records emanating from national bibliographic agencies. Do not modify
or delete this field.
November 2006
DESCRIPTIVE CATALOGING MANUAL
022
Z1
I N T E R N A T I O N A L S T A N D A R D S E R I A L NUMBER
|
Do not do any special searching to determine the ISSN; give the ISSN if it is available from the item in
hand, from analytic bibliographic records, or from the collected set bibliographic record for the series.
Do not give an ISSN if it has more or less than eight digits or if a letter other than “X” is the eighth digit.
Do not give an ISBN or ISSN listed by the publisher for a multipart item set.
When the title of a publication has changed, confirm that an ISSN appearing on the publication belongs to
the new title and not to the earlier title.
An incorrect ISSN can be given in a 667 field (e.g., “ISSN 1122-3344 is not a valid ISSN for this
publication”).
Do not use this field in an SAR for a series-like phrase. If an ISSN is on an item containing a phrase
judged not to be a series, reconsider the decision that the phrase isn't a series.
November 2006
DESCRIPTIVE CATALOGING MANUAL
035
System Control Number
As part of the conversion from MUMS, an 035 field was added to every
Do not add, change, or delete 035 fields. Catalogers have no responsibility for the 035 field.
October 1999
Z1
DESCRIPTIVE CATALOGING MANUAL
040
LC does not use:
Cataloging Source
subfield $f - Subject heading/thesaurus conventions
| When a record is updated, add “$d [MARC 21 code]” unless your institution is
already the last subfield $d in the 040 field.
July 1999
Z1
|
|
DESCRIPTIVE CATALOGING MANUAL
042
Z1
Authentication Code
This field may appear in authority records emanating from national bibliographic agencies. Do not modify
or delete this field.
DESCRIPTIVE CATALOGING MANUAL
May 2002
1
Z1
042
Z1
DESCRIPTIVE CATALOGING MANUAL
050
Library of Congress Call Number
Punctuation
Use periods after the terms listed below. Use periods for abbreviations in non-English languages
according to the usage in those languages.
fol. no.
pt. subser. Suppl. vol.
Use of "subser."
If a subseries (numbered or unnumbered, established subordinately or independently) is classified with the
main series, the call number of the main series plus "subser." is the call number given in the 050 field on
the subseries SAR; the abbreviation "subser." is part of subfield
$b.
main series
SAR:
subseries SAR:
05
0
$
a
AS36.
I92
64
6
$
a
c $5
05
0
$
a
AS36.
I92
64
6
$
a
m $5
$
b
A
2
$5
|
$
b
A
2
subser. $5
The abbreviation "subser." appears in the 050 field of the collected set bibliographic record for a
numbered subseries. The call number of the main series appears in the 050 field of a monograph analytic
bibliographic record for a volume of the subseries; the volume number of the main series given in the 4XX
field of the bibliographic record replaces "subser." in the call number in the bibliographic record.
main series collected set record:
November 2006
|
|
|
DESCRIPTIVE CATALOGING MANUAL
050
$a AS36.I92 $b A2 $5
050
$a AS36.I92 $b A2 subser. $5
November 2006
Z1
| numbered subseries collected set record:
|
Z1
DESCRIPTIVE CATALOGING MANUAL
|
monograph analytic record:
05
0
$
a
(if subseries numbered)
49
0
1 $
a
AS36.I92 $b A2 no. 63
[main series title] ; $v
no. [subseries title] ; $v
no. 5
63
.
$
a
monograph analytic record:
05
0
$
a
(if subseries unnumbered)
49
0
1 $
a
AS36.I92 $b A2 no. 63
[main series title] ; $v
no. [subseries title]
63
.
$
a
"Subser." is also used in 050 fields of nonanalyzable serials in monographic series.
periodical in a collected
series:
050
$
a
P9 $b .A24 subser. $5
245
$
a
Linguistica generalia.
440
$
a
Acta Universitatis
Carolinae. $p Philologica
Numbered multipart items classified with main or another series
When a numbered multipart item is in a monographic series or in a more comprehensive multipart item
that is classified as a collection, a collected set bibliographic record is also prepared for the smaller
multipart item as a whole. The call number in the 050 field of that bibliographic record consists of the call
number of the main/another series plus the volume number of the main/another series (not the volume
November 2006
|
DESCRIPTIVE CATALOGING MANUAL
Z1
number of the smaller multipart item) that constitutes the first or earliest known volume of the smaller
multipart item, followed by the abbreviation "etc." That call number is the one given in the 050 field of the
SAR for the smaller multipart item.
For the volume number of the main/another series, use the numbering designation already established as
shown in the 642 of the SAR or in subfield $v of 4XX/8XX fields in analytic bibliographic records. If
that information is not available (e.g., the only existing analytic record is a nonanalyzable series or the
series was previously not analyzed), always use the English abbreviations "vol.," "no.," and "pt." for
"volume," "number," and "part" or for any equivalents in the vernacular.
item in hand:
the main series
"vypusk 5" of the multipart item constitutes "tom 17" of
data base:
pre-AACR 2 analytic record for "vypusk 1" of the
multipart item shows that it constitutes "tom 6" of the main series and "t. 6" has been added as an integral
part of the call number of the analytic record
add in 050:
November 2006
t. 6, etc.
Z1
DESCRIPTIVE CATALOGING MANUAL
item in hand:
main series
"1. Teil" of the multipart item constitutes "Band 9" of the
data base:
no analytic records
add in 050:
vol. 9, etc.
Following are records showing the interrelationship of the fields in an SAR for a series classified as a
collection, an SAR for a multipart item in that series, the multipart item collected set bibliographic record,
and a multipart item analytic bibliographic record.
series SAR:
|
050 $a QE75 $b .B9 $5
130 $a U.S. Geological Survey bulletin
642 $a 1749 $5
|
646 $a c $5
|
multipart SAR:
050
130
areas--west-central Utah
$a QE75 $b .B9 no. 1749, etc. $5
|
$a Mineral resources of wilderness study
430
$a U.S. Geological Survey bulletin. $p
Mineral resources of wilderness study areas--west-central Utah
642
$a ch. A $5
|
646
$a m $5
|
{Note: if a volume number consists of only an arabic numeral (i.e., designation is lacking), "no." is given
with the arabic numeral at the end of a call number so that volume number doesn't look like a date.}
multipart collected set record:
November 2006
0
5
0
$a QE75 $b .B9 no. 1749, etc.
2
4
5
$a Mineral resources of
wilderness
study areas-west-
Z1
DESCRIPTIVE CATALOGING MANUAL
central Utah.
4
4
0
$a U.S. Geological Survey
bulletin
; $v 1749
5
0
5
$a ch. A. Mineral resources of
the
Swasey Mountain
and
Howell Peak Wilderness study areas, Millard County, Utah / by David A. Lindsay ... [et
al.]
analytic
record:
050
$a QE75 $b .B9 no. 1749-A
245
$a Mineral resources of the Swasey
Mountain and Howell Peak wilderness
study
areas, Millard County, Utah / $c by
David
A. Lindsey ... [et al.]
440
$a Mineral resources of wilderness study
areas--west-central Utah ; $v ch. A
Unnumbered multipart item classified with main or another series
November 2006
Z1
DESCRIPTIVE CATALOGING MANUAL
No collected set bibliographic record is prepared for an unnumbered multipart item in a monographic
series or in a more comprehensive multipart item classified as a collection.
So, in the 050 field of the SAR give the call number of the main or another series without an addition of
the volume designation of the main/other series. The 050 field in each biblio- graphic record has the
specific volume number of the main/other series.
main/other series SAR:
050
646
unnumbered multipart item
SAR:
multipart analytic
record:
$a Q11 $b .K84 $5
|
$a c $5
|
05
0
$a Q11 $b .K84 $5
|
64
6
$a m $5
|
050
$a Q11 $b .K84 no. 47
4XX
$a [main/other series title] ;
$v
no. 47
4XX
$a [multipart item title]
Exceptions to use of call number
If, by exception, a subseries has a classification decision different from that of the main series or a serial
analytic has a classification decision different from that of the series, explain the exception in the 050
subfield $d.
main series SAR:
050
$a
$b
November 2006
$d all vols. except [title of subseries]
646
$5
|
$a c $d all vols. except [title of subseries] $5
|
DESCRIPTIVE CATALOGING MANUAL
Z1
646
$a s $d [title of subseries] $5
|
646
$a s $5
|
subseries SAR:
series SAR:
November 2006
|
0
5
0
$
a
6
4
6
$
a
s $d all vols. except [title of serial]
$5
|
6
4
6
$
a
c $d [title of serial] $5
|
$b
$d [title of serial] $5
DESCRIPTIVE CATALOGING MANUAL
053
Z1
LC C L A S S I F I C A T I O N NUMBER
NACO practice: NACO participants may use this field only in the following situation: to record LC
classification numbers associated with personal name headings for authors who have written works of the
imagination, other than works for children. They may input classification numbers found on bibliographic
records created and input by LC; they may request verification of other classification numbers.
LC practice: LC music team catalogers and CPSO are adding 053 fields to NARs in the
ML410-429, individual biography covering individuals and performance groups. LC
| span
| ca
of the imagination, other than works for children. Follow team practice for when the field is added and
who adds the field. Add an LC authorized 053 field even if the number is identical to an unverified 053
field already in the NAR.
Verification of LC classification numbers for literary authors
LC's Cooperative Cataloging Team will supply verification of LC classification numbers for literary
authors upon request of a NACO participant. A web form for 053 submissions is available at URL:
http://www.loc.gov/catdir/pcc/053/053prop.html . BIBCO participants are strongly encouraged to use this
form to verify LC classification numbers for literary authors to allow for greater consistency and
applicability of their PCC cataloging.
Use and order of 053 fields
Do not add an 053 field to a NAR coded as an undifferentiated heading (code "b" in
008/32). When it is necessary to change a differentiated NAR that contains an 053 to
|
undifferentiated, delete the 053.
|
Indicators:
If the classification number is from a bibliographic record created and input by LC (040 $a DLC $c DLC)
or has been verified by LC, use a second indicator of "0." For any other 053 input by a NACO participant,
use a second indicator of "4" and a subfield $5 with the
participant's MARC 21 identification code. Multiple subfields $5 are not allowed.
Number and order of fields:
If a verified 053 (i.e., 053 with second indicator of "0") is already in the NAR, don't add an unverified 053
(i.e., 053 with second indicator of "4").
|
DESCRIPTIVE CATALOGING MANUAL
Z1
Generally, only one verified 053 and one unverified 053 are permitted in an NAR. Exception: If an author
writes in several languages, multiple verified and multiple unverified fields may be given; arrange the
fields in class letter/number order and add the name of the language in subfield $c in each 053 field.
A single or multiple verified 053 field(s) should precede a single or multiple unverified 053 field(s).
March 2006
1
053
DESCRIPTIVE CATALOGING MANUAL
Z1
X00 Personal Names – First Indicator Value for Surnames
|
LC series practice: As of June 1, 2006, LC does not create or update SARs
|
PCC series practice: The PCC Policy Committee has announced that the PCC series policy
|
remains unchanged.
|
In 1996, the first indicator value 2 (Multiple surname) in X00 fields in MARC 21 was made obsolete.
Value 1 (Single surname) was redefined as "surname" to be used for headings with either single or
multiple surnames. At the time value 2 was made obsolete, various factors contributed to a delay in
implementation, including the installation of the LC ILS. (By exception, the change was implemented by
the British Library and three NACO libraries (National Library of Scotland, Cambridge, and Oxford)
linked with the BL in a UK cooperative called the Copyright Libraries Shared Cataloguing Programme
(CLSC), and the UK's National Art Library. Authority records contributed by the Dance Heritage
Coalition also contained the change.)
Although LC and the rest of NACO began implementing the change on January 1, 2000, OCLC |
subsequently converted all name authority records with first indicator value 2 in authority fields | 100,
400, and 500 later that year.
LC practice for bibliographic records:
|
|
The implementation of the indicator change in corresponding bibliographic records has
bibliographic records.
| bee
|
The following guidelines apply to the treatment of fields 100, 400, 600, 700, and 800 in
|
bibliographic records:
1.
Newly created bibliographic records. Discontinue using value 2 in newly
created bibliographic records.
|
|
2.
Existing bibliographic records. Limit changes to those encountered in regular
| work, i.e., do not look for changes in the indicator value per se; but, if changing the record for
|
another reason, change the value 2 to 1 in all candidate fields as needed.
|
|
DESCRIPTIVE CATALOGING MANUAL
November 2006
Z1
X00
1
DESCRIPTIVE CATALOGING MANUAL
1XX
Z1
HEADINGS
General
When modifying an authority record for another reason, delete a final mark of punctuation in the 1XX
field unless it is a part of the data (e.g., a period in an abbreviation) or is called for by the cataloging rules
(e.g., a parenthetical qualifier).
NARs
For procedures involved with Canadian name headings, see DCM Z1 Appendix 2: Canadian headings.
British Library records. The British Library must be consulted prior to making any change to the 1XX
field of a record it has contributed (i.e., any record with the code "Uk" in 040 subfield $a). Send an email
message to nal-queries@bl.uk giving the Library of Congress Control Number (LCCN) of the record and
a brief explanation for the proposed change. Fax supporting information for the proposed change if such
information would be useful (International: +44 1937 546562).
NLM records. National Library of Medicine (NLM) catalogers take into account headings and usage in
the NLM bibliographic and authority files when preparing new AACR2 headings. They also change
AACR2 headings already formulated by LC when the NLM files support a different heading. For
headings used by NLM, the NLM heading has precedence over the LC heading when:
(1)
the LC heading has not yet been coded for AACR2, and the NLM heading
has already been established as AACR2;
(2)
the LC heading has been coded as AACR2-compatible (008/10 = d) and
NLM has established the heading as "pure" AACR2 (008/10 = c);
November 2006
1XX
1
DESCRIPTIVE CATALOGING MANUAL
Z1
(3)
both libraries have headings already coded as "pure" AACR2 and NLM
has a greater number of bibliographic records in support of its heading than LC has in support of its
heading. (If the number is equal, the better heading is chosen, basing the decision on judgment.)
SARs
November 2006
1XX
2
DESCRIPTIVE CATALOGING MANUAL
Z1
When creating an SAR for an entity already represented by an existing NAR, either cancel the NAR or
convert the NAR to an SAR.
When trying to decide if a publication is a series or a multipart item, consult the "Multipart Item vs.
Series" guidelines in LCRI 1.6.
For the title proper of a multipart item, consult AACR2 1.0A2b. Choosing a monographic series title
proper:
(1)
If the item in hand has more than one form of series title, consult AACR2
1.6B2 and .0B2 in the AACR2 chapter for the material being cataloged (.0B3 in ch. 3 & 12).
(2)
If the item in hand has the series title in more than one language or
script on the same source, consult AACR2 1.1D2 and its LCRI.
(3)
If the item in hand has series title pages in more than one language and
or script and the series title appears on each of the sources in the appropriate language or script, consult
AACR2 1.0A3a)ii).
(4)
Consider spacing and changes in typography when determining where
the series title begins and ends. Also consult AACR2 12.1B3 and its LCRI.
Establishing an SAR heading:
(1)
November 2006
Determine choice of entry based on chapter 21 of AACR2.
1XX
3
DESCRIPTIVE CATALOGING MANUAL
Z1
(2)
Exclude from the heading the following information included in the
series statement in the analytic bibliographic record:
(a)
(b)
(c)
(d)
(e)
(f)
November 2006
initial article in subfields $a, $t, $n, and $p;
other title information;
statement of responsibility;
parallel title(s);
ISSN;
numeric/chronological designations.
1XX
4
Z1
DESCRIPTIVE CATALOGING MANUAL
(3)
guidelines in LCRI 25.5B.
Add a parenthetical qualifier(s) if appropriate according to the
|
(4)
If you found a CONSER record,
|
|
(a)
categories:
•
•
do not use a heading from a record in the following
010 prefix is "cf"
010 prefix is "cn" and 040 $b is "fre"
(b)
use the choice and form of entry on records with 042 code
of lc or | lcd as the heading unless there is a clear-cut error. An error in form of qualifier may
be
| corrected; choice of qualifier is accepted as found. If you
are not a CONSER participant, notify | the CONSER Coordinator (lhaw@loc.gov) if an error is
discovered; use the correct heading on
| the SAR.
November 2006
1XX
5
Z1
DESCRIPTIVE CATALOGING MANUAL
4XX
S E E F R O M TRACINGS
LC series practice: As of June 1, 2006, LC does not create or update SARs
|
PCC series practice: The PCC Policy Committee has announced that the PCC series policy
|
remains unchanged.
|
General
NARs: Consult AACR2 Chapters 22-26 and its rule interpretations for guidelines on which 4XX
references to make.
SARs: Consult LCRI 26.5A for guidelines on making 4XX references.
When modifying an authority record for another reason, delete any final mark of punctuation in a 4XX
field unless it is a part of the data (e.g., a period in an abbreviation) or is called for by the cataloging rules
(e.g., a parenthetical qualifier).
Not all 4XX references require justification; see the section "Justifying references" in the 670 yellow pages
for those categories.
See the section "NACO normalization" in the yellow Introduction pages.
Subfield $w (control subfield)
November 2006
4XX
1
Z1
DESCRIPTIVE CATALOGING MANUAL
Follow the conventions in the authority format for use of subfield $w. Do not supply subfield $w unless a
value other than "n" would be appropriate in one of the positions. When supplying subfield $w, give it as
the first subfield in the field. Supply character positions preceding, but not succeeding, the value, e.g.,
$w nna = to indicate a pre-AACR2 form of heading
$w nnaa = to indicate a pre-AACR2 form of heading that is not appropriate as a reference in an AACR2
catalog
$w nne = to indicate a form previously used as an AACR2 heading
$w nnea = to indicate a form previously used as an AACR2 heading that is not appropriate as a reference in
an AACR2 catalog. Used only in records converted from Wade- Giles to pinyin romanization of Chinese.
November 2006
4XX
2
Z1
DESCRIPTIVE CATALOGING MANUAL
Linking references for NARs and SARs
If the AACR2 choice or form of entry differs from the pre-AACR2 choice or form, optionally, make a
linking reference from that form. Note: the addition of a qualifier is considered a change in form. For
SARs, give the linking reference regardless of whether the series was previously traced or untraced,
analyzed or not analyzed. However, do not give such a linking reference if:
(1)
the reference would normalize to the same form as the heading or
another reference on the same record or to the same form as a heading on another record. Instead, give
the form in a 667 field: "Old catalog heading:
;"
(2)
there is no one-to-one correspondence between the pre-AACR2 heading
and the AACR 2 heading, i.e., two or more pre-AACR2 headings will be treated as one heading under
AACR2, or one pre-AACR2 heading will be split under AACR2. Instead, in a 667 field give the appropriate
information. For the former, use "Includes the old catalog headings:
; and,
AACR2 covered by the heading:
." For the latter, use "Previous to
;"
(3)
for SARs, the series was previously untraced and it is not clear what form
should be considered the old catalog heading.
If the heading on an existing NAR or SAR is changed, give a reference from the replaced AACR2 heading
only if that form of reference would otherwise be given.
SARs
November 2006
4XX
3
Z1
DESCRIPTIVE CATALOGING MANUAL
Give references on all SARs (even those for series-like phrases). When the classification decision is "as a
collection," some references may duplicate added entries on the bibliographic record for the collected set.
If the volumes of a multipart item have different forms of the common title, use a 4XX reference rather
than a 5XX reference for the form of the title not chosen as the title proper of the multipart item.
November 2006
4XX
4
DESCRIPTIVE CATALOGING MANUAL
5XX
Z1
S E E A L S O F R O M TRACINGS
LC series practice: As of June 1, 2006, LC does not create or update SARs
|
PCC series practice: The PCC Policy Committee has announced that the PCC series policy
| rem
General
When modifying an authority record for another reason, delete any final mark of punctuation in a 5XX
field unless it is a part of the data (e.g., a period in an abbreviation) or is called for by the cataloging rules
(e.g., a parenthetical qualifier).
Subfield $w (control subfield)
Follow the conventions in the authority format for use of subfield $w. Do not supply subfield $w unless a
value other than "n" would be appropriate in one of the positions. When supplying subfield $w, give it as
the first subfield in the field. Supply character positions preceding, but not succeeding, the value, e.g.,
$w a = to indicate a reference from an earlier heading
$w b = to indicate a reference from a later heading
$w nnnc = to indicate a complex see also reference (record also contains a 663 field)
NARs
Consult AACR 2 Chapters 22-26 and rule interpretations for guidelines on which 5XX references to make.
November 2006
5XX
1
DESCRIPTIVE CATALOGING MANUAL
Z1
Routinely delete all subject-to-name references (5XX with subfield $w/1 = b) when changing a record for
another reason. (These references are no longer made; since existing references have not been maintained,
they may not be in accord with current subject cataloging policy.)
SARs
Do not code the subfield $w for an earlier/later relationship when the SAR is for (1) an unnumbered
series, (2) an unnumbered multipart item, or (3) a series-like phrase.
November 2006
5XX
2
DESCRIPTIVE CATALOGING MANUAL
Z1
If the title in the earlier/later relationship is not represented by its own SAR, do not give a 5XX reference
from that title. In a 667 field give a "Continues:" or "Continued by:" note, citing the other title; if the form
of entry for that title is not known to be the AACR 2 form, add "[unevaluated catalog entry form]" at the
end of that field. When an SAR is made for that title, delete the 667 field and add the appropriate 5XX
reference. (See also 667 yellow pages.)
If the volumes of a multipart item have different forms of the common title, use a 4XX reference rather
than a 5XX reference for the form of the title not chosen as the title proper of the multipart item.
November 2006
5XX
3
DESCRIPTIVE CATALOGING MANUAL
64X
Z1
S E R I E S T R E A T M E N T - G E N E R A L INFORMATION
This 64X section covers the following topics:
C National-level PCC default decisions for newly-established SARs for monographic series and multipart
items
C General policy
C Recording PCC local treatment decisions in new SARs
|
C Recording PCC local treatment decisions in existing
| SAR
C Existing SARs and non-LC analytic records
C SARs for serials other than monographic series
|
C Republications
C Document series in general C U.S. federal document series C United Nations documents
C Treaty series
C BIBCO tracing practice Also see specific 64X yellow pages.
National-level PCC default decisions for newly-established SARs for monographic series and multipart
items of local needs/preferences/resources. If a BIBCO library varies from the national default |
classification practice, any resulting analytic record may be a BIBCO record without a “class
November 2006
64X
1
DESCRIPTIVE CATALOGING MANUAL
Z1
separately” number also being supplied. If an analytic record is created, the default tracing practice is
mandatory.
(Note: BIBCO libraries may opt not to create an SAR for an unestablished series when cataloging a
bibliographic record at the core level; see the separate topic “BIBCO tracing practice” at the end of this
64X section for the handling of established/non-established series in BIBCO full and core records.)
The national level tracing decision information is given in two fields in the SAR: field 645 (tracing) and,
when appropriate, field 642 (form of number in added entry) to ensure consistent access points. The use of
the MARC 21 organization code “DPCC” (for the Program for Cooperative Cataloging) in subfield $5 of
those two fields indicates that the information applies at the national level. See the yellow pages for the
642 and 645 fields for specific information.
The “DPCC” code will not be given in subfield $5 in either field 644 (analysis) or
field.
November 2006
64X
2
DESCRIPTIVE CATALOGING MANUAL
Z1
SARs created between September 1989 and mid-November 1998 (when “DPCC” code began to be added
to new SARs) should not be modified to add PCC tracing policy.
Analytic records (either full or core) may be coded as BIBCO records if the series are traced.
SAR S F O R S E R I A L S O T H E R T H A N M O N O G R A P H I C SERIES
Note: The national-level default treatment decisions for analysis and classification do not apply to SARs
for serials other than monographic series (008/12 = z). The
decision to analyze an issue or issues of such a serial is a local decision. The
presence of a
| participant’s code in such an SAR does not mean that another library must follow the analysis or
classification decision recorded. However, if an analytic record is created, the default tracing practice is
mandatory.
H I S T O R Y O F LC/PCC T R E A T M E N T D E C I S I O N S R E C O R D E D I N SARS
Before August 1995, PCC participants could omit treatment fields, give treatment only for the PCC library
or only for LC, or give treatment for both the PCC library and LC. At point of contribution, SARs created
by PCC participants from August 1995-March 1998 lacked LC treatment decisions. From April to midNovember 1998, PCC participants included an LC tracing practice to serve as the national-level tracing
decision for the tracing of series in BIBCO
records. The use by LC staff and PCC participants of the MARC 21 organization
code “DPCC” | in subfield $5 of the 642 and 645 fields to indicate national-level
tracing decisions began in mid- | November 1998. As of June 1, 2006, LC does
not create or update SARs; LC’s treatment
| decisions are summarized in LCRI 13.3.
|
|
Republications
November 2006
64X
3
DESCRIPTIVE CATALOGING MANUAL
Z1
Do not consider a republication to be in the original series if the original series statement has been omitted.
The information can be given in a note on the bibliographic record. (See also LCRI 2.7B7.)
Photoreproduction, microform, and other republications are represented on the SAR for the original. If the
642, 644-646 treatment decisions for the republication are the same as for the original, add a second
subfield $5 to each of those fields. If the treatment decision for the republication is not the same as for the
original, use separate treatment fields with each having its
specific subfield $5. Use “
photo-offset reprint” in the subfield $5 for a photoreproduction.
with the appropriate MARC 21 organization code in subfield $5. If the treatment
fields for the
republication are not the same as for the original, give the treatment field for the original before
the treatment field for the republication. Always use a separate field for the republication if the same field
for the original shows a change of decision.
November 2006
64X
4
| For
Z1
DESCRIPTIVE CATALOGING MANUAL
646
$a s $5
050
$a
$
a
c $5
6
4
6
$
a
s $5
$a
|
photo-offset reprint
$b
6
4
6
050
$5
|
|
microfiche
$b
6
4
6
$
a
s $d no. 78- $5
|
6
4
6
$
a
c $d no. 1-77 $5
|
6
4
6
$
a
s $5
print
large
|
edition
If only a republication is in hand and no SAR exists for the original even though the original is in the
collection, either create a SAR for both the original and the republication or create an SAR only for the
republication. If the original is not in the collection, create an SAR only for the republication.
The inclusion of 643 and 670 fields for the republication is dependent on whether the SAR is for one or
more republications or is for the original and one or more republications. (Until April 1998, 643 and 670
fields were required for each type of republication and for each publisher/manufacturer of republications
on all SARs; do not delete any 643 and 670 fields for republications on SARs for the original and
republication(s) created before April 1998.)
(1)
Creating a new SAR for only a republication:
(a)
In the 643 field, indicate in subfield $d the type of republication of
the item for which the SAR is being made.
November 2006
64X
5
DESCRIPTIVE CATALOGING MANUAL
(b)
slash.
642
Z1
Begin the 670 field with the term for the type of republication and a
$a no. 1 $5 DPCC photo-offset reprint $5
photo-
|
offset reprint
643
$a [Place of republication] $b [Publisher/Manufacturer
of republication] $d photo-offset reprint
644
$a f $5
photo-offset reprint
645
$a t $5 DPCC photo-offset reprint $5
photo-offset
|
|
reprint
|
646
$a s $5
670
([usage])
$a Photo-offset reprint/[Title], [date]: $b [source]
(2)
(a)
republication.
November 2006
photo-offset reprint
Creating a new SAR for both the original and a republication:
Do not include a 643 field for the publisher/manufacturer of the
64X
6
Z1
DESCRIPTIVE CATALOGING MANUAL
Do not include a 670 field for the republished item.
(b)
0
5
0
$
a
6
4
2
$
a
$b
no. 23 $5 DPCC $5
reprint
$
5
|
$5 DPCC photo-offset
|
photo-offset reprint
6
4
3
$
a
[Place of original] $b [Publisher of original]
6
4
4
$
a
f $5
6
4
5
$
a
t $5 DPCC $5
$5
|
photo-offset reprint
$5 DPCC photo-offset reprint $5
|
|
photo-offset reprint
(3)
6
4
6
$a c $5
6
4
6
$
a
s $5
6
7
0
$
a
[Title of original], [date]: $b [source]
([usage])
|
photo-offset reprint
Adding a republication to an existing SAR:
(a)
Add treatment decisions for the republication.
(b)
Do not add 643 and 670 fields for the republication.
(c)
Do not delete any existing 643 and 670 fields for any republication(s).
November 2006
|
64X
7
Z1
DESCRIPTIVE CATALOGING MANUAL
Example showing addition of photoreproduction to existing SAR for original:
|
6
4
2
$
a
no. 1 $5
6
4
3
$
a
[Place of original] $b [Publisher of original]
6
4
4
$
a
f $5
$5
offset
photo-
reprint
|
6
4
5
$
a
t $5
$5
offset
photo-
reprint
|
6
4
6
$
a
s $5
$5
offset
photo-
reprint
|
6
7
0
$
a
[Title of original],
[date]:
$5
photo-offset reprint
$b [source]
([usage])
Example showing addition of large print edition republication to existing SAR for photoreproduction:
642
$a no. 1 $5
photo-offset reprint $5
large
|
print edition
643
$a [Place of reproduction] $b [Publisher of
reproduction] $d photo-offset reprint
644
$a f $5
photo-offset reprint $5
large print
|
edition
645
$a t $5
photo-offset reprint $5
large print
|
$a s $5
photo-offset reprint $5
large print
|
edition
646
edition
670
([usage])
$a Photo-offset reprint/[Title], [date]: $b [source]
Example showing addition of microfilm republication to existing SAR for original and photoreproduction
created before April 1998 (when 643 and 670 fields were still required for any
November 2006
64X
8
Z1
DESCRIPTIVE CATALOGING MANUAL
republication added to SAR for original):
642
$a no. 1 $5
$5
|
photo-offset reprint $5
microfilm
643
$a [Place of original] $b [Publisher of original] 643
$a [Place of reproduction] $b [Publisher of
reproduction] $d photo-offset reprint
644
$a f $5
$5
photo-offset reprint $5
|
$a t $5
$5
photo-offset reprint $5
|
$a s $5
$5
photo-offset reprint $5
|
microfilm
645
microfilm
646
microfilm
670
670
$a [Title of original], [date]: $b [source] ([usage])
$a Photo-offset reprint/[Title], [date]: $b [source]
([usage])
Document series in general
Definition of “document” = “Any publication bearing a government imprint or a statement that it has been
published at government expense.” This definition is to be interpreted to include international
organizations consisting of national governments, e.g., United Nations, World Health Organization,
International Labour Office, etc. Note that publications of institutions created or controlled by a
government (universities, colleges, museums, observatories, hospitals, libraries, institutes, etc.) are not to
be considered documents. However, publications of agricultural experiment stations are to be considered
documents. When in doubt, consider an item to be a document.
The above criteria are applicable only when establishing or reestablishing series headings; they are not to
be used in any other context.
|
U.S. federal document series
November 2006
64X
9
DESCRIPTIVE CATALOGING MANUAL
Z1
PCC participants may create SARs for U.S. federal document series without contacting
| the
will add its symbol in an 040 $d when it uses an SAR for the first time.
United Nations documents
Establish new UN document series according to normal procedures for document series.
Give the UN document number as a quoted note on the analytic record.
|
November 2006
64X
10
DESCRIPTIVE CATALOGING MANUAL
Z1
Treaty series
If the main entry is the jurisdiction promulgating the treaties, in subfield $t use “Treaties, etc.” and the title
proper of the series as a qualifier.
110
$a United States. $t Treaties, etc. (Treaties and other
international acts series)
|
BIBCO tracing practice
SAR A L R E A D Y E X I S T S I N T H E N A T I O N A L A U T H O R I T Y FILE
•
If the SAR was established before September 1989 and LC’s 644 has value f”
and LC’s 645 has value “n,” do not trace the series; code the bibliographic record (either full or core) as a
BIBCO record. Do not add the “DPCC” 642/645 fields to an existing SAR.
•
If the SAR other than one described in the previous category
–
has 645 value “t” with any subfield $5, trace the series and code the
bibliographic record (either full or core) as a BIBCO record. Do not add the “DPCC” 642/645 fields to an
existing SAR;
–
has only LC's 644 of “n” and LC's 645 of “n,” trace the series and code
the bibliographic record (either full or core) as a BIBCO record. Do not add the “DPCC” 642/645 fields to
an existing SAR;
–
lacks a 645 field, trace the series and code the bibliographic record
(either full or core) as a BIBCO record. Do not add the “DPCC” 642/645 fields to an existing SAR.
SAR D O E S N ' T E X I S T I N T H E N A T I O N A L A U T H O R I T Y FILE
For a full-level bibliographic record:
November 2006
64X
11
DESCRIPTIVE CATALOGING MANUAL
Z1
contribute an SAR* to the national authority file, and
trace the series in the analytic record.
•
•
For a core-level bibliographic record,
either:
• contribute an SAR* to the national authority file, and
• trace the series in the analytic record;
or:
• don't contribute an SAR to the national authority file, and
• don't trace the series in the analytic record.
November 2006
64X
12
DESCRIPTIVE CATALOGING MANUAL
Z1
* New SAR would have “$5 DPCC” in 642 and 645 fields.
If a BIBCO participant chooses not to follow the guidelines stated above, do not code the resulting analytic
records as BIBCO records.
November 2006
64X
13
DESCRIPTIVE CATALOGING MANUAL
640
November 2006
1
Z1
S E R I E S D A T E S O F P U B L I C A T I O N A N D / O R V O L U M E DESIGNATION
640
DESCRIPTIVE CATALOGING MANUAL
642
Z1
S E R I E S N U M B E R I N G EXAMPLE
Determine the form of numbering from the item in hand (not necessarily the first item of the series) and
then use that form in tracing all items in the series. When reestablishing a series, change any subfield $v
forms in access points in existing analytic records that don't match the form in the 642 field.
If the only number found on the item is the number in the series statement within the CIP data, ignore that
number and consider the series to be unnumbered.
If at the time of reestablishing a series, analytic records in the database show that the series is both
numbered and unnumbered but the item in hand is unnumbered, determine the form of number to be used
in the tracing from the records in the database and record the earliest number in the 642 field. Also add in
a 670 field the citation of the analytic bibliographic record on which the form of number is based; include
the number in the parenthetical data in the subfield $b.
If the analytic being cataloged is a multipart item that represents more than one volume in the series (e.g.,
the two volumes of the multipart item are numbers 17 and 18 of the series), record only one number in the
642 field; do not use a sequence of numbers.
When an analyzable multipart item is classified with another series (646 $a = m), the number recorded at
the end of the call number in the 050 field will not be the number found in the 642 field. The number
found in the 050 field is the number of the “other series” found on the item in hand. (See 050 yellow
page.)
When wording such as “new ser.” has been supplied in brackets with the numbering in the bibliographic
record 4XX subfield $v (cf. AACR2 1.6G1), include the brackets in the 642 field being added to the SAR:
e.g., 642 $a [new ser.], no. 1
Serial catalogers: include the 642 field even though subfield $v usually doesn't appear in 4XX/8XX of
serial analytic records.
November 2006
|
DESCRIPTIVE CATALOGING MANUAL
Z1
Recording national-level and PCC local decisions for form of numbering
| The
creating BIBCO records. The MARC 21 organization code used for this national-level decision
in subfield $5 is “DPCC” (PCC = Program for Cooperative Cataloging). PCC participants
guidelines.
|
PCC participants: new SAR
(1)
Always include the national-level decision for form of numbering for a
numbered monographic series, multipart item, or other series (serial) regardless of your local tracing
decision. Determine the form of number according to usual rules/policies.
642 $a [form of number] $5 DPCC
(2)
If your local tracing decision is to trace, optionally add your MARC 21
organization code as the last subfield $5 in the one 642 field.
642 $a [form of number] $5 DPCC $5 CoDU
PCC participants: existing SAR
(1)
If the national-level decision is not in the SAR, do not add it.
(2)
If your local tracing decision is to trace, optionally add your MARC 21
organization code as the last subfield $5 in an already-existing 642 field. Note: only one PCC participant
may include a form of numbering decision in an SAR. If a 642 field isn't present, optionally add the field
with your MARC 21 organization code in subfield $5.
642 $a [form of number] $5 DPCC $5 CoDU
November 2006
| sho
DESCRIPTIVE CATALOGING MANUAL
Z1
642 $a [form of number] $5 DPCC $5 DLC $5 IRA 642 $a [form of number] $5 DLC $5 IRA
642 $a [form of number] $5 WaU
(examples represent single fields in different SARs; “DPCC” already in the first and second SARs)
November 2006
DESCRIPTIVE CATALOGING MANUAL
643
Z1
S E R I E S P L A C E A N D P U B L I S H E R /I S S U I N G BODY
Give the information in the 643 field as found in subfields $a and $b of the 260 field of the bibliographic
record for the analytic (or, in situations when there will not be an analytic, the way it would be found if an
analytic existed). If you are using "cut and paste" or an automated authority generation program, it isn't
necessary in the 643 field to delete an address or brackets included from the 260 field. However, do not
use the form from 260 $b if AACR2 1.4D4 was applied to shorten the name given in 260 $b.
Generally, ignore changes of place if there is no change in publisher.
If the difference in publishers represents alternate rather than successive publishers, give each publisher in
its own 643, using "some issues" in subfield $d in each 643 field.
If there are more than three successive changes of publisher, revert to one 643 field belonging to the
volume cited in the first 670 field and give a 667 note. (See 667 yellow page.)
Generally, use "some issues" when a subfield $d is needed for unnumbered series or multipart items unless
a span of dates is readily available.
Give "643 $a Various places $b various publishers" as the 643 field for an undifferentiated phrase record.
(See Introduction yellow pages for more information about these records.)
When reestablishing a series, generally ignore changes in place or publisher occurring previous to AACR
2. If there is information (e.g., from analytic records or from item in hand) that the place and/or publisher
for some or all of the analytics is different from that of item being cited in the 670 field, record in the 643
field only the place and the publisher of that item.
Record the designation of that item in the subfield $d of the 643.
When creating an SAR for a republication only, indicate the type of republication in subfield $d. Use
"photo-offset reprint" for a photoreproduction; for other republications use an appropriate term, e.g.,
"microfilm," "large-print edition." Do not include a 643 field for the producer of the republication if the
November 2006
DESCRIPTIVE CATALOGING MANUAL
Z1
SAR covers both the original and one or more republications. Do not add additional 643 fields for other
types of republications cataloged later. (See 64X yellow pages for more information about
republications.)
November 2006
Z1
DESCRIPTIVE CATALOGING MANUAL
644
S E R I E S A N A L Y S I S PRACTICE
|
Recording PCC local analysis decisions
|
A PCC participant has the option to include or omit its analysis practice when creating or modifying an
SAR. Only one PCC participant may include its analysis practice in an SAR.
|
Exception to analysis practice
Sometimes the exception to the analysis practice will apply to all the volumes of a serial analytic or to all
the volumes of a subseries. In such cases, in subfield $b give the title of the serial analytic or of the
subseries instead of the series numbers of those items.
644
$a n $b [Title of serial] $5
|
646
$a c $5
|
Change of decision
When there is a change in analysis practice and the classification practice already is classified as a
collection (646 $a = c), use a processing date as the cut-off. For subfield $d in the two 644 fields use the
phrases "items processed after [date]" and "items processed before [date one day later than date in the
previous subfield $d]." For example, if the analysis decision change was made on Feb. 3, 1993, give these
644 fields:
644 $a n $d items processed after Feb. 2, 1993 $5
processed before Feb. 3, 1993 $5
| 646 $a c $5
November 2006
| 644
$a f $d items
|
DESCRIPTIVE CATALOGING MANUAL
Z1
When there is a change in analysis practice and the classification practice has been
classified separately (646 $a = s), use a numbering/chronological designation as the
cut-off; use the term(s) from the item itself. For subfield $d in the two 644 fields
use the designation of the latest analyzed volume in the database as the ending
volume in the second (earlier practice) 644 field and the next number at the
beginning volume in the first (current practice) field.
November 2006
Z1
DESCRIPTIVE CATALOGING MANUAL
existing SAR:
644
$a f $5
|
646
$a s $5
|
revised SAR:
644
$a n $d v. 24, 26, 33-
644
$a f $d v. 1-23, 25, 27-32 $5
646
$a c $d v. 24, 26, 33-
646
$a s $d v. 1-23, 25, 27-32 $5
|
$5
|
|
$5
|
Non-analyzable volumes
If the publication began as a not-analyzable serial and then became a monographic series without changing
its title, create one SAR. Give two 644 fields and a 667 notes that explains the change in the publication.
667
6
4
4
$
a
f $
d
v
.
9-
6
4
4
$
a
n $
d
v
.
1-8 $5
6
4
5
$
a
t $
5
DPCC $5
6
4
6
$
a
c $
5
$5
|
|
|
$a Lacked analyzable titles until v. 9.
If a later volume of an existing analyzed-in-full series is not analyzable, consider creating an
November 2006
|
| ana
DESCRIPTIVE CATALOGING MANUAL
645
Z1
S E R I E S T R A C I N G PRACTICE
National-level PCC tracing decision for all newly-established SARs for series, multipart items, and other
series (serial) = “trace.”
See the section “BIBCO tracing practice” in the 64X yellow pages for guidelines about tracing when the
SAR is already in the national authority file.
General policy for tracing practice
When reestablishing a series that was untraced prior to AACR 2, always give two 645 fields, using the
AACR 2 implementation date (regardless of the date of creating the SAR):
645 $a t $d items cataloged after Dec. 31, 1980 $5 [code] 645 $a n $d items cataloged
before Jan. 1, 1981 $5 [code]
PCC participants: new SAR
(1)
Always include the national-level decision to trace in any new SAR created
for a monographic series, multipart item, or other series (serial) regardless of your local tracing decision.
645 $a t $5 DPCC
November 2006
|
DESCRIPTIVE CATALOGING MANUAL
(2)
November 2006
Optionally, add your own local decision.
Z1
DESCRIPTIVE CATALOGING MANUAL
Z1
(a)
If your decision is to trace, add your MARC 21 organization code as
the last subfield $5 in the one 645 field.
645 $a t $5 DPCC $5 IRA
If your decision is not to trace, give two 645 fields with your decision
(b)
in a second 645 field.
two fields in one SAR:
645 $a t $5 DPCC
645 $a n $5 WaU
PCC participants: existing SAR
(1)
If the national-level decision is not in the SAR, do not add it.
(2)
Optionally, add your local tracing decision. Note: only one PCC participant
may include a local tracing practice in an SAR.
(a)
If your decision is to trace, add your MARC 21 organization code to
an already-existing 645 field with decision to trace; if a 645 field isn't present, add the field with your
MARC 21 organization code in subfield $5.
November 2006
6
4
5
$
a
t $
5
DPCC $5 WaU
6
4
5
$
a
t $
5
DPCC $5 DLC $5
CoDU
DESCRIPTIVE CATALOGING MANUAL
6
4
5
$
a
t $
5
DLC $5 CoDU
6
4
5
$
a
t $
5
IRA
Z1
(examples represent single fields in different SARs; “DPCC” already in the first and second SARs)
(b)
If your decision is not to trace, give your decision in a second 645
field if a 645 for a “traced” decision is present. If a 645 field isn't present, add the field with your MARC
21 identification code in subfield $5.
two fields in one SAR:
645 $a t $5 DPCC
645 $a n $5 IRA
single field in one SAR:
645 $a n $5 WaU
November 2006
DESCRIPTIVE CATALOGING MANUAL
646
Z1
S E R I E S C L A S S I F I C A T I O N PRACTICE
General guidance
|
|
If a main series is classified separately, a numbered subseries is normally classified separately (the default
decision). If a main series is classified separately, an unnumbered subseries can only be classified
separately. If a main series is classified as a collection, a subseries (numbered or unnumbered) is normally
classified with the main series.
If, by exception, a subseries has a classification decision different from that of the main series, give a
second 646 field on the main series SAR identifying the subseries exception. If, by exception, a serial
analytic has a classification decision different from that of the series, give a second 646 field on the series
SAR identifying the serial analytic exception.
main series SAR:
050
$a
$b
$d all vols. except [title of subseries]
646
$a c $d all vols. except [title of subseries] $5
|
646
$a s $d [title of subseries] $5
|
subseries SAR:
646
|
$a s $5
series SAR:
050
$a
$b
$d [title of serial]
6
$a s $d all vols.
except [title of serial] $5
4
6
$a c $d [title
6 of serial] $5
4
6
"Classified with main or other series"
This classification decision (646 $a = m) applies to two situations:
November 2006
|
|
DESCRIPTIVE CATALOGING MANUAL
Z1
(1)
a subseries (numbered or unnumbered, entered subordinately or
independently) whose main series is classified as a collection (i.e., the SAR for the main series has 646 $a
= c);
If the subseries is numbered, there will be serial collected set bibliographic records for both the main series
and the subseries; if the subseries is unnumbered, there will be a serial collected set record for only the
main series.
(2)
a multipart item, numbered or unnumbered, in a series or other
multipart item that is classified as a collection (i.e., the SAR for the series or multipart item has 646 $a =
c).
If the smaller multipart item is numbered, there will be collected set bibliographic records for both the
series/larger multipart item and the smaller multipart item; if the smaller multipart item is unnumbered,
there will be a collected set record only for the series/larger multipart item. The collected set record for the
series will be a serial record; the collected set record(s) for the multipart item(s) will be monograph
record(s).
Recording PCC local classification decisions
|
A PCC participant has the option to include or omit its classification practice when creating or modifying
an SAR. Only one PCC participant may include its classification practice in an SAR.
|
Unnumbered volumes in a collected set series
If a numbered series that is classified as a collection has some volumes that are unnumbered, use two 646
fields:
646
$a c $d numbered items $5 DLC
646
$a s $d unnumbered items $5 DLC
Change of decision -- numbered monographic series
When the classification decision for a numbered monographic series has changed, generally use
numeric/chronological designations in subfield $d of both 646 fields. Use the term(s) from the item itself.
November 2006
DESCRIPTIVE CATALOGING MANUAL
Z1
classification decision using definite beginning and ending numbers. For example, v. 1-35 are represented
by classified separately analytic bibliographic records. The classification decision has changed with the
processing of v. 38. Do not show gaps in the subfield $d; the person handling one of those "missing"
volumes later needs to know what treatment to use.
At times, if volumes were cataloged out of order (any of the uncataloged issues is earlier than the latest
analyzed volume in the database), some volumes would have to be reclassed into the collected set in order
to give a "clean" cut-off as shown above. Instead, generally record the specific volumes for each
classification practice. Give the new classification practice in the first 646 field; use a hyphen with the last
number to indicate that all volumes after that number should have the same treatment. In the second 646
field, show only the specific volumes not having the new classification practice.
November 2006
DESCRIPTIVE CATALOGING MANUAL
663/664
Z1
Complex See Also and See References
General
At LC these fields are commonly known as cataloger generated references.
The 663 field contains the explanatory text and the headings referred to that are required when
relationships exist between an established name and other established names that cannot be adequately
conveyed by one or more simple cross references generated from 5XX See Also From Tracing Fields.
(See also LCRI 22.2B and LCRI 26.2D.)
The 664 field contains the explanatory text and the headings referred to that are required when
relationships exist between an unestablished name and one or more established names that cannot be
adequately conveyed by simple cross references generated from 4XX See From Tracing fields in the
established heading records.
Complex See Also References and Complex See References may refer to a single
|
heading or to multiple headings.
Conversion from Complex Reference to Regular Reference. Change the record on which the
complex reference is traced by changing the $w control subfield and correcting the tag, if necessary.
During routine reference evaluation, correct the reference tracing only on the record in hand; it is not
necessary to revise all the records on which the complex reference is traced.
| aut
For a see reference, delete the record with the 664 field; if the record is not in the
Conversion from Regular Reference to Complex See or See Also Refer- ence. Change the $w
control subfield for the reference by adding a value "b" or "c" in the fourth position. Correct the tag if
necessary. For see also references, also change the record for the heading referred from, and add the
663 field to it.
Change to an Existing Complex Reference. If the reference is, and will remain, a see (664) reference,
and if the change is to the refer-to or refer-from lines, change the name authority record(s) on which the
complex reference is traced.
1
Z1
DESCRIPTIVE CATALOGING MANUAL
If the reference is, and will remain a see also (663) reference, adjust the text of the reference as
necessary. If the change is to the refer-to or refer-from lines, also change the name authority records on
which the reference is traced.
July 1999
663/6
64
1
Z1
DESCRIPTIVE CATALOGING MANUAL
667
N O N P U B L I C G E N E R A L NOTE
LC series practice: As of June 1, 2006, LC does not create or update SARs
|
PCC series practice: The PCC Policy Committee has announced that the PCC series policy
| rem
Give information of permanent value and general interest that would be useful also to institutions outside
of LC and to LC staff not working in the LC Database. A listing (not exhaustive) of types of notes is
given below; with the exception of notes about old catalog headings, series-like phrase core records, and
technical reports as well as the first part of the MESSAGE notes, the wording is recommended but not
prescriptive. The separate 667 fields may be given in any order.
6
6
7
$
a
Not same as:
6
6
7
$
a
Cannot identify with:
6
6
7
$
a
Reinvestigate before using again
6
6
7
$
a
Formerly on undifferentiated name record: [LCCN
of
[name or title, LCCN]
[name or title, LCCN]
undifferentiated name record]
667
$a Coded provisional because [reason for coding]
667 $a Change heading if name
used
667
$a For works issued before/after [date]
(to be used for official language changes)
NARs and subject usage
November 2006
continues to be
DESCRIPTIVE CATALOGING MANUAL
Z1
(1)
Notes indicating subject cataloging usage when an authority record heading is not
appropriate for use as a subject entry
Heads of state, etc.
(a)
Add a 667 note to name authority records indicating subject cataloging usage for corporate headings
representing the office held for Heads of state, etc., (AACR2 rule 24.20B1), Heads of governmental and of
international intergovernmental bodies (AACR2 rule 24.20C), Religious officials (AACR2 rule 24.27B1),
and Popes (AACR2 rule 24.27B2) when the name of the incumbent is included as part of the heading.
Also assign value “n” in 008/11 and value “b” in 008/15.
667
$a SUBJECT USAGE: This heading is not valid for use as a subject. Works about
this person are entered under [personal name heading].
November 2006
DESCRIPTIVE CATALOGING MANUAL
Z1
Example:
110 1# $a United States. $b President (1953-1961 : Eisenhower)
008/11 = n
008/15 = b
667
$a SUBJECT USAGE: This heading is not valid for use
as a subject. Works about this person are entered under Eisenhower, Dwight D. (Dwight
David), 1890- 1969.
See also DCM Z1 008/11 and DCM Z1 008/15.
Follow these guidelines for newly-created authority records. Revise existing records when making any
other change to the records.
Earlier/later linear jurisdictional name changes
(b)
It is LC subject cataloging policy to assign only the latest name of a political jurisdiction that has had one
or more earlier names as a subject heading or as a geographic subdivision, as long as the territorial identity
remains essentially unchanged (cf. SCM H 708). Upon creating an earlier/later heading for a geographic
name, catalogers must notify CPSO to add a 667 subject usage note to the earlier name and adjust the
appropriate 008 fields.
Example:
151
$a Ceylon
667 $a SUBJECT USAGE: This heading is not valid for use as a subject. Works about this
place are entered under Sri Lanka.
A web form to facilitate PCC catalogers’ notifications to CPSO is available at:
http://www.loc.gov/catdir/pcc/naco/nar667form.html LC catalogers should continue to follow the
guidelines provided in SCM H 708.
November 2006
DESCRIPTIVE CATALOGING MANUAL
Z1
(2)
Notes indicating that a geographic name heading is not appropriate for use as a
geographic subdivision
PCC optional practice:
Add a 667 note to name authority records for geographic headings that are not appropriate for use as
geographic subdivisions in subject cataloging usage (Per SCM H 835) when the name represents an entity
within a city and is qualified by the city name. Such notes will most frequently be needed for names of
city sections, districts, neighborhoods, etc. Make no changes to values in bytes of the 008.
November 2006
DESCRIPTIVE CATALOGING MANUAL
667
Z1
$a SUBJECT USAGE: This heading is not valid for use as a geographic subdivision.
Example:
1
5
1
$
a
Hollywood (Los Angeles, Calif.)
6
6
7
$
a
SUBJECT USAGE: This heading is not valid for
use
as a geographic subdivision.
Follow these guidelines for newly-created authority records. Add the note to an existing record when
making any other change to the record.
See DCM Z1 781 for guidelines on adding 781 fields to name authority records for geographic headings
that may also be used as geographic subdivisions.
MESSAGE notes (LC practice)
Use notes in the 667 field to indicate that an authority record is not yet finished or that it needs further
investigation. Use the notes only when the work cannot be completed promptly.
If a new authority record cannot be completed immediately, adjust the code in LDR/17 from “n” to “o” and
add a 667 note: “MESSAGE: Early notice.” When the record has been completed, change the code back
to “n” and delete the 667 MESSAGE note.
If an existing authority record needs investigation that cannot be completed immediately, adjust the code in
008/31 from “a” to “b” and add a 667 note: “MESSAGE: Being updated. [code and date]” (Additional
information explaining the problem may be added, if considered useful.) When the record has been
revised as necessary, change the value back to “a” and delete the 667 MESSAGE note.
November 2006
667
DESCRIPTIVE CATALOGING MANUAL
$a MESSAGE
Being updated. [code and date]
Z1
|
|
SARs
(1)
Notes re title proper:
There may be a clear pattern of fluctuation between two or more forms of title proper of a numbered series
(based on information in the database or from items in hand).
There
may be a change in the form of the title proper that isn't considered a title change (AACR 2 21.2A/LCRI
21.2A). You can use a 667 field in lieu of a 670 field to indicate the different title proper that is not
generating its own SAR. Give that form of the title proper in a 4XX field.
November 2006
DESCRIPTIVE CATALOGING MANUAL
6
6
7
$
a
Some issues have title: [title
proper]
6
6
7
$
a
Vol. 8 has title: [title proper]
Z1
[for fluctuating titles]
667
$a Vols. 9-
have title: [title proper]
[for change not generating separate record]
If the subtitle could be interpreted as the title proper of the series or as a subseries, note the subtitle in a 667
field and give it as a 4XX reference.
667
$a Subtitle: [title of subtitle]
Do not use the 667 field to indicate variant titles of the series title proper found on the same item (e.g.,
form of series title on cover is different from form of series on series title page); note the variant titles in
670 field(s) and give them as 4XX references.
Notes re relationship to other series/records:
(2)
If a series authority record represents a publication that is a successive entry that has occurred after a
series was last handled under pre-AACR 2 rules but for which no SAR yet exists, give the information
only in a 667 field rather than in 675/5XX fields. Label it, in square brackets, as an unevaluated catalog
entry form. When the pre-AACR 2 catalog entry form is being evaluated in terms of AACR 2 choice and
form of entry, delete this 667 and replace it with appropriate 675/5XX fields on both SARs.
667
$a Continues: [pre-AACR 2 catalog entry form] [unevaluated catalog entry form]
667
$a Continued by: [pre-AACR 2 catalog entry form] [unevaluated catalog entry form]
November 2006
DESCRIPTIVE CATALOGING MANUAL
Z1
If the earlier publication was not analyzable, give the information only in a 667 field rather than in
675/5XX fields.
667 $a Continues the not-analyzable serial:
in musicology.
Directory of computer assisted research
When the optional linking reference cannot be given between the AACR 2 form and the pre-AACR 2
form due to NACO normalization, if desired give the pre-AACR 2 information in a 667 field. Use one of
the notes given below. (See “NACO normalization” section in Introduction yellow pages.)
667
$a Old catalog heading:
November 2006
Z1
DESCRIPTIVE CATALOGING MANUAL
[Use if the reference would normalize to the
same form as the heading or another reference on the same record or to the same form as
a heading on another record.]
667
$a Includes old catalog headings:
Great Britain.
Foreign Office. Treaty series; and, Great Britain. Foreign and Commonwealth Office.
Treaty series"
[Use if two or more pre-AACR 2 headings will be treated as
667
one heading under AACR 2.]
$a Previous to AACR 2 covered by the heading:
[Use if one pre-AACR 2 heading will be split under AACR 2.]
(3)
Notes re publisher/issuing body:
When there are more than two changes of publisher or when there have been more than two different
consecutive bodies both issuing and publishing the publication, use only one 643 field and give an
explanation in a 667 field. The explanation should be as specific as is appropriate for the situation.
6
6
7
$
a
Imprint varies
6
6
7
$
a
Publisher varies
6
6
7
$
a
Published by various offices of the Division
of
Education
6
6
7
$
a
Issued by various agencies of the West German
government, e.g., Presse- und Informationsamt,
Bundesministerium der Justiz, Bundesministerium für Forschung und Technologie
(4)
November 2006
Notes re type of publication:
DESCRIPTIVE CATALOGING MANUAL
Z1
If the series is a document series, give a 667 note.
667
$a Document
|
If the publication has changed its identity (e.g., from a monographic series to a periodical), give a 667 note
that indicates what happened which will explain why a full set of analytic records is not available.
667
$a Telephone call to publisher, 11-2-88:
Change in
pattern of publication; v. 1-17 monographic works,
v. 18- collections of articles
667
$a Publication was periodical for v. 1-3; monographic series beginning with v. 4
|
(5)
November 2006
Notes re handling of series-like phrase:
Z1
DESCRIPTIVE CATALOGING MANUAL
6
6
7
$
a
Do not give as a quoted note
6
6
7
$
a
Give as a quoted note
6
6
7
$
a
Give as a quoted note if [name of publisher] is
not
recorded in the publication, distribution, etc.
area
of the bibliographic record
[for phrase that combines name of publisher and
a generic term]
6
6
7
$
a
Is an imprint, not a series.
publication,
Record in
distribution, etc. area of the bibliographic record
[for imprint that could be construed to be
title, e.g., Metropolitan Books]
6
6
7
$
a
Give as a quoted note, including the number, e.g.,
AAI no. 85-41
6
6
7
$
a
Give as other title information in the title and
statement of responsibility area of the bibliographic record
Notes re undifferentiated phrase record
(6)
When converting a series-like phrase for a single phrase to an undifferentiated phrase record to cover the
same phrase used by more than one publisher, give a 667 note using the wording given below. (See the
Introduction yellow pages for more information about these records.)
667
$a Undifferentiated phrase record:
Covers all
instances when this character string used by any
publisher is considered to be a series-like phrase; if character string is to be a
series, separate
November 2006
Z1
DESCRIPTIVE CATALOGING MANUAL
SAR has been made.
Give a second 667 note: “Give as a quoted note.” If a different handling is desired for one instance of the
phrase, either (a) make a separate phrase SAR and add a qualifier to its heading, or (b) add another 667
note in the undifferentiated phrase SAR: “For resources published by [
], give the phrase as [ ].”
|
Miscellaneous notes for whatever information needs to be conveyed:
(7)
667
$a Previous to AACR 2 subsumed under made-up set for UN documents
[See 64X yellow pages for more information about UN documents]
6
6
7
$
a
First printing of vol. 8 of the Princeton
theological monograph series erroneously carried
the
series statement:
Pittsburgh theological
monographs
6
6
7
$
a
Phone call to Borgo Press 1-20-84:
Starmont Press
series; Borgo reprints all titles generally 6
months
to a year later in cloth
November 2006
6
6
7
$
a
Lacked analyzable titles until v. 9
6
6
7
$
a
Indexed in:
Social sciences index
|
DESCRIPTIVE CATALOGING MANUAL
670
Z1
S O U R C E D A T A FOUND
This 670 section covers the following topics:
C General
C Transcription of names and titles
C Internet resources
C Recording dates
C Justifying references
C Transcription of other data
C Special types of citations
General
The purpose of this field is to record information about the name or title represented in the 1XX field. It
includes facts that contribute to the identification of the heading, that justify the choice of the name used as
the 1XX heading and references to it, and that clarify relationships between it and other headings in the
file.
F U N C T I O N S O F T H E 6 7 0 FIELD:
Ç To supply information, from bibliographic, and at times non- bibliographic sources (e.g., phone calls,
letters), in support of the choice and form of the heading and references
Ç To store information that may be used to break a conflict later
Ç To identify a person with a particular work or as an author in a particular discipline or time period
Ç To identify separate individuals whose access points must remain identical for now (i.e., undifferentiated
personal name headings)
Ç To clarify whether different forms of a body's name or of a title are simply variations or reflect a change
in the name or title and to identify relationships with other headings
Ç To record research required by the current rules
November 2006
DESCRIPTIVE CATALOGING MANUAL
Z1
Ç To facilitate authority and bibliographic file maintenance, i.e., the information in 670 fields aids in
making decisions about duplicate headings and misattributions
Ç To support machine manipulation based on algorithms using information in the 670
November 2006
DESCRIPTIVE CATALOGING MANUAL
Z1
NOTE THAT THE EXAMPLES GIVEN THROUGHOUT THE FOLLOWING TEXT HAVE DIFFERENT CONVENTIONS
IN REGARD TO PUNCTUATION AND STYLE. THESE CONVENTIONS ARE NOT PRESCRIPTIVE AND SHOULD BE
CONSIDERED AS BEST PRACTICES TO FACILITATE THE EXCHANGE OF INFORMATION IN A SHARED
DATABASE ENVIRONMENT. CATALOGERS ARE EXPECTED TO USE JUDGMENT AND COMMON SENSE.
Punctuation and style need not be consistent from record to record as long as the information
is clear and accurate.
In authority records created using an automated authority generation program, the 670 information may
include the main entry name as it appears in the bibliographic record for which the authority record is
being made. In order to maintain the cost effectiveness of this process, it is recommended that catalogers
accept the additional information as generated.
(1)
•
as an open date.
November 2006
The date of publication. Also see the guidelines below for specific categories:
Multipart items. If the part is the first part, give the date of publication
DESCRIPTIVE CATALOGING MANUAL
Z1
•
Serials other than monographic series. Generally, use a chronological
designation instead of a publication date; if there is no designation date, use the numeric designation and
the date of publication. Indicate, following the designation statement, if a “surrogate” was used.
670 $a The Verdict, Feb. 1975: $b t.p. ([data])
not
670 $a The Verdict, vol. 2, no. 1 (Feb. 1975): $b
t.p. ([data])
670 $a Studies in Confederate history, No. 1 (1966), surrogate $b cover ([data])
not
$b cover ([data])
670 $a Studies in Confederate history, 1966, surrogate
•
Integrating resources. Identify the iteration from which information
was taken (e.g., “viewed on” dates for updating Web sites, update number or release number for
updating loose-leafs).
670 $a Internet Broadway database, viewed on Jan. 21, 2003: $b about IBDB (League of
American Theatres and Producers)
(2)
The specific location(s) of the information found (e.g., t.p., jkt., label, map recto)
when the work cited is other than a standard reference source, (e.g., an encyclopedia or a bibliographic
file). For numbered multipart items, include the
volume number of the item with the specific location. If the heading is being
Specific location was not given on “n42-” (retrospective) SARs.
For NARs, generally, use “etc.” to avoid giving more than two locations or a sequence of locations (e.g.,
p. 316, etc., for p. 316-325, 329-331, 342). For SARs, always give each location separately.
(3)
Information found. Following the location, cite the information found there,
enclosed in parentheses. Automated authority record generation programs may supply additional
information from the bibliographic record from which the authority record is being made, e.g., complete
November 2006
| esta
DESCRIPTIVE CATALOGING MANUAL
Z1
statements of responsibility. In order to maintain the cost effectiveness of these programs, use
judgment in deciding what information can remain in the subfield $b and what is really extraneous to the
record being created and should be deleted.
As appropriate, give multiple occurrences of information from the same source
November 2006
DESCRIPTIVE CATALOGING MANUAL
Z1
following the location of the information. (Note: In SARs the parenthetical statement of the form of title
proper was omitted until June 1989.)
If an SAR is for a republication only, begin the 670 with the term for the type of republication and a slash.
Do not include a 670 for a republication if the SAR covers both the original and one or more
republications. Do not add additional 670 fields for other types of republications cataloged later. (See
64X yellow pages for more information about republications.)
670 $a Large print edition/Fool's coach, c1989 $b CIP
t.p. (An Evans novel of the West)
Transcription of names and titles
Transcribe names or series titles used in the heading or references in full, as they appear in the source,
without abbreviation by the cataloger.
For titles that are not series (cf. Introduction Page 2 on when an NAR for these titles is needed), generally
transcribe only titles that are considered important to document.
When preparing an authority record for the text of a law (AACR2 rule 25.15A2) or a subject compilation
of laws (AACR2 25.15A1), if a source being cited contains an official short title or citation title, cite that
title, preceded by the term “citation title” and its exact location, e.g.
670 $a Workers' compensation law of the state of North Carolina, c1980: $b t.p.
(Workers' compensation law of the state of
North Carolina) citation title, p. 49 (The North Carolina Workers' Compensation Act)
For corporate headings, include in the data cited all the hierarchy required to justify needed references, but
do not include elements irrelevant to the particular heading being established, e.g., subordinate body's
name. Automated authority generation programs may supply additional information beyond the specific
corporate body's name; use judgment in deciding what information (e.g., subordinate body's name) is
extraneous to the record being created and should be deleted.
November 2006
DESCRIPTIVE CATALOGING MANUAL
Z1
For all of the above categories, if the only expression of the name or title on the chief source of
information is in the bibliographic title given in subfield $a of the 670 citation, repetition of the name in
subfield $b may be omitted, provided no important information is lost.
If information about an earlier/later name or title is found in the same source as the name or title in the
heading, give all the information in the 670 field; do not separate the information about the earlier/later
name or title and give it in a 675 field.
November 2006
DESCRIPTIVE CATALOGING MANUAL
Z1
670 $a Strafvollzug, 1985 $b t.p. (Rechtsgeschichte) p. 2
(Continues: Veröffentlichungen / Justizministerium Nordrhein- Westfalen)
Data must be given in romanized form. Normally it is understood that the cataloger has provided the
romanization; therefore, when transcribing romanization found in the source, add after it the bracketed
phrase [in rom.].
In such languages as Arabic and Hebrew, vowels are commonly omitted from the orthography of texts,
and the cataloger supplies the missing vowels in transcribing data. When transcribing text that does
include the vowels, add after it in brackets [voc.] or [part voc.] as appropriate.
Internet resources
These instructions apply to electronic resources being cataloged and to resources used as reference sources.
Give the title of the Internet resource and the date it was consulted in subfield $a. In subfield $b, give a
location within the resource (e.g., home page, about page, HTML title, t.p. of
.pdf), if appropriate, and the information found.
Catalogers may optionally provide a uniform resource identifier (URI) in the 670 citation to link to the
cited resource if it contains significant information related to the established heading that cannot be cited
succinctly in the authority record. Note that use of a URI in the 670
$u does not take the place of the requirement to cite relevant data in subfields $a and $b of the 670 field
needed to support the heading or references (this information will continue to be available if the site
changes or disappears). Do not provide URIs for general reference sources and/or web-based reference
sources that are included in the LCRIs (e.g., Contemporary Authors online, GNIS, GEOnet). If a URI is
included, it must be given in subfield $u.
670 $a British Oceanographic Data Centre WWW Home page, Sept. 6,
1995 $b (BODC, est. Apr. 1989, developed British Oceanographic Data Service (BODS))
670 $a AltaVista, viewed Dec. 4, 1997: $b WWW page title screen
(AltaVista, search network) HTML title (Alta Vista) additional screens (World Wide Web
search engine developed by Digital
November 2006
DESCRIPTIVE CATALOGING MANUAL
Z1
Equipment Corp.)
670 $a Harvard Business School Publishing Corporation gopher, Nov.
23, 1994 $b main menu (Harvard Business School Publishing Corporation) readme (Harvard
Business School Publishing)
670 $a Stephen King.com,the official Web site, viewed Feb. 28, 2006 $b biography, etc.
(Stephen Edwin King; b. Portland, Maine, 1947) site also includes listings of author’s
works
$u http://www.stephenking.com
Recording dates
November 2006
DESCRIPTIVE CATALOGING MANUAL
Z1
To facilitate international contribution and use of authority records, when giving dates, use the abbreviated
forms for months given in AACR2 Appendix B.15. (The U.S. practice for recording dates using numerals
differs from the practice in some other countries). Do not change the style of dates in existing records.
Justifying references
Justify names or titles given as references by information cited from sources. However, justification is not
required in the following cases:
(1)
References justified by rules or rule interpretations only, usually because
the reference is derived from inverting, shortening, etc., the heading or giving a substitute form in the
heading.
(2)
References made on the basis of the cataloger's awareness of different
romanizations or orthographies.
(3)
Name/title cross references derived from the work being cataloged,
from other works cataloged under the same heading, or from information in standard reference sources.
(4)
References made on the basis of information from the Library and
Archives, Canada (cf. DCM Z1 Appendix 2: Canadian headings).
(5)
References to earlier/later headings of corporate bodies reflecting
changes due to national orthographic reform, changes in government headings due to an official
language change, or changes involving only a parent body to which the body being established is
subordinate.
(6)
References made on the basis of information from the British Library as
part of the English Short Title Catalogue project.
November 2006
DESCRIPTIVE CATALOGING MANUAL
(7)
retrospective NARs.
Optional references from pre-AACR 2 forms on SARs and on
Z1
Transcription of other data
NARs. Use judgment to determine how much data to record in the permanent authority record. Do not
abbreviate or translate distinguishing terms (e.g., titles of address or office) that appear in conjunction with
personal names in statements of responsibility and that potentially could be used as part of the heading.
Other data may be abbreviated or summarized. Generally
November 2006
DESCRIPTIVE CATALOGING MANUAL
Z1
informally translate other data from foreign languages into English, paraphrasing or summarizing as
convenient.
SARs. Use judgment to determine how much data other than forms of the title/phrase to record in the
permanent authority record. Numbering and names of issuing bodies are not required but may be given.
Special types of citations
The most commonly occurring citations are listed below. If these are not appropriate, devise others as
needed.
LC database. For LC catalogers not working in OCLC and RLIN, “LC database” as used in a 670
subfield $a equals name/series authority records and bibliographic records with the following values in the
906 $b: cbc, cbu, rip, par, and vip. Note that PREMARC records are now included in those categories of
bibliographic records. (LC catalogers: See the separate document about policy decisions related to local
authority control and PREMARC records.)
For LC catalogers working in OCLC and RLIN and for NACO participants, there is no change in what is
considered to be the “LC database” as used in 670 subfield $a.
NARs. Give the date of the search, using month abbreviations. In parentheses, prefaced by the label hdg.:
(or MLC hdg.: if appropriate), give the heading (or headings) found, even if it is the same as the current
heading.
If different forms of the name exist in the bibliographic records, record the heading and also any forms
found, including usage identical to the heading. Separate the heading from the other forms, and preface the
other forms with an appropriate label, e.g., usage:1 or variant:.2 Do not normally cite specific
1
“Usage” on bibliographic records refers to literal transcriptions of the forms of name usually found in
records' statement of responsibility. Literal transcriptions may also appear in other parts of the
bibliographic record, such as in the title proper or in a quoted note. Be sure that you are recording the
transcription of the name as it appeared on the publication and not as it was formulated because of
November 2006
DESCRIPTIVE CATALOGING MANUAL
Z1
cataloging rules. Be especially careful when taking information from the publication, distribution, etc.,
area and from series statements. Headings may never be provided as usage.
2
“Variant” on bibliographic records refers to a form of the name other than a literal transcription, e.g., a
form found in the publication, distribution, etc. area or in an unquoted note; normally, there is not a need
to cite such a variant in a 670 field. This understanding of “variant” within the context of a database does
not refer to the varying forms of name found on an item not
November 2006
Z1
DESCRIPTIVE CATALOGING MANUAL
bibliographic records or the exact location of the variations found.
6
7
0
$a LC
database,
Jan. 31, 1992 $b (hdg.: Rivière,
Pierre,
6
7
0
$a
LC
database,
Brasileira
pelo
Brasileira
para
Aug. 24, 1982: $b (hdg.: Sociedade
6
7
0
$a LC
database,
Mar. 11, 1996 $b (hdg.:
1815-1840)
Progresso da Ciencia; usage: Sociedade
o Progresso da Ciencia, SBPC)
Swedish
American Corporation; variant: Swedish American Corp.)
SARs. Give the date of the search, using month abbreviations, followed by the citation of the
bibliographic record. In parentheses give the series statement found in that record.
670 $a LC database, Nov. 28, 1983, Les Déchets ménagers, c1980 $b (Les cahiers de
l'AGHTM)
Minimal level cataloging records and less than fully authenticated serial records. Authority work
normally has not been done for headings used in minimal level cataloging records and less than fully
authenticated serial records (authentication field 042 does not contain any one of the codes lc, lcd, nlc, or
gpo). It may be necessary to reconsider the formulation of the heading. If the established heading is
different, do necessary bibliographic file maintenance. Also, an MLC or less than fully authenticated
serial record might provide useful information, such as a birth date not given elsewhere or usage not
otherwise available. Do not routinely cite MLC headings. However, when the information is useful,
document its source in the 670 field, e.g., MLC hdg.: or Less than fully authenticated serial usage:
LC manual authority card. LC practice: When formulating the 670 citation for a manual authority card
citation, use either LC manual auth. cd. or LC manual cat. (i.e., authority and bibliographic records) as
appropriate. Summarize and record data found, without specifying individual works cited on the manual
authority card or other sources of information which may have been mentioned there.
November 2006
Z1
DESCRIPTIVE CATALOGING MANUAL
Citing other files or catalogs. If a heading is found in other manual catalogs or online databases, use
judgment in creating a 670 citation. Begin the 670 field with a designation of the catalog/database in
which these other bibliographic records were found. There is no prescribed formulation of such citations;
examples are listed below:
6
7
0
$
a
LC in OCLC, date:
6
7
0
$
a
RLIN, date $b ([data])
6
7
0
$
a
M/B/RS Collections Authority file $b
([data])
selected as the form used for the heading.
November 2006
$b ([data])
Z1
DESCRIPTIVE CATALOGING MANUAL
670 $a New Delhi MARC file $b ([data])
670 $a MWA/NAIP files $b (hdg.:
; usage:
; variants:
)
670 $a NUC pre-56: $b ([data]) 670 $a NRMM $b ([data])
Library of Congress staff working with the National Union Catalog (NUC) reports used specific library
reports in the 670 citations when creating name authority records.
670 $a nuc85-70017: Lower and middle Pennsylvania
stratigraphy ... 1982 $b (hdg. on AAP rept.:
Sutherland, Patrick Kennedy, 1925- ; usage: Patrick
K. Sutherland)
Reference works. Cite reference sources and the information found in them as briefly as possible within
the requirements of intelligibility already stated, e.g.:
6
7
0
$
a
DNB $b ([data])
6
7
0
$
a
Harvard dict. of music $b ([data])
6
7
0
$
a
Comp. diss. index: $b ([data])
6
7
0
$
a
WW sci. Europe, 1991 $b ([data])
6
7
0
$
a
Banker's alm./yrbk., 1991: $b
([data])
A list of previously used abbreviations for some national bibliographies is in
Cataloging Service Bulletin, no. 22 (fall 1983).
November 2006
DESCRIPTIVE CATALOGING MANUAL
Z1
BGN. For geographic names established on the basis of information from the United States Board on
Geographic Names,3 convey a designated short form of name by adding within brackets immediately after
the appropriate element the statement [short form]. Repeat the short form if needed for clarity. Do this
even if the long form is chosen for the heading. Retain the phrases “[conventional],” “[(language)],” etc.,
when used by BGN. Give the date of the search in the online file and include the feature designation (e.g.,
ADM1, PPL), coordinates, and variants. If searching the latest available published gazetteer because
online access is not available, do not include the date but do include the feature designation and
coordinates. Note: In the published gazetteers the short form is shown with the use of boldface type.
6 13, 1989 $b (Coast [short form]
$a GEOnet, June
7
Province; ADM1,
3000'S 39 0 30'E)
0
or
$a BGN $b (Coast
6 [short form] Province; ADMD, 3000'S
39 0 30'E)
7
0
Published gazetteers or World Wide Web sites (GNIS (domestic information: URL:
http://geonames.usgs.gov; GEOnet (foreign information: URL: http://164.214.2.59/gns/html/)
3
November 2006
Z1
DESCRIPTIVE CATALOGING MANUAL
o
r
67
0
$
a
67
0
$
a
GEOnet, July 7, 1992 $b (Varese [short form]
Provincia di; ADM2, 45048'N 8 0 48'E)
BGN $b (Varese [short form], Provincia di; PROV,
45048'N
67
0
$
a
8 0 48'E)
GEOnet, Apr. 31, 1996 $b (Geneva [conventional];
Genève [native], PPL, 46012'N 6010'E; variants:
Ginevra, Genf)
o
r
67
0
$
a
BGN $b (Genève [French], Geneva [conventional];
POPL, 46012'N 6 0 10'E)
67
0
$
a
GEOnet, Sept. 28, 2001 $b (Cambridgeshire [short
form
= Cambridge]; ADM1, 52012'N 0 0 07'E)
Non-bibliographic sources. Give the non-bibliographic source, the date, and the information. The source
can be given specifically (“Letter from author,” “Phone call to publisher,” etc.) or in general terms
(“Information from author,” “Information from publisher,” etc.). When noting a specific source, it isn't
necessary to show how information was received, e.g, that letter was received via FAX rather than via
mail.
When a telephone call to a publisher/agency/organization is cited, usually give the name of the group
called, rather than the title or name of the person contacted.
November 2006
6
7
0
$
a
Phone call to H. Jones, Jan. 31, 1992 $b (Harry
Jones
6
7
0
$
a
Letter from author, May 29, 1994 $b (correct
6
7
0
$
a
Information from publisher, Feb. 6, 1991 $b (James
Allan's middle name is Stephen, not Steven)
6
7
0
$
a
Information from OCLC, Mar. 8, 1996 $b (
is real name of Lionel Jones)
birthdate for
)
is Oct. 14, 1950)
DESCRIPTIVE CATALOGING MANUAL
675
Z1
S O U R C E D A T A N O T FOUND
It is not always necessary to include in the 675 field every reference source consulted; use judgment in
deciding what sources are important enough to retain in the permanent record.
Include in the 675 field a source(s) giving information about the earlier and/or later name(s) or title(s)
recorded in the 5XX field(s).
November 2006
DESCRIPTIVE CATALOGING MANUAL
7XX
Z1
H E A D I N G L I N K I N G ENTRIES
LC series practice: As of June 1, 2006, LC does not create or update SARs
|
PCC series practice: The PCC Policy Committee has announced that the PCC series policy
|
remains unchanged.
|
General
The use of this field in NARs or SARs is limited to recording the authorized form of name from a national
bibliography. The purpose of including a 7XX in a NAR or SAR is usually to allow a National
Bibliography Agency (NBA) to retain its preferred form of name in its own bibliographic database, while
still contributing name authority records to the national authority file (NAF) under NACO standards.
Indicators
Use the appropriate first indicator. Use second indicator value 7 (the value most appropriate for this
application of the 7XX field).
Subfield $2
A 7XX field using second indicator value 7 must contain a subfield $2 and a code to identify the source of
the heading.
A NBA, such as a national library or other agency responsible for maintaining a national bibliography,
must apply to the LC Network Development and MARC Standards Office (NDMSO) to obtain a code
which will become part of the MARC Code List for Relators, Sources, Description Conventions.
November 2006
7XX
1
Z1
DESCRIPTIVE CATALOGING MANUAL
Information on the process of applying for codes is available from the NDMSO ndmso@loc.gov, or at:
http://lcweb.loc.gov/marc/relators/
MARC 21 model: 7XX for alternate authorized form of name
Consult the LC Cooperative Cataloging Team before including 7XX fields in NARs or
SARs.
Initially, the 7XX model will be limited to records created by NBAs and under certain conditions by
designated NACO contributors authorized by the NBA from within the same geographic jurisdiction, for
the sole purpose of recording the form of heading used in its national bibliography.
November 2006
7XX
2
DESCRIPTIVE CATALOGING MANUAL
Z1
NACO contributors from within the same geographic jurisdiction as the NBA that wish to create or modify
7XX headings should request permission directly from the NBA that controls the national bibliography.
These arrangements are to be made between the NBA and the individual institution and will not be
administered by the PCC or the Library of Congress; nonetheless, the NBA is expected to notify the
Cooperative Cataloging Team when making these agreements and provide a list of libraries authorized to
create or modify 7XX fields. The responsibility for applying for a subfield $2 code resides with the NBA;
once the proper code is identified, it should be used as needed in 7XX fields input by any library.
This policy will be evaluated after a sufficient period of using the 7XX approach, but not sooner than a
year.
Guidelines for including 7XX and subfield $2 in an authority record
A NBA or NBA-designated NACO library may include an alternate authorized form in a
| ne
•
The NBA should consult with the Cooperative Cataloging Team before using 7XX
fields in name or series authority records.
•
The 7XX must include a subfield $2 code to identify the NBA's authority file as the
source of the 7XX. The source code should be requested from the LC NDMSO by the
|
appropriate national library or NBA.
•
A 7XX heading in a NACO record may be modified only by the NBA and/or a NBAdesignated NACO library.
•
The NBA and/or NBA-designated NACO library contributing the 7XX form is
responsible for any maintenance to the NAR if the form of name authorized by the NBA changes.
•
The NBA is advised to consider the impact of 7XX fields on its internally-used system
(e.g., indexing, record maintenance) and consult with its system vendor prior to using 7XX fields.
Sample record
1XX
$a [Authorized NACO AACR2 form] 4XX
$a [Variant form]
670 ## $a [Citation] $b t.p. ([Usage or 1XX]) p. 5 ([Usage for 4XX])
7XX 17 $a [Alternate authorized form] $2 [source code]
November 2006
7XX
3
DESCRIPTIVE CATALOGING MANUAL
Z1
Current status of the 7XX in the NAF
NACO records containing 7XX fields are distributed by the LC Cataloging Distribution Service as part of
the LC/NAF. The 7XX fields have been implemented in the LC ILS, but LC
November 2006
7XX
4
|
DESCRIPTIVE CATALOGING MANUAL
Z1
does not yet use the 7XX fields in its own cataloging.
LC/NACO practice: Allow the 7XX fields to remain in records unchanged.
November 2006
7XX
5
DESCRIPTIVE CATALOGING MANUAL
781
Z1
S U B D I V I S I O N H E A D I N G L I N K I N G E N T R Y –G E O G R A P H I C SUBDIVISION
PCC optional practice (LC does not use this field):
For a geographic name heading that may also be used as a geographic subdivision, determine the form in
which the heading is to be used as a geographic subdivision following the guidelines in instruction sheet H
830 of the Subject Cataloging Manual: Subject Headings.
Enter the text of the geographic subdivision form in a 781 field with second indicator 0. For a geographic
heading that is used directly, such as a country, enter the data in a single $z subfield. For a geographic
heading that is used indirectly through a larger geographic entity, such as a city, enter the data in two
successive $z subfields. Use no other subfields. Make no changes to values in bytes of the 008.
Exampl
es:
August 2003
151
#
#
$
a
France
781
#
0
$
z
France
151
#
#
$
a
Paris (France)
781
#
0
$
z
France $z Paris
151
#
#
$
a
Lycia
781
#
0
$
z
Turkey $z Lycia
151
#
#
$
a
Sydney (N.S.W.)
781
#
0
$
z
Australia $z Sydney
(N.S.W.)
151
#
#
$
a
Valencia (Spain : Region)
781
#
0
$
z
Spain $z Valencia
(Region)
DESCRIPTIVE CATALOGING MANUAL
Z1
Do not add a 781 field to a record for a geographic name heading that is not appropriate for use as a
subject added entry (008/15 value “b”), such as the earlier name of a jurisdiction that has undergone a
linear name change, for example, Ceylon.
See also DCM Z1 667 for guidelines on adding 667 fields with notes indicating subject cataloging usage to
name authority records for geographic headings that may not be used as geographic subdivisions, such as
entities within cities that are qualified by the city name.
Follow these guidelines for newly-created authority records. Add a 781 field to an existing record when
making any other change to it. If revising an existing record that contains a 667 field subject cataloging
usage note indicating the proper geographic subdivision form, delete the 667 field and replace it with a 781
field.
August 2003
Z1
DESCRIPTIVE CATALOGING MANUAL
952
Cataloger's Permanent Note
LC series practice: As of June 1, 2006, LC does not create or update SARs
|
Content Designation
Indicators:
Both indicators are undefined. Subfield codes:
Cataloger's permanent note
$a
General
This is a local LC field.
This field is repeatable.
Use this field to record information about special local decisions made regarding the record.
151 ##
$a 6e Arrondissement (Paris, France)
952
1983
$a Arabic ordinal number form per Desc Pol, July 12,
952
$a eb02 consulted
A note "Online," used for a period of time to identify newly created records that were candidates for
unobtrusive quality review, was deleted programmatically during the conversion from MUMS.
November 2006
DESCRIPTIVE CATALOGING MANUAL
Z1
During the conversion from MUMS, a 952 note "RETRO" was added to records that had value "b" in
MUMS fixed field box 43. This identifies records originally created as part of the retrospective project to
convert manual LC authority cards to machine-readable form. The records may not contain all notes and
references found on the original 3x5 cards.
LC’s Rare Book Team uses this field in some records to specify the subcollection name in the Rare Book
and Special Collections Division.
110 2# American Imprint Collection (Library of Congress) 952 RBSCD subcollection name =
852 $m: Am Imp
|
November 2006
Z1
DESCRIPTIVE CATALOGING MANUAL
953
L O C A L S T A F F CODES
LC series practice: As of June 1, 2006, LC does not create or update SARs
|
Content Designation
Indicators:
staff creating record
$b
Both indicators are undefined. Subfield codes:
$a
Code of
Code of staff modifying record
General
This field is a local LC field. This field is not repeatable.
This field contains the cataloger codes of LC staff creating or modifying the record in the LC Database.
This field is added or updated only by catalogers working in the LC Database.
When creating a new record, input your cataloger's code in 953 $a. When revising a record that has a 953
field, add or adjust the code in 953 $b; if there is an existing code in 953 $b, replace it with your own code.
When revising a record that does not already have a 953 field, add only a 953 $b; do not “make up” a 953
$a.
Input codes as four characters: two lowercase letters and two numerals, e.g., ta18. During the conversion
from MUMS, data in MUMS fixed field box 25 was transferred to
953 $a and data in MUMS fixed field box 26 was transferred to 953 $b. If there was no data in
November 2006
DESCRIPTIVE CATALOGING MANUAL
MUMS fixed field box 25, a “dummy” code of xx00 was generated in 953 $a.
November 2006
Z1
DESCRIPTIVE CATALOGING MANUAL
958
Z1
Note -- Confidential Information
Content Designation
Indicators
Subfield codes:
Both indicators are undefined
$a
Confidential information
General
This is a local LC field. This field is not repeatable.
Use this field for confidential information that should be preserved in the record but should not be
distributed outside LC, e.g.
958
$a d. of b., 1902, not to be used until after death
of author, per author's request, Jan. 23, 1957--LC
manual auth. cd.
July 1999
|
DESCRIPTIVE CATALOGING MANUAL
985
Z1
Record History
Content Designation
Indicators:
Subfield codes:
Both indicators are undefined.
$a
Agency that keyed record/Record history
$b
Network used for first level of keying
$c
Network transmitting record to LC
$d
Date record entered in original or transmitting net-
|
work
$e
Responsible LC application
General
This field is a local LC field. This field is repeatable.
This field is generated for new records contributed from the NACO nodes or LC's overseas offices or
loaded as a special project.
985 fields containing outdated information about the contractor that originally keyed the record were
deleted programmatically during the conversion from MUMS.
Do not change or delete this field.
October 1999
|
DESCRIPTIVE CATALOGING MANUAL
Z1
APPENDIX 1: HEADINGS FOR AMBIGUOUS ENTITIES
November 2006
Appendix 1:
Headings for
Ambiguous Entities
1
DESCRIPTIVE CATALOGING MANUAL
Z1
H E A D I N G S F O R A M B I G U O U S ENTITIES
1
INTRODUCTION
1.1
BACKGROUND
Most headings fall into clearly defined categories and are established either as personal names, corporate
bodies, jurisdictions, uniform titles, named meetings, etc., in the name authority file or as topical subject
headings, named objects such as names of automobiles, geographical features, etc., in the subject authority
file. There are, however, certain named entities that have been problematic as to
a)
whether the heading should go into the name authority file
(descriptive cataloging) or the subject authority file (subject cataloging); and
b)
how the headings should be tagged in both authority and
bibliographic records.
To eliminate this confusion and to standardize the formulation and tagging of headings for such entities,
the former Office for Descriptive Cataloging Policy (Desc Pol) and the Office for Subject Cataloging
Policy (Subj Pol), working under the aegis of the Director for Cataloging, developed guidelines with
respect to
a)
b)
c)
d)
them should reside.
the responsibility for establishing the headings;
the conventions to be used in formulating the headings;
the tags to be used for content designation; and
the file (name and subject authority) in which the authority records for
In 1994, the Cooperative Cataloging Council (CCC) established the CPSO/CCC Task Group on Issues
Surrounding Maintenance of Separate Name and Subject Authority Files. This task group agreed to reduce
the “logical” inconsistencies between the two files so that they could be more easily used together. To this
end the task group recommended and the CCC approved the deletion from the subject authority file of
duplicate name headings that had been needed in the subject authority file to produce various products,
such as Library of Congress Subject Headings.
November 2006
Appendix 1:
Headings for
Ambiguous Entities
2
DESCRIPTIVE CATALOGING MANUAL
Z1
In 1995 the Program for Cooperative Cataloging (PCC) (successor to the CCC) created a follow-on task
group. PCC Task Group on Name Versus Subject Authorities, that considered and made recommendations
on the remaining categories of headings that could be established by either descriptive or subject
catalogers (cemeteries, city sections, concentration camps, and country clubs), events, and tagging
conventions for certain “geographic” entities.
The PCC approved the task group's recommendations, and the results are reflected below.
November 2006
Appendix 1:
Headings for
Ambiguous Entities
3
DESCRIPTIVE CATALOGING MANUAL
1.2.
Z1
G E N E R A L GUIDELINES
a)
These guidelines relate primarily to the family of problem cases, not to
the ones that are clear-cut. For example, the tagging decisions appended include some entities that are
within the concept “corporate body” but are also judged to exemplify the concept “geographic” and,
therefore, are tagged 151. (Note that when entities tagged 151 in the authority file are used as main or
added entries in bibliographic records (110, 710, 810), the first indicator is set to the value 1.) Care
should be taken, however, that a name containing one of the terms noted in one of the lists is indeed a
member of that category, e.g., Xavier Ranch Corporation is not a ranch in the sense of the Group 2 list.
b)
The provisions herein refer to “need” or “use” in descriptive or subject
cataloging. As far as descriptive cataloging is concerned, such statements are to be understood as
referring to main or added entry headings required by LC’s policies on main and added entries and to
cross references traced on name and series authority records. “Need” and “use” do not refer to subject
entries even if a descriptive heading is involved.
c)
When using an existing heading in an access point on a new record,
adjust the tagging on existing authority and bibliographic records to reflect current policy.
d)
When changing the form of an existing heading, adjust the tagging on
existing authority and bibliographic records to reflect current policy. (Note that a qualifier may need to
be added, or the type of qualifier may need to be changed.)
e)
NACO libraries. If a Group 2—Subject Authority Group heading is being
used as a main or added entry, the NACO library should notify the Cooperative Cataloging Team (Coop),
RCCD and provide a brief explanation. Coop will then consult with Cataloging Policy and Support Office
(CPSO) and report back to the NACO library. If the heading is being used as a subject entry only or if the
main or added entry is not in accord with LC’s policies on main and added entries, the NACO library will be
notified not to submit a name authority record.
f)
Canada. Follow normal routines for verification with the Library and
Archives, Canada (LAC) (cf. DCM C2) and then with the LAC response, apply also the directions in Appendix 2
of this DCM. (Note that this applies to main and added entries used in descriptive cataloging only.)
1.3
S P E C I F I C PROCEDURES
November 2006
Appendix 1:
Headings for
Ambiguous Entities
4
DESCRIPTIVE CATALOGING MANUAL
Z1
Headings have been divided into two groups, and special instructions for both these groups follow. Lists
of the two groups of headings are given at the end of this DCM. The lists are updated as the need arises;
refer potential additions to CPSO.
November 2006
Appendix 1:
Headings for
Ambiguous Entities
5
DESCRIPTIVE CATALOGING MANUAL
Z1
2
GROUP 1—NAME AUTHORITY GROUP: Headings always established according to
descriptive cataloging guidelines (AACR2 and LCRI); authority record always resides in the name authority
file.
2.1
IMPLEMENTATION
Establish the headings according to the usual descriptive cataloging rules and procedures. If a heading in
this category is needed in subject cataloging, those involved in descriptive cataloging establish it, and the
authority record is added to the name authority file.
2.2
Airports
Establish the heading for an airport according to the provisions for any other corporate body (see Library
of Congress Rule Interpretations (LCRI) 24.1).
110 2# $a San Francisco International Airport1
110 2# $a Logan International Airport (Boston, Mass.) 110 2# $a Jan Smuts Airport (Johannesburg, South
Africa) 110 2# $a Greater Cincinnati International Airport
110 2# $a Davis Airport (Montgomery County, Md.) 110 2# $a Davis Airport (Luzerne County, Pa.)
2.3
Arboretums, botanical gardens, herbariums, zoological gardens, etc.
These Group 1 entities are tagged as corporate names (110) and established according to chapter 24 of
AACR2. For other gardens, parks, etc., see Group 2.
110 2# $a State Arboretum of Utah 110 2# $a Missouri Botanical Garden
110 2# $a National Zoological Park (U.S.) 110 2# $a Hayden Planetarium
110 2# $a Miami Seaquarium
2.4
November 2006
Cemeteries, concentration camps, country clubs
Appendix 1:
Headings for
Ambiguous Entities
6
DESCRIPTIVE CATALOGING MANUAL
Z1
After July 1996, Cemeteries, concentration camps, and country clubs are treated only as Group 1 headings.
Establish them in accordance with the general principles for corporate name headings (chapter 24, AACR2)
(see LCRI 24.1).
1
MARC coding in the examples reflects the provisions of MARC 21 Format for Authority Data (except spaces added before and
after subfield codes) and not any individual system.
November 2006
Appendix 1:
Headings for
Ambiguous Entities
7
DESCRIPTIVE CATALOGING MANUAL
Z1
110 2# $a Arlington National Cemetery (Arlington, Va.) 110 2# $a Riverside Cemetery (Jackson, Tenn.)
110 2# $a Cmentarz Ewangelicko-Augsburski w Warszawie (Warsaw, Poland)
110 2# $a Auschwitz (Concentration camp)
110 2# $a Nësos Gyaros
110 2# $a Riomar Country Club
110 2# $a Manteno Young Women's Country Club
2.5
City sections
City sections, including city districts and neighborhoods, are treated only as Group 1 headings. Establish
them in accordance with the general principles for geographic names (chapter 23, AACR2, especially
23.4F2) (see LCRI 23.4F2).
151 ## $a Georgetown (Washington, D.C.)
151 ## $a Greenwich Village (New York, N.Y.) 151 ## $a Loop (Chicago, Ill.)
151 ## $a Rive gauche (Paris, France)
2.6
Collective settlements, conservation districts, communes, sanitation districts, etc.
Collective settlements, conservation districts, communes, sanitation districts, etc., are treated only as
Group 1 headings. Establish them in accordance with the general principles for geographic names
(chapter 23, AACR2).
151 ## $a Amana Society (Iowa)
151 ## $a Santa Cruz County Sanitation District (Calif.) 151 ## $a Englewood Water District (Fla.)
151 ## $a Chicago Park District (Ill.)
November 2006
Appendix 1:
Headings for
Ambiguous Entities
8
2.7
Events
DESCRIPTIVE CATALOGING MANUAL
Z1
If a name is for an event that is formally convened, directed toward a common goal, capable of being
reconvened, and has a formal name, location, date, and duration that can be determined in advance of the
date, establish the name according to the provisions of chapter 24, AACR2 (see LCRI 24.7 and 24.8).
111 2# $a Rose Bowl (Football game) 111 2# $a Tournament of Roses
111 2# $a Miss America Pageant 111 2# $a World Cup (Soccer game)
November 2006
Appendix 1:
Headings for
Ambiguous Entities
9
DESCRIPTIVE CATALOGING MANUAL
Z1
111 2# $a Tour de France (Race)
111 2# $a International Henryk Wieniawski Violin Competition 111 2# $a World Jamboree of Boy Scouts
111 2# $a Athens Black-eyed Pea Jamboree
111 2# $a National Folk Media Festival $d (1988 : $c Nairobi, Kenya)
111 2# $a Fiesta San Antonio
2.8
Forests, parks, preserves, etc.
When a forest, park, preserve, etc. (commonly a unit of the United States National Park Service or the
United States Forest Service), is needed as a main or added entry on a bibliographic record because the
forest, park, preserve, etc., has some responsibility for the intellectual content of the item, establish them
in accordance with the general principles for corporate name headings and qualify the name with
“(Agency).” When this is not the case, continue to treat these entities as Group 2 headings and establish as
a subject authority records as directed in: Subject Cataloging Manual: Subject Headings, H 1925, Parks,
Reserves, National Monuments, Etc.
110 2# $a Chugach National Forest (Agency: U.S.)
(Needed as added entry—Group 1)
151 ## $a Chugach National Forest (Alaska)
(No intellectual content responsibility–Group 2)
2.9
Named buildings/museums
If a heading is needed for an entity in the category of a named building/museum, judge whether or not the
entity is a museum or not. If it is a museum, treat it as a Group 1 heading and establish it accordingly; if
not, treat it as a Group 2 heading and have it established as a subject authority record as directed in the
guidelines for Group 2 headings in 1.3 below.
110 2# $a Albrecht-Dürer Haus
(museum—Group 1)
November 2006
Appendix 1:
Headings for
Ambiguous Entities
10
DESCRIPTIVE CATALOGING MANUAL
110 2# $a Simson African Hall (California Academy of Sciences)
Z1
(building—Group 2)
2.10
Plans, programs, and projects
Treat plans, programs, and projects as corporate bodies whether or not they have a staff. Do not consider
that headings for entities with these words in their names need the addition of a qualifier that conveys the
idea of a corporate body (cf. 24.4B).
November 2006
Appendix 1:
Headings for
Ambiguous Entities
11
DESCRIPTIVE CATALOGING MANUAL
2.11
Z1
Railroads
Establish railroads in accord with the general principles for corporate name headings (AACR2, chapter 24).
During the period 1984-1985, railroad headings were established according to the conventions of the
former Subject Cataloging Division. Generally, a railroad heading represented by an AACR2 name
authority record should be accepted unless the item being cataloged shows another form, and the item is
the railroad’s own publication. In such cases re- evaluate the existing heading. At one time, railroads were
represented by two separate headings, one for the company, which was tagged as a corporate heading, and
another for the line, which was tagged as a topical subject heading. To locate all existing bibliographic
records for a railroad when a name authority record for it needs to be created or coded for AACR2, search
for the name both as a corporate body and as a topical subject heading.
3
GROUP 2—SUBJECT AUTHORITY GROUP: Headings always established according
to subject cataloging guidelines (Subject Cataloging Manual: Subject Headings (SCM:SH)); the authority
record resides either in the subject or name authority file
N.B. This section of the DCM is given primarily for information: the responsibility for the establishment
and maintenance of Group 2 headings rests entirely with those performing subject cataloging. See Subject
Cataloging Manual: Subject Headings, H405.
3.1
CHARACTERISTICS
The headings in this group reside in the subject authority file whenever they are established and used only
for subject purposes. Those that are tagged 110 and some tagged 151 are also candidates for descriptive
cataloging use as the need arises. These headings then reside in the name authority file whenever they are
established according to subject cataloging guidelines for the name authority file because of a need for one
as a descriptive cataloging access point, or whenever they are needed for such a purpose after having been
established only for subject purposes. When these headings are established, they are established according
to AACR2, but also reflect subject cataloging policy, the most noteworthy aspects being the following:
a)
The 4XX reference structure reflects subject cataloging practice.
Linking references to old catalog headings are not used except for records residing in the name authority
file and if supplied for subject cataloging purposes at the time the heading is requested to be established
for descriptive cataloging use. (At the point Group 2 headings go into the name authority file, they must
also carry the descriptive cataloging reference structure.)
November 2006
Appendix 1:
Headings for
Ambiguous Entities
12
DESCRIPTIVE CATALOGING MANUAL
Most headings will contain local place-name qualifiers.
b)
November 2006
Z1
Appendix 1:
Headings for
Ambiguous Entities
13
DESCRIPTIVE CATALOGING MANUAL
Z1
c)
Records residing in the name authority file will also contain a 667 field
with the notation: Subj Cat Manual/AACR2. This notation is intended to characterize the record and to
provide a quick and easy means of indicating that maintenance of the record is the responsibility of CPSO.
Catalogers should then refer changes to CPSO, rather than initiating the changes themselves.
3.2
U S E O F T H E S E H E A D I N G S I N D E S C R I P T I V E CATALOGING
Note the following:
a)
If the heading is in the subject authority file but not represented in
the name authority file, request CPSO to move the heading. Send the item to CPSO with the regular orange
referral slip (form 6-127) showing the request.
If the heading is represented in the name authority file and is coded
b)
AACR2, use that form whether or not it conforms to the characteristics described above in 3.1 but barring
any change to the heading that might be stimulated by the item being cataloged; if the item stimulates a
need to change the heading, refer the matter to CPSO for evaluation and related actions (as in a) above).
c)
If the heading is represented in the name authority file but not coded
for AACR2, refer the matter to CPSO for evaluation and possible change and related actions (as in a) above).
d)
If the heading is not represented in an authority file, establish it
according to the guidelines in SCM:SH.
November 2006
Appendix 1:
Headings for
Ambiguous Entities
14
DESCRIPTIVE CATALOGING MANUAL
Z1
GROUP 1—NAME AUTHORITY GROUP HEADINGS
(Named entities always established according to descriptive cataloging guidelines and always residing in
the name authority file)
CATEGORY
MARC 21 TAG
Abbeys
110
Academies
110
Airplanes, Named
110
Airports2
110
Almshouses
110
Aquariums, Public3
110
Arboretums3
110
Art works, Individual
100, 110, 130
Artificial satellites
110
Asylums (Charitable institutions)
110
Athletic contests
111
Banks
110
Bars
110
Biblical characters
100
Biological stations
110
Boards of trade
110
(Chambers of commerce)
Botanical gardens3
110
Broadcasting stations
110
Cathedrals
110
Cemeteries4
110
Chambers of Commerce
110
Chapels
110
Churches (In use or ruins)
110
November 2006
Appendix 1:
Headings for
Ambiguous Entities
15
Circuses
DESCRIPTIVE CATALOGING MANUAL
110
City sections5
151
Collective settlements6
151
2
See 2.2
3
See 2.3
4
See 2.4
5
See 2.5
6
See 2.6
November 2006
Z1
Appendix 1:
Headings for
Ambiguous Entities
16
DESCRIPTIVE CATALOGING MANUAL
Z1
Colleges
110
Comic strips7
130
Communes6
151
Competitions8
111
Computer programs and software 7
130
Concentration camps4
110
Concert halls
110
Conservation districts6
151
Contests8
111
Convents
110
Correctional institutions
110
Country clubs4
110
Crematories
110
Dance halls
110
Denominations, Religious (Individual)
110
Dispensaries
110
Ecclesiastical entities that are also names of places, e.g., Basel (Switzerland :
Ecclesiastical principality)
110
Ecological stations
110
Educational institutions
110
Electronic discussion groups
130
Embassies
110
Events8
111
Exhibitions8
111
Expeditions, Military
111
Expeditions, Scientific
111
Experiment stations
110
November 2006
Appendix 1:
Headings for
Ambiguous Entities
17
8
Expositions
DESCRIPTIVE CATALOGING MANUAL
111
Factories
110
Fairs8
111
Festivals and celebrations8
111
Fish hatcheries
110
Folk festivals and celebrations8
111
Forests (as agencies)
110
Forests districts
110
Funds
110
Funeral homes, mortuaries
110
Galleries
110
Z1
7
Although headings in this category are generally established under title and tagged 130, those that are established under personal
or corporate names are tagged 100 or 110.
8
See 2.7
November 2006
Appendix 1:
Headings for
Ambiguous Entities
18
DESCRIPTIVE CATALOGING MANUAL
Z1
Games (Events)8
111
Halfway houses
110
Helplines, hotlines
110
Herbariums3
110
Hospitals
110
Hotels
110
Individual works of art
100, 110, 130
Jurisdictions, Ancient (other than cities)
151
Laboratories
110
Libraries
110
Library districts
110
Markets
110
Military installations
151
(Active; also all after 1899)
Mining districts
151
Monasteries
110
Morgues
110
Mosques
110
Motels
110
Motion pictures
130
Museums9
110
Night clubs
110
Nursing homes
110
Observatories
110
Old age homes
110
Opera houses
110
Orphanages
110
Parades8
111
Park districts6
151
Parks (as agencies)10
110
November 2006
Appendix 1:
Headings for
Ambiguous Entities
19
Planetariums3
9
DESCRIPTIVE CATALOGING MANUAL
110
Plans (Programs)11
110
Poorhouses
110
Port authorities
110
Prisons
110
Projects, plans, etc.10
110
Public celebrations, pageants, anniversaries8
111
Publishers' imprints
110
Z1
See 2.9
10
See 2.8
11
See 2.10
November 2006
Appendix 1:
Headings for
Ambiguous Entities
20
DESCRIPTIVE CATALOGING MANUAL
Z1
Pueblos
151
Races (Contests)8
111
Radio programs
130
Railroads
110
Recreation districts10
151
Religious denominations
110
Research stations
110
Reserves (as agencies)
110
Restaurants
110
Sanitoriums
110
Sanitation districts6
151
Satellites, Artificial
110
School districts
110
Schools
110
Service stations
110
Ships
110
Shipyards
110
Shows (Exhibitions)8
111
Software, Computer7
130
Sound recording labels
110
Space vehicles
110
Sporting events8
111
Stock exchanges
110
Stores, Retail
110
Studies (Research projects)
110
Synagogues
110
Television programs
130
Temples (in use; excludes temples in ruins)
110
Theater companies
110
Tournaments8
111
November 2006
Appendix 1:
Headings for
Ambiguous Entities
21
DESCRIPTIVE CATALOGING MANUAL
Tribes (as legal entities only, U.S. only)
151
Truck stops
110
Undertakers
110
Universities
110
Utility districts6
151
Water districts6
151
Works of art, Individual
100, 110, 130
Zoological gardens3
110
November 2006
Z1
Appendix 1:
Headings for
Ambiguous Entities
22
DESCRIPTIVE CATALOGING MANUAL
Z1
GROUP 2—SUBJECT AUTHORITY GROUP HEADINGS
(Named entities always established according to subject cataloging guidelines and residing in either the
name or subject authority file)
CATEGORY
MARC 21 TAG
Amusement parks
151
Apartment houses
110
Arenas
110
Armories
110
Artists' groups
150
Asian conglomerate corporations
110
Astronomical features (asteroids, comets,
galaxies, planets, etc.)
151
Auditoriums
110
Awards
150
Bathhouses
110
Baths, Ancient
110
Bridges
151
Building details
150
Buildings, Private
110
Buildings occupied by corporate bodies9
110
Bus terminals
110
Camps
151
Canals
151
Capitols
110
Castles8
110
Celestial bodies
151
Cities, Extinct (Pre-1500)12
151
City halls
110
Civic centers
110
November 2006
Appendix 1:
Headings for
Ambiguous Entities
23
Clans
12
DESCRIPTIVE CATALOGING MANUAL
100
Club houses
110
Coliseums
110
Collections, Public or Private
110
Collective farms
151
Community centers
110
Computer languages
150
Computer networks
150
Computer systems
150
Convention centers
110
Z1
For instructions on establishing and applying headings for extinct cities, see SCM:SH H715.
November 2006
Appendix 1:
Headings for
Ambiguous Entities
24
DESCRIPTIVE CATALOGING MANUAL
Z1
Courthouses
110
Customhouses
110
Details, Building
150
Docks
151
Doors
150
Dwellings9
110
Estates
151
Events13
150
Exhibition buildings
110
Fairgrounds
151
Families
100
Farms
151
Feasts
150
Ferry buildings
110
Fire stations
110
Forests (Geographic entities)
151
Fortresses (Structures)
151
Fountains
150
Gangs
150
Gardens
151
Gates
150
Golf courses
151
Grain elevators
110
Gymnasiums
110
Hazardous waste sites
151
Highways
151
Historic sites
(Including historic districts not in cities)
151
Immigration stations
110
Islands, Non-jurisdictional
151
November 2006
Appendix 1:
Headings for
Ambiguous Entities
25
Land grants
DESCRIPTIVE CATALOGING MANUAL
151
Lighthouses
110
Manors
110
Mansions
110
Market buildings
110
Military installations
151
Z1
(Before 1900 and inactive)
13
Mine buildings
110
Mines
151
Mints
110
Monuments (Structures, statues, etc.)
150
Events that generally cannot be repeated and have no formal name but are commonly referred to by generic terms only.
November 2006
Appendix 1:
Headings for
Ambiguous Entities
26
DESCRIPTIVE CATALOGING MANUAL
Z1
Music halls
110
Office buildings
110
Official residences
110
Palaces9
110
Parks (Geographic entities)
151
Pavilions
110
Playgrounds
151
Plazas (Open spaces, squares. etc.)
151
Police stations
110
Pools, Public
151
Ports (Physical facilities)
151
Post offices
110
Posthouses
110
Power plants
110
Presidential mansions
110
Public comfort stations
110
Racetracks
110
Railway stations
110
Ranches
151
Recreation areas
151
Refugee camps
151
Reservations, Indian
151
Reserves (Parks, forests, etc.)
151
Resorts
110
Roads
151
Rooms
150
Sanitary landfills
151
Satellites (i.e., moons)
151
Schools of artists
150
Shopping centers
110
November 2006
Appendix 1:
Headings for
Ambiguous Entities
27
Shrines (not churches)
DESCRIPTIVE CATALOGING MANUAL
150
Spas
110
Sport arenas
110
Sports facilities
110
Stadiums
110
Stagecoach stations
110
Streets
151
Structures (Non-geographic, e.g., towers)
150
Temples (In ruins)
110
Terminal buildings
110
Theater buildings
110
Theme parks
151
Tombs
150
Towers
150
November 2006
Z1
Appendix 1:
Headings for
Ambiguous Entities
28
DESCRIPTIVE CATALOGING MANUAL
Z1
Trails
151
Tribes (Ethnic groups)
150
Tunnels
151
Villas
110
Walls
150
Waterways
151
November 2006
Appendix 1:
Headings for
Ambiguous Entities
29
Z1
DESCRIPTIVE CATALOGING MANUAL
APPENDIX 2: CANADIAN HEADINGS
December 2005
Appendix 2: Canadian headings
1
Z1
DESCRIPTIVE CATALOGING MANUAL
Canadian Headings
LC/LAC C O O P E R A T I V E AGREEMENT
Through a cooperative agreement between the Library of Congress and the Library and Archives, Canada
(LAC), all headings for Canadian corporate bodies used in current cataloging must be in the LAC
authorized form. The LAC form for personal names will be accepted for some personal names used in
cataloging materials with Canadian imprints. In the interest of efficiency, both corporate and personal
names may be accepted from information found in Canadian CIP data or access points on current LAC
bibliographic records without further searching.
LAC A U T H O R I T Y F I L E (AMICUS)
Access to the AMICUS database authority file is provided to LC catalogers through Z39.50 access as a
remote database feature in the LC ILS. PCC catalogers may access the LAC authority file via AMICUS
web through their local internet browser. Both LC and PCC catalogers must search the AMICUS authority
file to find the LAC approved form of the heading when this form is needed in cataloging of Canadian
imprints and it is not available elsewhere, e.g., Canadian CIP data or access points on current LAC
bibliographic records. When the AMICUS file is searched and a needed heading found, LC catalogers
will import the LAC authority record according to the appended ”LAC Name Authority Record Adapt
Procedures for LC catalogers.” PCC catalogers will use the information found as instructed in the
following guidelines incorporating the information in the appropriate MARC data fields for authority
records as usual.
When there is no need to search the AMICUS file, such as when Canadian CIP data is available, both LC
and PCC catalogers will create an authority record as usual taking into consideration the guidelines
outlined in the following sections.
PCC catalogers must contact the Cooperative Cataloging Team (Coop) in the Regional and Cooperative
Cataloging Division (RCCD) to have Canadian corporate headings verified by LAC only when these
headings are not found in Canadian CIP data, access points on current LAC bibliographic records or in the
AMICUS authority file or bibliographic database. LC catalogers may contact LAC for verification of
corporate name headings when these are not found via their LAC Liaison in their Division (cf. List ). Both
December 2005
Appendix 2: Canadian headings
2
Z1
DESCRIPTIVE CATALOGING MANUAL
LC and PCC catalogers will create an authority record for LAC corporate headings based on the
information supplied directly by LAC or by the Coop Team according to the guidelines outlined in the
following sections.
December 2005
Appendix 2: Canadian headings
3
Z1
DESCRIPTIVE CATALOGING MANUAL
1.
G E N E R A L OVERVIEW.
1.1.
Personal Name Headings:
LC catalogers: Headings for personal names are taken preferably from Canadian CIP data printed in the
book. Personal names may also be taken from access points found on current LAC issued bibliographic
records, including those found in the AMICUS database at url: http://www.collectionscanada.ca/amicus/
If the access point on the LAC bibliographic record or the Canadian CIP data is not clear, appears to need
updating, or there is no CIP data available, search the AMICUS authority file. If the name is not found it
is not necessary to ask LAC to establish a personal name heading; establish the personal name based on
the information in the item, etc. as per usual.
PCC catalogers: Follow the guidelines above, if the personal name heading is not found no further LAC
verification will be sought; establish the personal name based on the information in the item and the
guidelines provided in Section 2 of this document.
1.2.
C O R P O R A T E N A M E HEADINGS:
LC catalogers: New Canadian corporate names may be established from Canadian CIP data or from
headings found on access points on current bibliographic records issued by LAC. New Canadian
corporate names not found in these two sources and corporate names not yet coded for AACR2 or coded
AACR2 but lacking LAC verification or which are in conflict, must be verified by searching the AMICUS
database. If the corporate name is not found in the AMICUS database, it will be necessary to ask LAC to
supply the form of the heading and any attendant cross references.
PCC catalogers: New Canadian corporate names may be established from Canadian CIP data or from
headings found on access points on current bibliographic records issued by LAC (as found in the
bibliographic utilities or by searching the AMICUS database). New Canadian corporate names not found
in these sources and corporate names not yet coded for AACR2 or coded AACR2 but lacking LAC
verification, or which are in conflict must be verified by searching the AMICUS database. If the corporate
name is not found in the AMICUS database, the Coop liaison will ask LAC to supply the form of the
heading and any attendant cross references. The PCC participant will create a NAR based on this
information following the usual NACO procedures.
December 2005
Appendix 2: Canadian headings
4
Z1
DESCRIPTIVE CATALOGING MANUAL
Alternatively, PCC participants may create the corporate name heading (keeping in mind the procedures
outlined in Section 3 of this document) and contribute it to the national authority file and afterward notify
their Coop liaison of the need for LAC verification.
The PCC participants follow this course of action with the understanding that they may need to make
modifications to the heading, etc. after their Coop liaison consults LAC.
December 2005
Appendix 2: Canadian headings
5
Z1
DESCRIPTIVE CATALOGING MANUAL
1.3.
C O N F E R E N C E N A M E HEADINGS:
Use judgment in considering meetings held in Canada as “Canadian.” For example, if an international
conference happens to meet in Canada, it is not necessary to verify its heading according to these
instructions.
1.4.
G E O G R A P H I C HEADINGS:
The LAC form of the geographic headings will be used without modification (cf. LCRI 23.2) When a
geographic heading is not found in Canadian CIP data, access points on current LAC bibliographic
records, or by searching the AMICUS authority file LAC must be contacted in order to verify the form of
the name.
LAC has notified CPSO that names of Canadian First Nations should continue to be
|
established as 110 headings until such time as LAC notifies LC of a change.
|
1.5.
CIP CATALOGING:
When a Canadian corporate heading is needed for a CIP item and the heading is not found in the AMICUS
database, LC cataloger’s will create a NAR based on the information in the item, etc. save it to the
database and then send a message to LAC for verification of the name.
1.6.
C O N T A C T I N G LAC:
LC catalogers: LAC may be contacted through the LAC Division Liaison (cf., Section 9) or through the
LAC Liaison in the Coop Team in RCCD. Catalogers should send an e- mail with the name in the exact
form in which it appears on the publication(s), including any hierarchical information which may be
December 2005
Appendix 2: Canadian headings
6
Z1
DESCRIPTIVE CATALOGING MANUAL
available, give the date of the publication and, whenever possible, the source of the name, e.g., “t.p.,”
“incl. in title,” “preface.”
PCC catalogers: Participants will continue to request verification of LAC corporate names as needed.
Participants may send an e-mail with the name in the exact form in which it appears on the publication(s),
including any hierarchical information which may be available, give the date of the publication and,
whenever possible, the source of the name, e.g., “t.p.,” “incl. in title,” “preface,” or the information may
be faxed, etc.
The Coop liaison will contact LAC for verification of corporate name headings and subsequently return
the information to the PCC participant for further processing. The Coop liaison will not adapt the LAC
heading for inclusion into the LC Database on behalf
December 2005
Appendix 2: Canadian headings
7
Z1
DESCRIPTIVE CATALOGING MANUAL
of the external user nor should the LAC MARC identification code be used in the 040 of the name
authority record created by the PCC participant.
2.
G U I D E L I N E S F O R E S T A B L I S H I N G C A N A D I A N P E R S O N A L NAMES.
The LAC form is used for personal name headings on bibliographic records for items with Canadian
imprints (i.e., the name of a Canadian city appears as the primary (first) place of publication) in the
following cases:
A.
The heading is being newly established; or,
B.
The heading has been established but the AACR2 form has not yet been
assigned, and the current form is not the AACR2 form that would be assigned based on information in
the database being cataloged against (i.e., accept the LAC form instead of formulating an LC/PCC form)
2.1.
S O U R C E S F O R P E R S O N A L N A M E HEADINGS:
Canadian CIP data:
General: Look for the LAC form of heading in the Canadian CIP entry in the book. If found, create an
NAR as usual, giving as the first 670 the title of the item being cataloged and cite the Canadian CIP entry
in the 670 “Sources found” field. Cite also the Canadian CIP entry as part of the same 670, even if the
information is exactly the same:
e.g.: Social inequality, c1984: t.p. (Edward G. Grabb) Can CIP (Grabb, Edward G.)
LC catalogers: If there is no Canadian CIP, search the AMICUS authority file. If the heading is found in
the AMICUS authority file, import the record, editing it according to the “LAC Name Authority Record
Adapt Procedures for LC Catalogers.”
December 2005
Appendix 2: Canadian headings
8
Z1
DESCRIPTIVE CATALOGING MANUAL
PCC catalogers: If there is no Canadian CIP, send a message to the Coop liaison to execute an AMICUS
search for the name in question. If information is found the liaison will return the information to the
participant who will create the authority record as usual, based on the information supplied by the Coop
Team. Cite the AMICUS database search according to the guidelines in DCM Z1, 670 field (e.g., LAC
database, date $b hdg.:
)
General: If the LAC form is not found in these sources, establish the name according to
December 2005
Appendix 2: Canadian headings
9
Z1
DESCRIPTIVE CATALOGING MANUAL
usual procedures. Do not refer the name to LAC for special verification. Cite LAC and the date of the
search in the 675 “sources not found” field.
Note: CIP data may be found to be incorrect. Catalogers should use judgement in determining if
additional searching is needed and/or if the heading should be accepted “as is.” In the interest of
efficiency a quick decision is encouraged; however, do not query LAC on the form of the heading. If
necessary establish the name according to usual LC practice and record the LAC form in a 670 citation.
A C C E S S P O I N T S O N C U R R E N T LAC B I B L I O G R A P H I C RECORDS:
General: If the heading being formulated is found as an access point on a current LAC bibliographic
record, catalogers may create an NAR based on that information. If the LAC bibliographic record is the
same item being cataloged give as the first 670 the title of the item with subfield $b information as per
usual. If the heading on the same titled LAC bibliographic record contains a date, fuller form of name, etc.
not found in the item- in-hand use judgement in formulating a cogent citation.
670 $a When the fat man sings, 2002: $b t.p. (Liz McKeen) LAC hdg. (McKeen, Liz, 1952-)
If it is not the same, cite the LAC heading in a second 670 citing the form of the heading and the usage
found in the 245 subfield $c of the bibliographic record, as per usual.
670 $a OCLC database, date $b (LAC hdg: Grabb, Edward G.; usage: Edward G. Grabb)
OR
670 $a AMICUS database, date $b (LAC hdg: Grabb, Edward G.; usage: Edward G. Grabb)
2.2.
December 2005
C O N F L I C T W I T H A N O T H E R P E R S O N A L NAME:
Appendix 2: Canadian headings
10
Z1
DESCRIPTIVE CATALOGING MANUAL
If the form found in the AMICUS authority file or in the Canadian CIP would conflict with another
heading, do not use it. Instead, establish the name according to usual LC practice and record the LAC form
in a 670 citation.
2.3.
LC H E A D I N G I N LC D A T A B A S E F O R C A N A D I A N P E R S O N A L NAME:
If the existing LC heading matches the LAC heading except that the LAC heading includes a date, accept
the existing LC heading as the AACR2 form, i.e., do not change
December 2005
Appendix 2: Canadian headings
11
Z1
DESCRIPTIVE CATALOGING MANUAL
the heading to add the date, and vice versa. (Dates added to personal name heading are additions to the
heading and are not considered when comparing forms)
Note: When establishing a new heading and the LC or PCC cataloger has date information but there is no
conflict, do not include the date whenever the LAC form does not show this addition.
2.4.
P E R S O N A L N A M E REFERENCES:
For personal names, accept LAC references without justification; however, assure that these are
formulated according to current LC conventions and practices (cf. DCM Z1, LCRIs Chapter 22 and 26,
etc.). Justify any references generated by new cataloging as per usual.
3.
G U I D E L I N E S F O R E S T A B L I S H I N G LAC C O R P O R A T E NAMES.
3.1.
Capitalization/Punctuation:
If the LAC form differs from the LC/PCC AACR2 practice for capitalization or punctuation, accept the
LAC form.
3.2.
CONFERENCES:
LAC establishes ongoing conferences with qualifiers for each individual conference. Delete these
qualifiers and establish one authority record for the series of conferences (cf. LCRI 24.7B).
3.3.
December 2005
C O R P O R A T E N A M E S EXCEPTIONS:
Appendix 2: Canadian headings
12
Z1
DESCRIPTIVE CATALOGING MANUAL
If LAC indicates that the name is not a corporate body (e.g., a plan, a project) establish the heading
according to the usual LC/PCC practice. Record the LAC decision in the 670 field.
LAC treats the Religious Society of Friends as a corporate body but LC treats it as a subject heading.
LC/NACO practice is to establish Society of Friends "meetings," etc., directly under their own names
whereas LAC establishes these entities subordinate to "Society of Friends." LAC has agreed that
LC/NACO libraries do not have to contact LAC for Canadian corporate bodies associated with the Society
of Friends.
LAC has notified CPSO that all headings for Canadian parks and forests will continue to
December 2005
|
Appendix 2: Canadian headings
13
Z1
DESCRIPTIVE CATALOGING MANUAL
be established as subject headings (cf. Subject Cataloging Manual: Subject Headings,
| LAC has also notified CPSO that Canadian First Nations will continue to be established
| H19
| as 110
corporate name headings until further notice.
|
|
Catalogers should contact CPSO if there are any questions on these points.
3.4.
|
F R E N C H V S . ENGLISH:
LC/PCC practice is to establish Canadian corporate names in English whenever possible, the exception
being headings for Québec corporate names which LC establishes in French. LAC practice is to establish
all corporate headings in both English and French whenever possible–meaning that the two forms appear
on works they have in hand. This means for many headings, there are separate and complete authority
records in the English form and in the French form. There may also be some headings with a combination
of the French and English. It is always necessary to search for the English form in the AMICUS database
for use in establishing the heading.
3.5.
C A N A D I A N C O R P O R A T E H E A D I N G S F O R QUÉBEC:
In 1974 the government of Québec established French as the sole official language of the province. As a
result, for LC/PCC, English headings for Québec government bodies are obsolete for the period that
begins with the change of official language. For publication issued through the end of 1974, an English
heading is proper. For publications issued 1975- , use a French heading.
LAC verifies two heading for bodies that existed before and after the 1974/75 dividing line: an English one
(through 1974) and a French one (1975- )
In the case of headings for non-government bodies in Québec, also accept LAC’s verification in French
(even, for example, if the work being cataloged is in English). There are some purely English-language
December 2005
Appendix 2: Canadian headings
14
Z1
DESCRIPTIVE CATALOGING MANUAL
private bodies in Québec, and LAC verifies these in English. For those verified in French that cross the
language policy divide, apply the provisions given above for government bodies.
If the French form is chosen as the appropriate heading and it includes a qualifying term that has been
given in French, change the qualifying term to the English term given in the LAC English equivalent
heading. (In such cases the heading will be a “combination” of
December 2005
Appendix 2: Canadian headings
15
Z1
DESCRIPTIVE CATALOGING MANUAL
the French and English LAC headings.)
If a corporate name in French contains the diphthong “oe” which appears in the LAC form as separate
letters rather than as a ligature, use the LAC form in the heading.
N.B. The system of counties no longer exists in Québec; the term Comté has been replaced by the new
division Municipalité regional de comté.
3.6.
S O U R C E F O R C O R P O R A T E N A M E HEADINGS:
The AMICUS authority file is the source for establishing name headings for Canadian corporate bodies not
found in Canadian CIP data or on access points on current bibliographic records (see Section 2.1 “Sources
for Personal Name headings” for examples of 670 citations for headings created based on these sources)
LC catalogers: If a corporate name hading is not found in the two sources above, or if the heading found
appears to need updating or presents some other complication, search the AMICUS authority file through
the Z39.50 access in the LC ILS. If a record for the heading is found, import the record, editing it
according to the “LAC Name Authority Record Adapt Procedures for LC Catalogers.” If a record is not
found, send a request to LAC to establish the heading for LC use (cf. 1.5).
PCC catalogers: If a corporate name heading is not found in the two sources above, or if the heading
found appears to need updating or presents some other complication, search the AMICUS authority file, if
the name is not found in the AMICUS authority file contact the Coop liaison for verification of the heading
by LAC (cf. 1.5). Create the authority record as usual, based on the information supplied by the Coop
Team. Cite either the AMICUS database or LAC according to the guidelines in DCM Z1, 670 field (e.g.,
LAC database, date $b
(hdg.:
December 2005
) or LAC, date $b (hdg.:
))
Appendix 2: Canadian headings
16
Z1
DESCRIPTIVE CATALOGING MANUAL
3.7.
C O R P O R A T E N A M E REFERENCES:
Trace “see” references found on LAC NARs or as provided by LAC unless incompatible with other
existing entries; trace “see also” references given by LAC according to normal guidelines (cf. LCRI 26.3BC). Justification of these references is not necessary (cf. DCM Z1). If a subfield $w is found on a LAC
NAR; analyze the reference to determine if this subfield is needed. Delete or adjust the subfield (or the
reference) if it does not
December 2005
Appendix 2: Canadian headings
17
Z1
DESCRIPTIVE CATALOGING MANUAL
follow the current conventions in the MARC 21 Authority Format blue pages or the current cataloging
policies.
Earlier/Later: When making connections between earlier and later corporate names, LAC formerly used
simple “see also’s,” (no subfield $w coding used). If using an older LAC record, and If information is
available, code the references earlier/later per LC practice.
Additional references may be given if required, justified according to normal practice.
4.1 O T H E R G E N E R A L CONSIDERATIONS:
Uniform titles (including series) are exempt from the LC/LAC agreement.
When modifying an existing LAC name authority record (i.e., 040 = $a CaOONL $b eng
$c CaOONL $d DLC) which may contain MARC fields not generally created by LC/PCC catalogers (e.g.,
016, 042, 7xXs) do not delete any of these fields unless these are found to contain errors.
December 2005
Appendix 2: Canadian headings
18
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DESCRIPTIVE CATALOGING MANUAL
LAC name authority record adapt procedures for LC catalogers Section 1: Assumptions
Section 2: LAC name authority record “adapt” procedures for LC catalogers
Section 3: MARC 21 008 (fixed field) values for use with LAC Authority Records (NARs Section 4:
Accessing the AMICUS authority file via Z39.50
Section 5: Searching Hints For The Amicus Authority File Section 6: ILS Database Searching Parameters
Section 7: Sample Searches
Section 8: Comparison Between the Builder Search Codes and the Keyword Search Codes Section 9:
Procedures for LAC Verification for PCC Participants
Section 10: List of LAC Liaisons in the Cataloging Directorate
Section 1: Assumptions:
1.
The Library and Archives, Canada’s (LAC) authority file module of the AMICUS database will
be made available as a remote database site in the System Administration module of the LC ILS so that it
is available for catalogers to search via Z39.50 while in the cataloging module.
2.
Catalogers will search Canadian corporate and personal name headings in the AMICUS
authority file for verification of the heading form and to resolve complex authority record problems,
conflicts, etc. involving Canadian name headings, when these fall into the parameters stated in this
document. (Uniform titles (including series) are exempt from the LC/LAC agreement)
3.
When a corporate name heading is not found in the AMICUS authority file, catalogers will
continue to request verification from LAC, via the established procedures (e.g., forward heading requests
to a LAC Division Liaison or directly to the Coop Team in RCCD who will in turn contact LAC and request
that the heading be established (cf. DCM Z1 Appendix for Canadian headings, Section 1.6 for more
information.)
4.
It is not necessary to request LAC verification for personal name headings if these are not
found in the AMICUS authority file.
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5.
When the appropriate name authority record (NAR) is found in the AMICUS authority file,
the LC cataloger will “adapt” the NAR (cf. attached guidelines) and add the NAR by clicking on the sailboat
icon to save it to the LC database.
6.
Statistics will be kept to allow the inclusion of the LAC “adapted” NARs in the Coop Team’s
statistical reports. (See Section 2, K)
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7.
Procedures will be developed to assure that the AMICUS password is changed every six
months (as per current procedures) without loss of access to the LAC database.
8.
PCC participants will continue to request LAC verification for corporate name headings
through the Coop Team. (See Section 9)
9.
Notification that LAC adapted name authority records will be added to the NAF and
distributed to the copy holding partners (OCLC, RLG, and BL), PCC participants, CDS customers, etc.
through the appropriate channels. This notification will include guidance on any interaction to be taken
by users of the file (e.g., not removing fields unless these are erroneous)
S E C T I O N 2: LAC N A M E A U T H O R I T Y R E C O R D “ A D A P T ” P R O C E D U R E S F O R LC CATALOGERS
Once the desired name authority record is found for an LAC corporate or a personal name it is incumbent
upon the cataloger to examine the record carefully and assure that all fields comply with the current
conventions and cataloging practices for creation of a new name authority records before saving it to
the LC Database (Cf.: Anglo American Cataloging Rules 2ed. rev., Chapters 22-26, Library of Congress
Rule Interpretations (LCRIs) Chapters 22-26, MARC 21 Authority Format, LC ILS Bibliographic Workflow
Training Document no. 6, Descriptive Cataloging Manual (DCM) Z1, Appendix for Canadian headings).
A.
008: Examine carefully and assure that the coding follows the MARC 21 conventions (see
the attached guide). Note the bytes for “Romanization Scheme” (008/07) and assure that it is set to the
fill character*; “Language of cataloging” (008/08) is set to blank or underscore; “Subject heading”
(008/11) is set to a; and that “Govt. Agency” (008/28) is set to the fill character. (These values are known
to differ from current LC practice; * refer to Sec. 3 footnote for this byte).
B.
Do not routinely delete any fields (MARC tags) from the NAR unless these are found to
erroneous or can be identified as non-MARC 21 tags.
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C.
010: Add an LCCN using the generator icon for name and series LCCNs as described in the
“010 Guidelines for Library of Congress Staff” in DCM Z1 010 section, pages 2-3.
D.
040: Add a subfield $d DLC and assure that the subfield $b is set to “eng.”
E.
053: If found, adjust to conform with the LC shelflist and change indicator to 0.
F.
1XX: Accept the heading “as is” unless modifications are necessary to conform with the
principles set out in DCM Z1, Appendix for Canadian headings.
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Note: LAC uses tags 110 for geographic headings instead of 151, adjust the tag to 151 before saving the
record to the ILS database.
G.
4XX-5XX:
Normally do not delete any 4xxs or 5xxs; however, adjustments may be made as necessary to conform to
the current cataloging practices (e.g., add dates and/or qualifiers to references if these are included in the
heading) and the conventions stated in DCM Z1, Appendix for Canadian headings.
Check the subfield $w (if one is present) and assure that all the values assigned follow the current
conventions for that subfield stated in the MARC 21 Authority Format. Do not attempt to convert the
extant $w data; analyze the reference and determine what coding is needed. If necessary delete the
subfield $w or the entire field.
Add other 4XX or 5XX when necessary to reflect information found on the item-in-hand, any research
performed, etc. (cf., DCM Z1, Appendix for Canadian headings for complete instructions).
H.
6XX: Adjust 670s to reflect the current conventions set out in DCM Z1 for creation of
NARs (e.g., add subfield b information when cataloging the same title, etc.) Add a 670 for the book in
hand if it is a different title and it provides more or variant information. Add other 670s and/or 675s as
needed. Delete 665 notes; these may be converted to 670s.
I.
7XX: Do not delete or adjust any 7XXs. Analyze the information and if appropriate add a
4XX reference to the NAR based on the 7XX data in accord with current LC cataloging policies and the
principles set out in DCM Z1 Appendix for Canadian Headings, p. 7-8.
J.
9XX: Add a 953 with your cataloger’s code.
K.
Save the record to the LC Database, by clicking on the sailboat icon.
L.
Keep a tally of all LAC headings added to the LC Database and send these to the
Cooperative Cataloging Team on a weekly basis.
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S E C T I O N 3: MARC 21 008 ( F I X E D F I E L D ) V A L U E S F O R U S E W I T H LAC A U T H O R I T Y R E C O R D S (NARS)
MARC21
Value in bold-type is the valid value when adapting LAC NARs.
When in doubt check the MARC 21 Authority Format
Status (Record status)
05
n=(new)
Enc/l (Encoding level)
17
n=(verified record)
LC-ILS
Leader:
o=early notice record; if used-- add 667 field
008:
008:
Subdivision
008/06
n=(not applicable)
Language of cataloging
008/08
underscore or blank is valid value
Cataloging rules
008/10
c=(AACR2 )
Type of series
008/12
n=(not a series)
Main or added entry
Subject added entry
Series added entry
008/16
Check all boxes except for Series added entry
Personal name
008/32
May be set to any of these; adjust if necessary
Heading use boxes:
a=unique personal name b=nonunique name
n=not a personal name
Modified record
008/38
underscore or blank is valid value
Romanization scheme
008/07
fill character is ONLY valid value; unless hdg. is Chinese*
Kind of record
008/09
a=(established)
Subject heading
008/11
a=(LCSH)
Numbered series
008/13
n=(not applicable)
Subject subdivision
008/17
n=(not applicable)
Govt. agency
008/28
fill character is ONLY valid value
Reference evaluation
008/29
May be adjusted if references added or deleted; a=references
evaluated
b=refs. not evaluated (not valid value for LAC)
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n=no references
Record update
008/31
a=is default
b=rec. being updated; if used add 667 note
Level of establishment
008/33
a=is default; may be adjusted if necessary
b=memo
c=provisional d=preliminary
n=not applicable
Cataloging source
008/39
underscore or blank is only valid value for LAC records
*for a Chinese language hdg. romanized according to LC’s rules for Pinyin or Wade-Giles use
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S E C T I O N 4: A C C E S S I N G T H E AMICUS A U T H O R I T Y F I L E V I A Z39.50
1)
Click on the Voyager 2000 icon and then follow the usual procedures to access LC/ILS
cataloging session.
2)
After opening a session of the Voyager 2000 cataloging module click on the Search icon. A
search box will appear (figure 1). Select remote.
Figure 1
3)
An available Locations box will appear (figure 2). Scroll down until you find NLC Authority
File. Highlight and left double click in the box at NLC Authority File, a check mark will appear in the box
by the name and NLC Authority File will appear in the selected locations box then press the Connect
button.
∫∫
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4)
A search box labeled Remote Search: NLC Authority File will appear (figure 3). Select the
Non-keyword or Keyword tab to begin your search for LAC authority records. If an LAC authority record is
found adapt the record to LC procedures and then boat the record. (See: LAC adapt procedures: Section
2)
Figure 3
Follow the instructions for Non-keyword or Keyword tab searches in Section 5 below.
S E C T I O N 5: S E A R C H I N G H I N T S F O R T H E A M I C U S A U T H O R I T Y FILE
Searches from either the Non-keyword tab or the Keyword tab will retrieve Library and Archives, Canada
(LAC) authority records. Depending on the search used hit counts may vary. A list of searching parameters
appear in Section 6.
A)
Non-Keyword Tab Search:
1)
Click on the down arrow at the search by box to retrieve a list of options such as:
AUTHOR [LEFT ANCHORED] CONFERENCE NAME [LEFT-ANCHORED] CORPORATE NAME [LEFT-ANCHORED]
PERSONAL NAME [LEFT-ANCHORED]
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Figure 4
2)
Choose the option that fits the type of search. For instance if searching for a personal name
you can click on: Author [left-anchored] OR Personal name [left-anchored].
3)
Next, in the search for box type the name of the author beginning with last name (e.g.,
wesche, rolf). Press the enter key to retrieve records. If an authority record is found adapt the record
according to LC procedures and then boat the record.
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1)
One can retrieve an authority record via the following commands listed below. Choose the
appropriate command for the type of search. The commands are not case sensitive therefore letters may
or may not be capitalized. Make sure that “Boolean” is highlighted (see figure 5). NALL can be used to
search a personal or corporate heading.
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S E C T I O N 6: ILS D A T A B A S E S E A R C H I N G PARAMETERS
1)
When using the Keyword tab, quotation marks should precede and follow the search term if
it contains more than one word. If right truncation is desired, the “?” should be placed at the end of the
search term before the closing quotation mark.
2)
When using the Non-keyword tab, quotation marks and the question mark are not
necessary. The search is automatically sent inter-site as a phrase search with right truncation.
S E C T I O N 7: S A M P L E SEARCHES
In the examples below, identical searches are indicated– first using a NON-KEYWORD search selection
and second using a KEYWORD search. The “Author” search can be used to search any of the three
combinations: Personal names, corporate names, and conference names.
Author (left-anchored)
banff centre
NALL
“banff centre?”
Author (left-anchored)
wesche
NALL
wesche
Personal name (left-anchored)
turner, fay
100H
“turner, fay?”
Conference (left-anchored)
banff summer
111H
“banff summer?”
Corporate (left-anchored)
banff centre library
110H
“banff centre library?”
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Title (left-anchored)
canadian literature
TALS
“canadian literature?”
ISSN (left-anchored)
1206-4912
ISSL
“1206-4912"
LC call number left-anchored)
qa76.w4
05XX
“qa76.w4?”
Subject (left-anchored)
glacier
SALL
glacier?
Z1
Section 8: Comparison Between Non-Keyword and Keyword searches Codes:
The search codes in a non-keyword search has the same meaning as those
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in the keyword search. The only difference is that with the keyword search one must type in a search
command whereas in non-keyword one can choose from a list provided in a drop down menu.
KEYWORD SEARCH CODES
NON-KEYWORD SEARCH CODES
NALL
Author (left-anchored)
111H
Conference name (left-anchored)
110H
Corporate name (left-anchored)
ISSL
ISSN (left-anchored)
05XX
LC call number (left-anchored)
100H
Personal name (left-anchored)
SALL
Subject (left-anchored)
TALS
Title (left-anchored)
Please contact Larry Dixson (ldix@loc.gov) if you have questions about Z39.50 searching in Voyager.
S E C T I O N 9: P R O C E D U R E S F O R LAC V E R I F I C A T I O N F O R PCC PARTICIPANTS
PCC Participants will continue to request verification of LAC corporate name headings via e- mail or
through the OCLC National Review file as is currently the practice for individual libraries. The Coop
Team’s liaison for the institution will search the heading via the Z39.50 procedures or via the Web
according to individual preferences. If the heading is found, the information is returned to the PCC
Participant for further processing as per current procedures. The COOP liaison will not adapt the LAC
heading for inclusion into the LC Database on behalf of the external user. If the heading is not found the
COOP liaison will contact LAC for verification of the heading as per the current procedures.
S E C T I O N 10: L I S T O F LAC L I A I S O N S I N T H E C A T A L O G I N G DIRECTORATE
NAME
1) Brown-Allen, Diana
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DIVISION
ASCD
TELEPHONE
7-3013
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2) Doughty, Beth
SRD
7-2648
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3) Gilliam, Gracie
RCCD
7-2250
4) Habib, Mary Ann
SMCD
7-2428
5)
Caroline
SSCD
7-3317
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6) Richey, Alex
G&M
7-8508
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7)
Kimberly
HLCD
7-3465
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Z1
APPENDIX FOR LC STAFF
This appendix to the Z1 section of the Descriptive Cataloging Manual is issued only to LC cataloging staff.
This appendix deals with the local aspects of the topics listed below.
|
Authority generation/templates
•
|
Subfield $z when classifying “as a collection”
•
|
•
“acq” records for collected sets
•
Returning multipart items to Acquisitions for analytic records
|
•
Number and relationship of bibliographic, holdings, and item records for
multipart items and monographic series
Technical report monographic series
•
|
Multiple 050 fields in bibliographic records
•
A U T H O R I T Y GENERATION/TEMPLATES/MACROS
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Reminder: the Voyager authority generation feature cannot be used to create NARs
for
headings that are not headings in bibliographic records (e.g., parent bodies in headings or
references, qualifiers for bodies or serial/series titles). There are LC-created macros
for NARs in
the “Names” folder in the Voyager templates folder.
Use the appropriate macro if you create an NAR using the authority generation feature.
Invoke the macro after issuing the “Create auth” command and then proceed to add cross references,
update 670, etc. Note that the cataloger must both enter data and press the “Enter” key at certain stages for
the macro to complete the steps.
NAR macro (“Ctrl+F7”)
Macro updates 008/39; adds tag 953 and waits for cataloger to add code and press “Enter” key; macro adds $b in 040; adds tag 010 and
waits for cataloger to add LCCN.
Some divisions may have made adjustments to retain an earlier invoking key for the
macro.
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Z1
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S U B F I E L D $ Z W H E N C L A S S I F Y I N G “A S A COLLECTION”
When creating the collected set record for a new analyzed multipart item or a new analyzed monographic
series, add a subfield $z note to the holdings record for the collected set record. When cataloging an
analytic in a multipart item/monographic series classified as a collection, ensure that the appropriate note
is present in subfield $z. The note supplies information to people searching in the OPAC.
If the analysis decision is “analyzed in full” (644 $a = f), add the note given
•
| bel
“See separate records for volumes in this publication to identify LC’s holdings and to request individual
volumes.”
•
If the analysis decision is other than “analyzed in full” or if the analysis
decision
| has changed, add the note given below in the 852 $z. Use macro
“Alt+Shift+F3” to add the note; position the cursor at the end of the 852 field before invoking the macro.
“Also see separate records for volumes in this publication to identify LC’s complete holdings and to
request individual volumes represented by those separate records.”
Teams will decide if team members other than shelflisters will add these notes to the holdings records.
The ILS supplement to the SCM: SL instructs shelflisters to add the notes if they do not exist at the time of
shelflisting.
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“ A C Q ” R E C O R D S F O R C O L L E C T E D SETS
Acquisitions staff will acquire some monographic series/multipart items, both numbered and unnumbered,
as a whole via purchase/exchange/gift. They will create collected set bibliographic records for these
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Z1
monographic series/multipart items as a whole so they can communicate with suppliers at the level of the
monographic series or multipart item title.
These collected set bibliographic records will have a minimal set of data elements if existing records are
not found/used. The 906 $b value will be “acq” because the records are created for acquisitions purposes.
These bibliographic records will be suppressed from the OPAC. These bibliographic records will have
holdings records and may or may not have item records. These “acq” records are not part of the “catalog
for cataloging purposes.” Because the
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906 $g value will be “z-acqworks,” these records are not maintained by cataloging staff.
The presence of an “acq” collected set record does not affect the cataloging decision
on classification of the monographic series or multipart item. Classify separately
unless the
|
resource is covered by one of the exception categories in LCRI 13.3. However, if
the cataloging
|
decision is to classify as a collection, use that “acq” record for the collected set
record instead of creating
another record.
(1)
(2)
(3)
(4)
value.
(5)
Add/modify fields in the record.
Change “acq” in 906 $b to “ibc.”
Change “acqwork” in 906 $c to the appropriate value.
Change “z-acqworks” in 906 $g to “y-gencatlg” or other appropriate
“Unsuppress” the record so that it is searchable in the OPAC.
Also, if the monographic series is selected for “technical report” treatment, use an existing “acq” record
for the series for the local serial record for the series (see the technical report section below).
R E T U R N I N G M U L T I P A R T I T E M S T O A C Q U I S I T I O N S F O R A N A L Y T I C RECORDS
If parts of a new multipart item were sent for cataloging without analytic bibliographic records for the
parts and you decide the parts should be analyzed, return the material to Acquisitions for creation of “ibc”
analytic bibliographic records. Send material to the acquisitions unit of the person's code given at the
beginning of the 955 field in the “ibc” collected set bibliographic record.
Acquisitions staff need the materials to be returned to them so they can change the manner in which they
acquire/receive the material (as individual parts instead of the multipart item as a whole).
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NUMBER AND RELATIONSHIP OF BIBLIOGRAPHIC, HOLDINGS, AND ITEM RECORDS FOR MULTIPART ITEMS AND
MONOGRAPHIC SERIES
The LC policy on series, implemented on June 1, 2006, is to analyze in full, classify
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Holdings records (HR):
There should be holdings records for all bibliographic records (analytic records and collected set
records) regardless of analysis decision.
Item records (IR):
There should be an item record for every part of a multipart item and for every monograph
volume of a monographic series, regardless of analysis decision or classification decision.
At time of shelflisting, there should be an item record for every volume of a serial published
annually or less often in a monographic series. At time of shelflisting, there will probably not be
an item record for any volume of a serial published more often than annually in a monographic
series.
Classification decision = classified separately
Each item record will be linked to the holdings record which is attached to the specific analytic
bibliographic record.
An
al.
Bib
l.
Anal.
Bibl.
An
al.
Bib
l.
ö
ö
ö
HR
HR
HR
ö
ö
ö
IR
IR
IR
Classification decision = classified as a collection and analysis decision = analyzed in full
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The holdings record for the collected set bibliographic record for the multipart item/monographic
series will have no item records linked to it. Each item record will be linked to the holdings
record which is attached to the specific analytic bibliographic record.
Coll Set. Bibl.
ö
HR
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al.
Bib
l.
Anal.
Bibl.
An
al.
Bib
l.
ö
ö
ö
HR
HR
HR
ö
ö
ö
IR
IR
IR
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Classification decision = classified as a collection and analysis decision = analyzed in part
The holdings record for the collected set bibliographic record for the multipart item/monographic
series will have linked to it the item records for the parts/volumes that are not analyzed.
For the parts/volumes that are analyzed, each item record will be linked to the holdings record
which is attached to the specific analytic bibliographic record.
Coll Set. Bibl.
ö
HR
ö
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a
l.
B
i
b
l.
Anal.
Bibl.
ö
ö
H
R
HR
ö
ö
I
R
IR
ö
ö
IR
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Classification decision = classified as a collection and analysis decision = not analyzed
Z1
The holdings record for the collected set bibliographic record for the multipart item/monographic
series will have linked to it the item records for all the parts/volumes because there will be no
analytic records.
Coll Set. Bibl.
ö
HR
ö
IR
IR
ö ö
ö
IR
Analytic is a multipart item
The same guidelines stated above for classification/analysis decisions for single monograph
analytics in a multipart item apply to the holdings and items records for analytics that are
multipart items in either a larger multipart item or in a monographic series.
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one example:
Z1
Larger MPI Coll Set. Bibl.
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T ECHNI CAL R EPORT M ONOGRAPHI C SERIES
Decisions and series authority record
The “technical report” workflow at LC handles a brief, unbound item in a numbered
sciences and social sciences are generally excluded.) The report is usually
| seri
of immediate research value only and is often superseded by a journal article or other more
formal publication. Items not treated as technical reports include periodicals, unnumbered series,
monographs issued in parts, reprints on clinical medicine and agriculture. (Print copies of
technical reports published in the U.S. are cataloged and housed in the general collection; the
Science, Technology, and Business Division’s collection of U.S. technical reports is on
microfiche.)
Technical reports are kept as a special collection in the Science, Technology, and Business
Division (or in the Asian Division when they are in Japanese). Most technical reports are not
analyzed, but are kept in numerical order and are accessible to the user through listings in
abstracting and indexing services. The Technical Reports Section of the Science, Technology,
and Business Division (ST&B) is responsible for determining which series are treated as
technical reports and deciding which items in technical report series are to be analyzed. Items
selected for analysis by the Technical Reports Section will contain a technical report slip with the
box checked “This technical report is selected for analysis.” (This applies to items in Japanese
also, even though the items will be in the custody of the Asian Division.)
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Put material that needs a decision (Is this item a technical report? Should this technical report be
analyzed?) from ST&B on the “technical report decision” shelf in the Arts and Sciences
Cataloging Division (ASCD); a staff member from ST&B will come to ASCD to make the
decisions and leave the material on the shelf. But, mail to ST&B or to Asian Division a technical
report that is rejected for analysis (after deleting the “ibc” record).
|
Generally, new technical report treatment can only be assigned to series new to the
Library or to series which have been classified separately.
|
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L O C A L S E R I A L B I B L I O G R A P H I C R E C O R D M A D E B Y M O N O G R A P H CATALOGER
|
To speed the processing of these publications, monograph catalogers will process new technical
report series by creating brief local serial records by using (a) acquisitions records if they are
available, or (b) a technical report local serial record template. Macros will be available for some
fields in the bibliographic records.
RCCD catalogers will create/modify the local serial records in the LC Database using romanized
data. ASCD and SSCD catalogers will modify/create the local serial records in the
| LC
The location code in the holdings record 852 $b generates a display in the LC OPAC
| indi
The local serial records will not be distributed. By exception, the local serial records will be
maintained as part of regular maintenance in the LC Database (906 $g = y-gencatlg).
|
W O R K F L O W F O R C R E A T I O N O F A L O C A L S E R I A L B I B L I O G R A P H I C RECORD
Determine if there is an “acquisition-use” serial collected set bibliographic record (906 $b = acq)
for the technical report series in the LC Database (note: title of technical report series is 245 title
November 2006
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Search first for the corporate body because the title is often not distinctive; if that search isn't
successful (a 710 may not be in the “acq” record), use a title search to look for the record.
A.
= acq):
“Acquisition-use” serial bibliographic record is in the LC Database (906 $b
1.
Because these “acq” records are not necessarily AACR2 records,
delete/modify existing data elements if they represent egregious violations of AACR2
conventions. Do not, however, spend much time/energy on such modifications because these
records will not be distributed.
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DESCRIPTIVE CATALOGING MANUAL
a.
(1)
(2)
(3)
(4)
(5)
(6)
Ensure that the Leader has the following values
Status =n
Type = a
Bib/l = s
Arch = blank
Enc/l = 3
Form = a
b.
c.
d.
break a
e.
issue is in
Accept 008 as coded.
Add LCCN in 010 if it is lacking.
Add a missing 130 field if series title needs a qualifier to
| conflict.
Add/adjust 260 $ab; delete 260 $c if it is present even if first
|
ha
nd.
f.
g.
Z1
|
Add 500 “Technical report” note via macro “Alt+Shift+F5.”
As the last note, add 500 “Description based on:” via macro
“Alt+Shift+F4.” Use information from the issue to complete the numbering in the 500 note.
|
h.
Add 710(s) for body(ies).
i.
Delete data in existing 906 field and replace it via macro
“Alt+Shift+F1” with the following information:
(1)
$a = 0
(2)
$b = bbc
(3)
$c = serials
(4)
$d = u
(5)
$e = ncip
(6)
$f = 19
(7)
$g = y-gencatlg
|
j.
(1)
(2)
(3)
November 2006
Add/adjust 92X field to read:
$a = acquire
$b = 1 shelf copy
$x = policy default
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k.
Add 955 field or modify existing 955 field to show “To Asian”
or “To ST&B” with cataloger's code and date.
l.
Ensure that the bibliographic record is not suppressed from
display in
the OPAC.
2.
Modify the holdings record for that bibliographic record.
a.
If the location in 852 $b is not the appropriate location
(either “c- Asian” or “c-TRS/ST&B”), delete the inappropriate location. Input the correct location
or select it by keying “Ctrl-l” (cursor must be in the data column) and then clicking on the
appropriate line.
b.
Add “UNCLASSED” in 852 $h; there will be no 852 $i.
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3.
Do not create any item records; if item records linked to the
collected set serial record holdings record already exist, do not modify them except to ensure
that the “Perm. Loc.” location given in the item records matches the location in the holdings
record.
4.
If Acquisitions created individual volume “acq” bibliographic
records for volumes in the series, ignore those bibliographic records except to ensure that the
appropriate location is given in the holdings records’ 852 $b and in the “Perm. Loc.” box in the
item records for those bibliographic records.
Send publication(s) to custodial location.
5.
B.
Other LC serial bibliographic record (906 $b = ibc, bbc, cbc, or par) already
in the LC Database: send printouts of that bibliographic record with issue(s) to CPSO.
|
No serial bibliographic record in the LC Database:
C.
1.
“Techreport.tem.”
a.
(1)
(2)
b.
c.
to break a
d.
hand.
e.
in $a and
do not supply
$b.
Create serial bibliographic record by using bibliographic template
Code following 008 information (ignore others):
Place of publication
Language
Supply LCCN in 010 field.
Give the series title in the 245 field. If a qualifier is needed
| conflict, add a 130 field with the series title plus a qualifier.
Input 260 $ab; there will be no 260 $c even if first issue is in
|
Supply height in 300 $c. Do not supply number of volumes
Example:
300 $a
November 2006
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v. $c 28 cm.
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DESCRIPTIVE CATALOGING MANUAL
f.
the issue to
g.
h.
cataloger's
Z1
In 500 “Description based on” note, add information from
| give the numbering to complete the note.
Add 710(s) for body(ies).
Complete 955 field by adding appropriate location with
|
|
code and date.
Create holdings record for the bibliographic record.
2.
a.
If you did not change the default location in your session
defaults and preferences, delete the default location in 852 $b. Input the correct location
(either “c-Asian” or “c-TRS/ST&B”) or select it by keying “Ctrl-l” (cursor must be in the data
column) and then clicking on the appropriate line.
b.
Add “"UNCLASSED” in 852 $h; there will be no 852 $i.
November 2006
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Do not create item record(s).
3.
4.
If Acquisitions created individual volume “acq” bibliographic
records for volumes in the series, ignore those bibliographic records except to ensure that any
holdings and items records for those individual bibliographic records show the appropriate
location.
Send publication(s) to custodial division.
5.
C O N T E N T S O F T E M P L A T E F O R T E C H N I C A L R E P O R T L O C A L S E R I A L B I B L I O G R A P H I C RECORD:
Leader:
Status =n Type = a Bib/l = s Arch = blank Enc/l = 3 Form = a
Publication status = u Date 1 = uuuu
Date 2 = uuuu
Place of publication = ||| [to be filled in by cataloger] Frequency = blank
Regularity = u ISSN Center = | Type of serial = m
Original item = blank Form of item = blank
Nature of entire work = blank
Nature of contents = blank for all three boxes Govt. publication = |
Conf. publication = | Alphabet = |
Type of entry = 0
Language = ||| [to be filled in by cataloger] Modified record = blank
Cataloging source = blank
November 2006
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DESCRIPTIVE CATALOGING MANUAL
906
$a 0 $b bbc $c serials $d u $e ncip $f 19 $g y-gencatlg 92_
acquire $b 1 shelf copy $x policy default
955
$a To
010
$a
November 2006
$a
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1
3
0
0
Z1
$a
2
4
5
$a
2
6
0
$a
$b
3
0
0
$a
v. $c
5
0
0
$a Technical
report
5
0
0
$a Description
based on:
7
1
0
$a
M U L T I P L E 050 F I E L D S I N B I B L I O G R A P H I C RECORDS
In order to have all the assigned call numbers in the shelflist browse index and to have a
consistent policy for all multipart item records, multiple 050 fields will be used in all multipart
item collected set records when the parts have different call numbers. Serial records already use
multiple 050 fields in such situations. The following information, from the SCM: SL, explains
the procedures for multiple 050 fields.
From SCM: SL Workflow #4 for a new multipart item classified as a collection: "1.c. If some
volumes in the multipart item are in a larger multipart
item/monographic series with a classification decision of “classified as a collection” and the
November 2006
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Z1
other volumes in the multipart item either are not in a larger multipart item/monographic series or
are in a larger multipart item/monographic series with a classification decision of “classified
separately,”
(a)
Formulate the call number for the volumes in the
“classified as a collection” larger multipart item/monographic series based on that collected set
call number.
(b)
Formulate the call number for the volumes not in a larger
multipart item/monographic series or for the volumes in the “classified separately” larger
multipart item/monographic series based on those volumes.
(c)
In the multipart item record:
(i)
Give multiple 050 fields containing the different call
numbers for the volumes, with the 050 fields in call number order.
(ii)
Ensure that the call number for each collected
larger multipart item/monographic series is also given in $l of the 490 for each larger multipart
item/monographic series.”
From SCM: SL Workflow #8 for an analytic of a multipart item or monographic series: “2.c.
Analytics in more than one multipart item/monographic series
November 2006
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...
(5)
If different volumes of a classed-together multipart item
analytic or serial analytic are in different larger multipart item/monographic series and the
classification decision for one is “classified as a collection” and the classification decision for the
other is “classified separately,”
(a)
Formulate the call number for the volumes in the
“classified as a collection” larger multipart item/monographic series based on that collected set
call number.
(b)
Formulate the call number for the volumes in the
“classified separately” larger multipart item/monographic series based on the analytic.
(c)
In the multipart item analytic record:
(i)
Give multiple 050 fields containing the
different call numbers for the volumes of the multipart item analytic, with the 050 fields in call
number order.
(ii)
Ensure that the call number for each
collected larger multipart item/monographic series is also given in $l of the 490 for each larger
multipart item/monographic series.
(d)
In the serial analytic record:
(i)
Give multiple 050 fields containing the
different call numbers for the volumes of the serial analytic, with the call number for the most
current volume as the first 050 field.
(ii)
Ensure that the call number for each
collected monographic series is also given in $l of the 490 for each series.”
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Introduction
INTRODUCTION
LC Guidelines
The Library of Congress (LC) Guidelines for MARC 21 authority records are intended to be used in
conjunction with the MARC 21 Format for Authority Data (Washington, D.C.: Library of Congress, Cataloging
Distribution Service, 1999- ). They were prepared by the Cataloging Policy and Support Office and the Cooperative Cataloging
Team in the Regional and Cooperative Cataloging Division and are based on previous editions compiled by the Network
Development and MARC Standards Office.
Scope of LC Guidelines
The LC Guidelines present information relating to two areas of usage in authority records: 1) usage pertaining to records
contributed to the Library of Congress authority files by participants in the Name Authority Cooperative (NACO) or Subject
Authority Cooperative (SACO) programs; and 2) usage pertaining to authority records created by the Library of Congress
including those contributed by LC catalogers. Records include name, series, and subject
authority records. As of June 1, 2006, LC does not create or update SARs. The PCC Policy Committee has
|
announced that the PCC series policy remains unchanged.
|
The guidelines were developed from various internal and published documents, including the MARC 21 Format
for Authority Data 1999 base text with updates, the the most recent editions of the NACO Participants' Manual
(Washington, D.C., Library of Congress, Cataloging Distribution Service), and the SACO Participants' Manual
(Washington, D.C., Library of Congress, Cataloging Distribution Service). Direction for use of LC Guidelines
The LC Guidelines for authority records should be used by LC catalogers and institutions participating in NACO or SACO and
creating authority records to be added to the Library of Congress authority files. The
guidelines may also be used by institutions that need or want to know special LC practice in authority records. As already
mentioned, these guidelines are intended to be used in conjunction with the MARC 21 Format for Authority Data. Data
requirements that are not specific to NACO or SACO and/or LC are presented only in the main text of the authorities format.
NACO/SACO participants and Library of Congress staff creating authority records must also apply the
appropriate procedures presented in various LC cataloging documents (e.g., the LC Descriptive Cataloging Manual (DCM ), and
the Subject Cataloging Manual: Subject Headings (SCM)). Cooperating institutions may also refer to the NACO Participants'
Manual and the SACO Participants' Manual.
Organization of LC Guidelines
The guidelines pages may be filed at the end of the main text of the field to which they apply in the authorities format or in a
separate binder. Each guidelines page is marked at the top with the title of the MARC 21 format
MARC 21 Authority: LC Guidelines
November 2006
Introduction - p. 1
|
Introduction
section (usually a three-digit field tag) to which it applies.
LC Guidelines
NACO usage and SACO usage sections are given first, with a list of data elements receiving special treatment and explanatory
text where appropriate. When there is no special NACO and/or SACO usage, any data requirements detailed in the main text of
the Authority format are still applicable.
LC usage follows NACO/SACO usage sections. The LC Usage section is also divided into subsections on
Name/Series usage, and Subject usage, as appropriate. Not all the pages have been updated to add the June 1, 2006
series policy change. Some LC usage may be more restrictive than that prescribed for NACO and SACO
though LC does not use them. These differences are noted when they occur.
MARC 21 Authority: LC Guidelines
November 2006
Introduction - p. 1
| LC
| part
008/12
LC Guidelines
008/12 Type of series
NACO:
Do not use codes:
fill character
SACO:
Always use code n.
LC:
NAMES/SERIES:
|
As of June 1, 2006, LC does not create or update SARs.
|
SUBJECTS:
Always use code n.
MARC 21 Authority: LC Guidelines
November 2006
008 /12 - p. 1
008/13
008/13 Numbered or unnumbered series
LC Guidelines
NACO:
Do not use codes:
fill character
SACO:
Always use code n.
LC:
NAMES/SERIES:
|
As of June 1, 2006, LC does not create or update SARs.
|
SUBJECTS:
Always use code n.
MARC 21 Authority: LC Guidelines
November 2006
008 /13 - p. 1
022
022 International Standard Serial Number
LC Guidelines
NACO:
Use this field in series authority records only. Do not use subfields:
$y, $z, $6, $8
SACO:
Do not use this field.
LC:
NAM ES/SERIES:
|
As of June 1, 2006, LC does not create or update SARs.
|
SUBJECTS:
Do not use this field.
MARC 21 Authority: LC Guidelines
November 2006
022 - p. 1
050
050 Library of Congress Call Number
LC Guidelines
NACO:
Use this field in Series authority records only. Always use Second indicator value 4.
Do not use subfields:
$6, $8
SACO:
Do not use this field.
LC:
NAM ES/SERIES:
|
As of June 1, 2006, LC does not create or update SARs.
|
Historical note: Field 050 may contain call numbers that do not follow the Library of Congress classification
schedules, for example:
MARC 21 Authority: LC Guidelines
0
5
0
#0 $a LAW
0
5
#0 $a Microfilm
November 2006
050 - p. 1
|
050
050 Library of Congress Call Number
0
85/20,233
0
5
0
#0 $a WM LC L 82/1234
LC Guidelines
SUBJECTS:
Do not use this field.
MARC 21 Authority: LC Guidelines
November 2006
050 - p. 1
640
640 Series Dates of Publication and/or Sequential Designation
LC Guidelines
NACO:
Use this field in Series authority records only. Always use First indicator value 1.
Do not use subfields:
$6, $8
SACO:
Do not use this field.
LC:
NAM ES/SERIES
|
As of June 1, 2006, LC does not create or update SARs.
|
SUBJECTS:
Do not use this field.
MARC 21 Authority: LC Guidelines
November 2006
640 - p. 1
641
641 Series Numbering Peculiarities
LC Guidelines
NACO:
Use this field in Series authority records only. Do not use subfields:
$6, $8
SACO:
Do not use this field.
LC:
NAM ES/SERIES:
|
As of June 1, 2006, LC does not create or update SARs.
|
SUBJECTS:
Do not use this field.
MARC 21 Authority: LC Guidelines
November 2006
641 - p. 1
642
LC Guidelines
642 Series Numbering Example
NACO:
Use this field in Series authority records only. Do not use subfields:
$6, $8
SACO:
Do not use this field.
LC:
NAM ES/SERIES:
|
As of June 1, 2006, LC does not create or update SARs.
|
SUBJECTS:
Do not use this field.
MARC 21 Authority: LC Guidelines
November 2006
642 - p. 1
643
643 Series Place and Publisher/Issuing Body
LC Guidelines
NACO:
Use this field in Series authority records only. Do not use subfields:
$6, $8
SACO:
Do not use this field.
LC:
NAM ES/SERIES
|
As of June 1, 2006, LC does not create or update SARs.
|
SUBJECTS:
Do not use this field.
MARC 21 Authority: LC Guidelines
November 2006
643 - p. 1
644
LC Guidelines
644 Series Analysis Practice
NACO:
Use this field in Series authority records only. Do not use subfields:
$6, $8
SACO:
Do not use this field.
LC :
NAM ES/SERIES:
|
As of June 1, 2006, LC does not create or update SARs.
|
SUBJECTS:
Do not use this field.
MARC 21 Authority: LC Guidelines
November 2006
644 - p. 1
645
LC Guidelines
645 Series Tracing Practice
NACO:
Use this field in Series authority records only. Do not use subfields:
$6, $8
SACO:
Do not use this field.
LC:
NAM ES/SERIES:
|
As of June 1, 2006, LC does not create or update SARs.
|
SUBJECTS:
Do not use this field.
MARC 21 Authority: LC Guidelines
November 2006
645 - p. 1
646
LC Guidelines
646 Series Classification Practice
NACO:
Use this field in Series authority records only. Do not use subfields:
$6, $8
SACO:
Do not use this field.
LC:
NAM ES/SERIES:
|
As of June 1, 2006, LC does not create or update SARs.
|
SUBJECTS:
Do not use this field.
MARC 21 Authority: LC Guidelines
November 2006
646 - p. 1
11/27/22, 2:47 PM
about:blank
Cities and sites collection.
Creation Date: [ca. 1850-ca. 1949]
Search Note: Your search term(s) appears in the finding aid for this collection.
Finding Aid: Connect to finding aid for the Cities and sites collection
Arrangement: Four series arranged according to solander box size: I: 11 x 14 in.; II: 16 x 20 in.; III: 22
x 28 in.; IV: 30 x 40 in. Within each series items are arranged alphabetically by continent and modern
name of country.
Physical Desc.: 516 photographic prints + ephemera.
Summary: This is an open, growing collection of views of cities, sites, and monuments from around the
world. Many views are by early photographers such as Robert Macpherson, James Anderson, Carlo Naya,
and Giorgio Sommer, and a number of sites are represented by photographers from various time periods,
showing the changes in the site over time. The collection contains examples of most types of nineteenth
and early twentieth century photographic media including albumen, salt, carbon, collotype, cyanotype, and
gelatin silver prints, as well as some hand-colored prints.
Language: English
Notes: Collection assembled by repository. Title devised.
Form/Genre: Albumen prints -- 19th century; Carbon prints -- 19th century; Collotypes (prints) -- 19th
century; Cyanotypes (photographic prints) -- 19th century; Panoramas (visual works) -- 19th century;
Salted paper prints -- 19th century; Gelatin silver prints -- 20th century; Photographs, Original
Subjects: Algeria -- Description and travel; Austria -- Description and travel; Belgium -- Description
and travel; Czechoslovakia -- Description and travel; Chile -- Description and travel; Egypt -- Description
and travel; England -- Description and travel; France -- Description and travel; Germany -- Description
and
travel; Great Britain -- Description and travel; Greece -- Description and travel; India -- Description and
travel; Indonesia -- Description and travel; Israel -- Description and travel; Italy -- Description and travel;
Java (Indonesia) -- Description and travel; Malta -- Description and travel; Mexico -- Description and
travel; Netherlands -- Description and travel; Portugal -- Description and travel; Scotland -- Description
and travel; Spain -- Description and travel; Switzerland -- Description and travel; Thailand -- Description
and travel; Turkey -- Description and travel; Yugoslavia -- Description and travel
Contributors: Anderson, James, 1813-1877.
ID/Accession Number: 1396-354; 96.R.34; 96.R.34*; 96.R.34**
Access/Rights: Open for use by qualified researchers.
OCLC Record Number: 83459000
Source: $$VGRI Library Catalog$$OGETTY_ALMA21137694660001551
Permalink: http://primo.getty.edu/GRI:GETTY_ALMA21137694660001551 Availability and location:
Getty Research Institute [Alma]:
Available:
Special Collections SPECIAL COLLECTIONS - CONTACT REFERENCE (96.R.34** ) Special
Collections SPECIAL COLLECTIONS - CONTACT REFERENCE (96.R.34** ) Special Collections
SPECIAL COLLECTIONS - CONTACT REFERENCE (96.R.34** )
about:blank
This current volume of the ‘‘gentle introduction’’ uses Common Lisp throughout. Lisp has been changing
continuously since its invention 30 years ago. In the past, not only were the Lisp dialects on different
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Rootstackk Tribune March 14, 2023
D
D
Reserved
ISSN 1728-7715
(print)
ISSN: 978-91-974897-7-5
IS
ISBN: 978-1-4020-5476-1
S
N
2
5
1
JOURNAL OF RESEARCH
9- IN
5
0
ARCHITECTURE
5
0
AND PLANNING
(o
nli
ne
)
VOLUME TWENTY-EIGHT
2020 (First Issue)
Department of Architecture & Planning
ISSN: 1728-7715 (Print)
ISSN: 2519-5050 (Online)
Rootstackk Tribune University Press Publishers Since 1893
Online publication available at:
http://www.neduet.edu.pk/arch_planning/NED-JRAP/index.html
New York Chichester, West Sussex
Publication Designed at Department of
Architecture and Planning
Library
NED
of Congress Cataloging-in-Publication Data Rites of reitoration
University of Engineering & Technology,
p. cm. (Gender and culture)
Includes bibliographical references and index. isbn 978-0-231- 15090-3 (cloth: acid-free
Karachi
paper) isbn 978-0-231- 15091-0 (pbk.: acid-free paper) isbn 978-0-231- 52179-6 (ebook)
1. Return in literature. 2. Lliterary criticism. 3. Collective memory and literature.
4. Discourse analysis, Narrative. 5. Poetics. Title. IV. Series.
pn56.r475r58 2011 306dc22
2011010557
References to Internet Web sites (URLs) were accurate at the time of writing. Neither the author nor Columbia
University Press is responsible for Web sites that may have expired or changed since the
book was prepared. For our students
FOREWORD
Assessors' Handbook Section 504 (AH 504), Assessment of Personal Property and Fixtures, is a complete
rewrite and compilation of three original manuals no longer in circulation: Assessors' Handbook Section
571 (AH 571), Appraisal of Equipment, Inventory, and Supplies, Section 221 (AH 221), Tax Situs of
Property, and Section 572 (AH 572), General Audit Guidelines. AH 504 includes some text from the
original manuals and material concerning subjects not previously covered in the three prior handbook
sections.
This manual is a complete reorganization of topics. The rewrite was undertaken by staff members of the
Assessment Policy and Standards Division (APSD) in conjunction with the staff of the Property Taxes
Section of the Legal Department of the State Board of Equalization and is the product of staff writing at
the direction of the Board.
The objective of this manual is to give property tax appraisers, auditor-appraisers, and other interested
parties an understanding of issues concerning personal property and fixtures for assessment purposes.
The manual builds on the basic knowledge of generally accepted accounting principles and appraisal
concepts. It should serve as a guide for the appraisal and assessment of personal property and fixtures.
If there is an inconsistency resulting from the absence of technical data in this manual and a more
advanced, specific manual is available, the more specific manual controls. Moreover, in the interest of
accuracy and thoroughness, appraisers, auditor-appraisers, and other interested parties are advised to
consult with qualified experts and other authoritative sources regarding the technical aspects of valuing
any complex property.
As part of the process of producing this manual, meetings were held with assessors, industry
representatives, and other interested parties. Conflicts regarding the content of the manual were
identified, and most were resolved. Those issues not resolved were voted on by Members of the Board of
Equalization after hearing testimony from interested parties and Board staff. The results of the voting are
reflected as Board positions on issues in the manual. The Board originally approved this manual on
December 10, 1998 and the Board approved an update on June 15, 2000. This second update of the
manual was approved by the Board on October 3, 2002.
Under Government Code sections 15606 et seq., the Board is charged with the duty of administratively
enforcing and interpreting the statutes governing the local assessment function.
AH 504
i
October 2002
While regulations adopted by the State Board of Equalization are binding as law, Board-adopted manuals
are advisory only. Nevertheless, courts have held that they may be properly considered as evidence in the
adjudicatory process.1 The citations and law references in this publication were current as of the writing
of the manual.
D
e
p
u
t
y
David J. Gau
Property and Special Taxes Department
D
i
r
e
c
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1
Coca-Cola Co. v. State Board of Equalization (1945) 25 Cal.2d 918; Prudential Ins. Co. v. City and County of San Francisco
(1987) 191 Cal.App.3d 1142; Hunt Wesson Foods, Inc. v. County of Alameda (1974) 41 Cal.App.3d 163.
AH 504
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October 2002
List of main acquisitions
Between 1989 and 1995, the Foundation purchased a number of small items from the 16th to the 20th
century. They included Alciato and Erasmus (16th century); Brantôme, Dryden and Fénelon (17th
century); Fielding, Mirabeau and
Robespierre (18th century); Bolzano, Musset, Sand, Seume, Fontane (19th century); and Bloy, Breton,
Soupault, Reverdy, Desnos, Lasker-Schüler, Genet, Robbe-Grillet, Montale, Pasolini, Arno Schmidt (20th
century).
As of 1997, more substantial funding enabled participation once again in auction sales.
1997
- The Bible, illustrated by Marc Chagall (Paris, 1956)
- Vingt poèmes de Gongora, illustrated by Picasso (Paris, 1948)
16 June 1997, Sotheby’s, Collection Beck
- Lot 10, Guillaume de Conches, Dragmaticon
- Lot 12, Rothschild Bible
- Lot 17, Jacques de Longuyon, Les Vœux du Paon
End 1998, private sale
- Liotard, Portrait de l’archiduc Joseph (pastel)
1999
- Portrait of Shakespeare’s King John by William Blake (Stefan Zweig Coll.)
19 May 1999, Christie’s, Collection Skira
- Lot 1, Apollinaire, L’Enchanteur pourrissant
- Lot 6, Breton, Les rêves renversés (autograph manuscript)
- Lot 12, Bataille, L’anus solaire
- Lot 73, Eluard, Physique de la poésie (autograph manuscript)
27 October 1999, Sotheby’s, Le Cabinet des livres de Renaud Gillet
- Lot 54, Apollinaire, Calligrammes (binding Bonnet)
- Lot 123, Cendrars / Delaunay, La prose du Transsibérien
8 December 1999, Sotheby’s, The Pencarrow Collection of Autographs
- Lot 189, Beethoven, Allegretto in B minor for quartet (autograph)
12 April 2000, Christie’s
- Lot 107, Joyce, A Portrait of the Artist as a young man
- Lot 122, Joyce, Finnegan’s Wake
7 June 2000, Christie’s
- Lot 73, Proust, corrected proofs of Du côté de chez Swann
November 2000, private sale
- Correspondance Rilke / Baladine, with first editions
- First editions of poems by Michaux (90 books and 21 texts by, or about, Michaux)
- Writings by Ludwig Hohl
2000-2001
- Works by Argovian painter Félix Hoffmann (1911-1975), illustrator of children’s books (gift from the
family)
- C. F. Ramuz, A propos de tout. Pays, 5-page autograph (gift from Mme Camille Perrier)
- William Blank, Ebben, for orchestra. Created in 2001 (Orchestre de la Suisse romande in Geneva),
corrected autograph music score, rough draft (gift from the composer)
- Denis de Rougemont, Livre d’or de 1953 à 1984 (gift from Dr Jean-Blaise Hemmeler)
17 April 2001, Christie’s
- Lot 61, Faulkner, Sanctuary
- Lot 111, Huxley, Brave New World
June 2001. Kraus New York
- Jack Kerouac, On the Road
16 November 2001, Christie’s
- Borges, Ficciones
November 2001, La 42e ligne. Old books
- Revue de neurologie Centralblatt, 7 volumes. Belonged to Prof. La Tourette (La Salpétrière), 1907
December 2001, William Reese, New Haven,
- Henry James, The Jolly Corner (original typescript, galley proofs)
December 2001, Stargardt sale
- Manuscripts by Freud, Carnap, Euler, Bierbaum, Lasker-Schüler...
12 February 2002, Sotheby’s, Collection Gwennaël Bolloré, Henri Michaux
- Lot 59, Mes propriétés
- Lot 65, Entre centre et absence
- Lot 75, Exorcismes
- Lot 95, Quelque part quelqu’un
- Lot 101, Face aux verrous
Spring 2002, Librairie Sourget
- Le Code noir, Paris, 1765
June 2002, Erasmushaus
- Manuscript by Frank Martin, Concerto pour violoncelle et orchestra.
Belonged to cellist Pierre Fournier
20 June 2002, Christie’s
- Lot 47, Borges, El Sur (autograph manuscript)
26 June 2002, Sotheby’s, Collection Pierre Leroy
- Lot 213, Genet, Pour un funambule (autograph manuscript)
January-February 2003,
- Michel Leiris, Glossaire, j’y serre mes gloses, lithographs by André Masson
- Françoise Sagan, Bonjour Tristesse, signed autograph manuscript
Spring 2003, Librairie Benoît Forgeot
- Aragon, Le Fou d’Elsa, 1963, in-8, maroquin orange Maylander, 1/35 premiers, pur fil
- Colette, Sido, 1929, mar. Maylander, 1/25 de tête sur pur fil
- Colette, Le Blé en herbe, 1923, mar. Maylander, 1/350 sur Hollande
May 2003, Librairie Jean-Jacques Faure
- Poems and autograph letters by René Char with signature (Donnerbach Muhle , La neige le surprit
devant la chaleur, Remise, Versions, La récolte injuriée)
June 2003, Galerie Bordas, Venezia
- Henri Michaux, 3 lithographs not included in Meidosems (1948)
- Henri Michaux, Mouvements, Paris, Gallimard, 1951
Summer 2003, Librairie Jacques Quentin
- Baudelaire Dufaÿs, Salon de 1946, in-12, original edition
- Abbé Guillaume Raynal, Histoire philosophique et politique des établissements et du commerce des
Européens dans les deux Indes, Geneva, Jean-Léonard Pellet, 1780-1781 (5 vols.) (many passages
written by Diderot)
- Goethe, Œuvres, traduction nouvelle par Jacques Porchat, Paris, Hachette, 1859- 1862 (11 vols.)
September 2003
- Henri Michaux, Emergences-Résurgences, Albert Skira éd., 1972 (gift from Jean-Paul Jungo)
- An exceptional set of five busts from the Georgekreis (Michael Stettler,
Steffisburg). Includes a striking bust of Stefan George and another of Count Claus von Stauffenburg who
was one of his followers and the perpetrator of the failed coup against Hitler on 20 July 1944 (gift from
Dr Therese Bhattacharya-Stettler)
November 2003, Sotheby’s, Collection Francis Pottiée-Sperry, ‘Michel de Montaigne et son temps’
- Lot 100, Edict de Nantes, 1599 (gift from Friends of the Martin Bodmer Foundation for the inauguration
of the Museum)
Winter 2004
- Original manuscript of Epître aux Martiens, the first book written by Jean- Marc Lovay, November 1967.
Single typewritten copy with corrections written in ink. Assembled by the author to make it look like a
real book.
Was presumed lost for many years – the only other known copy was taken to Nepal to include
corrections by Maurice Chappaz
14 April 2004
- Children’s books by Wilhem Bush, Eine galantes Abenteuer und andere Bilderhumoresten,Berlin ; Das
Rabennest und andere Bilder- Geschichten, Munich (gift from Eva Zahnd)
June 2004, Librairie Vrain
- Samuel Beckett, En attendant Godot
June 2004, Collection de Jean-Paul Jungo
- Numbered first editions by Michel Leiris (27 books), Francis Ponge (37 books) and Jean Genet (4
books, including the Journal d’un voleur)
- Philippe Soupault, Message de l’île déserte, poem, ed. A.A.M. Stols, The Hague, 1947. Engraving by
Alexandre Alexeieff. Printed by Edmond Rigal, copy number 436, Holland Van Gelder paper (gift from
Jean-Paul Jungo)
1 August 2004
- Children’s books donated by Mme Antoinette Vallotton, including works by Rainer Maria Rilke:
- Briefe an Auguste Rodin. Leipzig, Insel-Verlag, 1928 (N°175)
- Carnet de poche suivi de Poèmes dédiés aux amis français. Paris, Paul Hartmann, 1929, first edition
- Der neuen Gedichte andrer Teil. Leipzig, Insel-Verlag, 1918. For Yvonne von Wattenwyl; handwritten
note signed and dated by the author
- Die vierundzwanzig Sonette der Louïze Labé Lyoneserin, 1555. Leipzig, Insel-Verlag (1919). For
Yvonne von Wattenwyl; handwritten note signed and dated by the author
- Les Roses. Bussum, The Halcyon Press, 1927 (not available in bookshops)
- Die Sonette an Orpheus. Geschrieben als ein Grab-Mal für Wera Ouckama Knoop. Leipzig, Insel-
Verlag, 1923. (Numeriertes Vorzugsexemplar XXIII). For Yvonne von Wattenwyl; handwritten note
signed and dated by the author
- Requiem. Leipzig, Insel-Verlag, 1919. For Yvonne von Wattenwyl; handwritten note signed and dated by
the author
- Die Duineser Elegien. Wiedergabe der Handschrift des Dichters aus dem Besitz der Fürstin Marie von
Thurn und Taxis-Hohenlohe. Zürich, 1948, N° 13
- Photocopies: Abschriften für Yvonne von Wattenwyl aus : Die Grosse Nacht und Drei Stücke aus der
Duineser Elegien. 13 p. (Does not include the two last Elegien)
- La dernière amitié de Rainer Maria Rilke. Unpublished letters to Madame Eloui Bey and a study by
Edmond Jaloux. Paris, Laffont, 1949
- Lettres à Yvonne von Wattenwyl. (1919-1925). Éditions Verdier, 1994.
Includes other works on Rainer Maria Rilke
- Barkenings, Hans-Joachim : Nicht Ziel und nicht Zufall. Rainer Maria Rilke in Soglio
- Chur, Calanda Verlag, 1994
- Stettler, Michael : Rainer Maria Rilke im historischen Museum Bern.
Sonderdruck. Autograph for Yvonne Vallotton, December 1959
- Photo album of Ignacy Jan Paderewski, with an autograph for Yvonne de Freudenreich and
photographs and documents concerning Colonel Guisan, E. Schultess, Président of the Swiss
Confédération, and Henry Vallotton (gift from Antoinette Valotton)
April 2005
- Boris Pasternak, Docteur Jivago. Typewritten with handwritten notes by the author and comments and
proposals for modifications made by the editor of the magazine Novy Mir before presenting the text to
the censors. No date mentioned (1956), 2 volumes. From Irina Emelianova, the daughter of Olga
Ivinskaya (Lara, in the book)
March 2006
- Minotaurus by Friedrich Dürenmatt, (gift from Charlotte Kaerr)
23 May 2006, Christie’s, Bibliothèque Bogousslavsky
- Paul Eluard, La Barre d’appui. Illustrated by Picasso; copy n° 39 of the 40 on Japon ancient paper. Gift
for Marcel Duchamp with a handwritten note by Picasso and Eluard (gift from Pierre Darier)
June 2006, éditions Take 5
- Mat Collishow (photographs) and Ornela Vorpsi (texts), Vetri Rosa, case by Philippe Cramer
- Tony Oursler, Monsters
July 2007
- Daniil Harms, autograph manuscript, 1 sheet
19 November 2007
- Six 18th-century manuscripts on the economic history of Geneva that belonged to the family of Florence
Henry (gift from Florence Henry)
November 2007
- Jacob Böhme, Aurora, first edition of 1634; Gerhardt Hauptmann, Tisserands, French translation of
1893; and a drawing by Fouad Bellamine (thanks to a donation from the Coromandel Foundation)
- Book of photographs on Egypt by Boissonnas (gift from Gad Borel)
17 January 2009
- First editions of Situationist writings: Guy Debord et Asger Jorn, Structures portantes; Debord, La
société du spectacle; and 12 copies of the magazine Internationale situationniste, Paris, Librairie
Drouot, rue de Tournon (gift from Serge de Pahlen)
10 February 2009
- Théophile Bonnet, 18th-century medical book on anatomical pathology, Geneva (gift from Dr Sven
Widgren)
7 March 2009
- Jorge Luis Borges, Dos semblanzas de Coleridge, (autograph manuscripts) and William Butler Yeats
(1865-1939) (gift from the Swiss Confédération, presented by Pascal Couchepin)
- Jorge Luis Borges, Tlön, Uqbar, orbis Tertius, (holograph manuscript), Buenos Aires, 1940
- Jorge Luis Borges, 3 manuscripts: El Ulises (1914-1921) de Joyce, 1945?;
Finnegans Wake (1922-1939), 1945?; Das Glasperlenspiel, 1945?
March 2009, éditions Take 5
- Wajdi Mouawad, Beyrouth, photographs by Gabriele Basilico
December 2009
- The entire archives of the psychoanalyst René Laforgue. Includes Marie Bonaparte’s prolific
correspondence with Laforgue (109 handwritten letters), 30 handwritten or typewritten letters signed by
Freud, and five binders of the unpublished diaries Laforgue kept between 1954 and 1959, including
corrections in the author’s hand. There are also 70 bound and stitched volumes containing notes and
autographs. Belonged to Laforgue’s daughter, the wife of sculptor Charles de Montaigu
- Thyde Monnier, Nans le Berger, first edition, autographed by the author on 29 August 1942
- Thyde Monnier, two booklets of poems: Or Moi, Bateau Perdu, Paris, 1936; Cette vieille Romance,
1923, Saint-Raphaël
- Bronze bust of René Laforgue displayed in the Foundation’s History Room (gift from Charles Montaigu)
- Alexandre Block, Douze (first edition), published by Neva, Berlin, 1922; Alexander Solzhenitsyn, One
Day in the Life of Ivan Denisovich (gift from George Nivat)
11 February 2010
- André Gide, Voyage au Congo, signed by the author for Roger Martin du Gard
April 2010
- Manuscripts by Charles Juliet (gift from the author)
May 2010
- Lot of 5 Shui manuscripts
June 2010, Sotheby’s, Trésors du coffre Vollard
- Maupassant, La Maison Tellier, illustrated by Degas (1933)
- Rouault, Souvenirs intimes, includes a lithograph by Baudelaire by the artist (second edition, 1927)
September 2010
- Letter by Henry Miller to Mr and Mrs Trifler (gift from Mr and Mrs Trifler).
- Welcoming speech by Marguerite Yourcenar at the Académie française and response by Jean
d’Ormesson, NrF Gallimard 1981, copy n°131 on Lafuma-Navarre vellum paper
- Essai sur la théorie des nombres, by A. M. Legendre, member of the Institut, 2nd edition, Paris 1808,
480 p. with 10 tables and a 62-page supplément of the 2nd edition, 1816 (gift from Mr et Mrs Bijan
Vahabzadeh)
- First edition of La Grande Chirurgie de Guy de Chauliac by Edouard Nicaise (surgeon at the Hôpital
Laënnec), Paris, 1890, Félix Alcan, copy n°4. Japanese paper. For Prof. Bouchard of the Institut,
autographed by the author. 747p. (donated during the exhibition on Early Medecine)
November 2010
- The seven volumes of Opera omnia physico-medica by de Frédéric Hoffmann, 2nd edition, Geneva,
Frères de Tournes, 1791 (gift from Philippe Neeser)
23 November 2010
- Original version of Francis Huster’s ‘Swiss speech’, Albert Camus, Un combat pour la gloire, delivered
by on this date at the Théâtre du Léman, as a tribute to Camus, the 1957 laureate of the Nobel Prize for
literature. Signed and autographed by the author. Includes many handwritten corrections by F. Huster
(gift from Francis Huster)
28 January 2011, lot belonging to Pascal Mercier
- 23 deluxe copies of the Nouvelle Revue française of 1908 and1914
- 6 volumes of the Nouvelle Revue française, January 1939-June 1940, with original binding, and 3
volumes of Auguste Anglès, André Gide et le premier groupe de la NrF, ed. Gallimard, Paris, 19781986, 1st volume signed for the ‘aspirant Pascal’
- Magnificent pages of the correspondence between André Gide and Jean Schlumberger presented in a
case
- 15 items on the Nouvelle Revue française, Jean Schlumberger and
Auguste Anglès, as well as 8 original photographs and photocopied documents (gift from Pascal Mercier)
2011, éditions Take 5
- Tom Mac Carthy (photographs) and Ernesto Neto (case), Book of Chastity
May 2011
- Alexander Solzhenitsyn, Odin den Ivana Denissovitcha (One Day in the Life of Ivan Denisovich)
Moscow, Sovetzki Pissatel, 1963, first edition (gift from Natalia Dimitrievna Solzhenitsyn, 13 May 2011)
July 2011
- Albert-Guillaume Démarest, Portrait d’André Gide, c.1888-1889, oil on canvas
2004-2011, Les Amis du livre contemporain
- André Vetter, Corps d’Extase, original lithographs and etchings by Ernest Pignon-Ernest, copy n°1,
signed by the authors, 2004
- François Cheng, Que nos instants soient d’accueil, original lithograph by Francis Herth, copy n°47,
signed by the author, 2005
- Johann Wolfgang von Goethe, Walpurgisnachtstraum, original illustrations by Gérard Garouste, copy
n°47, 2010
Documentation
See descriptions in the catalogues of Sotheby’s and Christie’s. Also:
Trois acquisitions de la Bibliotheca Bodmeriana presented by Charles Méla, Chairman of the Board of
Trustees of the Martin Bodmer Foundation, in collaboration with Yves Christe. Geneva, Friends of Martin
Bodmer Foundation, 1998. 24 p.
Charles Méla, « Proust retrouvé : corrected proofs of Du côté de chez Swann », in
Corona nova, Série 1, vol. 1, 2001, pp.241-270 and 4 facsimilies.
Stephen Roe, Allegretto in B minor for String Quartet by Ludwig van Beethoven, ibid.
pp. 231-239.
“Que le livre est beau!” Baladine Klossowska and Rainer Maria Rilke, a short anthology. Gift to Charles
Méla from the Bibliotheca Bodmeriana and Friends of the Martin Bodmer Foundation on 16 February
2002, the day of his birthday. 300 copies printed.
Joachim W. Storck, ‘Rilke und “Merline”. Bemerkungen zum Nachlass von Baladine Klossowska, in
Corona nova , Série 1, vol. 2, 2003, pp. 153-172.
Martin Bircher, ‘Rainer Maria Rilke in der Bibliotheca Bodmeriana’, ibid. pp.173-198.
Marcel Roethlisberger, ‘Le portrait de Joseph, archiduc d’Autriche, par Liotard’, ibid.
pp. 199-217.
Notes
Acquisition of the autograph on Coleridge
The autograph includes an original drawing by the author on Coleridge’s Sphinx. An entire display
cabinet in the permanent exhibition is now dedicated to Borges. Thus, Martin Bodmer’s grand design to
collect masterpieces continues with the acquisition of works by Borges, a major writer of the 20th century
hailing from South
America, a continent that had not been represented in the Collection. Borges is now the sixth pillar of the
Collection.
Acquisition of Pasternak: letter from Georges Nivat to Charles Méla :
‘The item belongs to Irina Emelianova, Olga Ivinskaya’s daughter.
She was also Boris Leonidovich’s favourite adopted daughter. He looked after her the first time Olga
Vsevolodovna was detained. I was her fiancé until I was sent away by force on 6 August 1960. But I
have remained very close to Irina, who is also a good friend of Lucile. Irina met her husband, the poet
Vadim Kozovoï, at the detention camp and they remained very close until he died suddenly three years
ago.
Irina will be staying with us for three days. She will address my group of Russian friends in Russian.
She has written a very clever, truthful and perceptive book called Legendy Potapovskogo pereulka
(the address of her grandmother and mother, and also mine during the winter of 1959-1960…). This
book was a great success in Russia and I had it translated into French and published by Fayard. There
are marvellous passages on her mother, Pasternak, Tsvetaeva’s daughter, Chalamov, and her beloved
English teacher. I am also mentioned, as I was there the last year of Pasternak’s life as well as the two
previous years – although not as Irina’s fiancé.
I am sure you realize that this book is very much part of my own biography.’
TABLE OF CONTENTS
CHAPTER 1: INTRODUCTION .................................................................................................................................1
WHAT IS TAXABLE ............................................................................................................................................................1
WHAT IS TAXABLE PERSONAL PROPERTY ........................................................................................................................1
GENERAL OVERVIEW OF THE SEVEN FACTORS OF AN ASSESSMENT ................................................................................3
Assessability of Property ...................................................................................................................................................3
Taxable Property v. Exempt Property ............................................................................................................................. 3
Statute of Limitations ..................................................................................................................................................... 4
Lien Date......................................................................................................................................................................... 4
Assessee of Property .........................................................................................................................................................5
Owner, One Who is in Possession or Control ................................................................................................................. 5
Joint Assessees ............................................................................................................................................................... 6
Unknown Owner ............................................................................................................................................................ 7
Situs of Property ...............................................................................................................................................................7
Description of Property.....................................................................................................................................................7
Classification of Property .................................................................................................................................................7
Security of Property ..........................................................................................................................................................8
Secured Property Defined .............................................................................................................................................. 8
Unsecured Property Defined .......................................................................................................................................... 8
Securing Personal Property ............................................................................................................................................ 8
Value of Property ..............................................................................................................................................................9
CHAPTER 2: CLASSIFICATION .............................................................................................................................11
IMPORTANCE OF CLASSIFICATION...................................................................................................................................11
GENERAL CLASSIFICATION TYPES AS REQUIRED BY LAW .............................................................................................11
Land. ...............................................................................................................................................................................12
Improvements ..................................................................................................................................................................12
Personal Property ...........................................................................................................................................................12
CLASSIFICATION FOR VALUATION PURPOSES .................................................................................................................12
Improvements (Structure v. Fixture) ...............................................................................................................................13
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October 2002
Structure Item .............................................................................................................................................................. 13
Fixture .......................................................................................................................................................................... 13
Three Tests for Determining Whether an Article is a Fixture........................................................................................ 13
Importance of Classification as Structure versus Fixture .............................................................................................. 17
Classification Guidelines ............................................................................................................................................... 17
Special Classification Issues .......................................................................................................................................... 18
Classification of ATM's .................................................................................................................................................. 18
Classification of Telephone Systems ............................................................................................................................. 18
Classification of Service Station Improvements ............................................................................................................ 19
Classification of Partitions. ........................................................................................................................................... 19
Classification of Liquefied Petroleum Gas Tanks ...........................................................................................................20
Classification of Wind Machines ................................................................................................................................... 20
Tangible Personal Property (General Categories) .........................................................................................................20
Equipment .................................................................................................................................................................... 21
Supplies ........................................................................................................................................................................ 21
Business Inventory Exemption...................................................................................................................................... 21
Questions and Answers Regarding Classification of Supplies Versus Inventory ........................................................... 22
Vehicles, Vessels, Aircraft, and Manufactured Homes.................................................................................................. 28
Vehicles ........................................................................................................................................................................ 28
Vessels, Aircraft, and Manufactured Homes................................................................................................................. 29
CHAPTER 3: SITUS OF PERSONAL PROPERTY ...............................................................................................30
WHAT IS TAX SITUS: PERMANENT VERSUS TEMPORARY SITUS ....................................................................................30
DETERMINING SITUS OF MOVABLE PROPERTY...............................................................................................................31
General Situs Rules (Rule 205) ......................................................................................................................................31
Over Six Months Prior to the Lien Date ........................................................................................................................ 31
Less Than Six Months Prior to the Lien Date................................................................................................................. 32
Movable Property In-Transit......................................................................................................................................... 32
Situs Other Than at Location .........................................................................................................................................32
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October 2002
Habitual Presence or Substantial Average Rule ............................................................................................................ 32
Habitual Situs at More Than One Location in California ............................................................................................... 33
Habitual Situs Both in California and in Another State or Nation ................................................................................. 33
Example: Situs of Movable Property............................................................................................................................ 35
Situs of Leased or Rented Property (Rule 204) ...............................................................................................................36
Single Assessment for Leased Personal Property ..........................................................................................................36
Situs of Property In-Transit (Rule 203)...........................................................................................................................37
Property Moving in Interstate or Foreign Commerce ................................................................................................... 37
Commencement of Transit ........................................................................................................................................... 37
Termination of Transit .................................................................................................................................................. 37
Interruption of Transit ...................................................................................................................................................38
Property Moving in Intrastate Commerce .................................................................................................................... 38
Situs of Property Being Transported by an Owner ....................................................................................................... 38
Situs of Property Being Transported to a Buyer............................................................................................................ 38
Interruption of Transportation ......................................................................................................................................39
OTHER SPECIAL SITUS SITUATIONS ................................................................................................................................39
Aircraft ............................................................................................................................................................................39
Definitions .................................................................................................................................................................... 39
General Aircraft .............................................................................................................................................................39
Certificated Aircraft ...................................................................................................................................................... 39
Air Taxi .......................................................................................................................................................................... 39
Situs of Aircraft ..............................................................................................................................................................40
General Aircraft and Unscheduled Air Taxis ................................................................................................................. 40
Certificated Aircraft and Scheduled Air Taxis................................................................................................................ 40
Aircraft Repair and Replacement Parts......................................................................................................................... 41
Vessels .............................................................................................................................................................................41
Definition of Documented and Nondocumented Vessels ..............................................................................................41
Situs of Documented Vessels .........................................................................................................................................42
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Situs of Nondocumented Vessels ..................................................................................................................................43
Situs of Intercounty Ferryboats .................................................................................................................................... 43
Situs of Seagoing Vessels / Home Port Doctrine ........................................................................................................... 43
Application of Situs Determination ............................................................................................................................... 46
Situs of Linen Supply .......................................................................................................................................................47
Situs of Vending Equipment/Games ................................................................................................................................47
Situs of Containers ..........................................................................................................................................................47
Returnable Containers .................................................................................................................................................. 47
Semi-Permanent Containers ......................................................................................................................................... 48
Situs of Artificial Satellites ..............................................................................................................................................48
Situs of Racehorses. ........................................................................................................................................................48
Situs of Personal Property Owned by Members of the Armed Forces ............................................................................48
CHAPTER 4: VALUATION OF PERSONAL PROPERTY ...................................................................................49
REVIEW OF THE VALUE CONCEPT...................................................................................................................................49
APPROACHES TO VALUE .................................................................................................................................................50
Cost Approach ................................................................................................................................................................50
Reproduction Cost Approach.........................................................................................................................................51
Replacement Cost Approach ........................................................................................................................................ 51
Historical Cost Approach .............................................................................................................................................. 51
Variations of the Cost Approach ................................................................................................................................... 52
Valid Cost Components ................................................................................................................................................ 53
Direct and Indirect Costs .............................................................................................................................................. 53
Trade Level ................................................................................................................................................................... 63
Depreciation of Machinery & Equipment ......................................................................................................................70
Types of Depreciation Defined ......................................................................................................................................71
Methods of Estimating Depreciation and Value ........................................................................................................... 72
Limitations of the Cost Approach ................................................................................................................................. 81
Comparative Sales Approach ..........................................................................................................................................83
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Income Approach ............................................................................................................................................................85
Processing the Income Stream ......................................................................................................................................87
Vacancy (Idle Time) and Collection Losses.................................................................................................................... 87
Expenses ....................................................................................................................................................................... 87
Valuation Methodology ................................................................................................................................................ 88
Summary of the Income Approach ............................................................................................................................... 89
RECONCILIATION AND VALUE CONCLUSION ..................................................................................................................90
CHAPTER 5: ASSESSMENT OF IMPROVEMENTS RELATED TO BUSINESS PROPERTY .......................91
DEFINITIONS OF RELEVANT TERMS ................................................................................................................................91
Improvements ..................................................................................................................................................................91
Building Improvements ...................................................................................................................................................91
Landlord Improvements ..................................................................................................................................................92
Leasehold (or Tenant) Improvements..............................................................................................................................92
Structure Items ................................................................................................................................................................92
Fixtures ...........................................................................................................................................................................93
Types of Fixtures........................................................................................................................................................... 93
Trade Fixtures ............................................................................................................................................................... 93
Fixed Machinery and Equipment .................................................................................................................................. 94
CLASSIFICATION..............................................................................................................................................................95
Classification on the Property Statement ........................................................................................................................95
Why Classification is Important ......................................................................................................................................95
Fixtures are a Separate Appraisal Unit When Measuring Declines in Value ................................................................. 95
Fixtures may be a Separate Appraisal Unit for Supplemental Roll Purposes ................................................................ 96
Fixture Value Included in Value Criterion for Mandatory Audit.................................................................................... 97
APPRAISAL OF IMPROVEMENTS RELATED TO BUSINESS PROPERTY ...............................................................................97
General ...........................................................................................................................................................................97
Some Valuation Issues ....................................................................................................................................................98
New Construction ......................................................................................................................................................... 99
Valuation of Abandoned Leasehold Improvements.....................................................................................................100
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Valuation of Fixtures Under Decline in Value ..............................................................................................................101
DETERMINATION OF ASSESSEE .....................................................................................................................................102
COORDINATION IN THE ASSESSMENT OF LANDLORD IMPROVEMENTS AND LEASEHOLD IMPROVEMENTS
. .....................................................................................................................................................................................103
Establish a Comprehensive Set of Written Procedures Regarding Assessment of Landlord and Leasehold
Improvements
..................................................................................................................................................................................... 10
3
Clearly Identify Landlord and Leasehold Improvements on Appraisal Records
..................................................................................................................................................................................... 10
4
Coordination of Landlord and Leasehold Improvement Appraisal
..................................................................................................................................................................................... 10
4
CHAPTER 6: SPECIAL ISSUES
..................................................................................................................................................................................... 10
5
VALUATION OF OTHER TYPES OF PERSONAL PROPERTY
..................................................................................................................................................................................... 10
5
Leased Equipment
..................................................................................................................................................................................... 10
5
Assessability
................................................................................................................................................................................... 10
5
Assessee
................................................................................................................................................................................... 10
5
Leasing with Exempt Entities
................................................................................................................................................................................... 10
6
Situs
................................................................................................................................................................................... 11
0
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Description: Types of Leases
................................................................................................................................................................................... 11
1
Short-Term Leases
................................................................................................................................................................................... 11
1
Extended-Term Leases
................................................................................................................................................................................... 11
1
True Leases
................................................................................................................................................................................... 11
2
Conditional Sales Contracts or Financing Leases
................................................................................................................................................................................... 11
2
Valuation of Leased Equipment
................................................................................................................................................................................... 11
4
Supplies
..................................................................................................................................................................................... 11
4
Construction in Progress
..................................................................................................................................................................................... 11
5
Computer and Related Equipment
..................................................................................................................................................................................... 11
6
General Valuation
................................................................................................................................................................................... 11
6
Storage Media for Computer Programs
................................................................................................................................................................................... 11
6
SPECIAL CONSIDERATIONS
..................................................................................................................................................................................... 11
8
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Idle, Unused, or Obsolete Equipment
..................................................................................................................................................................................... 11
8
Equipment Purchased Used
..................................................................................................................................................................................... 11
8
Vehicles
..................................................................................................................................................................................... 12
1
Expensed Equipment
..................................................................................................................................................................................... 12
3
Containers
..................................................................................................................................................................................... 12
3
Liquefied Petroleum Gas Tanks
..................................................................................................................................................................................... 12
4
Oak Barrels
..................................................................................................................................................................................... 12
4
Animals and Migratory Livestock
..................................................................................................................................................................................... 12
5
Special Value Allowances
..................................................................................................................................................................................... 12
5
Works of Art
................................................................................................................................................................................... 12
5
Motion Pictures
................................................................................................................................................................................... 12
6
Business Records
................................................................................................................................................................................... 12
6
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October 2002
One-Way Paging Companies
..................................................................................................................................................................................... 12
6
Biopharmaceutical Industry Equipment and Fixtures
..................................................................................................................................................................................... 12
7
Possessory Interests
..................................................................................................................................................................................... 12
8
Pawn Shops
..................................................................................................................................................................................... 12
8
VALUATION OF AIRCRAFT AND VESSELS
..................................................................................................................................................................................... 12
8
BANKRUPTCY
..................................................................................................................................................................................... 12
9
Assessee of a Business in Bankruptcy Protection
..................................................................................................................................................................................... 12
9
Special Valuation Issues Surrounding Bankrupt Entities
..................................................................................................................................................................................... 12
9
CHAPTER 7: PROPERTY STATEMENTS ...........................................................................................................132
DISCOVERING ASSESSABLE PERSONAL PROPERTY.......................................................................................................133
OBTAINING STATEMENTS..............................................................................................................................................136
Filing Requirements. .....................................................................................................................................................136
Direct Billing ................................................................................................................................................................137
PROCESSING PROPERTY STATEMENTS ..........................................................................................................................138
Preliminary Review: Required Information .................................................................................................................138
Contents of Statement ................................................................................................................................................138
Situs .............................................................................................................................................................................138
Description of Property ...............................................................................................................................................139
Tax Day ........................................................................................................................................................................139
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Authorized Signature ...................................................................................................................................................140
Specific Sections of The Property Statement .................................................................................................................140
Part I: General Information .........................................................................................................................................141
Part II: Declaration of Property Belonging to You .......................................................................................................142
Supplies .......................................................................................................................................................................142
Construction-In-Progress (CIP).....................................................................................................................................143
Schedule A ...................................................................................................................................................................143
Schedule B: Proper Classification of Fixture and Structure Items (Schedule B) .........................................................143
Supplemental Schedule ...............................................................................................................................................144
Part III: Declaration of Property Belonging to Others .................................................................................................144
Inconsistent Reporting ..................................................................................................................................................144
Review of Previous Audit Findings ...............................................................................................................................145
Property Statement Checklist. .......................................................................................................................................145
Valuation .......................................................................................................................................................................147
Late Filings and Non-Filings ........................................................................................................................................147
Verification of Existing Business. .................................................................................................................................147
Business Close-Outs ......................................................................................................................................................148
Low Value Property (Low Value Ordinance)................................................................................................................148
Property Statements for Special Types of Property ......................................................................................................148
Aircraft.........................................................................................................................................................................149
Vessels .........................................................................................................................................................................149
Racehorses ..................................................................................................................................................................150
CHAPTER 8: PROPERTY TAX AUDITS .............................................................................................................151
AUDIT OBJECTIVE .........................................................................................................................................................151
STATUTORY PROVISIONS ..............................................................................................................................................151
GENERALLY ACCEPTED STANDARDS ...........................................................................................................................155
General Standards ........................................................................................................................................................156
Standards of Field Work ...............................................................................................................................................156
AUDIT SELECTION .........................................................................................................................................................156
Types of Audits ..............................................................................................................................................................157
Mandatory Audits ........................................................................................................................................................157
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Nonmandatory Audits .................................................................................................................................................157
Waivered Audits (Waiver of Statute of Limitations) ....................................................................................................157
Exempt Organization Audits ........................................................................................................................................158
California Counties Cooperative Audit Services Exchange (CCCASE) ...........................................................................159
Audits by Correspondence...........................................................................................................................................159
Office Audits ................................................................................................................................................................159
PREPARATION FOR AUDIT .............................................................................................................................................159
Review of Information ...................................................................................................................................................159
Contact assessee ...........................................................................................................................................................160
CONDUCTING AN AUDIT ...............................................................................................................................................161
Gather General Information Regarding Company ....................................................................................................... 162
Review Records .............................................................................................................................................................164
Verification of Machinery and Equipment. ..................................................................................................................164
Reconciliation of Sources.............................................................................................................................................164
Sampling to Confirm Accuracy .....................................................................................................................................165
Other Adjustments ......................................................................................................................................................165
Classification ................................................................................................................................................................166
Verification of Improvements ......................................................................................................................................166
Verification of Supplies ................................................................................................................................................166
Verification of Construction In Progress ......................................................................................................................166
Verification and Identification of Leased Equipment ...................................................................................................167
Items or Audits Requiring Special Attention ................................................................................................................168
In General ....................................................................................................................................................................168
Special Situations .........................................................................................................................................................168
Total Property Audits...................................................................................................................................................170
Audits of Leasing Companies .......................................................................................................................................171
INSPECTION OF PROPERTY ............................................................................................................................................174
AUDIT VALUATION AND SUMMARIZED FINDINGS ........................................................................................................174
Compare Audited Cost to Reported Cost ......................................................................................................................174
Audited Value ................................................................................................................................................................175
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Compare Audited Value to Assessed Value...................................................................................................................176
Final Product: Audit Work Papers ..............................................................................................................................176
Table of Contents ........................................................................................................................................................176
Summary of Findings ...................................................................................................................................................177
Audit Checklist .............................................................................................................................................................177
Audit Narrative ............................................................................................................................................................177
Other Working Papers .................................................................................................................................................177
Review by Supervisor ....................................................................................................................................................178
Notify assessee of findings ............................................................................................................................................178
Notice for Filing an Application....................................................................................................................................181
Processing Roll Changes ..............................................................................................................................................182
CHAPTER 9: ROLL PROCEDURES .....................................................................................................................183
IDENTIFYING ROLL ERRORS..........................................................................................................................................183
ESCAPE ASSESSMENTS ..................................................................................................................................................183
Tax Rate and Interest ....................................................................................................................................................185
Penalty ..........................................................................................................................................................................185
Statute of Limitations ....................................................................................................................................................186
Notice of Proposed Escape Assessment ........................................................................................................................186
Entry on Roll .................................................................................................................................................................187
ROLL CORRECTIONS......................................................................................................................................................187
REFUNDS .......................................................................................................................................................................188
BASE YEAR VALUE CORRECTIONS ...............................................................................................................................189
SUMMARY OF REVENUE AND TAXATION CODE SECTIONS REGARDING ROLL PROCEDURES ......................................189
CHAPTER 10: MORGAN PROPERTY TAXPAYERS' BILL OF RIGHTS......................................................192
LEGISLATIVE INTENT ....................................................................................................................................................192
NOTICE OF PROPOSED ESCAPE ASSESSMENT................................................................................................................193
RECORDS AVAILABLE TO THE ASSESSEE
..................................................................................................................................................................................... 19
3
RIGHT TO APPEAL
..................................................................................................................................................................................... 19
4
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APPENDIX A: IMPROVEMENTS AS STRUCTURE ITEMS VERSUS FIXTURES
..................................................................................................................................................................................... 19
6
APPENDIX B: COORDINATION OF LANDLORD AND LEASEHOLD IMPROVEMENT APPRAISALS
..................................................................................................................................................................................... 20
1
DEVELOP AN INTER-DEPARTMENTAL MEMORANDUM FOR COORDINATION
..................................................................................................................................................................................... 20
1
Description of Method
..................................................................................................................................................................................... 20
1
APPENDIX C: DEFINITION OF SALES TAX BUSINESS CLASSIFICATION CODES
..................................................................................................................................................................................... 20
6
APPENDIX D: SAMPLE BUSINESS PROPERTY STATEMENT
..................................................................................................................................................................................... 20
8
APPENDIX E: SAMPLE AUDIT CHECKLIST
..................................................................................................................................................................................... 21
1
APPENDIX F: SAMPLE STATUTE OF LIMITATIONS WAIVER
..................................................................................................................................................................................... 21
6
APPENDIX G: SAMPLING
..................................................................................................................................................................................... 21
7
GENERAL
..................................................................................................................................................................................... 21
7
Representativeness
..................................................................................................................................................................................... 21
7
Sample Size
..................................................................................................................................................................................... 21
8
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Stratification
..................................................................................................................................................................................... 21
9
Measurement.
..................................................................................................................................................................................... 22
0
Outliers
..................................................................................................................................................................................... 22
0
VALIDITY OF RESULTS
..................................................................................................................................................................................... 22
0
SUMMARY
..................................................................................................................................................................................... 22
1
APPENDIX H: APPLICATION OF THE MARKET METHOD
..................................................................................................................................................................................... 22
2
DEVELOPING COMBINED FACTORS
..................................................................................................................................................................................... 22
3
Method 1: Compute Changes Between Current Lien Date and Previous Years
..................................................................................................................................................................................... 22
3
Example
................................................................................................................................................................................... 22
3
Method 2: Compute Historical Changes in Price
..................................................................................................................................................................................... 22
3
Example
................................................................................................................................................................................... 22
4
SUMMARY
..................................................................................................................................................................................... 22
4
APPENDIX I: LIFING STUDIES
..................................................................................................................................................................................... 22
5
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DATA SOURCES
..................................................................................................................................................................................... 22
6
GENERAL STEPS
..................................................................................................................................................................................... 22
7
Calculating the Survivor Curve
..................................................................................................................................................................................... 22
7
Matching to Known Patterns of Survival
..................................................................................................................................................................................... 22
8
Applying the Parameters of the Matching Curve
..................................................................................................................................................................................... 22
8
APPENDIX J: SUMMARY OF COURT CASES
..................................................................................................................................................................................... 23
5
GLOSSARY OF TERMS
..................................................................................................................................................................................... 24
3
BIBLIOGRAPHY
..................................................................................................................................................................................... 25
4
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Chapter 1
C HAPTER 1: INTRODUCTION
W HAT I S TAXABLE
Article XIII, section 1 of the California Constitution defines taxable property: Unless otherwise provided
by this Constitution or the laws of the United States.
(a)
All property is taxable and shall be assessed at the same percentage of fair market
value. When a value standard other than fair market value is prescribed by this Constitution or by
statute authorized by this Constitution, the same percentage shall be applied to determine the assessed
value. The value to which the percentage is applied, whether it be the fair market value or not, shall be
known for property tax purposes as the full value.
(b)
All property so assessed shall be taxed in proportion to its full value.
All property is taxable (or assessable) unless it is exempt by the Constitution or statutes.2 This taxable
property may be defined as real property and personal property. This section of the Assessors' Handbook
deals with appraisal and assessment procedures for taxable personal property and fixtures, and it includes
discussions of property tax audits, roll changes, and reporting requirements.
W HAT I S T AXABLE P ERSONAL PROPERTY
Real property is specifically defined by the law. Real property, or real estate, is:
(a)
The possession of, claim to, ownership of, or right to the possession of land.
(b)
All mines, minerals, and quarries in the land, all standing timber whether or not
belonging to the owner of the land, and all rights and privileges appertaining thereto.
(c)
Improvements.3
2
The county assessor is responsible for the assessment of most property. However, the California Constitution (article XIII,
section 19) requires the Board of Equalization to assess property (except franchises) owned or used by regulated railway,
telegraph or telephone companies, car companies operating on railways in the state, and companies transmitting or selling
gas or electricity. The California Constitution also requires the Board to assess pipelines, flumes, canals, ditches, and
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Chapter 1
aqueducts lying within two or more counties. The assessed values as determined by the Board (except for the railway car
companies) are allocated to the counties and other local tax jurisdictions.
3
Revenue and Taxation Code section 104. (All section references in this section of the Assessors' Handbook refer to Revenue
and Taxation Code sections unless otherwise noted.)
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Personal property, on the other hand, is defined by exception; personal property is all property except real
estate.4 Tangible personal property is defined as all "property that may be seen, weighed, measured, felt,
or touched, or which is in any manner perceptible to the senses" except real property as defined above.5
Not all property defined as personal property is taxable. Unlike real property, personal property may, in
whole or in part, be exempted by the Legislature. Examples of current exemptions provided by legislative
statute include: business inventories, personal household furnishings, personal effects, and pets. But, in
general, personal property remains taxable.6
Assessment of taxable personal property relies on the same basic value concepts applicable to real
property, and both are taxed at the same maximum percentage (1 percent) of full cash value (or market
value).7 However, personal property is treated differently in many other respects. Some of the most
notable differences, also identified in Assessors' Handbook Section 501 (AH 501), Basic Appraisal,8
are:
•
Special assessments are levied on real property only.9
•
The Legislature has wide authority pursuant to article XIII, section 2, of the Constitution
concerning the taxation and/or exemption of personal property.
•
Personal property cannot be assessed to insurance companies or banks;10 fixtures
are assessable, however.
•
Real property is governed by article XIII A (and assigned a base year value), while
personal property is appraised at market value annually.11
•
There is no taxable possessory interest in personal property, except as provided for
in section 201.5.
•
Before declines in value can be recognized, machinery and equipment classified
as improvements must be separated from other improvements.12
4
Section 106.
5
Rule 123 of Title 18 of the California Code of Regulations. (All rule references in this section of the Assessors' Handbook
refer to the Property Tax Rules in Title 18 of the California Code of Regulations.)
6
Regarding the treatment of intangible assets and rights, see the discussion in AH 502, commencing at page 150.
7
California Constitution, article XIII, section 1 and article XIII A, section 1. The Article XIII A, section 1(b) 1 percent
limitation does not apply to bonded indebtedness.
8
All references to Assessors' Handbook sections refer to handbooks published and produced by the California State Board of
Equalization. Publication dates will vary and will be noted, with page numbers, if specific to the discussion.
9
Section 3972 defines special assessment to mean "any assessment levied pursuant to any of the improvement acts of the
State of California, whether or not represented by a bond, and which are liens upon a specific parcel of real property."
10
California Constitution, article XIII, sections 27 and 28 and Revenue and Taxation Code section 23182.
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Manufactured homes and floating homes, although classified as personal property, are assessed in the same manner as real
property. See section 229 and sections 5802 et. seq.
11
12
Section 51(d), Rule 461(e).
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Chapter 1
An appraiser or auditor-appraiser assessing personal property should be familiar with the differences listed
herein, as well as other basic appraisal concepts as discussed in AH 501, Basic Appraisal, and generally
accepted accounting principles (GAAP). This handbook section builds on that basic understanding with a
focus on guidelines for the appraisal and assessment of personal property, as it differs from real property,
and fixtures.
G ENERAL O VERVI EW OF THE S EVEN F ACTORS OF AN ASSESSMENT
The making of an assessment requires the determination of seven factors for that assessment to be proper
and complete. These seven factors are especially important regarding personal property and fixtures
because they can be difficult to determine and they often tend to change. The seven factors are
Assessability, Assessee, Situs, Description, Classification, Security, and Value.
A brief description of each of the factors is included here as a foundation for additional information
presented in the text. A more thorough study of Situs, Classification, and Value is necessary to make an
accurate assessment of personal property and fixtures; these factors are each discussed in detail in separate
chapters of this manual.
A S S E S S A B I L I T Y O F PROPERTY
T A X A B L E P R O P E R T Y V . E X E M P T PROPERTY
In the making of an assessment, the first determination is whether the property is taxable (or assessable)13
or exempt. As previously noted, article XIII, section 1 of the California Constitution states that, unless
otherwise exempt as provided by the State Constitution or the laws of the United States, all property is
taxable. While real property may be exempt specifically by the State or U.S. Constitution only, the
Legislature has been granted general power to exempt personal property in whole or in part. Article XIII,
section 2 of the California Constitution states, in part:
The Legislature may provide for property taxation of all forms of tangible personal property, shares of
capital stock, evidences of indebtedness, and any legal or equitable interest therein not exempt under any
other provision of this article. The Legislature, two-thirds of the membership of each house concurring,
may classify such personal property for differential taxation or for exemption.
Personal property is and can be exempt by reason of its ownership, use, and/or type. For example,
personal property owned by banks, financial corporations, and insurance companies is exempt by
ownership14 while property used by free public libraries is exempt by use.15 Business
13
For purposes of property tax assessment and this text, "taxable" and "assessable" are used almost synonymously.
"Assessable" has the same meaning as "taxable" as used earlier in this chapter and in AH 501.
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California Constitution, article XIII, section 28 prohibits taxation of personal property to insurance companies. California
Constitution, article XIII, section 27 and Revenue and Taxation Code section 23182 provides for
14
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Chapter 1
inventories and household personal property are exempt by type.16 Property may be exempt by one or
more of these reasons. For instance, section 241 exempts from property taxation the first
$50,000 of employee-owned hand tools.17 This is an exemption by ownership and use.
Certain exemptions exist under the State or U.S. Constitution, apart from Legislative enactment, due to a
lack of tax assessment jurisdiction. For example, personal property on certain military reservations
(federal enclaves) and Indian reservations is immune from taxation due to lack of jurisdiction.
Article XIII, section 3 and the 200 and 900 sections of the Revenue and Taxation Code identify real and
personal property exemptions as granted by the Constitution and the Legislature, respectively. It is
important for an appraiser to be aware of exemptions in general in order to determine the assessability of
the property being appraised. It is also important to note that not all exemptions are automatic. Some are
allowed only if appropriate forms are filed timely.18 In these cases, the property remains assessable unless
an exemption claim is filed and approved.
S T A T U T E O F LIMITATIONS
Sections 51.5 and 532 establish Statutes of Limitations on the assessor, which affect the assessability of
property. Although a property itself is not exempt, an assessment must be made timely to be valid.
Unless the assessee intentionally evades taxation, as discussed in sections 502, 503, and subdivision (c) of
51.5, an assessment must normally be made within four years of the assessment period in which the
property escaped assessment or was underassessed. (This topic is discussed further in Chapter 9, Roll
Procedures.)
L I E N DATE
Sections 2192 and 722 identify the lien date as January 1.19 Personal property is assessable only if taxable
on this date.
Following is an example of how the lien date affects the assessment as determined by the assessor:
exemption of personal property owned by banks and financial corporations; this exemption does not apply to personal
property owned by federal credit unions.
15
California Constitution, article XIII, section 3.
16
Section 219 and section 224, respectively.
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October 2002
Chapter 1
Section 241 was amended to increase the exemption allowed from $20,000 to $50,000, beginning with the January 1, 2002
lien date.
17
18
Contact the county assessor and/or see Assessors' Handbook Section 222 (AH 222), Standard Form List, Section 267
(AH 267), Welfare, Church, and Religious Exemptions, and Section 265 (AH 265), Cemetery Exemption, for information
regarding exemptions and requirements necessary to qualify and receive an exemption.
19
Effective January 1, 1997, the lien date for locally assessed property was changed from 12:01 a.m. March 1, to 12:01 a.m.
January 1.
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EXAMPLE 1.1 LIEN
DATE
On the lien date, January 1, 2002, a boat owned by owner A is located in Sacramento. The
assessee (owner A) sells the vessel to a boat dealer (owner B) on January 15, 2002. It becomes
inventory to owner B on that date.
Owner A receives a tax bill for the fiscal year July 1, 2002, through June 30, 2003, for the
assessment of the vessel. The assessee does not own the boat during the fiscal year the bill
covers, but the bill is valid based on ownership on the lien date (owner A was the owner on the
lien date, January 1, 2002). Taxes on unsecured property are due on the lien date.
If the sale were reversed, and the dealer sold the boat to owner A after the lien date, the boat
would be exempt as inventory even though owner A owned the boat from January 15
through June 30, 2002. Generally, ownership on the lien date determines the taxability, situs, and
assessee of the property.
A S S E S S E E O F PROPERTY
In determining the assessee, the assessor is not limited to only the fee owners of the property. Sections 405
and 611 authorize the assessor to assess the owners, persons in possession or control, joint assessees,
and/or unknown owners of any property.
O W N E R , O N E W H O I S I N P O S S E S S I O N O R CONTROL
Section 405 identifies the assessee as the "persons owning, claiming, possessing, or controlling it on the
lien date." Under most circumstances, this will be the owner. However, the assessee may be one who is
simply in possession or control although not the legal owner. This is often the case with leased equipment
and improvements related to business property.
It is important that the assessee's name is accurately spelled or abbreviated. A person must be able to
reasonably ascertain that he or she is the assessee. "A mistake in the name of an owner or supposed owner
of property on the unsecured roll which does not prevent the person from reasonably ascertaining that he
or she is the assessee does not render invalid an assessment or any tax sale."20
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20
Section 613.
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Assessee of Leased Equipment
With regard to leased equipment, either the lessor or the lessee may be the assessee. Typically:
•
if the lease is a true lease, the lessor is considered the owner;
•
if the lease is a finance lease or conditional sales contract, the lessee is technically the
owner, and may be the assessee.
However, in practice, leasing transactions can be complicated and the determination of the assessee may
not be straightforward. For example, if the lessor is unknown (in either case listed above) the lessee may
be assessed. If the lessor is a bank or financial institution (financial corporation) which is exempt from
personal property taxes, section 235 provides that the lessee is the owner (and therefore the assessee) for
assessment purposes. Communication with the two parties to the lease and/or review of the lease or
financing agreement helps to alleviate problems. (See also discussion of leased equipment in Chapter 4
and Chapter 6).
Assessee of Improvements
Improvements can also cause similar problems in identifying the assessee. Improvements installed by
tenants may be assessed to either the landlord (the lessor) or the tenant (the lessee). Nevertheless,
improvements that are considered an integral part of the landlord's structure are generally assessed to the
landlord on the secured roll. Fixtures owned by the tenant, which are improvements by definition (section
105), and tenant-owned fixed machinery and equipment are assessed to the tenant on the unsecured roll.
However, as with leased equipment, the assessee should be determined according to facts specific to each
case.
Again communication with the two (probable) assessees is helpful, but the appraiser's and auditorappraiser's cooperation also assists in resolving problems and clarifying factual questions. As will be
discussed later in the manual, Chapter 2, Classification, and Chapter 5, Assessment of Improvements
Related to Business Property, the two appraisers should review the lease agreement and coordinate their
fact-gathering efforts where ambiguity exists.
J O I N T ASSESSEES
In every situation an effort should be made to determine the appropriate assessee. It is preferable to assess
only one party to avoid administrative difficulties, but the assessor has the authority to assess taxable
property to the lessor, the lessee, or both parties.21
When both parties are assessed, tax bills are required to be sent to both parties. This requirement presents
a difficulty in that dual tax bills may result in dual payments. The assessor cannot indicate primary and
secondary liabilities; the property tax statutes do not recognize such differences. Should both persons pay
the tax, the tax collector must accept the first payment and return the second. Therefore, the assessor
should confine the joint assessment procedure to those cases in which a collection problem is anticipated.
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21
Chapter 1
Section 405(b).
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Chapter 1
U N K N O W N OWNER
In contrast to section 405, section 611 requires the assessor to assess property to unknown owners if the
owner of the property is not known. If the property is assessed to unknown owners, the property may be
seized and sold in order to pay property taxes.22
S I T U S O F PROPERTY
Pursuant to the California Constitution, article XIII, section 14, all property taxed by local government
shall be assessed in the county, city, and district in which it is situated. Thus, situs determination is
important.
Situs is seldom a problem with property that remains in one location, as in the case of real property, but
many problems are encountered when determining the situs of movable property such as personal
property. Rules 201 through 206 were adopted to deal with situs problems involving movable property.
A complete discussion of these rules and situs in general is included in Chapter 3 of this manual.
D E S C R I P T I O N O F PROPERTY
An accurate assessment requires a description of the property assessed. Personal property, as required by
section 445, must be described in the detail requested on the property statement. The description includes
the cost of the property, if the information is within the knowledge of the assessee or is available to
him/her from his/her own or other records.23
The property statement, mandated by section 441, is a vital link in the communication system between the
property owner and the assessor. It requests a variety of information regarding taxable property needed by
the appraiser and/or auditor-appraiser for making an annual review and accurate assessment of the
property. A detailed discussion of property statements, the nature of the reporting process, and variations
of property statements related to different types of property is found in Chapter 7 of this manual.
C L A S S I F I C A T I O N O F PROPERTY
In accordance with the California Constitution and related statutes, all property on the roll must be
classified as land, improvements, or personal property.24 Rules 121 through 124 identify the proper
classification. Classification is one of the more complex and important of the seven factors of a legal
assessment. It is covered in detail in a separate chapter (Chapter 2) of this manual.
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Chapter 1
22
Weyse v. Crawford (1890) 85 Cal. 196.
23
Section 445.
24
California Constitution, article XIII, section 13 and sections 602 and 607 of the Revenue and Taxation Code.
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S E C U R I T Y O F PROPERTY
An assessment roll, as defined in section 109, is the entire listing of all taxable property within the
county.25 (The assessor actually prepares two separate rolls each year: the regular assessment roll and
the supplemental assessment roll.) The assessment roll consists of two parts—secured and unsecured.
S E C U R E D P R O P E R T Y DEFINED
The "secured roll" is that part of the roll containing state assessed property and property the taxes on which
are a lien on real property sufficient, in the opinion of the assessor, to secure payment of the taxes.26 The
taxes on the secured roll are a lien on the real property.
U N S E C U R E D P R O P E R T Y DEFINED
The remainder of the roll is the "unsecured roll."27 The taxes on the unsecured roll are a personal liability
of the assessee.
Assessments on the two parts of the roll have different due dates, delinquency dates, and tax collection
procedures. In addition, in any given year, the tax rates between the secured and unsecured rolls may be
different; the tax rate on the unsecured roll is the rate "for the preceding tax year upon property of the
same kind where the taxes were a lien upon land sufficient in value to secure their payment."28 Therefore,
it is necessary to determine whether each assessment will be listed on the secured or the unsecured roll.
S E C U R I N G P E R S O N A L PROPERTY
Most personal property has a degree of mobility; it can be moved from location to location or out of the
taxing jurisdiction in which it had situs on the lien date. This can create difficulties in tax collection. It is
therefore desirable to secure personal property to real property, which has a fixed situs, to facilitate
payment of the taxes.
In determining whether personal property may be placed on the secured roll, the assessor is guided by
sections 2189 et seq. and by Assessors' Handbook Section 201 (AH 201), Assessment Roll Procedures.
Under section 2189, personal property may be placed on the secured roll when the property is physically
located on the real property on the lien date and is assessed to the person or entity which owned the real
property. Upon assessee request, personal property at a different location may also be secured to real
property under section 2189.3; this is known as cross-securing. When personal property is cross-secured,
the assessor will determine whether or not the real property is sufficient to secure the payment of the
taxes. If so, a Certificate of Security for taxes on personal property will be issued which must be recorded
with the county recorder on or before the lien date.
25
The entire assessment roll includes the "local roll" which is the county assessor's duty to assess, and the "Board roll," which
is part of the secured roll, containing state assessed property.
26
Section 109.
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27
Section 109.
28
California Constitution, article XIII, section 12.
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When personal property is secured to real property and the real property (but not the personal property) is
sold after the lien date but before the assessment is made, administrative difficulties may occur. The new
owner of the realty may be assessed for personalty that he or she never owned or possessed. In this case,
even though the initial assessment was valid due to the conditions on the lien date, the assessor is required
to transfer the personal property assessment to the unsecured roll.29
V A L U E O F PROPERTY
Value, for property tax purposes, is market value. This is the price (the amount of money) that a property
will bring when it is sold in an open market. It is a dollar amount determined by the utility of the property,
as manifested through the purchasing power of those who are interested in acquiring it, the relative
scarcity of the commodity, and the difficulty involved in overcoming this scarcity. In other words, value
(market value) is determined by supply and demand.30
The California Supreme Court, in a benchmark decision, defined the term market value as used in the
context of property tax assessment.
It provides, in other words, for an assessment at the price that property would bring to its owner if it were
offered for sale on an open market under conditions in which neither buyer nor seller could take advantage
of the exigencies of the other. It is a measure of desirability translated into money amounts . . . and might
be called the market value of property for use in its present condition.31
Similarly, the Legislature has defined the term in sections 110 and 110.1. Section 110(a) states:
Except as is otherwise provided in Section 110.1, "full cash value" or "fair market value" means the
amount of cash or its equivalent that property would bring if exposed for sale in the open market under
conditions in which neither buyer nor seller could take advantage of the exigencies of the other, and both
the buyer and the seller have knowledge of all of the uses and purposes to which the property is adapted
and for which it is capable of being used, and of the enforceable restrictions upon those uses and purposes.
Of the seven factors in an assessment, value is consistently the most difficult. AH 501, Basic Appraisal,
includes a comprehensive study of the value concept in general and an in-depth discussion of value as
applied to real property.32 In many respects, the same basic principles discussed in that section apply to
personal property. However, unlike most real property, personal property is assessed at market value
every year; it is not governed by the value limitations under Proposition 13 (California Constitution,
article XIII A). Except for manufactured homes and floating homes, there is no base year value for
personal property and
29
Section 2189.
30
Supply and demand are the market effects of scarcity and utility.
31
De Luz Homes Inc. v. County of San Diego (1955) 45 Cal.2d 546, 561-562.
32
Valuation of personal property is also discussed briefly in AH 501, Chapter 7.
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the appraisal date is always the lien date, January 1. Further discussion of value, specific to personal
property and fixtures, is a major portion of this section of the Assessors' Handbook. It is included in
Chapter 4, Valuation of Personal Property, Chapter 5, Assessment of Improvements Related to Business
Property, and Chapter 6, Special Issues.
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C HAPTER 2: CLASSIFICATION
IMPORTANCE OF CLASSIFICATION
Classification is an important and required factor of the (local) assessment function for several reasons.33
Principally, it is important because property tax law requires that land, improvements (including fixtures),
possessory interests, personal property, and other classes of property (as defined by the State Board of
Equalization) must have separately assessed values shown on the roll.34 It is also significant because of
the assessment differences between real property and personal property, which include the following: (1)
special assessments are levied only on real property, (2) the tax rate on personal property on the unsecured
roll is the rate of tax on personal property on the prior year's secured roll,35 (3) personal property is
appraised annually at market value and not governed by article XIII A of the California Constitution, and
(4) fixtures are a separate appraisal unit when measuring declines in value.
GENERAL CLASSIFICATION TYPES AS REQUIRED BY LAW
Section 602 provides, in part, that the local roll shall show:
(e)
(f)
(g)
owner of the land.
(h)
(i)
The assessed value of real estate, except improvements.
The assessed value of improvements on the real estate.
The assessed value of improvements assessed to any person other than the
The assessed value of possessory interests.
The assessed value of personal property, other than intangibles.
This means that all property listed on the roll must be classified as (1) land, which is all real property
except improvements, (2) improvements, (3) possessory interests, (4) personal property, or any other
things required by the Board.36
33
Classification does not apply to state assessed properties. "The Board may use the principle of unit valuation in valuing
properties of an assessee that are operated as a unit in a primary function of the assessee. In valuing such properties, the
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Board must appraise them at their full values when put to their beneficial and productive uses. Unit taxation prevents real
but intangible value from escaping assessment and taxation by treating public utility property as a whole, undifferentiated
into separate assets such as land or buildings, or even separate kinds of assets such as realty or personalty." GTE Sprint
Communications Corp. v. Alameda County (1994) 26 Cal.App.4th 992.
34
Rule 252, and sections 602 and 607.
35
California State Constitution, article XIII, section 12.
36
Section 602(l). Per section 20, the word "Board" means the State Board of Equalization.
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Each class of separately enrolled property is defined in the Revenue and Taxation code (sections 103, 104,
105, 106, and 107) and by Title 18 of the California Code of Regulations (Rules 121, 122, 122.5, 123,
124, and 131). Some of the definitions are summarized here for ease of use and reference.
LAND
Land is identified by section 602(e) as real estate, or real property, except improvements. It includes:
(a)
The possession of, claim to, ownership of, or right to the possession of land.
(b)
All mines, minerals, and quarries in the land, all standing timber whether or not
belonging to the owner of the land, and all rights and privileges appertaining thereto.37
IMPROVEMENTS
Section 105 defines improvements as:
(a)
All buildings, structures, fixtures, and fences erected on or affixed to the land.
(b)
All fruit, nut bearing, or ornamental trees and vines, not of natural growth, and not
exempt from taxation, except date palms under eight years of age.
Examples of property generally classified as improvements are listed in Rule 124(b). The listing is a guide
to classification of those named and similar items.
For valuation purposes, all improvements should be subclassified as structure items or fixtures. This
separation and distinction is extremely important and encompasses a large portion of the discussion in the
remainder of the chapter.
P E R S O N A L PROPERTY
Personal property includes all property except real estate.38 It is property that may be exempted, in whole
or in part, by the Legislature. A discussion of personal property categories (taxable and exempt) is
included in a later portion of this chapter.
CLASSIFICATION FOR VALUATION PURPOSES
As required by law for enrollment purposes, property must be classified as land, improvements, or
personal property - pursuant to the definitions provided in the previous section. For valuation purposes,
however, property is categorized as land, structure items (improvements), fixtures (improvements), and
personal property.
37
Section 104(a) and (b). See also Rule 121.
38
Section 106.
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I M P R O V E M E N T S (S T R U C T U R E V . FIXTURE)
Both structure items and fixtures are improvements; they are not taxed separately. However, they are
treated differently and separately for valuation purposes. It is therefore important to discuss and
understand the terms in order to classify the improvements properly.
S T R U C T U R E ITEM
A structure item (or improvement) is "an edifice or building; an improvement."39 It is an item commonly
referred to as an improvement. The Business Property Statement defines structure as an improvement
whose:
. . . primary use or purpose is for housing or accommodation of personnel, personalty, or fixtures and has
no direct application to the process or function of the industry, trade, or profession.
FIXTURE
In contrast to structure, fixture is a somewhat vague term in that it has different meanings to different
people. For example, certain items (such as bathroom 'fixtures') may be denoted as "fixtures" by a
business owner or an accountant, even though the property tax appraiser classifies them as structure
improvements (rather than fixture improvements) for assessment purposes.
For assessment purposes, pursuant to Rule 122.5, a fixture40 is:
. . . an item of tangible property, the nature of which was originally personalty, but which is classified as
realty for property tax purposes because it is physically or constructively annexed to realty with the intent
that it remain annexed indefinitely.
In discussions with taxpayers and accountants, the auditor-appraiser should keep in mind that the concept
of fixtures for assessment purposes is not necessarily the same concept used by taxpayers. Where there is
a contradiction between the assessee's or accountant's concept of classification and the express language of
statutory and rule provisions, the statutes and rules are controlling for assessment purposes.
T H R E E T E S T S F O R D E T E R M I N I N G W H E T H E R A N A R T I C L E I S A FIXTURE
In determining whether an article is a fixture, the application of the three tests set forth in Rule
122.5 must be applied to the evidence available. The three tests are:
Physical Annexation (manner of annexation),
Constructive Annexation (adaptability), and
•
•
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39
Appraisal Institute, The Dictionary of Real Estate Appraisal, s.v. "structure."
40
For property tax assessment purposes, fixtures include trade fixtures and fixed equipment. See also Chapter 5,
Assessment of Improvements Related to Business Property.
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Intent.
•
P H Y S I C A L A N N E X A T I O N (TEST)
The term "affixed to land" is the key to the physical annexation test. Section 660 of the Civil Code
includes a definition of the term, which reads in part as follows:
A thing is deemed to be affixed to land when it is attached to it by roots, as in the case of trees, vines, or
shrubs; or imbedded in it, as in the case of walls; or permanently resting upon it, as in the case of
buildings; or permanently attached to what is thus permanent, as by means of cement, plaster nails, bolts,
or screws. .
..
Thus, the test for physical annexation under Rule 122.5(b)(1) may be summarized as follows:
•
If the property being classified cannot be removed without substantially damaging it or
the real property with which it is being used, it is considered physically annexed. It is classified as a
fixture.
•
If the property can be removed without material damage but is actually attached, it is
classified as a fixture, unless there is an intent manifested by outward appearance or historic usage, that
the item is to be moved and used at other locations.
•
Property may be considered physically annexed if the weight, the size, or both are such
that relocation or removal of the property would be so difficult that the item appears to be intended to
remain in place indefinitely.
•
Property shall not be considered physically annexed to realty solely because of
attachment to the realty by "quick disconnect" attachments, such as simple wiring and conduit
connections.
C O N S T R U C T I V E A N N E X A T I O N (TEST)
An item may be classified as a fixture even if it is not physically fastened to a building or other structure.
This is the concept of constructive annexation, the second test. Constructive annexation per Rule
122.5(c)(1) may be summarized as follows: if the property is not physically annexed to realty, but is a
necessary, integral, or working part of the realty, it is constructively annexed. Factors to be considered
are: (1) is the nonattached item designed and/or committed for use with specific realty, and/or (2) whether
the realty can perform its desired function without the nonattached item.
Constructive annexation, as well as physical annexation, is "installation specific." As such, visual
inspection of the actual annexation or relationship of the item to the real property or improvements may be
necessary. If the installation and/or removal aspects of the item remain unclear even after visual
inspection, further information should be requested from the assessee. For instance, the assessee may be
requested to provide the detailed procedures involved in the installation or removal of the item and an
accounting of all costs before a final determination can be made.
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Following is a list of items, which were formerly personal property, that are classified as improvements
due to constructive annexation based on decisions of the court (and information specific to each case).
The list should serve as a guideline for determining whether an item is classified as an improvement using
the test of constructive annexation.
EXAMPLE 2.1
PROPERTY CLASSIFIED AS FIXTURES (IMPROVEMENTS) DUE TO CONSTRUCTIVE ANNEXATION
A ship anchored at a specially constructed pier. The support lines for water, sewage, air
conditioning, heating, etc. were of a type used for permanent rather than temporary installation; motive power
for the ship was partly removed and the rest permanently disabled; the ship could be moved only at great expense
and could not be moved beyond the harbor; and extensive land-based facilities including roads, bridges, and a
parking lot were constructed especially for the visitors to the ship. Specialty Restaurants, Corp. v. Los Angeles
County (1980) 111 Cal.App.3d 607 (Queen Mary case).
•
Cranes mounted on specially installed rails at a wharf area. The area of the wharf containing the
rails was extensively reinforced to accommodate the great weight of the cranes. Without the cranes, the facility
could not function in consonance with its purpose and design. Seatrain Terminals of California, Inc. v. County of
Alameda (1978) 83 Cal.App.3d 69.
•
Movable structures anchored to realty by the force of gravity. Rinaldi v. Goller (1957) 48 Cal.2d
276.
•
Portable buildings, platforms, tracks, machinery and shipyard equipment owned by the
government and located on private property. The government's contractual right to remove its buildings and fixed
equipment did not affect classification of the items as improvements for property tax purposes. Kaiser Co. v. Reid
(1947) 30 Cal.2d 610.
•
Pumps of such a size they are not easily moved and from outward appearances, to third parties,
appear to be permanent. Bell v. Bank of Perris (1942) 52 Cal.App.2d 66.
•
Vault doors, although removable without damage to the vault, are functionally and physically
integrated with the vault itself. Vaults alone without doors would not be useful as vaults and would fail in their
intended purpose. San Diego Trust & Savings Bank v. County of San Diego (1940) 16 Cal.2d 142.
•
•
Head sets and stools specially designed for use with affixed central telephone office
equipment.
Southern California Telephone Company v. State Board of Equalization (1938) 12 Cal.2d 127.
I N T E N T (TEST)
Intent is the most important of the three tests and may be the deciding factor regarding classification of
property. Rule 122.5 (d)(1) states:
Intent is the primary test of classification. Intent is measured with-not separately from-the method
of attachment or annexation. If the appearance of the item indicates that it is intended to remain
annexed indefinitely, the item is a fixture for property tax purposes. Intent must be inferred from what is
reasonably
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manifested by outward appearance. An oral or written agreement between parties, such as a contract
between lessor and lessee, is not binding for purposes of determining intent. [Italics added.]
Intent must be determined by physical facts, and is the means of applying the physical and constructive
annexation tests. For instance, great expense or difficulty in removal is indicative of intended
permanence.41 Intent cannot be a hidden matter, but is "reasonably manifested by outward appearances."42
If an item appears physically attached to real property, an appraiser can assume that the intent of the
annexation is that the item will remain attached unless there is other evidence that indicates the attachment
is only temporary.
The guiding precedent for determining intent is the California Supreme Court case, Crocker National
Bank v. City & County of San Francisco (1989) 49 Cal.3d 881. Here the Court found that computer
equipment is personalty even when a newly constructed building includes a data processing center. The
inclusion of safety, security, cooling, power, and fire suppression systems designed into the building
specifically for the computer center did not change the classification of the equipment from personalty to a
fixture. Excerpts from the decision provide instruction on the importance of intent:
. . . in determining whether an item constitutes a fixture, three criteria must be taken into consideration:
(1) the manner of its annexation to the realty; (2) its adaptability to the use and purpose for which the
realty is used; and (3) the intention with which the annexation is made. It is also settled that for tax
purposes, the "intention" must be determined by the physical facts or reasonably manifested outward
appearances.
. . . In resolving whether an item placed on the premises constitutes a fixture or personal property, the
aforelisted three elements do not play equal parts. In making the determination in a particular case, the
element of intent is regarded as a crucial and overriding factor, with the other two criteria being
considered only as subsidiary ingredients relevant to the determination of intent.
Because the
legal problem here is taxability,
and because the "intent" here is constructive
and not actual, the test reduces itself to whether a reasonable person would consider the item to be a
permanent part of the property, taking into account annexation, adaptation, and other objective
manifestations of permanence. . . .
Finally, there are no other objective manifestations of permanence that are sufficient to outweigh the
manifestations revealed by the evidence bearing on annexation and adaptation - viz., that the [computer]
equipment did not constitute a permanent part of the building.
Accordingly, we conclude that a
reasonable
41
Morse Signal Devices v. County of Los Angeles (1984) 161 Cal.App.3d 570, Allstate Insurance Co. v. County of Los Angeles
(1984) 161 Cal.App.3d 877, Security Pacific National Bank v. Los Angeles County (1984) 161 Cal.App.3d 877, Crocker National
Bank v. City and County of San Francisco (1989) 49 Cal.3d 881.
42
Trabue Pittman Corp. v. County of Los Angeles (1946) 29 Cal.2d 385, 397.
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person, taking into account annexation, adaptation, and other objective manifestations of permanence,
would not consider the equipment at issue to constitute a permanent part of the building. [Emphasis
added.]
I M P O R T A N C E O F C L A S S I F I C A T I O N A S S T R U C T U R E V E R S U S FIXTURE
As mentioned earlier, it is important to sub-classify improvements as structure items or fixtures because
they are treated differently for valuation and assessment purposes.43 Structure items and fixtures are
treated differently in that:
•
Fixtures are a separate "appraisal unit" when measuring declines in value (Rule 461(e)).
•
Fixtures are treated differently than other real property (i.e., structure items) for
supplemental roll purposes.
•
Fixtures and personal property values are components in the value criterion for
determination of a mandatory audit.
Thus, care must be taken to properly classify improvements as structure items or fixtures. The danger
with respect to improper classification of an item is that it could become subject to double assessment or
may escape assessment. If an item such as a compressor, for example, is included in the real property
appraisal of the building in which it is located (per Rule 124(b)), and the assessee lists the compressor on
the Business Property Statement as a fixture used in the trade or industry, it may also be included in the
appraisal of the business property, subjecting it to a double assessment. While this problem is addressed
in detail in Chapter 5, and Appendices A and B, it bears repeating that much caution must be exercised in
compiling and comparing appraisal data and making accurate classifications in order to avoid escapes and
duplicate assessments.
C L A S S I F I C A T I O N GUIDELINES
An appraiser should consider all three tests when classifying property: physical annexation, constructive
annexation, and intent. Each test affects the final classification of the property based upon the evidence
available. However, intent, as the courts have stated, is the most important and must be measured with-not separately from--the method of physical attachment or constructive annexation.
Although the three tests (physical annexation, constructive annexation, and intent) for determining
whether or not an item is classified as a fixture have been provided by the code and by the court, lack of
detailed statutory definitions has led to some confusion when attempting classification regarding
improvements, structure versus fixture. Rule 463(c) defines a fixture in general ("an improvement whose
use or purpose directly applies to or augments the process or function of a trade, industry, or profession"),
but no specific examples are given in the statutes. Assessors' Handbook Section 581 (AH 581), Equipment
Index and Percent Good Factors, provides some clarification by listing improvements by type, that
is, when an improvement
43
See Chapter 5, Assessment of Improvements Related to Business Property.
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relates primarily to the structure (structure), and when an improvement relates mainly to the function of a
trade, industry, or profession (fixture). This list is included in Appendix A for review and ease of use.
Each example in this list is classified only on the limited description offered. In practice, classification of
a property should be based on all relevant facts concerning that property. For example, dual purpose
improvements should be classified as to their primary purpose.
S P E C I A L C L A S S I F I C A T I O N ISSUES
Certain types of property consistently create classification problems: automatic teller machines (ATM's),
telephone systems, partitions, service station fixtures, liquefied petroleum gas tanks (propane tanks), and
wind machines. These categories of property and the classification issues involved with each are
discussed below.
C L A S S I F I C A T I O N O F ATM'S
ATM's may be classified as personal property or fixtures. The determination must be made on a case by
case method. Most ATM's are owned by banks and financial institutions which by law are exempt from
personal property tax (and are subject to an in-lieu franchise tax).44 Therefore, classification of ATM's
may determine taxability. Using the three tests of a fixture (physical annexation, constructive annexation,
and intent) will aid an appraiser in the proper classification.
Rule 122.5(e)(9) classifies ATM's that are installed as free standing or counter-top units within a building
(such as a bank, supermarket, or other retail establishment), as personal property. An ATM installed in a
structure that was built primarily for the purpose of housing the ATM is a fixture, because the realty
cannot perform its main function without the ATM. Similarly, an ATM installed through the wall of a
building is a fixture because that portion of the realty was designed or modified for the specific purpose of
housing the ATM.
C L A S S I F I C A T I O N O F T E L E P H O N E SYSTEMS
Telephone systems (not including state assessed telephone companies) often pose problems because there
may be many different components making up the system as a whole, and each component must be
analyzed and classified separately. The components integrated into the structure are physically annexed,
generally having permanence (intended to be annexed indefinitely), and are therefore structure items.
However, components that plug into the wiring system are not physically annexed to the structure. These
components are necessary in order for the operation of the system (constructively annexed), but they are
portable and can be used in other structures. Use of these components is not limited to only one system.
The intent of the property owner is that these components be movable (i.e., when the realty is sold, the
portable telephone components are not sold with it). This part of the telephone system is personal
property.
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Exempt banks and financial institutions do not include federally chartered credit unions. Personal property and real
property owned by federally chartered credit unions are not exempt from property taxes.
44
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C L A S S I F I C A T I O N O F S E R V I C E S T A T I O N IMPROVEMENTS
Service station improvements may also be made up of many components. Each component should be
identified, tested, and classified individually consistent with existing statutory law, property tax rules, and
standard appraisal principles. In general, fixtures include items such as signs, hoists, and tanks if they
directly augment the function of the service station trade. Structure items include other improvements
such as buildings, curbing, and landscaping; their primary use and purpose is for housing or
accommodation of personnel, personalty, or fixtures. Items that have a dual purpose will be classified
according to their primary purpose.
Following (Table 2A) is a generalized listing of property typically found in connection with service
stations and their appropriate classification as proposed by industry.45 As technological advancements are
made and other changes occur in this industry, these general categorizations may need to be modified.
TABLE 2A
CLASSIFICATION OF SERVICE STATION IMPROVEMENTS
Structures
Fixtures
Buildings Curbing Paving Restrooms Walls
Fencing
Yard Lighting
Island Curbing Signs
Hoists Compressors
Air & Water Wells Dispensers/Pumps
Tanks & Related Equipment
Landscaping Island Canopy
C L A S S I F I C A T I O N O F PARTITIONS
Partitions may be classified as either personal property, structure items, or fixtures. Each partition must be
classified on the physical characteristics of the item.
Most partitions currently used in office buildings are not permanently attached or built into the structure.
The partitions are designed to be rearranged easily to accommodate the current needs of the business.
These types of partitions are properly classified as personal property.
Partitions built into the structure or designed to function only in a specific structure are improvements.
They are physically annexed and can be classified as fixtures or structures as appropriate. Partitions that
are floor-to-ceiling height, and for the most part constructed at the time the building is constructed, are
structure improvements. Partitions in an office space that
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45
Classification recommendation supplied by the Western States Petroleum Association Marketing Property Task Force.
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are less-than-ceiling height, attached to the floor, and constructed with studs and sheetrock or masonry
materials are fixtures. In either case, the partitions may remain indefinitely.
C L A S S I F I C A T I O N O F L I Q U E F I E D P E T R O L E U M G A S TANKS
Liquefied petroleum gas tanks, commonly referred to as propane tanks, may be classified as personal
property or fixtures. The determination must be made on a case by case basis depending upon the facts
available. The three tests for determining whether an article is a fixture (i.e., physical annexation,
constructive annexation, and intent), as discussed earlier in this chapter, should be considered and applied
by the appraiser in order to make this determination. Rule 124 recognizes that propane tanks "which
remain in place are categorized as improvements."
For example, if the tank and related equipment cannot be removed without material damage to real
property and the intent "manifested by outward appearances" or historic usage indicates that the property
will remain indefinitely, the property should be classified as a fixture. If, on the other hand, the intent of
the owner is to move the property and use it at other locations the property should be classified as personal
property. Again, the determination must be made based on the facts available in each individual situation.
C L A S S I F I C A T I O N O F W I N D MACHINES
Wind machines may be classified as fixtures or personal property. Wind machines are used in the
agricultural industry to protect crops, trees, and vines from adverse weather conditions. These machines
consist of a large fan mounted on a tower, a motor to drive a fan, a fuel tank or electrical hookup, and
other related equipment necessary for operation.
A wind machine that is physically annexed to realty with the intent that it remains annexed indefinitely is
a fixture. Rule 122.5(e), example (10) specifically states that wind machines annexed to realty are not
considered a building, structure, or a fence. For property tax assessment purposes, they are fixtures. On
the other hand, wind machines attached to or resting on a truck or other type of moveable equipment are
properly classified as personal property.46
T A N G I B L E P E R S O N A L P R O P E R T Y (G E N E R A L CATEGORIES)
Tangible personal property is defined in Rule 123 as:
All property that may be seen, weighed, measured, felt, or touched, or which is in any other manner
perceptible to the senses, except land and improvements, is tangible personal property.
In general, personal property is sub-classified according to type as provided on property statements:
equipment, supplies, vessels, aircraft, and manufactured homes. Each of these general categories is
discussed below. Since not all personal property is assessable, it is
46
Rule 122.5, Fixtures, was amended to include an example of wind machines, effective February 6, 2002. Please refer to the
rule for further guidance on the proper classification of wind machines.
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important to sub-classify this property further (e.g., business inventory, licensed vehicles, etc.). In some
cases, classification affects not only valuation but it affects taxability as well.
EQUIPMENT
The term equipment is a general term. The Business Property Statement subdivides equipment into the
following five primary categories: (1) machinery and equipment, (2) office furniture and equipment, (3)
other equipment, (4) tools, molds, dies, and jigs, and (5) computer equipment. Machinery and equipment
includes equipment that is directly related to a particular industry (including equipment that is driven
and controlled by a computer that is an integral part of the production equipment). For example,
washers and dryers are types of equipment that laundromats would include in this category. The
category titled tools, molds, dies, and jigs is limited to manufacturing industries; generally, it is selfexplanatory to those industries. Other categories, office equipment and computer equipment, on the
property statement represent equipment used by most types of businesses. Items such as desks, tables,
chairs, and filing cabinets are included in office equipment. The column entitled computer equipment
represents not only non-production computer components but also related equipment.47
SUPPLIES
Supplies are items that are used in the normal operation of the business and are not intended for sale or
lease on the lien date. They are assessable as personal property at their current replacement cost, or
market value. Assessable supplies do not, however, include any items that become a component part of a
product that is manufactured or sold in addition to items that are sold with the product. Examples of
supply items which are exempt inventory when they are sold with the product include packaging boxes,
pallets, price tags, and cash register tapes. These items are inventory and are exempt.48 Examples of
assessable supplies (items that do not become part of the product) include stationery and office supplies,
chemicals, and precious metals used to produce a chemical or physical reaction, janitorial and lavatory
supplies, fuel, and sandpaper. Medical,49 legal, or accounting supplies held by a person in connection with
a profession that is primarily a service activity may also be reportable as supplies. Items that are to be
delivered to a customer as part of a nonprofessional service, such as chemicals added to a customer's pool
by a swimming pool maintenance company, are inventory.
B U S I N E S S I N V E N T O R Y EXEMPTION
It is important to distinguish supplies, which are assessable, from inventory items, which are exempt. Rule
133(a) identifies business inventory.50 In short, business inventory includes all items of personalty that
become part of or are themselves a product that is held for sale or lease in the ordinary course of
business. The key phrases ordinary course of business and goods
47
The Business Property Statement requests computer equipment (and related equipment) be reported separately based on
cost of the computer system.
48
Sections 129 and 219, Rule 133.
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49
Some medical supplies are considered inventory.
50
Rule 133(b) describes property not eligible (exclusions) for the business inventory exemption.
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intended for sale or lease must apply for the property to qualify for the business inventory exemption. For
example, a retailer in the business of selling shoes is also requesting a business inventory exemption on a
vessel he/she is trying to sell on the lien date. Since the sale of vessels is not part of his/her ordinary
course of business, the vessel would not qualify for the inventory exemption. If a copier leasing company
holding machines for lease uses one of the machines prior to the lien date or intends to use the copier after
the lien date, that copier is no longer part of the goods intended for sale or lease and would not qualify
for the business inventory exemption even if it is held for lease on the lien date.
In general, basic provisions under Rule 133(a) are:
•
Personal property (including animals, crops, and feed) sold in the ordinary course
of business is exempt business inventory.
•
Items incorporated into a product and held for sale in the ordinary course of business
are exempt business inventory.
•
Goods transferred incidental to the rendition of a professional service are not eligible
for the business inventory exemption. (Examples are given later in this chapter.)
•
Goods transferred in the rendition of a nonprofessional service are eligible for the
business inventory exemption. (Examples are given later in this chapter.)
•
Animals used in the production of food or fiber are exempt business inventories.
•
Property held for lease in the normal course of business on the lien date is exempt
business inventory.
Tangible personal property that is owned or used rather than intended for sale or lease does not qualify for
the business inventory exemption. Such equipment is assessable.
Q U E S T I O N S A N D A N S W E R S R E G A R D I N G C L A S S I F I C A T I O N O F S U P P L I E S V E R S U S INVENTORY
Following are some common questions and answers regarding the business inventory exemption. The
questions are grouped into five categories: manufacturing, retailing, professional and service enterprises,
agricultural enterprises, and property held for lease.
Manufacturing
DO MANUFACTURING SUPPLIES QUALIFY FOR THE BUSINESS INVENTORY EXEMPTION?
Yes. Manufacturing supplies, that will be incorporated in a product that is to be sold, such as welding
rods, nuts, bolts, and screws, are eligible.
No. Supplies such as oxygen and acetylene for welding, drill bits, and similar items that are consumed in
the manufacturing process but that are not physically incorporated into the product are not eligible. Also
not eligible are catalysts used to accelerate chemical or physical reaction but which are not intentionally
incorporated into the product.
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ARE OAK BARRELS USED IN THE MANUFACTURING OF WINE (OR BRANDY) ELIGIBLE FOR THE BUSINESS INVENTORY
EXEMPTION?
Yes, if used to impart flavor or aroma. Particles of chemical components of oak barrels transfer to wine
(or brandy) during the aging process, adding flavor, aroma, and color. This enhancement process is the
primary purpose for aging wine (or brandy) in oak barrels instead of other containers. During the time
oak wine barrels are used or held to be used as a raw material to impart the flavor and aroma-enhancing
chemical compounds of the oak into wine (or brandy), such property is business inventory. (See Rule
133(a)(2)(B).)
No, if used solely for storage. An oak barrel used in the manufacturing process is not eligible for the
business inventory exemption when it is not, or is no longer, used to impart the flavor and aroma of the
oak into the wine (or brandy). Such an oak barrel is used merely for the storage of wine and subject to
assessment as property used in the "ordinary course of business." (See Rule 133(a)(2)(B).)
D O T O O L S , M O L D S , D I E S , O R J I G S H E L D F O R U S E Q U A L I F Y F O R T H E B U S I N E S S I N V E N T O R Y EXEMPTION?
No. Tools, molds, dies, or jigs are assessable property when used or intended to be used in the ordinary
course of business.
ARE PARTS HELD BY MANUFACTURERS TO PERFORM WARRANTY SERVICE ON PRODUCTS THEY SELL ELIGIBLE FOR
THE BUSINESS INVENTORY EXEMPTION?
Yes. Although the parts are not sold outright, they are held for repair (replacement of defective parts) of
products that are sold. The selling prices of the products will include amounts to cover normal warranty
repairs.
IS SAND AND GRAVEL HELD BY A LICENSED CONTRACTOR FOR INCORPORATION INTO A BRIDGE OR ROADBED
ELIGIBLE FOR THE BUSINESS INVENTORY EXEMPTION?
Yes. Business inventories include all materials held by a licensed contractor which will be incorporated
into real property, except those to be incorporated into real property which the contractor is constructing
for his own use.
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IS FACTORY BUILT HOUSING HELD FOR SALE BY THE MANUFACTURER ELIGIBLE FOR THE BUSINESS INVENTORY
EXEMPTION?
Yes. If held for sale as individual sections of a building, they would be eligible. They would also be
eligible where the manufacturer is also a licensed contractor and assembles the sections at a building site,
then sells the buildings.
Retailing
IS FARM OR CONSTRUCTION EQUIPMENT, THAT WAS PREVIOUSLY USED BY A FARMER OR CONTRACTOR, ELIGIBLE
FOR THE BUSINESS INVENTORY EXEMPTION ONCE IT IS CONSIGNED TO AN AUCTIONEER FOR SALE?
Yes, the equipment is held for sale by the auctioneer whose normal business is selling such goods.
FARM OR CONSTRUCTION EQUIPMENT IS HELD AND ADVERTISED BY A FARMER OR CONTRACTOR FOR SALE AS A
MEANS OF DISPOSING OF OLD OR EXCESS EQUIPMENT. IS SUCH EQUIPMENT ELIGIBLE FOR THE BUSINESS
INVENTORY EXEMPTION?
No. It is not held for sale in the normal course of business. His or her business is farming or contracting,
not selling used equipment.
A R E D I S P L A Y I T E M S E L I G I B L E F O R T H E B U S I N E S S I N V E N T O R Y EXEMPTION?
Yes, unless they have been altered to the point where it is unlikely they will be sold. An example of a
display that is not eligible is a cut-away of a tire showing the interior construction. Such an item would
not be sold by the retailer; thus, it is not eligible for the exemption.
ARE
SALESPERSON'S SAMPLES AND DEMONSTRATION EQUIPMENT ELIGIBLE FOR THE BUSINESS INVENTORY
EXEMPTION?
Yes, if items are sold from the samples and/or demonstration equipment or if the samples and/or
demonstration equipment are periodically rotated and returned to stock for sale.
A
RETAILER
SELLING
OFFICE
MACHINES
AND
INVENTORY FOR USE AS HIS OFFICE EQUIPMENT.
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EQUIPMENT
PERIODICALLY
REMOVES EQUIPMENT FROM
THE EQUIPMENT IS USED FOR A PERIOD OF TIME THEN
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IS THE EQUIPMENT BEING USED AS OFFICE EQUIPMENT BY THE RETAILER
E L I G I B L E F O R T H E B U S I N E S S I N V E N T O R Y EXEMPTION?
RETURNED TO INVENTORY FOR SALE.
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No. The equipment is in use at the consumer level and is not being displayed or otherwise offered for
sale. Property which has been used by the holder prior to the lien date is NOT eligible for the inventory
exemption, even though held for lease on the lien date (see Rule 133(b)(4)).
Professional and Service Enterprises
GOODS TRANSFERRED IN THE RENDITION OF A "PROFESSIONAL SERVICE" ARE NOT ELIGIBLE FOR THE BUSINESS
INVENTORY EXEMPTION, WHILE GOODS TRANSFERRED IN THE RENDITION OF A "NONPROFESSIONAL SERVICE" ARE
ELIGIBLE. WHAT CRITERION DETERMINES WHETHER A SERVICE IS PROFESSIONAL OR NONPROFESSIONAL?
A "profession" is a vocation where the labor and skill is predominantly mental or intellectual, rather than
physical or manual. A "profession" requires knowledge of an advanced type in a given field of science or
learning gained by a prolonged course of specialized instruction and study.
A "nonprofessional service" is generally defined as a vocation requiring skill of a manual or mechanical
nature. Courts tend to classify a "nonprofessional service" as a business as opposed to a profession.
Examples may include barbers, carpenters, and plumbers.
Rule 133(c) gives examples of medicine, law, architecture, or accountancy as "professional services." It
lists dry cleaners, beauty shop operators, and swimming pool service companies as examples of
"nonprofessional services." There are, of course, many services in between that are more difficult to
assign to one group or the other.
ARE
EMBALMING FLUIDS OF A MORTUARY ELIGIBLE FOR THE BUSINESS INVENTORY EXEMPTION AS GOODS
TRANSFERRED IN THE RENDITION OF A NON-PROFESSIONAL SERVICE?
Yes. The skills required of an embalmer are of a manual or mechanical nature.
A R E M E D I C I N E S T H A T A D O C T O R K E E P S O N H A N D B U S I N E S S INVENTORIES?
No, because they are typically transferred to patients incidental to the rendition of the professional service.
A R E M E D I C I N E S H E L D B Y A H O S P I T A L P H A R M A C Y E L I G I B L E F O R T H E B U S I N E S S I N V E N T O R Y EXEMPTION?
Yes, if the hospital pharmacy holds medicines dedicated for sale to the general public (out-patients and/or
walk-in customers) that portion held for resale is eligible for the business inventory exemption.
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No, medicines held by the hospital pharmacy for issue to in-patients as part of a service are not eligible for
the business inventory exemption.
IS THE FOOD HELD FOR SERVING TO HOSPITAL PATIENTS AS PART OF THE DAILY HOSPITAL SERVICE ELIGIBLE FOR
THE BUSINESS INVENTORY EXEMPTION?
No. The meals are incidental to the rendition of the professional service. However, food held for sale in
the hospital cafeteria is eligible.
AN ACCOUNTANT MAINTAINS A STOCK OF ACCOUNTING BOOKS WHICH HE OR SHE PASSES ON TO HIS CLIENTS AS A
PART OF HIS SERVICE. HE/SHE HAS A RETAILER'S PERMIT. DO THE BOOKS QUALIFY AS BUSINESS INVENTORIES?
No. However, if the accountant regularly bills clients for the books as a separate item in addition to his
services, the books would qualify for the exemption.
ARE CLOTHES HANGERS AND PLASTIC BAGS HELD BY DRY CLEANERS SUBJECT TO THE BUSINESS INVENTORY
EXEMPTION?
Yes, because they are delivered to customers regularly as part of the non-professional service
performed.
A R E C H L O R I N E T A B L E T S H E L D I N S T O R A G E B Y A S W I M M I N G P O O L S E R V I C E C O M P A N Y B U S I N E S S INVENTORIES?
Yes, because they are delivered to customers as an item regularly included in the non- professional
service.
Agricultural Enterprises
ARE
INSECTICIDES,
FUEL,
AND
FERTILIZER
HELD
BY
A
FARMER
SUBJECT
TO
THE
BUSINESS
INVENTORY
EXEMPTION?
No, because these items are held for use rather than for sale.
IS FEED THAT IS HELD BY A FARMER FOR FEEDING TO ANIMALS USED IN THE PRODUCTION OF FOOD OR FIBER
ELIGIBLE FOR THE BUSINESS INVENTORY EXEMPTION?
Yes. See Rule 133 (a)(2)(D).
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A R E F A R M A N I M A L S H E L D F O R B R E E D I N G P U R P O S E S S U B J E C T T O T H E B U S I N E S S I N V E N T O R Y EXEMPTION?
Yes, if their offspring are normally used as food for human consumption or for the production of
fiber useful to man.
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ARE STALLIONS AND MARES HELD FOR THE PRODUCTION OF OFFSPRING ELIGIBLE FOR THE BUSINESS INVENTORY
E X E M P T I O N A S " A N I M A L S H E L D F O R T H E B R E E D I N G O F L I V E S T O C K ?"
No. Those qualifying for exemption as "animals held for the breeding of livestock" are animals that
produce offspring that will be used for food or fiber for human use or consumption.
Property Held for Lease
ARE PACK ANIMALS USED BY A GUIDE TO PACK CAMPERS INTO THE MOUNTAINS ELIGIBLE FOR THE BUSINESS
INVENTORY EXEMPTION?
No. However, if the pack animals are held for lease to campers, are directly under the campers' control,
and are not otherwise used by their owner, they would be eligible.
A R E G O O D S H E L D F O R L E A S E E L I G I B L E F O R T H E B U S I N E S S I N V E N T O R Y EXEMPTION?
Yes. "Held for lease" means that the property is not actually out on lease on the lien date and is not used
by or intended to be used by the lessor for some purpose other than the prospective sale or lease of that
property. Also, the property while on lease must be placed under the control of the lessee.
ARE VENDING MACHINES HELD IN THE OWNER'S HANDS THAT ARE NORMALLY PLACED ON SITE TO DISPENSE FOOD
ELIGIBLE FOR THE BUSINESS INVENTORY EXEMPTION?
No, unless the machines are held for rent. Placing them on site does not constitute a rental. Sharing of the
receipts with the site owner constitutes payment for use of the site. (Note: The food in the vending
machines is exempt.)
ARE ITEMS ELIGIBLE FOR THE BUSINESS INVENTORY EXEMPTION IF HELD FOR LEASE BY A PERSON WHO LEASED
THE ITEMS FROM SOMEONE ELSE?
Yes. The determining factor is the status of the items on the lien date; i.e., they are held for lease in the
normal course of business.
ARE BOATS HELD FOR RENTAL PURPOSES ELIGIBLE FOR THE BUSINESS INVENTORY EXEMPTION IF, ON THE LIEN
DATE, THE RENTAL OPERATION IS CLOSED FOR THE WINTER?
Yes. When boats are rented, and control of the property transfers to the lessee during the rental term, the
rental of this property qualifies as a lease for assessment purposes. Property leased or held for lease in the
ordinary course of business is eligible for the inventory exemption. Even though the boats are not "held
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for rent" on the lien date due to the operation being closed for the winter, they are still eligible for the
exemption since they are held for rent in the normal course of business.
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ARE GOLF CARTS AVAILABLE FOR USE (RENTAL) ONLY ON A SPECIFIC GOLF COURSE ELIGIBLE FOR THE BUSINESS
INVENTORY EXEMPTION?
No. Assuming that the golf carts are only available for use on a golf course, the golf carts would not be
eligible for the exemption. They are personal property, used in the ordinary course of business, assessable
to the owner. To qualify as a lease, the property must be under the control of the lessee during the lease
term.
ARE THE SUPPLIES OF MOTOR FUELS HELD BY A RENTAL OPERATION ELIGIBLE FOR THE BUSINESS INVENTORY
EXEMPTION WHERE THE FUELS WILL BE PROVIDED TO A CUSTOMER WITH THE RENTAL OF A MACHINE?
Yes. The fuel supplies are eligible whether billed separately or included in the rental charge.
ARE LINEN SUPPLIES THAT ARE LEASED OR RENTED TO CUSTOMERS ELIGIBLE FOR THE BUSINESS INVENTORY
EXEMPTION?
No, not if on lease, or committed to lease, or rented on the lien date.
V E H I C L E S , V E S S E L S , A I R C R A F T , A N D M A N U F A C T U R E D HOMES
Vehicles, vessels, aircraft, and manufactured homes not on permanent foundations are also classified as
personal property. They are assessable personal property to the owner, whether the owner is an individual,
a business, or otherwise. To be assessable, there is no requirement that they be used for business purposes
as required for other types of personal property.
VEHICLES51
Vehicles are broadly defined by both the statutes and case law. Section 670 of the Vehicle Code defines a
vehicle as:
A "vehicle" is a device by which any person or property may be propelled, moved, or drawn upon a
highway, excepting a device moved exclusively by human power or used exclusively upon stationary rails
or tracks.
Motor vehicles (including trailers and recreational vehicles), that are "of a type subject to registration
under the Vehicle Code," pay licensing fees to the Department of Motor Vehicles (DMV) which are in
lieu of property tax.52 However, vehicles exempt from DMV registration requirements, per Vehicle Code
Section 4000-4020, are assessable personal property.
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51
Chapter 2
See also Chapter 6.
52
Section 10758. Section 225 specifically exempts from personal property taxation a trailer, semitrailer, logging dolly, pole or
pipe dolly, or trailer bus, that have valid identification plates issued pursuant to section 5014.1 of the Vehicle Code, or any
auxiliary dolly or tow dolly. However, this exemption does not apply to a logging dolly that is used exclusively off-highway.
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Based on the Vehicle Code and court decisions, a device could be illegal to operate on the highway and
exempt from vehicle registration but may still be a vehicle. Thus, the court held that a forklift met the
definition of a vehicle in Travelers Indemnity Co. v. Colonial Ins. Co. (1966) 242 Cal.App.2d 227.
Transport argues that a forklift is neither designed nor used to haul persons or property on a public
highway; that the forklift here involved was not so used; and that the Vehicle Code provisions exempting
forklifts from registration show a legislative intention not to include them in the definition of "motor
vehicle." We disagree.
Accordingly, tractors, backhoes, forklifts, crawler loaders, golf carts, riding lawnmowers, unlicensed
racecars, and any other type of equipment that is self propelled or is designed to be moved by something
other than "exclusively human power" may qualify as vehicles. These items therefore do not qualify for
the exemption provided by section 224.
Vehicles such as golf carts and riding lawn mowers are not exempt either as personal effects or as
vehicles which pay in lieu fees to the Department of Motor Vehicles. Section 155.20 authorizes the
county board of supervisors to provide for a low-value exemption ordinance of up to $5,000. Such an
exemption, if implemented in a county, will eliminate assessment of most household vehicles. However,
no exemption would be available for vehicles such as tractors or backhoes with a market value greater
than a county's low-value exemption. Such vehicles are not exempt as household personal property.
V E S S E L S , A I R C R A F T , A N D M A N U F A C T U R E D HOMES
Assessment of vessels, aircraft, and manufactured homes are discussed in separate handbooks to give
each subject the attention required. Vessels are discussed in Assessors' Handbook Section 576 (AH 576),
Assessment of Vessels. Aircraft are discussed in Assessors' Handbook Section 570 (AH 570), Assessment
of Commercial Aircraft, and Section 577 (AH 577), Assessment of General Aircraft. Manufactured
homes are discussed in Assessors' Handbook Section 511 (AH 511), Assessment of Manufactured
Homes and Parks.
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C HAPTER 3: S ITUS OF P ERSONAL PROPERTY
"All property taxed by local government shall be assessed in the county, city, and district in which it is
situated."53 Situs, the place where property is legally situated, is therefore one of the essential factors of a
valid assessment. For real property, situs usually needs to be determined only once. It will always be the
same. Personal property, however, is mobile property with no fixed situs. Situs may always be the same
or it may be different year to year, month to month, or day to day.
A property tax appraiser or auditor-appraiser is concerned with the property's tax situs on the January 1
lien date.54 On the lien date, property with a tax situs in California is assessable in California; property
with a tax situs outside of California, almost without exception, is not assessable here. Similarly, property
with a tax situs in the jurisdiction of a taxing agency is assessable by that agency.
W HAT I S T AX S I TUS : P ERMANENT VERSUS T EMPORARY SITUS
Article XIII, section 14, provides that a property's tax situs is the location where the property is "situated."
"Situated" connotes a more or less permanent location, or situs. Thus, taxation of property in the state
must be based on the fact that it is to some extent kept or maintained in California rather than here
casually or in transit.55 The statute does not refer to the temporary location of property, but to its
permanent situs.56
If property stays in one place, as does real property, this location is the permanent and tax situs. However,
when property is moved periodically, a tax situs is established at a given location on the lien date. For
example, property which is normally located in a taxing jurisdiction, moved on the lien date, and then
immediately moved back does not avoid taxation at this situs. Although gone on the lien date, the
property has not established permanent situs elsewhere. Therefore, its permanent situs and thus taxable
situs, remains at the original location.
Since there is no requirement to keep one's property in a specific jurisdiction where it is subject to
taxation, an assessee may move property in an attempt to avoid taxation. In doing so, the property must
attain situs elsewhere. A degree of permanency must attach to that situs before that can happen.57 Again,
the word "situated" connotes a more or less permanent location or situs. Property may be removed to
avoid the imposition of taxes if the removal is permanent. "If the removal is intended to be temporary,
only for tax reduction purposes or otherwise, the property remains taxable at its permanent situs."58
53
California Constitution, article XIII, section 14.
54
Prior to 1997, the lien date was on March 1. In 1997, the lien date was changed to January 1.
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47
October 2002
55
People v. Niles (1868) 35 Cal. 282.
56
Rosasco v. County of Tuolumne (1904) 143 Cal. 430.
57
Brock & Co. v. Board of Supervisors (1937) 8 Cal.2d 286.
58
Ibid.
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Chapter 3
48
October 2002
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On the other hand, property that is in California temporarily but has a permanent tax situs outside of
California is not assessable in California. The California constitutional requirement (article XIII, section
1) that all property be taxed in proportion to its full value does not require or allow assessment of all
property temporarily in this state. Property is assessable only in the county, city, and district in which it is
situated or has situs.59 At all times there is property that is being transported across this state, from one
foreign state to another, that no one would claim should be assessed in California.60
In summary, permanent versus temporary situs must be considered when determining tax situs for
property tax purposes. This principle was upheld in the case of Seegmiller v. County of Nevada (1997) 53
Cal.App.4th 1397. An assessee moved his business property from a permanent location in California to a
permanent location in the State of Nevada during August of the fiscal tax year. There was no dispute that
the location of the equipment on the March 1 lien date was Nevada County, California, but the assessee
sued for a prorated assessment to avoid possible duplicate assessment of the property at the new location.
The court found Nevada County's entire assessment valid based on permanent situs of the property (in that
county) on the March 1 lien date. A permanent situs on the lien date is the basis for the assessable situs.
DETERMINING SITUS OF MOVABLE PROPERTY
Property which is frequently moved, such as transportation equipment and construction equipment, is
defined as movable property under Rule 205.
Movable property is all property which is intended to be, and is, moved from time to time from one
location to another.
The situs of such property should be governed by the duration of its stay at any location as discussed
generally in Rule 205, Movable Property, and referenced further in Rule 204, Leased Equipment, and Rule
203, Property in Transit. These rules are discussed below.
G E N E R A L S I T U S R U L E S (R U L E 205)
O V E R S I X M O N T H S P R I O R T O T H E L I E N DATE
Movable property has situs where located on the lien date if (1) it has been in the county for more than 6
of the 12 months immediately preceding the lien date and (2) the objective facts indicate it will remain in
or return to the county for any substantial period during the 12 months immediately succeeding the lien
date. (Rule 205 does not apply to vessels, certificated aircraft, and racehorses. Situs for each of these
exceptions is discussed later in this chapter.)
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59
California Constitution, article XIII, section 14.
60
City and County of San Francisco v. Talbot (1883) 63 Cal. 485.
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L E S S T H A N S I X M O N T H S P R I O R T O T H E L I E N DATE
Movable property which has been in the county for less than 6 of the 12 months immediately preceding
the lien date, but which is committed to use in the county for an indeterminate period or for more than 6
months, has situs there regardless of whether the use extends through or commences with the lien date.
(Rule 205.)
If the property does not meet the qualifications for situs as discussed above, the situs of the property is the
location where it normally returns between uses.
M O V A B L E P R O P E R T Y I N -TRANSIT
Movable property may be in-transit on the lien date, and this may affect the property's assessable situs. As
explained later in this chapter, situs and even assessability may be based on the destination of the property
(whether in interstate, intrastate, or foreign commerce) and the terms of transit.
S I T U S O T H E R T H A N A T LOCATION
Movable property that does not have permanent situs where it is located on the lien date has assessable
situs at the location where it is normally returned between uses. If there is no such location, the situs is the
principal place of business of the owner. (Rule 205.)
H A B I T U A L P R E S E N C E O R S U B S T A N T I A L A V E R A G E RULE
In cases where property does not remain in one location long enough to establish a permanent location or
situs, and does not have a location it normally returns to, its assessable situs is the place where it is
frequently present or habitually located.61 Instruments of commerce (commercial aircraft, railroad cars,
barges, etc.), linen supplies, and returnable containers are common examples of property that attain
assessment situs because there is a substantial average or habitual presence at a specific location.
Special rules have evolved for assessing and determining situs for most types of instruments of commerce.
Where such statutes or rules do not exist, the courts have traditionally supported any reasonable method of
apportionment. In Sea-Land Services, Inc. v. County of Alameda62 the court found that an assessment of
cargo containers based on an "average presence" was proper. In another case involving cargo containers,
the United States Supreme Court also approved the concept of a property tax assessment based on average
presence.63 The assessment in this case was voided by the Court, however, because the cargo containers
were foreign-owned instrumentalities of international commerce and a state may not tax such property.64
61
GeoMetrics v. County of Santa Clara (1982) 127 Cal.App.3d 940.
62
(1974) 12 Cal.3d 772.
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51
October 2002
63
Japan Line, Ltd. v. County of Los Angeles (1979) 441 U.S. 434.
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64
All ocean-going cargo containers of 1,000 cubic feet or more are now exempt under section 232. This exemption does not
affect the principle of tax situs due to habitual or average presence however.
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H A B I T U A L S I T U S A T M O R E T H A N O N E L O C A T I O N I N CALIFORNIA
The habitual presence rule is applicable only to property which is (1) used in California and in other states
or foreign nations and (2) not assessable under other regulatory formulas. Property that has tax situs in
California on the lien date is assessable at only one location, based on its value as of that date, even
though the property may have substantial presence at more than one location.65 Thus, if a property is in
county "A" for seven months and County "B" for five months, County "A" will assess the entire property
and County "B" will not assess the property at all. No apportionment of the assessment is required.
H A B I T U A L S I T U S B O T H I N C A L I F O R N I A A N D I N A N O T H E R S T A T E O R NATION
The rules of situs are often affected by the requirements of apportionment where the property has a
substantial presence in more than one state. Apportionment is a process used to allocate or eliminate,
based on the time of presence, the assessments or the taxes for time spent out of the state. Apportionment
is allowed under current law and is expressed in relatively recent court decisions which are discussed
below. First, however, a brief discussion of federal law versus a state's power to tax is appropriate.
Federal Law Versus State Law
Federal and state law must both be observed when determining situs and assessability of items which
concern or have a tax situs in states other than California because in several matters the federal
government regulates interstate commerce. For example,
•
the "commerce clause" (United States Constitution, article I, section 8, clause 3) grants
to Congress the power to regulate interstate and foreign commerce;
•
the "import-export clause" (United States Constitution, article I, section 10, clause 2)
prohibits states from levying taxes on imports or exports without the consent of Congress; and
•
the President of the United States (United States Constitution, article II, section 2, clause
2) has the power, with the advice and consent of the Senate, to make treaties with foreign nations.
While federal statutes do not limit ad valorem taxation by the states66 and federal courts are prohibited
from taking jurisdiction in tax assessment cases (unless it can be proved that a plain, speedy, and efficient
remedy does not exist under state law),67 related federal law does take precedence if a controversy arises.
65
An exception to this rule is certificated aircraft, scheduled air taxis, and inter-county ferryboats. See Other Special
Situs Situations.
66
With the exemption of railroads under the 4-R Act (section 306 of the Railroad Revitalization and Regulatory Reform
Act of 1976) which prohibits discriminatory taxation against railroad cars traveling interstate.
67
28 U.S.C. section 1341.
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It is clear that neither federal law nor the courts prohibit taxation of property that has presence in more
than one state. However, apportionment may be required. Although there have been many state and
federal court cases that deal with apportionment of taxes on instruments of interstate commerce,68 neither
the courts nor the Congress has ever specified any particular method of allocation or taxation. Several
courts have commented that a slight overlapping of taxes (which occurs accidentally because different
states have different rules regarding situs) is permissible. In general, the courts have only said that the
state's tax system must provide for fair apportionment, not discriminate against interstate commerce, and
be fairly related to the services provided by the state.
A P P O R T I O N M E N T B E T W E E N S T A T E S A N D / O R F O R E I G N NATIONS
As a result of Ice Capades, Inc. v. County of Los Angeles69 it became necessary to apportion taxes on
property that has established tax situs (1) in California, and (2) in another state. The court's ruling in this
case (resulting in the Ice Capades Rule) made it clear that where multiple tax situs between states exists,
taxes must be apportioned. This apportionment should be based on the time of the property's presence,
regardless of whether or not the other state(s) are actually assessing the property.
Ice Capades, Inc. v. County of Los Angeles involved a touring ice show which owned and operated
facilities in both California and New Jersey. The California Appellate Court held, among other things,
that:
•
apportionment applies only where property has a tax situs in more than one state;
•
an assessee contending that some portion of property is not taxable by the state of
domicile has the burden of proving by sufficient evidence that situs has been established elsewhere;
•
in a borderline situation, it is reasonable to apportion the tax if the other jurisdiction
actually levied a tax;
•
transitory contact with other states does not establish tax situs even though the visits
were annual; and
•
the transitory contact of certain types of property with various states is different than
"habitual presence" of other types of property (instruments of commerce) typically present at a given
location.
When property has situs in California but has its permanent or primary situs in another state or country, it
is taxable here only to the extent of time spent here. When property is here on a transitory basis this rule
does not apply; the property is not assessable here. Apportionment should be calculated based on the time
that property had tax situs in California versus total time (e.g., 60 days in California divided by 365 days)
when a sufficient quantum of contact has established (assessable) situs here and in another state. When
the multiple situs' are verified,
68
See AH 570, Assessment of Commercial Aircraft, for discussion of several cases involving allocation of instruments of
interstate commerce.
69
(1976) 56 Cal.App.3d 745.
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apportionment may be appropriate. A tax bill from another state, for example, is one method of verifying
a situs out-of-state. It may be relevant evidence in determining multiple tax situs, although the dollar
amount of the other state's tax bill is irrelevant.
Consistent with Ice Capades, if a California property has a substantial presence in another nation, the
California assessment should be apportioned to eliminate that time the property has established situs
outside the state, whether or not the foreign nation actually taxed the property.70 However, the assessee
must prove that such substantial presence exists. Transitory contact, such as may occur when a vessel or
aircraft makes a round-the-world voyage, does not establish substantial presence. Tax situs of the property
would remain in California.
E X A M P L E : S I T U S O F M O V A B L E PROPERTY
Following is an example of situs determination using movable property owned by an assessee whose
primary business location is outside of California. General rules of situs were employed to make the
determination.
EXAMPLE 3.1
OUT-OF-STATE CONSTRUCTION COMPANY
An out of state construction company worked on a two-year gas pipeline project in California.
The equipment did not leave California during the project.
The equipment used on the project moved into ABC County in December 2001.
The equipment used on the project moved out of ABC County in March 2002.
It was typical that the equipment moved in and out of a county in less than six months.
DID THE PROPERTY ESTABLISH SITUS IN ABC COUNTY ON THE 2002 LIEN DATE, JANUARY 1?
Under Rule 205, the property established a tax situs in California but did not establish a tax situs in a
specific county. (The property was not in transit; therefore Rule 203 does not apply.) The equipment
moved frequently, but remained in California on the lien date and for a time period both before and
after, although the equipment did not remain in any county long enough to meet the six month test
required in Rule 205.
Situs in the appropriate county becomes dependent on article XIII, section 14 of the California
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70
GeoMetrics v. County of Santa Clara (1982) 127 Cal.App.3d 940. (This case involved aircraft which were not "instruments of
commerce." They were involved in airborne geophysical surveys. The assessor was required to apportion the value of aircraft
physically abroad for all or substantial parts of the year, though domiciled in California.)
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S I T U S O F L E A S E D O R R E N T E D P R O P E R T Y (R U L E 204)
Situs of leased equipment is determined not only on the basis of physical location of the property, but also
on the intent of the owner. Determination of situs regarding this property is governed by Rule 204, Leased
Property:
Property leased or rented on a daily, weekly or other short-term basis has situs at the place where the
lessor normally keeps the property. Temporary absences from that location do not change the situs of the
property.
The situs of property leased or rented for an extended, but unspecified, period or leased for a term of more
than six months shall be determined on the basis of the lessee's use.
The intent of the lessor and the lessee as demonstrated by objective facts is the determining factor in
ascertaining the situs of leased or rented property. For example, property leased to a contractor for a
period of one month has situs at the lessor's location. It is clearly the intent of both parties that the
property returns to this original location; this is its permanent and tax situs. However, where the contractor
has leased the equipment for an unspecified period which would appear to extend beyond six months, the
equipment is taxable at its actual location on the lien date.
S I N G L E A S S E S S M E N T F O R L E A S E D P E R S O N A L PROPERTY
When a property owner has multiple taxable items leased throughout a county, precise situs of each lease
becomes less important. Section 623 provides a definition for situs by allowing assessors to combine the
multiple assessments for leased equipment, owned by the same lessor, into one assessment. Section 623
states:
The assessor may place a single assessment on the roll for all leased personal property in the county that is
assessed with respect to the same taxpayer. Any property assessed pursuant to this section shall, in the
absence of evidence establishing otherwise, be deemed to be located at the taxpayer's primary place of
business within the county.
A "primary place of business" is the taxpayer's headquarters, office, or facility within the county. If the
company has more than one facility within the county, the facility with the largest equipment value is the
situs that should be used for all leased equipment. In the absence of a "primary place of business within
the county", the location having the greatest value of a company's leased equipment should be considered
that company's primary place of business within the county. On the other hand, if a company has an
office, warehouse, or other "primary place of business within the county", but has nearly all of its leased
equipment located at a single site in a different tax-rate area, the situs where the majority of the equipment
is located should be used for all of the company's leased equipment in the county.
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Section 623 only applies to leased personal property assessed to the same assessee. It does not affect
personal property that is not leased, and combining assessments in the manner authorized by section 623 is
strictly an option for assessors to use, not a requirement.
S I T U S O F P R O P E R T Y I N -T R A N S I T (R U L E 203)
Although property is normally taxable at the location where it has established permanent situs on the lien
date, what is the situs of property in transit on the lien date? The answer is determined by the destination
of the property, the legal owner of the property on the lien date, and the application of Rule 203, Property
in Transit.
P R O P E R T Y M O V I N G I N I N T E R S T A T E O R F O R E I G N COMMERCE
Property in transit on the lien date, to or from interstate or foreign destinations, is exempt from taxation.
However, it is important that the property actually be in transit to be exempt. Property that is otherwise
taxable remains taxable until transit has commenced and may become taxable once again when transit has
ended. For example, property being held or stored in railroad cars for the convenience of the owner is not
in interstate transit even though it remains in the shipping cars. Property is not in interstate transit if the
holding by the carrier is not incidental to its transportation.
Note that the exemption of property in interstate or foreign transit does not include instruments of
commerce or property that has a permanent situs but is leaving or entering the state on a temporary basis
as of the lien date. This exemption applies to property that is being moved from one established situs to
another, such as equipment being shipped from a distribution warehouse to a retail store or otherwise
being relocated from one factory to another.
C O M M E N C E M E N T O F TRANSIT
Transit commences when property has either started moving on its interstate or foreign journey or has
been committed to a common carrier for that purpose. However, property deposited at the point of
shipment in interstate commerce but not committed to a carrier is still subject to taxation.71
T E R M I N A T I O N O F TRANSIT
In general, transit has terminated when the property reaches the hands of the owner at the destination
point. Property brought into the state is taxable at the point transit ends. For property tax purposes,
"reaching the hand of the owner" does not, however, always mean physically. For example, when the
carrier becomes entitled to make storage, demurrage, or other charges for keeping the property or when
the carrier acts as a warehouse by operation of law, the property is considered to have reached the owner.
Likewise, when the owner is notified that property is available for unloading, it has reached the hands of
the owner. If the holding of the property by the carrier is not merely incidental to its transportation, then
the transit has most likely terminated.
71
Coe v. Errol (1885) 116 U.S. 517.
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I N T E R R U P T I O N O F TRANSIT
If the temporary suspension of the movement of the property is required in order to facilitate its
transportation, to prevent its destruction, or to change the method of its carriage, it is still considered in
transit and remains exempt. Property may be subject to taxation when the interruption in transit is for
purposes unconnected with its transportation. Otherwise, it remains exempt. The courts have
distinguished between suspension and termination of transit, stating:
Where property has come to rest within a state, being held there at the pleasure of the owner, for disposal
or use, so that he may dispose of it either within the state, or for shipment elsewhere, as his interest
dictates, it is deemed to be a part of the general mass of property within the state and is thus subject to its
taxing power.72
P R O P E R T Y M O V I N G I N I N T R A S T A T E COMMERCE
Unlike property in interstate or foreign commerce, property remains taxable while in transit within
California (in intrastate commerce). Tax situs of this property among counties therefore becomes the
issue.
S I T U S O F P R O P E R T Y B E I N G T R A N S P O R T E D B Y A N OWNER
If an owner of property is transporting his or her own property on the lien date, the property has situs at
the point of origin of the shipment regardless of the mode of transportation or the ownership of the means
of conveyance.73
S I T U S O F P R O P E R T Y B E I N G T R A N S P O R T E D T O A BUYER
Property being transported to a buyer has its situs at the point of destination unless the buyer demonstrates
that the seller had title until delivery, in which case it has situs at the point of origin.
Title transfer is normally an agreed upon item in the purchase agreement; property will be purchased and
shipped "F.O.B. shipping point" or "F.O.B. destination." F.O.B. (free on board) designates whether the
seller or the purchaser will pay freight or transportation charges and determines when title transfers.
"F.O.B. shipping point" means the purchaser is responsible for the property, and title transfers, at the point
of origin (at the shipping point). "F.O.B. destination" means that title remains with the seller, and he/she
bears the cost of transportation, until the property reaches its destination. The Uniform Commercial Code
provides that the free on board (F.O.B.) designation, unless otherwise agreed between a seller and buyer,
constitutes a term of delivery. Title to property remains with a seller until he or she has completed
delivery by making the property available for disposition by the buyer at the F.O.B. point. Retention of a
security interest by a seller must be disregarded for purposes of determining situs.74 If questions
72
Minnesota v. Blasius (1933) 290 U.S. 1.
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73
Rule 203(a)(1).
74
Rule 203(a)(2).
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arise regarding situs or assessee, a buyer should provide the purchase agreement and/or shipping
agreement in order to demonstrate the timing of the title transfer.
I N T E R R U P T I O N O F TRANSPORTATION
As previously discussed, the interruption of transportation for purposes incidental to transportation does
not remove property from its "in-transit status." Interruption of transportation for business purposes or
profit of the property owner terminates the transportation and generally creates a situs for taxation at the
place where the property is situated on the lien date.75
O THER S PECI AL S I TUS SITUATIONS
AIRCRAFT
The guidelines for situs of aircraft depend on aircraft type. For assessment purposes, aircraft are typed or
classified as general aircraft, certificated aircraft, or air taxis. Each is briefly defined below in order to
properly discuss situs in relation to this property.76
DEFINITIONS
General Aircraft
General aircraft is any contrivance used or designed for the navigation of or for flight in the air which has
been flown at least once.77 It is not a parachute or similar emergency safety device, a rocket or missile, or
a certificated aircraft or scheduled air taxi as defined below.
C E R T I F I C A T E D AIRCRAFT
Certificated aircraft is aircraft operated by an air carrier or foreign air carrier engaged in air transportation
while there is in force a certificate or permit issued by the Civil Aeronautics Board of the United States, or
its successor (Federal Aviation Administration), or a certificate issued by the California Public Utilities
Commission authorizing such air carrier to engage in such transportation. 78
A I R TAXI
Air taxi means aircraft used by an air carrier which (1) does not utilize aircraft having a maximum
passenger capacity of more than 30 seats, (2) does not have a maximum payload capacity of more than
7,500 pounds in air transportation, and (3) does not hold a certificate of public convenience and necessity
or other economic authority issued by the Civil Aeronautics Board of the United States, or its successor,
or by the California Public Utilities Commission, or
75
Rule 203(a)(2).
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For a complete in-depth discussion and definition of aircraft types, see AH 570, Assessment of Commercial Aircraft
and AH 577, Assessment of General Aircraft.
76
77
Section 5303.
78
Section 1150.
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its successor.79 This definition can be further broken down to scheduled and unscheduled air taxis.
Scheduled air taxis are treated similar to certificated aircraft and unscheduled air taxis are treated similar
to general aircraft.
S I T U S O F AIRCRAFT
General Aircraft and Unscheduled Air Taxis
General rules of situs apply to general aircraft as they do to other personal property.80 Situs is the
location where the aircraft is habitually kept or to which it returns, when not in service.81 When an aircraft
substantially divides its time between two or more airports in California, situs becomes determinable
based on a time test but no apportionment is necessary. Rule 205(b) states:
. . . An aircraft that spends a substantial amount of ground time at each of two or more airports has its tax
situs at the airport where it spends the greatest amount of ground time.
If an aircraft establishes tax situs both in California and outside California, apportionment may be
necessary and the rules established in Ice Capades, Inc. v. County of Los Angeles and GeoMetrics v.
County of Santa Clara apply.
•
For California aircraft, the assessment must be apportioned to eliminate the time the
aircraft has established tax situs outside California. All the remaining time—whether or not in
California—is allocated to the California airport where it spends the greatest amount of ground time.
•
For an aircraft that has a primary situs outside of California, but has established some
situs in this state, the California assessment is based on the time actually in this state—at the airport
where it spends the greatest amount of ground time—and all other time is allocable elsewhere.
C E R T I F I C A T E D A I R C R A F T A N D S C H E D U L E D A I R TAXIS
Certificated aircraft and air taxis using airports within this state while engaged in interstate, intrastate, or
foreign commerce are taxable for an apportioned value of the aircraft based on time in this state when tax
situs has been established in California.82 Specific statutes, sections 1150 through 1156, govern the
method of apportionment when tax situs is established here. To establish tax situs within California,
intentional physical contact involving actual embarking or disembarking of crew, passengers, or freight
must be made. Emergency contact does not, in and
79
Section 1154.
80
One exception is found in section 220, Aircraft Being Repaired. Out-of-state aircraft in California solely to undergo repairs
are exempt from property taxation under this section even though they may be in California on the lien date.
81
Rule 205(b).
82
Flying Tiger Line, Inc. v. County Los Angeles (1958) 51 Cal.2d 314.
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of itself, establish situs any more than does flying over the state without landing.83 The apportioned value
is justified, even though an instrument of commerce, by the fact that the taxing jurisdiction extends
opportunities, benefits, and protection to the property (the aircraft) engaged in interstate or foreign
commerce during the pro rata time that the property is physically present within that jurisdiction.84
However, where an aircraft is foreign-owned, based, registered, and serving California airports
exclusively in foreign commerce, the state is precluded from taxation. No permanent, tax situs has been
established here and thus it is not taxable.85
A I R C R A F T R E P A I R A N D R E P L A C E M E N T PARTS
Aircraft parts have situs where habitually located pursuant to Rule 201, in most circumstances, but aircraft
components may occasionally acquire situs elsewhere. The following example identifies one of these
situations.
EXAMPLE 3.2
SITUS OF AIRCRAFT REPAIR AND REPLACEMENT PARTS
An air carrier at all times rotates eight engines between storage repair and installation. Two engines are
normally found at the place of storage, two at another location for repair, and four are installed in
operating aircraft at any one time. The number of engines normally located at each location has situs
and is assessable there.
VESSELS
Vessels are classified as personal property for property tax purposes. Similar to other property, vessels
may be assessed the ad valorem tax or qualify for full or partial exemptions depending upon their value,
ownership, use, and/or type. Similar to many other types of personal property, identifying a vessel's
property taxing authority is a central issue many assessors contend with – that is, determining the tax situs
for this type of transitory property. Therefore, a brief discussion of vessel types and situs related to
various vessels follows. See AH 576, Assessment of Vessels for more information and for a discussion on
vessels qualifying for exemptions.
D E F I N I T I O N O F D O C U M E N T E D A N D N O N D O C U M E N T E D VESSELS
The Revenue and Taxation Code defines vessels as "every description of watercraft used or capable of
being used as a means of transportation on water, but does not include aircraft."86 Vessels are sub-defined
as documented vessels and nondocumented vessels for assessment purposes.
83
Rule 202(b).
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See Rule 202(c) Allocation Formula and AH 570, Assessment of Commercial Aircraft, for discussion of allocation formulas for
various types of aircraft.
84
85
Scandinavian Airlines Systems, Inc. v. County of Los Angeles (1961) 56 Cal.2d 11.
86
Section 130(a).
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A documented vessel is defined by section 130 as:
. . . any vessel which is required to have and does have a valid marine document issued by the Bureau of
Customs of the United States or any federal agency successor thereto, except documented yachts of the
United States, or is registered with, or licensed by, the Department of Motor Vehicles. . . .
A nondocumented vessel is defined by exception in section 1141 as any vessel not required to be
documented.
It is important to understand the meaning of both terms for the purposes of applying vessel situs statutes.
The term documented vessel has a different meaning to non-property tax agencies. To the U.S. Coast
Guard and the Department of Motor Vehicles (DMV), the term documented refers only to a vessel that is
required to and does have a valid marine document issued by the U.S. Coast Guard and not to vessels
licensed by DMV.87 For property tax assessment purposes, however, the definition of documented vessels
in section 130 includes all vessels required to be registered with DMV, as well as those documented with
the U.S. Coast Guard. Therefore, to the property tax appraiser, both U.S. Coast Guard registered vessels
and DMV licensed vessels are documented vessels and are within the provisions of sections 130, 1139,
and 1140. Although documented by the Coast Guard, vessels of more than 50 tons net burden and
engaged in the transportation of freight or passengers are not subject to the statutes set forth for other
documented vessels, as such vessels are wholly exempt from taxation.88
S I T U S O F D O C U M E N T E D VESSELS
A vessel, although transitory in nature, is assessable in California if the vessel has established situs here.
Thus, the determination of where a vessel is legally situated has an effect on whether or not a vessel is
assessable by a California county. As with aircraft, situs may depend on vessel type. A documented vessel
shall be assessed at the place of documentation unless the place of documentation does not represent the
situs of the vessel.89 Such cases may occur when:
•
a vessel owner has permanently removed the vessel from its original designated situs to
another location where the vessel has become habitually moored and the owner has so informed the
proper assessor in writing.90
•
an assessor can show, despite the place of documentation, original situs designation, or a
notice that a vessel has been removed, that the vessel is permanently located in his/her county,
provided the original county indicated that the vessel is not assessed there.91
87
Vehicle Code section 9840 sets forth a list of all types of vessels and prescribes which ones must be registered with DMV
(and are thereby documented as defined by the assessor).
88
Article XIII, section 3, subdivision (l).
89
Sections 1137-1141.
90
Section 1139.
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Article XIII, section 14 of the California Constitution (". . . in the county. . . in which it is situated") takes precedence
over provisions of sections 1139 and 1140 of the Revenue and Taxation Code.
91
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•
Coast Guard documentation of a new vessel occurred after 1995. Since that time, all
documentation occurs at the National Vessel Documentation Center in West Virginia rather than in
regional centers in this State. For these vessels, the place of documentation does not represent the situs
of a vessel.
•
a vessel is documented outside of the state, but travels regularly in California waters, and
the owners reside in this state.92
•
a vessel that is documented in this state or when the vessel's owner is domiciled in
California, the vessel may, by being indefinitely and exclusively employed within the waters of another
state, acquire an actual situs there that will permit the vessel to be taxed in that state.
The county where the DMV registers a vessel, the place of documentation, is typically the county where
the vessel is located and assessed. The address indicated on the registration certificate is the mailing
address of the registered owner but it does not indicate where the vessel is habitually moored, which may
be different from the owner's mailing address. The DMV stores the situs information in its computer
system and passes the information along to the assessors in their reports. To facilitate the tracking of
vessel owners and vessel locations, many assessors have also established an on-line communication link
with the DMV to access its database.
S I T U S O F N O N D O C U M E N T E D VESSELS
Nondocumented vessels, those not required to be documented by the DMV or by the U.S. Coast Guard,
establish situs in the county where they are habitually moored when not in service.93 Smaller boats that are
not habitually kept at a mooring but are lifted from the water and kept in a boathouse or transported by
trailers to the owner's residence or another location are taxed at the location where the boat is habitually
kept.
S I T U S O F I N T E R C O U N T Y FERRYBOATS
The tax situs of intercounty ferryboats is regulated by statute. When a ferry connects ports in more than
one county, it is assessed in equal proportions in each of the counties. The wharves, storehouses, and
stationary property ancillary to the ferryboat operation are assessed in the county or counties where they
are located.94
S I T U S O F S E A G O I N G V E S S E L S / H O M E P O R T DOCTRINE
Vessels plying the high seas may constantly move between ports throughout the year. Such vessels are
generally bound by the "home port" doctrine that permits only the taxing authority of
92
Section 1138.
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93
Section 1141.
94
Section 1137.
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a home port to impose a tax. No other jurisdiction, including those ports visited by the vessel during its
voyages, has the power to tax it.95
The "home port" doctrine, established under common law, is a doctrine which permits vessels engaged in
foreign or interstate commerce to be taxed at the domicile of the owner or at the port of registration
regardless of where the vessel actually happens to be located on the lien date. This doctrine has limited
application in modern times, as both the United States Supreme Court, in Japan Line, Ltd. v. County of
Los Angeles,96 and the California Supreme Court, in Sea-Land Service, Inc. v. County of Alameda,97 have
described the home port doctrine as anachronistic;98 however, the home port doctrine may be applied to
seagoing vessels when no permanent situs has otherwise been established for a vessel. Prior to 1995,
owners typically documented these vessels at the port nearest to their place of domicile, which was
considered the vessel's tax situs.
Annual renewal of a Certificate of Documentation for vessels documented prior to 1995 will continue to
show the original port of documentation on the certificate. Since 1995, a "hailing port," as opposed
to a "home port," is now used on the Certificate of Documentation. As a result, the tax situs for seagoing
vessels put into service since 1995 is the domicile of the owner.
The home port doctrine was developed for and applied to the taxation of vessels, as distinguished from the
apportionment rule that has been applied to railroad rolling stock and aircraft. The United States Supreme
Court granted the domiciliary state the power to tax in full and denied the power to tax to all other
jurisdictions, regardless of where the vessel happened to be actually located on the lien date.99 This ruling
has been consistently applied to vessels by California courts.
Despite the home port designated by an owner, a vessel's home port should be determined by a ship's
actual operations and not by the fictitious home port created solely by registry. A home port is to be
distinguished from a "port of convenience". A port of convenience has no taxing authority as it is a port
where a vessel primarily at sea enters temporarily between ocean voyages to deliver goods, obtain
provisions, and make repairs.100 If a seagoing vessel is inactive and not engaged in any kind of commerce
for a period of time that cannot be considered temporary, however, it acquires a tax situs where it is
anchored or moored, irrespective of any so-called home port.101
Due to the nature of interstate or foreign commerce and travel, the physical presence of a vessel may not
establish permanent situs. A vessel may establish a habitual or significant presence at one or more
locations. However, unlike some other types of personal property, vessels (other
95
Hays v. Pacific Mail S.S. Co. (1855) 17 How (58 U.S.) 596.
96
441 U.S. 434, 443 (1979).
97
12 Cal.3d 772, 786-787 (1974).
98
Both the Japan Line, Ltd. and Sea-Land Service, Inc. cases addressed the taxability of cargo containers.
99
Hays v. Pacific Mail S.S. Co., supra.
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100
Martinac v. County of San Diego (1967) 255 Cal.App.2d 175.
101
Continental Dredging Co. v. County of Los Angeles (1973) 366 F.Supp. 1133.
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than intercounty ferries) are not subject to apportionment. When sites are temporary, even when a
habitual or significant presence is established, tax situs is not acquired for property tax purposes. The tax
situs of a vessel is not determined by an owner's designation of a home port but depends upon the
existence of sufficient contacts, such as the use and employment of a vessel within the jurisdiction and the
opportunities, benefits, or protection afforded a vessel by the jurisdiction, to satisfy due process.102
A sea-going vessel, therefore, regardless of whether the vessel has a "home port" or a "hailing port"
designation, can acquire a new tax situs, if the vessel becomes habitually moored at a new location.
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102
County of San Diego v. Lafayette Steel Company (1985) 164 Cal.App.3d 690.
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A P P L I C A T I O N O F S I T U S DETERMINATION
The following is an example of making a determination of tax situs for a vessel using the sections and
rules described above. The conclusion regarding situs is specific to the information given.
EXAMPLE 3.3 SITUS OF VESSEL
An assessee/vessel owner purchased a boat December 1, 2001, and registered it with the Department of Motor
Vehicles (DMV) using a mailing address in XYZ County. On February 1, 2002, the assessee filed a vessel property
statement with XYZ County using the same address for purposes of registration as the assessee's mailing address
and habitual place of mooring. However, on the back of the form, he noted that the boat was now moored in
Mexico.
To determine situs and taxability, the assessor contacted the assessee and gathered the following information:
•
The boat was purchased in San Jose, California on December 1, 2001.
•
The boat was registered January 1, 2002, and the registration address (in XYZ County) shown
was the domicile of the owner's son.
•
The assessee claims (without documentation) that the boat is now habitually moored in Baja,
Mexico, but is unable or unwilling to verify the date or permanent address (situs) of the new habitual mooring
location. The situs address on the DMV registration certificate in XYZ County remains unchanged.
•
Assessee claims permanent domicile in the State of Washington.
•
The state of Washington will not register vessels without a physical inspection.
BASED ON THE FACTS PROVIDED, THE TAX SITUS OF THIS VESSEL ON LIEN DATE JANUARY 1, 2002 IS
XYZ COUNTY FOR THE FOLLOWING REASONS (IN ORDER OF IMPORTANCE):
Application for a CF number and registration with the DMV establishes situs for vessels; thus, the
tax situs is XYZ County, since the assessee indicated an XYZ County address as both his mailing address and the
place of habitual mooring on the registration for his vessel (section 1139). Under California law: "Every
undocumented vessel using the waters or on the waters of this state shall be currently numbered." (Vehicle Code
section 9850). The assessee's intention was to use the boat in the waters of this state.
•
The assessee stated on the property statement that the boat was located in XYZ County. This
statement was signed under penalty of perjury. (The remarks on the back of the form are not sufficient
documentation verifying a different situs for the vessel.)
•
•
If a vessel is (permanently) moved from the registered situs, an owner is required to notify the
DMV by changing the address on the registration certificate or by filing another property statement or other
documentation notifying the assessor pursuant to section 1139. Since this did not occur, the situs of the vessel for
property tax purposes is XYZ County.
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S I T U S O F L I N E N SUPPLY
Towels, uniforms, and other laundered linen are items normally supplied by linen supply companies.103
For a monthly rental fee, the company supplies linen with the understanding that the items will be
replaced periodically with a fresh supply. Soiled linen is taken back to the owner's business location for
cleaning and redistribution. In general, these linens are exempt business inventory items when not
committed to lease on the lien date.104 Linens that are committed to lease; i.e., the lessee has a contractual
right to a specific quantity of linens or specific linens (company uniforms, towels, etc.), and under the
contract has a right to control the use of the linens, the specific linens are not eligible for the inventory
exemption.
Tax situs of linens must be determined based on the type and length of the lease involved pursuant to
Rules 204 and 205. According to these rules, if the linens are rented on a short-term basis (six months or
less or substantially shorter than the life of the property), they are to be assessed at the location where they
are returned for cleaning. On the other hand, if the linens are rented on a long-term basis (more than six
months, or for a major portion of the expected life), they attain a situs at the lessee's location. For
example, laundries often lease readily identifiable industrial garments to service stations on a continuous
basis. Often, these garments are temporarily taken to the laundry for normal maintenance and cleaning,
but they are returned to the same user (lessee) where they are used until worn out. As such, these items
are retained by the lessee for the major portion of their lives and attain a situs at the service station where
they are used. Trade level per Rule 10 and the provisions of section 623 concerning a single assessment of
leased property should be considered.
S I T U S O F V E N D I N G EQUIPMENT/GAMES
Vending machines (such as coin-operated pinball machines, food and drink vending machines, and music
machines) are typically placed at various locations for extended periods of time and are only returned to
the owner's business location for repair or for storage prior to disposition. Since these machines are more
or less permanently situated at various locations, they have situs where located on the lien date.
S I T U S O F CONTAINERS
R E T U R N A B L E CONTAINERS
Cylinders, beer barrels, and steel drums are types of returnable containers.105 Typically, returnable
containers require a deposit as they are not intended for sale. The sole purpose of such containers is to
provide a moveable vessel for their contents that have been sold, such as
103
Similarly, linen supply hardware such as towel cabinets, soap dispensers, and soiled rag containers are supplied to remain
at the customers' locations for the duration of the contract. Situs of these items is typically the lessee location based on
general situs rules.
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104
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Rule 133.
105
It should be noted that containers held for sale or lease are exempt from property taxation under the business inventory
exemption. See section 129 and Rule 133.
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compressed gas, beer, and solvents. The situs of such containers is the location to which they are returned
for reprocessing or refilling (i.e., the owner's business location).
Returnable containers for soft drink beverages, pursuant to section 996, "shall be assessed only to the
person in possession thereof on the lien date." Therefore, situs of this type of returnable container is the
place of possession.
Where returnable containers originate from out-of-state and are returned to the out-of-state location for
refilling, the "average presence" rule set forth in Sea-Land Service, Inc. v. County of Alameda is
applicable in determining tax situs.
S E M I -P E R M A N E N T CONTAINERS
There are various containers that are more or less permanently located at a particular site. Examples are
butane or propane tanks used for fuel storage. These tanks are refilled at the respective locations and
remain there for considerable periods. Situs for assessment purposes is the place where they are located
on the lien date.
S I T U S O F A R T I F I C I A L SATELLITES
"An artificial satellite permanently located in outer space does not have a tax situs in this state."106
Satellites are launched into outer space and guided to their FCC approved orbital assignment where they
remain until they are no longer operative. After satellites are launched, they never return to earth.
Satellites no longer operative are moved to a location known as a "space graveyard."
S I T U S O F RACEHORSES
Section 5720.6 states that the tax situs of racehorses, subject to in-lieu taxation, is the home ranch of the
owner or other place where the racehorses are quartered or domiciled and to which they normally return
when not racing or in training at a race track. If the racehorses are not quartered at a home ranch or other
location when not racing or in training to race, the situs is the residence of the owner. This determination
is made at 12:01 a.m., on the lien date January 1, each year.
S I T U S O F P E R S O N A L P R O P E R T Y O W N E D B Y M E M B E R S O F T H E A R M E D FORCES
The Soldiers' and Sailors' Civil Relief Act provides that non-business personal property owned by active
duty service personnel has a tax situs in the state of the owner's legal residence.107 Under this act, a
property's physical location may be California, but its tax situs may be in New York if the owner's legal
residence is in that state. The personal property of a service member who files a statement with the
assessor declaring his or her legal residence to be in another state is therefore exempt from taxation in this
state.
106
Rule 206, Assessment of Artificial Satellites, effective January 1, 2002.
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107
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Title 50 United States Code Annotated, section 574.
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C HAPTER 4: V ALUATION OF P ERSONAL PROPERTY
AH 501, Basic Appraisal, includes a personal property chapter that gives a basic overview of the appraisal
of personal property for property tax assessment purposes. Generally, as indicated in that chapter, basic
appraisal principles apply to both real property and personal property. However, there are differences
between the two.
This chapter focuses on basic and advanced valuation issues as related to personal property specifically.
In order to discuss the topics in a complete manner, some review of information previously covered in
other Assessors' Handbook sections is necessary.
R EVI EW OF THE V ALUE CONCEPT
Value is defined as the present worth of anticipated future benefits, or the monetary worth of a property at
a given time. It is one of the most important and complex appraisal concepts. AH 501 includes a
comprehensive discussion of the topic. This chapter discusses value as it applies specifically to personal
property. Although the approaches to value are similar, real property and personal property differ
significantly in that auditor-appraisers must estimate the market value of personal property on the lien date
every year. Annually, it must be taxed in proportion to its value as defined in section 110:
. . . the amount of cash or its equivalent that property would bring if exposed for sale in the open market
under conditions in which neither buyer nor seller could take advantage of the exigencies of the other, and
both the buyer and the seller have knowledge of all of the uses and purposes to which the property is
adapted and for which it is capable of being used, and of the enforceable restrictions upon those uses and
purposes.108
Unlike real property, personal property (with the exception of manufactured homes and floating homes) is
not governed by the base year value limitations of article XIII A of the California Constitution
(Proposition 13).
The annual lien date value of personal property, which must reflect market value, is unrelated to net book
value (capitalized cost less depreciation) reflected on an assessee's books. Fair market value as defined in
appraisal terms and net book value as defined in accounting terms are separate concepts. Any similarity is
merely coincidental. It is important to recognize the difference. The court has said,
The accountant deals with past historical cost to the present owner and by the process of amortization
spreads the cost of property over its useful life. The
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108
Section 110(a).
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unamortized cost reflected on the balance sheet has no relation to the "full cash value," i.e., the price that a
willing buyer would pay a willing seller.109
As mentioned earlier, an appraiser's concept of value is full cash value, or fair market value, or simply
market value, as of the lien date. In contrast, the accountant's concept of value is normally the book value
of the property, the capitalized asset's acquisition cost less depreciation. This may or may not be the same
as market value, as stated by the court in De Luz Homes, Inc. v. County of San Diego. In some cases, the
"historical" cost basis for property tax purposes is different from what is recorded as the book cost of the
asset. (Costs applicable to valuation for assessment purposes are discussed later in this chapter.)
APPROACHES TO VALUE
Rule 3, Value Approaches, which applies to both real property and personal property, discusses five
approaches to value. The three major appraisal approaches for estimating value (cost, comparative sales,
and income) as discussed regarding real property, are applicable to personal property as well. Although
all three approaches to value should be considered, the use of all three may not always be appropriate.
The nature of the property, its market, and the availability of data will normally indicate which
approach(es) is most applicable. This is supported by Rule 3, which states, in part:
In estimating value as defined in section 2, the assessor shall consider one or more of the following
[approaches to value], as may be appropriate for the property being appraised. (Italics added.)
The auditor-appraiser, therefore, should analyze all available information to determine the most applicable
and reliable approach(es). An appraiser should have knowledge of each approach as it applies to personal
property and business fixtures to make this determination.
C O S T APPROACH
The cost approach to value estimates the value of an asset or a group of assets as the original or historical
cost of the asset (or group of assets), adjusted to account for changes in value since purchase and/or
installation. It is the method of valuation used most frequently to value personal property and business
fixtures for assessment purposes because it lends itself to mass appraisal110 and is employed based on
information provided on yearly property statements. As stated in Rule 6, the cost approach is particularly
appropriate for property that is not over- or under- improved, and is not affected by other forms of
depreciation or obsolescence. Use of the cost approach is preferred if the following conditions exist: (1)
no reliable sales data are available, (2) no reliable income data are available for the property being
valued, and (3) the income of the
109
De Luz Homes, Inc. v. County of San Diego (1955) 45 Cal.2d 546.
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Mass appraisal is "the process of valuing a universe of properties as of a given date utilizing standard methodology,
employing common data, and allowing for statistical testing" according to the Appraisal Institute, The Dictionary of Real
Estate Appraisal, Third Edition, p. 224.
110
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property being valued is not so regulated as to make current replacement costs irrelevant to value.
Rule 6 allows and prescribes more than one type of cost approach that an appraiser may use. The
three variations of the cost approach provided are reproduction cost, replacement cost, and historical cost.
Although an appraiser may not utilize each variation, general knowledge of the terms and concepts
associated with each is important to a thorough understanding of value in the context of property tax
appraisal. Each variation is briefly described below.
R E P R O D U C T I O N C O S T APPROACH
The reproduction cost approach, as a variation of the cost approach, has limited usefulness because it uses
reproduction cost (the cost to replace an existing property with an identical property, a replica) as a basis
for estimating value. It is frequently not possible or desirable to duplicate an existing property, due either
to the lack of certain materials or trade skills or the functional obsolescence of a property.
The difficulty of using reproduction cost increases as a property ages. When a property would not be
exactly duplicated, as is often the case, reproduction cost loses validity as an indicator of market. This
lack of validity can be overcome if depreciation is accurately estimated, but this can be somewhat difficult
to determine for an exact replica.
R E P L A C E M E N T C O S T APPROACH
Replacement cost is the cost to replace an existing property with a property of equivalent utility111 as of a
particular date. The replacement cost concept is the most meaningful as far as the principle of substitution
is concerned.
In the replacement cost approach, elements of a property that would clearly not be included in a substitute
of equal utility are excluded from the estimated replacement cost. For example, a buyer may not look for
an identical new property to replace an older property. The buyer would look instead for the best way to
perform the same function(s). The best way may be to use the latest state-of-the-art technology and
materials, or may be another used piece of equipment able to perform to specifications of equivalent
utility. In making this decision, a buyer would look at various aspects of available properties. These
considerations include, but are not limited to, the cost to acquire each property, the age of the properties,
the remaining expected lives of the properties, and the expected cost to operate each in comparison to the
property being replaced and to each other.
H I S T O R I C A L C O S T APPROACH
Historical cost reflects the level of cost at the time of a property's original construction or acquisition, and
is discussed in Rules 3 and 6 in two contexts: (1) as a method of estimating
111
Rule 6(d) provides that the "replacement cost of a reproducible property may be estimated . . . by applying current prices
to the labor and material components of a substitute property capable of yielding the same services and amenities, with
appropriate additions . . . ".
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reproduction cost or replacement cost and (2) as the historical cost/historical cost less depreciation
approach used in the valuation of rate-regulated properties.
The replacement or reproduction cost approach is applicable to any property whose earnings or benefits
are not regulated; that is, the assessor may use historical or original cost as a method of estimating
reproduction or replacement cost new using price indexes or data on current prices for similar property.
(The estimate must then be reduced by the amount of estimated depreciation to arrive at an indicator of
fair market value.)
The historical cost/historical cost less depreciation approach referred to in Rule 3(d), is a variation of the
cost approach frequently applied to investor-owned, regulated public utilities. The approach has little
application to the county assessor and is not discussed in this manual.
V A R I A T I O N S O F T H E C O S T APPROACH
The reproduction cost approach and the replacement cost approach, as discussed in Rule 6, are the
variations most commonly used to value personal property and business fixtures at the county level. In
general, these variations of the cost approach use historical or original cost112 information to estimate a
reproduction cost new (current cost new to reproduce an identical property) or replacement cost new
(current cost new to replace a property with a similar property of the same utility). Then, the reproduction
or replacement cost new is adjusted to reflect depreciation to arrive at an assessable value.113 AH 582,
Explanation of the Derivation of Equipment Percent Good Factors, and the yearly update of AH 581,
Equipment Index and Percent Good Factors, discuss this procedure in detail and provide suggested index
factors and percent good tables for use by auditor-appraisers. Use of indexes and percent good factors
provided in the AH 581 based on the indicated remaining economic life of the subject property give an
estimate of what the market value should be for a property based on a broad, but similar "market basket."
In most cases it is a practical method to apply for mass appraisal purposes, although it does not always
reflect all types of depreciation for all types of property; additional adjustments are necessary. Market
data may also be used to develop such factors, when data are available.
When using the factors and valuation method contained in the Assessors' Handbook, an appraiser should
not only estimate a full economic cost (replacement cost new or reproduction cost new) and consider all
forms of depreciation that apply to a particular property, but should also be aware of the limitations
inherent to this approach. It is important for an appraiser to recognize the limitations of the cost approach
in regard to a specific property because adjustments may be needed, or a different approach to value
utilized. The annual Business Property Statement allows property owners to identify all property specific
conditions that would warrant adjustment
112
Rule 6 uses the terms historical cost and original cost synonymously, the cost of the property when new. The term
acquisition cost is, in the Rule, used as the cost to the current owner. For purposes of this manual, the terms are used as
defined in Rule 6.
113
Alternatively, one factor may be developed and used to estimate value using one mathematical operation
(original/historical cost x value factor = value estimate as opposed to original/historical cost x index factor x percent good
factor = value estimate).
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beyond normal appreciation and depreciation guidelines. Supplemental information that may be presented
by the assessee may be valid, whether or not submitted with the Business Property Statement. Cost
components, depreciation, and the limitations of the cost approach are discussed below.
V A L I D C O S T COMPONENTS
A property's recorded purchase price does not necessarily reflect all costs required to estimate value for
assessment purposes, nor does it necessarily exclude costs which do not contribute to value. In other
words, not all costs contributing to value are booked and not all costs booked contribute to value. For
example, the booked cost may represent acquisition cost as opposed to historical cost, acquisition cost
being the cost to the current owner, and historical cost being the original cost when new. If either the
historical cost or the cost to the current owner does not accurately reflect all valid cost components or
market value at the time the property was purchased,114 resulting cost approach value estimates may not be
good indicators.
It is important to be aware of all cost components. Rule 6 and Rule 10 define these costs as including
labor, material, entrepreneurial services, interest on borrowed or owner-supplied funds, freight or shipping
costs, installation costs, sales or use tax, and "other costs typically incurred in bringing the property to a
finished state (or to a lesser state if unfinished on the lien date)."115
D I R E C T A N D I N D I R E C T COSTS
Cost for assessment purposes may be thought of as full economic cost. Full economic cost should include
all market costs, both direct and indirect, necessary to purchase or construct equipment and make it ready
for its intended use. Costs which add value, direct and indirect, associated with manufacturing the
equipment and/or making it ready for its intended use should be included in the full economic cost. Not
all costs add value, for example, relocation costs are not costs contributing to the assessable value of the
property. Direct costs, or "hard" costs, are expenditures for the labor, materials, and direct factory
overhead required to construct the property whether purchased in the form of raw materials or a finished
product. Indirect costs, or "soft" costs, include expenditures other than labor and material necessary to
make the equipment ready for its intended use.
The following listing illustrates typical costs which should be included in full economic cost, that is,
those costs typically incurred in bringing the property to a finished state. Some of the more common items
are discussed in more detail in the pages following the table.
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114
Dennis v. County of Santa Clara (1989) 215 Cal.App.3d 1019.
115
Personal property leased for a period of six months or less (Rule 10(c)) and certain liquefied petroleum gas tanks as
provided by Rule 153 are treated differently. See the discussion of these issues in Chapter 6.
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TABLE 4A
TYPICAL VALID COST COMPONENTS
Purchased Equipment
Direct Costs
•
Indirect Costs
Purchase price including sales tax,
freight, trade-in allowances, and
installation less discounts—(with all
•
Unbooked sales/use
installation, etc.
tax,117
freight-in,118
features & attachments)116
Self-Constructed Equipment
Direct Costs
Indirect Costs
•
Materials
•
Labor used in construction
•
Sub-contractor's fees
•
•
Freight-in
•
Charges for equipment
equipment rentals
•
Installation
(foundations,
pilings,
connections, trial runs, debugging)
utility
•
Trade-in allowances
•
Interest on borrowed or owner supplied funds for
construction only (finance charges for purchased
equipment are not components of cost)
•
Testing costs, sometimes referred to as
or
Materials storage facilities (on
site)
•
Profit (if appropriate)
•
Direct overhead
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P U R C H A S E PRICE
Normally, a recent purchase price is the best evidence of the value of an asset. The Revenue and Taxation
Code permits the assessor to presume fair market value from a property's full purchase price (less
allowable discounts), but does not bind the assessor to rely upon it.119
Rule 6 contemplates the use of the original cost of the property and adjusted for subsequent price level
changes. However the Rule states: "If the property was not new when acquired by its present owner and
its original cost is unknown, its acquisition cost may be substituted for original cost in the foregoing
calculation…." The calculation referenced here is the one involving the application of price index factors
to the original cost to determine replacement or reproduction cost new.
However, the assessor should determine whether the purchase price accurately represents market value at
the time of acquisition. If evidence shows that price is not a good indicator of value, it should not be
used.120 For example,
•
if a seller were in dire straits and was required to sell an asset, the price might be below
the maximum value a "willing" buyer in the market would pay in other circumstances; the asset may be
sold for less than "fair market value";121
•
if the transaction was between related parties (i.e., not an "arms-length" transaction),
the price might be below the maximum value a "willing" buyer in the open market would pay;
•
a total sale price may have been allocated to various property types (e.g., land,
improvements, equipment, and goodwill); the allocation may not be an accurate indication of market
value; or
•
if the sale is of an ongoing business or operation, or includes non-assessable intangible
property, the sales price might be above the value of the assessable property.
Therefore, the circumstances surrounding a sale should be considered: Was the property or business
offered for sale in the open market? Was this an "arms length" transaction, was the sale between related
parties? Was the business in financial distress?
If the acquired property includes personalty, and/or business fixtures, the auditor-appraiser must then
estimate the remaining economic life of the acquired property, to determine the fair market value at
valuation dates subsequent to the acquisition date. Acquisitions of entire businesses, or total assets of an
entity, should be given very close scrutiny. Frequently, liabilities are assumed, intangible property may be
present, and the costs recorded on the books for the various acquired asset categories are merely
allocations of the purchase price, and do not reflect the true market value of the taxable, tangible personal
property, business fixtures, and leasehold or tenant improvements.
119
Dennis v. County of Santa Clara (1989) 215 Cal.App.3d 1019.
120
Section 110(b) discusses use of purchase price in relation to valuation of real property. This section can be applied to
personal property where appropriate.
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121
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Section 110.
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S A L E S /U S E T A X , F R E I G H T , A N D INSTALLATION
The general rule in determining market value is that where price is the basis of value, sales/use tax,
freight, and installation cost are elements of that value.122 These elements should be included in full
economic cost since they are part of value when they are paid. Moreover, if these costs would have been
applicable to a similar consumer using the equipment at a similar trade level, they may be assessable even
when not paid.123 The costs apply at the same rate as those that apply to a similar consumer, whether
actually paid or not.
However, there are exceptions to the general rule. Equipment rented to federal instrumentalities and
aircraft used by common carriers (neither of which are subject to sales tax), for example, are valued
without sales tax as an element of value. The reason in both cases is that the consumer (the federal
government or the air carrier) is never liable for sales tax on purchases of such equipment. Consequently,
the reproduction or replacement cost of such property should not include sales tax, unless or until the
property is put to private use or rented to a private party.124
Other exceptions to the general rule include a partial sales tax exemption on the purchase and lease of
farm equipment and machinery, commercial timber harvesting equipment and machinery, and racehorse
breeding stock. Beginning September 1, 2001, qualified sales and purchases (including lease payments
made after that date) of these types of property are exempt from the state general fund portion of the sales
tax.125 (The partial exemption also applies to the repair and replacement parts for these categories of
equipment and machinery.) The partial exemption does not apply to any local, city, county, or district
taxes. Local, city, county, and district portions of the sales tax will continue to be included in the full
economic cost of the property for property tax valuation purposes.
With regard to the exemption allowed on the equipment, the property must be purchased by a qualified
person to be used primarily in the industry identified in the exemption. Qualified person means any
person engaged in the line of business described in each exemption and
122
Xerox Corp. v. Orange County (1977) 66 Cal.App.3d 746.
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Property must be valued at the level situated on the lien date. This is the trade level concept. Thorough discussion of this
topic is included later in this chapter.
123
124
See the Sales and Use Tax Law for more information regarding sales tax requirements.
125
It should be noted that there is a difference between the state sales and use tax rate ("state rate") and the state general
fund portion of the sales and use tax rate. For example, as of January 1, 2002, the state rate is 6.00%, while the state general
fund portion of the sales and use tax rate is only 5.00%, as 1.00% of the state rate is directed towards local revenue funds.
The partial exemption discussed above is limited to the state general fund portion of the sales and use tax rate. Please see
the table attached to LTA No. 2002/029 for the appropriate adjustment to a property's full economic cost, based upon the
asset's acquisition date.
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primarily means used 50 percent or more of the time for such purposes. Property qualifying for this
partial exemption includes:
•
farm equipment and machinery purchased to be used by a person engaged in the
agricultural industry and used for producing and harvesting agricultural products.126
•
commercial timber harvesting equipment and machinery purchased to be used by a
person engaged in the commercial timber harvesting industry and used for harvesting timber.127
•
racehorse breeding stock capable of reproduction and for which the purchaser states that
it is the purchaser's sole intent to use the horse for breeding purposes.128
For all three partial exemptions, the purchaser must complete a partial exemption certificate (as described
in Sales and Use Tax Rule 1667) in order for the retailer to claim the partial exemption. Therefore, if the
purchaser qualifies for the exemption and completes an exemption claim, their reported cost should only
include a sales tax component for any local, city, county, or district tax. The reported cost should not
include a sales tax component attributed to the state general fund portion of the sales tax.129
T R A D E -I N ALLOWANCES
In some cases, a buyer will pay for property in part or in whole with a trade-in of older property or
equipment. This is a trade-in allowance and an element of value when using the cost approach. This
allowance is part of the price paid for the property, although the price was not paid in cash. Had the tradein allowance not been accepted as payment, the cash price would have been higher. Appraisers must,
therefore, add-back any trade-in allowances subtracted from the purchase price or booked cost.
C A P I T A L I Z E D I N T E R E S T (I N T E R E S T D U R I N G CONSTRUCTION)
Self-constructed property, property constructed by the user and put to productive use in that business, has
an interest cost associated with it regardless of whether the source of funds is debt or equity and whether
or not the interest is actually incurred. Therefore, an increment of interest must be identified and included
when valuing self-constructed property.130 This only applies to financing costs during the construction
period. Financing costs, actual or imputed, attributable to the holding of the property after the
completion of construction, including purchase financing,
126
Section 6356.5 provides the exemption for farm equipment and machinery; in addition, see Sales and Use Tax Rule
1533.1.
127
Section 6356.6 provides the exemption for timber harvesting equipment and machinery; in addition see Sales and Use Tax
Rule 1534.
128
Section 6358.5(a)(2), in part, see code section for further information regarding this exemption; in addition, see Sales and
Use Tax Rule 1535.
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For further guidance on how this sales tax exemption affects the economic cost of property for property tax
purposes, see LTA 2002/029.
129
130
Rule 6.
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should not be included in the cost of construction.
Care must be taken to include only
the interest attributable to the piece of equipment under construction.
When identifying the cost of the capital rate to apply, the following criteria should be
considered:
•
The rate derived should be the typical rate for the specific industry of the assessee.
•
The rate should be the weighted average cost of capital, taking into consideration
the typical debt-equity ratio for the industry.
•
The cost of debt for long-term capital projects in most industries typically relates
to long-term bonds, rather than short-term prime rate borrowing.
•
Interest cost is related to and measured against the typical pattern for use of funds on
any given project.
EXAMPLE 4.1 COMPUTING CAPITALIZED INTEREST
FACTS:
A candy company constructed candy manufacturing equipment. The construction activity started
on March 1, 2001, and the equipment was ready for use on December 1, 2001 (a nine-month acquisition period).
•
On March 1, 2001, at the beginning of construction, the company borrowed $400,000 at 15
percent for five years to pay for the parts and material acquired for use in construction.
•
WHAT IS THE INTEREST COST COMPONENT NECESSARY TO INCLUDE WHEN USING THE COST APPROACH TO VALUE?
Funds Borrowed to Begin Construction x Interest Rate x Time = Interest Cost
$400,000 x 0.15 x 9/12 = $45,000
WHAT IS THE TOTAL ORIGINAL COST OF THE EQUIPMENT (BASED ON THE INFORMATION PROVIDED)?
Funds Borrowed to Begin Construction + Cost During Construction = Total Cost
$ 400,000 + 45,000 = $445,000
Note: No interest cost is capitalized after the equipment is placed in use on December 1, even though interest continues to
accrue on the $400,000 loan for the acquisition of parts and material needed for the construction of the equipment.
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T E S T I N G COSTS
Testing costs are those costs incurred during construction or installation of a production line or equipment.
Some of these costs may be assessable.
Machinery testing costs are costs incurred in the process of verifying that the production line is working
correctly. They are part of the installation process and are necessary in bringing the property to a finished
state. Machinery testing costs are assessable as valid cost components.
Product testing costs, on the other hand, are costs incurred in the research and development stage of a
product, rather than during the construction or installation of the equipment. Product testing costs would
be incurred when a product is developed, for example. These costs should not be included in an
appraiser's estimate of the full economic cost of the assessable equipment. These costs are part of
inventory (part of the product) and are unrelated to the matter of bringing the manufacturing equipment to
a finished state.
FDA V A L I D A T I O N COSTS
The FDA (Federal Food and Drug Administration) defines validation as "confirmation by examination
and provision of objective evidence that the particular requirements for a specific intended use can be
consistently fulfilled."131 It is the responsibility of the user to develop and conduct such examinations to
ensure compliance with FDA guidelines specific to the industry or to a property. Equipment or processes
which must be validated may include, for example, processes such as sterilization, molding, and welding.
Thus, FDA validation costs are those costs incurred to establish:
. . . evidence which provides a high degree of assurance that a specific process will consistently produce a
product meeting its predetermined specifications and quality characteristics.132
These costs are not assessable attributes of the property to which they are associated. Validation costs are
generally incurred once at the start of a process, as distinguished from verification costs which may
continue periodically over the life of a process. The FDA defines verification as "confirmation by
examination and provision of objective evidence that specified requirements have been fulfilled;"133 a cost
associated with maintaining property.
R E S E A R C H A N D D E V E L O P M E N T COSTS
Research and development (R&D) costs are appropriately included as elements of full economic cost only
when they relate to machinery or other assessable property. Even then, R&D may be
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131
www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfPCD/showCFR.cfm?CFRPart=820&s, March 19, 2002.
132
www.fda.gov/ora/inspect_ref/igs/gloss.html, March 19, 2002.
133
www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfPCD/showCFR.cfm?CFRPart=820&s, March 19, 2002.
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assessable or non-assessable depending on the specific set of facts involved. For example, R&D relating
to design or development of a tangible product which the taxpayer intends to sell is inventory and
therefore non-assessable.
R&D costs may be appropriately included in assessable property when they relate specifically to the
successful development and construction of machinery or other assessable property used to produce a
product. However, the appraiser must carefully scrutinize these R&D costs to determine the appropriate
value added rather than simply including the total cost incurred. R&D often involve a trial and error
process, with success following a number of failed attempts. Moreover, the appraiser must be careful not
to include in the value of assessable tangible personal property the value of non-assessable property
created by the R&D, such as patents, trade secrets, etc.
Finally, there may be timing and allocation questions to consider. For example, R&D costs may be
incurred to successfully design, develop, construct, and test a piece of equipment to be used in a
manufacturing or testing process. To the extent that R&D is properly includable in the cost of the tangible
personal property, some reasonable method should be used to recognize the contribution of the includable
R&D to the value of the initial and each subsequent machine. It would be inappropriate to allocate
includable R&D costs to the first such self-constructed piece of equipment where the taxpayer plans to
build additional machines of the same or similar type utilizing such R&D information.
DISCOUNTS/ADJUSTMENTS
The purchase price of equipment may reflect discounts allowed due to payment within a pre- determined
period or due to the quantity purchased. For example, a seller may offer a discount (say, 2 percent) if the
equipment is paid for in-full within a short time (say, 30 days). If the purchaser takes advantage of this
discount and pays timely, the booked value of the asset would reflect the discount. Likewise the seller
may offer discounts that escalate based on the quantity purchased, and would exceed that which may be
offered on smaller orders.
Discounts and rebates offered by a seller are a normal part of supply and demand in the process of setting
market value, where the prudent buyer pays as little as reasonably possible and the seller charges as much
as possible. The price paid for the property after recognition of discounts and rebates represents the
amount received by the seller as well as the cost to the buyer.134 (Discounts between related parties may
require further examination.) Discounts and rebates are therefore excluded from the full economic cost of
equipment for property tax assessment purposes.
Income tax credits, by contrast, are simply reductions of federal income tax liability. They are
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The price paid by the buyer may include a sales tax component and is a valid cost component for valuation purposes.
Sales tax is not part of the compensation retained by the seller.
134
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similar to depreciation or amortization charges against income for income tax purposes. Other allowances
that are treated similarly to income tax credits include energy tax credits and manufacturers' investment
credits. These items are therefore included in the full economic cost of equipment for property tax
assessment purposes.
The purchase agreement may include a clause that provides liquidated damages in the event of the
untimely delivery of equipment. Liquidated damages means:
An amount contractually stipulated as a reasonable estimation of actual damages to be recovered by one
party if the other party breaches. If the parties to a contract have agreed on liquidated damages, the sum
fixed is the measure of damages for a breach, whether it exceeds or falls short of the actual damages.135
In certain situations, timeliness of delivery is a critical component of a transaction. The company
purchasing the property may be in a situation where money may be lost if the equipment is not delivered
by a certain date. Consequently, a clause may be included in the purchase contract that provides for a
stated amount of damages to be recovered by the purchaser if the property is not delivered by that stated
date.
Liquidated damages are not part of the consideration paid for a property. The damages a company may
receive if the property is not delivered timely is not a valid adjustment to market value. Liquidated
damages are not the same as discounts, which are a normal part of supply and demand. Discounts, a
reduction in the purchase price of equipment, may be due to a payment received within a pre-determined
period or due to the quantity purchased. Liquidated damages are amounts recovered due to a breach in
contract.
Other items are excluded from a property's full economic cost when "other assets" are included in a
purchase contract. Full economic cost does not include extended service plans or extended warranties,
supplies, or other assets or business services that may have been included in a purchase contract.136
Adjustments to a purchase price for these items should be made if they contribute value to the total
contract purchase price. In addition, the effect on the purchase price for any included financing should be
considered and an adjustment made, if appropriate.
The following chart is an outline of types of adjustments discussed above and the proper treatment for
assessment purposes.
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135
Black's Law Dictionary, Seventh Edition (1999), page 395.
136
Rule 10(b) and (e).
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TABLE 4B DISCOUNTS/ADJUSTMENTS
Excluded from
Included in
Full Economic Cost
Full Economic Cost
Description
Quantity discount
X
Cash discount
X
"Other" assets or business services
X
included in purchase contract137
Seller rebates
X
Income tax credits
X
Energy tax credits
X
Manufacturers' investment credit
X
Liquidated Damages
X
O T H E R A P P L I C A B L E COSTS
Other costs, whether booked or otherwise, should be considered on an individual basis in relation to how
they affect a property's market value.
Other costs may include, for example, those incurred in a major overhaul of a piece of equipment. If an
overhaul extends the life of an asset or increases its utility, the value of the asset may be affected. (This
should not be confused with minor repairs, overhauls, and maintenance required to continue the existing
use of a piece of equipment; these costs do not represent assessable property.) The costs associated with a
major overhaul may be expensed or may be booked as a capitalized asset. In any event, it is important to
consider major overhaul costs in the valuation of equipment if the costs add value.
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137
Full economic cost does not include extended service plans or extended warranties, supplies, or other assets or business
services that may have been included in a purchase contract. (Rule 10(b) and (e).)
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T R A D E LEVEL
Consistent with the definition of full cash value, property must be assessed at the proper level of trade
based on its location and use on the lien date. An appraiser must recognize that property normally
increases in value as it progresses through production and distribution channels, and to the consumer,
whether or not the cost or value added is booked.
The trade level concept is applicable when book cost does not provide adequate information for making a
fair market value appraisal. It is a cost component which is most frequently applicable to leased
equipment and self-constructed equipment. Rule 10(a), Trade Level for Tangible Personal Property,
explains the concept of trade level and reads in part:
In appraising tangible personal property, the assessor shall give recognition to the trade level at which the
property is situated and to the principle that property normally increases in value as it progresses through
production and distribution channels. Such property normally attains its maximum value as it reaches the
consumer level. Accordingly, tangible personal property shall be valued by procedures that are consistent
with the general policies set forth herein.
Under the provisions of the rule, personal property is assessed on the basis of how it is situated or used on
the lien date rather than at the book cost of the owner. In effect, the rule provides for equal value for
properties equally situated.138
This concept is more easily understood using the following example.
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138
Fixtures, and other real property, should be assessed at the appropriate stage of production as discussed in AH 501,
Basic Appraisal (January 2002), page 12.
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EXAMPLE 4.2 TRADE LEVEL
FACTS:
•
ABC Grading Company purchases a bulldozer for $250,000 and uses it to prepare land for
subdivision development.
At the same time, Dozer Sales, a bulldozer dealer, purchases an identical bulldozer for $200,000
(dealer's cost) and rents it on a one-year lease to JKL Grading Company. JKL uses the bulldozer to prepare land for
subdivision development, in competition with ABC.
•
Concurrently, the bulldozer manufacturer (GHI) provides an identical bulldozer to its subsidiary,
RST Grading Company (a competitor of ABC and JKL). The manufacturer's cost is $150,000. RST uses the bulldozer
to prepare land for subdivision development, in competition with ABC and JKL.
•
Logically, the full economic cost for each piece of equipment should be the same. In each situation, the bulldozer
is used for the same purpose or at the same trade level. If no trade level adjustments were made and the book
costs were used as the sole basis for appraising, the assessments would not be the same; they would be
substantially different. The trade level principle, per Rule 10, requires the assessor to estimate fair market value
for the three machines and provide uniformity of assessment.
Based on the information above, Dozer and GHI's costs would require two different trade level adjustments to
arrive at the $250,000 (consumer level) value. Dozer's cost ($200,000) is a dealer cost that would not include
retail items such as sales tax and the dealer's profit margin. GHI's cost ($150,000) is the manufacturer's cost which
does not yet include retail items missing from the dealer cost, plus items such as profit margin normally added in
when the manufacturer sells the product to either the dealer or a retailer. In this case, the dealer cost is adjusted
125% ($250,000 / $200,000) and the manufacturer's cost is adjusted 167% ($250,000 / $150,000) to arrive at the
proper trade level.
As illustrated in Example 4.2, the trade level concept requires adjustments based on what a consumer at
that level of consumption would pay. If another consumer of like property at that level of trade would be
subject to a cost (i.e., sales tax), the full economic cost should include that cost component whether or not
the cost was actually incurred. However, quantity discounts, as discussed on page 66, should be excluded
from full economic cost. In Xerox Corporation v. County of Orange, (1977) 66 Cal.App.3d 746,139 the
Court indicated that under the market value concept, where price is the basis of value, the sales tax and
freight charges are elements of value. Consumer trade level includes sales tax, freight and installation
charges and the property is valued in accordance with the comparative sales, cost or income method. The
courts have also supported the trade level concept by allowing inclusion of a markup in value for
interdivisional transfers of manufactured goods for purposes of delivery or to facilitate marketing.140
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139
Decision supported in County of San Diego v. Assessment Appeals Bd. No. 2 (1983) 140 Cal.App.3d 52.
140
Beckman Instruments, Inc. v. County of Orange (1975) 53 Cal.App.3d 767.
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Internal Revenue Code section 482 states that the Internal Revenue Service (IRS) may allocate or
apportion income between two or more organizations, trades, or businesses (whether or not incorporated,
whether or not organized in the United States, and whether or not affiliated) owned or controlled directly
or indirectly by the same interests. For example, if a company has a product manufactured by its related
offshore manufacturer, the product's cost to the U.S. entity for income tax purposes may include the cost
to manufacture the equipment plus an additional element for profit. The standard cost plus intercompany
profit is called the transfer price. If the transfer price is used to determine the book cost of selfmanufactured equipment, then the book cost contains or includes a trade level adjustment. The transfer
price may or may not be equal to the market value at the time of transfer since transfer price is an
adjustment for income tax purposes. An auditor-appraiser should recognize that a profit element is
included in book cost and relate this cost to market value at the time of transfer to determine the
appropriate trade level adjustment for assessment purposes.
The following table simplifies the application of the trade level principle:
EXAMPLE 4.2 (CONTINUED) TRADE LEVEL
ABC
Gradin
g
Dozer
Sales
Lease to
JKL
GHI
Manufactur
er
$150,000
Manufacturer's Cost
(Cost incurred to produce equipment, costs incurred to
bring equipment to finished state)
50,000
+ Value Added as Moved to Next Trade Level (mark
up to include profit to manufacturer)
Dealer's Cost
+ Value Added as Moved to Next Trade Level (mark
up to include profit to dealer, sales tax, freight,
installation, and other necessary
charges)
$250,00
0
$200,000
$200,000
50,000
50,000
$250,000
$250,000
Consumer Level Cost / Full Economic Cost
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In practice, determination of a trade level adjustment may be more complex because of
(1) uniqueness of the equipment, (2) the infrequency of sales, and (3) the unavailability of facts necessary
to determine its marketability on the lien date. To simplify the process, keep in mind the example
provided here and first determine how the property is actually held or used on the lien date.
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In gathering data to determine a proper trade level adjustment, the use of a property prior to and after the
lien date should be considered since it may influence how it is valued on the lien date. For example, if a
lessor of copy machines uses a copier prior to and/or after the lien date but places the copier in its
inventory on the lien date, that copier is properly classified as assessable equipment at the consumer trade
level.
Include all costs necessary and appropriate for the property's trade level, and make adjustments for any
discounts that may be appropriate.141 For example, if the consumer is a company that typically receives
quantity discounts due to the amount of equipment purchased, it generally is appropriate to reflect such a
discount in the adjusted cost (see also Discounts/Adjustments).
Following is an example of trade level adjustment incorporating quantity discounts:
EXAMPLE 4.3
TRADE LEVEL WITH QUANTITY DISCOUNT
FACTS:
Alpha Company purchases a computer for $2,500 and uses it in its business.
Beta Company purchases 1,000 identical computers for $2,100 per computer and uses them in its
business. The price difference is from a quantity discount.
At the same time, Comp Sales, a computer dealer, purchases 1,000 identical computers for
$1,700 (dealer's cost with a quantity discount) and rents them on a one-year lease to Kappa
Company. Kappa uses the computers in its business, in competition with Alpha and Beta.
Concurrently, the computer manufacturer (Sigma) withdraws 2,000 identical computers from
inventory. The manufacturer's cost is $1,500 per unit. Sigma uses the computers in its business,
in competition with Alpha, Beta, and Kappa.
Logically, the cost per unit and the full economic cost of the piece of equipment to Alpha Company is
$2,500 per unit. The cost per unit and the full economic cost for each piece of equipment to Beta
Company is $2,100 per unit. It is important to recognize that trade level does not extinguish a quantity
discount. The full economic cost for each piece of Comp Sales equipment should be $2,100 per unit, since
Beta Company and Comp Sales purchased the same quantity. The quantity discount allowed for Sigma
(manufacturer) needs to be determined by the auditor-appraiser. The auditor-appraiser needs to examine
the greatest quantity discount given by the manufacturer, and make an appraisal judgment to determine if
a greater quantity discount is justified. The quantity discount allowed the manufacturer, when it is its own
largest customer, should be at least as large as its largest external wholesale or retail customer.
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141
See Valid Cost Components in this chapter for a discussion on full economic cost.
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EXAMPLE 4.3 (CONTINUED)
TRADE LEVEL WITH QUANTITY DISCOUNT
Alpha
Beta
Comp
Sales
Sigma
$1,500
Manufacturer's Cost
(Cost incurred to produce equipment, costs
incurred to bring equipment to finished state)
+ Value Added as Moved to Next Trade Level
(Mark up to include profit to manufacturer)
200
Dealer's Cost
$1,700
1,700
+ Value Added as Moved to Next Trade
Level (Mark up to include profit to dealer,
sales tax, freight, installation, and other
necessary charges)
400
400
$2,100
$2,100
Consumer Level Cost/Full Economic Cost
$2,500
$2,100
or
some
value
less
than
$2,100
A unique trade level problem arises when a manufacturer of equipment is also its own largest consumer,
and the manufacturer routinely awards significant purchase discounts to others. In valuing such
equipment used for internal consumption, Rule 10 mandates assessment at the price this equipment could
be purchased for from an outside supplier. Such purchases would probably reflect at least the largest
purchase discount awarded to any other consumer. Additional adjustments should be made for differences
in the self-constructed equipment and equipment sold to the manufacturer's customers. Such discounts
and/or appropriate retail selling prices for internally used equipment can be determined through (1)
analysis of sales transactions, which reflect large customer discounts or (2) use of a gross margin mark up
method. When actual sales data are available, the first method is preferred.
Previous examples demonstrate the determination of trade level through analysis of sales transactions.
The second method of determining full economic cost when a trade level adjustment is necessary is called
the gross profit method. The auditor-appraiser may use the manufacturer's gross margins on United States
sales to determine the trade level adjustment. This method should be used with caution, and only when
the manufacturer has actual sales at the retail level.
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EXAMPLE 4.4
TRADE LEVEL ADJUSTMENT USING GROSS PROFIT METHOD
Total Sales to End Users Only (Net of value added retailers and original
equipment manufacturers)
$10,000,00
0
Cost of Goods Sold (Net of marketing and administrative costs if not
included in book costs)
7,500,000
Gross Profit
2,500,000
Gross Profit Percentage
33.33%
Trade Level Adjustment (1 + Gross Profit Percentage)
1.3333
Full Economic Cost with Added Trade Level ($1,500 x 1.333 = $2,000)
$
2,00
0
To determine appropriate adjustments, information should be gathered from available sources (which may
include review of accounting records to determine normal profit margin added at each level, review of
cost guides, and gathering of information from equipment dealers). This information should be evaluated
and determined to be appropriate prior to use. For example, when using the gross profit method, total
sales should include all sales at the appropriate level; and the trade level adjustment should result in the
property's full economic cost at the user's level. For any given situation, information gathering relevant to
cost and evaluation of this information is an important part of the process and value estimate.
Caution must be exercised when the gross margin mark up method is used. The gross margin should
reflect only those sales to end-users. If the manufacturer only sells at the wholesale level of trade, use of
the gross margin method to extract a trade level factor will not bring the costs to the retail trade level.
Further analysis of sales or other data will be required to determine an appropriate increment to add to
achieve the retail, or end user level.
Sales to value-added retailers (VARs) and to original equipment manufacturers (OEMs) are not sales to
end-users. Financial data pertaining to the sales to value added retailers or original equipment
manufacturers should be extracted from the "total sales revenue" and the "cost of goods sold" to isolate
those sales at the retail level. Caution should be exercised when using income statements and annual
reports, because they reflect combined sales and cost of goods sold data, i.e., sales to all customers, both
wholesale and retail, are consolidated for reporting purposes.
The auditor-appraiser should analyze the underlying sales records to isolate revenue, discounts, and cost
of goods sold data to end users only. Sales journals of actual invoices and purchase contracts will provide
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relevant information concerning the appropriate quantity discounts to be reflected in the final trade level
factor.
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The auditor-appraiser's analysis should include an analysis of the booked costs of the selfmanufactured assets, as well as the components of the cost of goods sold. These costs should include
comparable components of cost if the gross profit method is being used. If they are not comparable the
trade level factor applied will not reflect the retail level. For example, booked costs may include material,
labor, and some overhead, while "cost of goods sold" usually includes material, labor, overhead,
marketing and administrative costs. The "cost of goods sold" amount in the financial statements must be
adjusted to remove marketing and administrative costs prior to calculation of the trade level factor.
During the analysis of the booked costs of the self-manufactured assets, the auditor-appraiser should
review for the inclusion of sales tax on materials. Some manufacturers pay the sales tax on materials and
include it in the standard, or booked costs. An adjustment should be made to recognize this in the final
calculation of a trade level factor.
Only sales within the United States should be considered when calculating a trade level factor from the
assessee's financial records. The mark-up on exported products may vary considerably from the mark up
on the sale of domestic products.
If the manufacturer is diversified and sells a wide range of products and services, caution should be
exercised to isolate revenue and costs from the sale of products that are comparable to the selfmanufactured asset that are being appraised.
While the trade level principle is most frequently relevant when assessing leased and selfconstructed equipment, it is also important regarding other property where book cost is not indicative of
costs generally incurred by the market, considering the location and use of the property. However, caution
must be exercised when applying the trade level principle. Consider the rental of the bulldozer by Dozer
Sales to JKL Grading Company in Example 4.2. If the rental had been for less than six months (shortterm lease) instead of the one-year lease specified in the example, Rule 10 directs that the bulldozer shall
be assessed at Dozer's acquisition value ($200,000 dealer cost with sales tax added) instead of the
$250,000 consumer-level cost. The lessor would then be considered the consumer pursuant to subdivision
(c) of Rule 10.
Trade level is an important concept in the assessment valuation process. The Business Property Statement
requires that assessees report costs at the proper trade level.142 During the course of an audit the auditorappraiser should verify that the assessee compiled and reported at the proper trade level, and that all
necessary and appropriate adjustments have been made.
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142
Rule 10.
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D E P R E C I A T I O N O F M A C H I N E R Y & EQUIPMENT
Depreciation, for appraisal purposes, is a loss in value from any cause. It is the difference between the
value of a hypothetical new, similar property and the current value of the subject property; the total
measure of the reduced value at a particular point in time. In other words, it is a by-product of the value
estimate.
For appraisal purposes, depreciation occurs in two different ways. First, and probably most important, the
remaining economic life of a property may decline. Instead of yielding benefits for ten years as when
new, a property may now have only eight years remaining service. Second, there may be a reduction in
net benefits from the property. Fewer benefits may be provided, or the same benefits are provided at a
higher cost (thus, fewer net benefits are provided). Thus, a decline in the remaining life or the efficiency
of property causes depreciation.
The appraiser's definition and use of depreciation is fundamentally different from the accountant's
definition and use of depreciation, as discussed earlier regarding value. The accountant uses depreciation
to amortize a property's cost over the life of the property. Each year the accountant estimates
depreciation, based on a preselected life, to recover the cost of the equipment in the most beneficial legal
manner for GAAP and/or income tax purposes.
These definitional differences are represented mathematically below:
REPLACEMENT COST NEW - DEPRECIATION = CURRENT MARKET VALUE (APPRAISER) REPRODUCTION COST NEW DEPRECIATION = CURRENT MARKET VALUE (APPRAISER) CAPITALIZED COST - DEPRECIATION = BOOK VALUE (ACCOUNTANT)
The appraiser should recognize that depreciation from reproduction cost new is different from
depreciation from replacement cost new when these costs are different. In situations where equipment has
undergone minimal changes in technology, reproduction cost and replacement cost are likely to be similar.
The appraiser cannot use the accountant's depreciation estimate when valuing an asset because he or she
must determine an estimate of depreciation which directly relates to the actual loss in value the property
has incurred. Accountants are not concerned with representing market value at any point in time, but are
concerned only with writing off the cost incurred to purchase the asset. If book value (capitalized cost depreciation
= book value) has any relation to market value, it is only coincidental. Rather than using depreciation
computed for accounting purposes as an estimate, appraisers should use methods of estimating
depreciation that represent the loss in value a property has suffered.
Although depreciation may be, and most often is, estimated in a lump sum, it is important to be aware of
each type of depreciation in order to determine (1) if all necessary adjustments have been made and (2)
that there are no duplicate allowances for any one type. Each type of depreciation: physical deterioration,
functional obsolescence, and external obsolescence, is defined and discussed below.
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T Y P E S O F D E P R E C I A T I O N DEFINED
A property may suffer from one or more forms of depreciation. That is, a single piece of equipment may
contain elements of physical deterioration as well as both functional and external obsolescence. In some
cases, calculation methodologies may be used to separately estimate the amount of depreciation
attributable to each cause. In many situations, however, it may be impossible to categorize the amount of
depreciation attributable to each cause. Regardless of whether total depreciation is calculated as a whole
or as a sum of parts, recognizing and identifying the types of depreciation applicable to a property may aid
in estimating total depreciation to arrive at value.
P H Y S I C A L DETERIORATION
Physical deterioration is the loss in value which may be the result of wear and tear either from use or
exposure to various elements. This type of depreciation is expected on most equipment. Virtually all
properties deteriorate as they age, and it is not abnormal unless equipment is put to excessive use or
misused. Good maintenance will slow the process, while lack of maintenance and overuse will increase
physical deterioration.
Most physical deterioration can be corrected. However, the relationship between the costs involved and
the economic benefit derived determines whether it is economically feasible to correct or repair physical
deterioration. An element of physical deterioration is considered curable when the cost to correct the
deficiency is less than the economic benefit resulting therefrom. When the cost to correct the deficiency is
greater than the resulting economic benefit, the element of physical deterioration is considered incurable.
F U N C T I O N A L OBSOLESCENCE
Functional obsolescence is the loss of value in a property caused by the design of the property itself.
When the capacity of a property to perform the function for which it was intended declines, functional
obsolescence is present. Functional obsolescence may include such things as changes in taste in the
marketplace, changes in equipment design, materials, or process, or poor initial design.
Changing technology commonly creates functional obsolescence for machinery and equipment, and some
functional obsolescence can be or should be considered normal to varying degrees (depending upon the
industry and equipment type). Older machines and sometimes newer machines or entire lines of
equipment, even though still in use, may be made obsolete by new technologies and manufacturing
processes and the market value may be reduced because of functional obsolescence.
Functional obsolescence may be less tangible or visible than physical deterioration, but it may be more
significant. However, it may be curable. An element of functional obsolescence is considered curable
when the cost to correct the deficiency is less than the resulting economic benefit. When the cost to
correct the deficiency is greater than the resulting economic benefit, the element of functional
obsolescence is considered incurable.
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E X T E R N A L OBSOLESCENCE
External obsolescence, also known as economic obsolescence, is a loss in value resulting from adverse
factors external to the property that decrease the desirability of the property. This type of depreciation
may include the loss of value due to: inflation, high interest rates, legislation, environmental factors,
reduced demand for the product, increased competition, changes in raw material supplies, and increasing
costs of raw material, labor or utilities without a corresponding price increase of the product.
Loss in value attributable to external obsolescence is usually beyond the owner's control and is mostly
atypical depreciation. It can, however, be normal in industries where markets have shown long-term,
sustained, and predictable shifts, such as the market for semiconductor and other high-technology
equipment. It can be identified by studying the overall market conditions for a property. For example, if
the output of a machine is superseded in the marketplace by output of a different material (i.e., fiberglass
for metal or plastic for wood), and the market no longer absorbs the superseded output, then the machinery
has suffered external obsolescence.
M E T H O D S O F E S T I M A T I N G D E P R E C I A T I O N A N D VALUE
There are several methods of estimating depreciation and value for appraisal and assessment purposes.
Appraisers may need to use one or more of these methods while determining depreciation from all causes.
Again, the appraiser's methods are not the same as the accountant's methods because an accountant uses
depreciation to recover cost over a preselected useful life of the property as determined by GAAP and/or
federal and state income tax laws while an appraiser uses depreciation to estimate market value.143
M A R K E T METHOD
The Market Method of calculating value factors (and/or developing depreciation tables) relies on market
data, with adjustments made for relevant property characteristics incorporated (see Appendix H). It is a
method of estimating a property's total depreciation directly without utilizing indirect engineering
economics calculations. The market method is the preferred method when reliable data144 are available
because it captures all forms of depreciation, including both external and functional obsolescence.
Using a variation of this methodology, an analyst and/or appraiser may gather market data for identical or
similar property to compare the used price of an asset to the original new price of that same asset. The
difference is the analyst and/or appraiser's estimate of percent good (used price / new price = percent
good factor or value factor)145 at the age it was at the time of
143
Assessors tend to utilize equipment index factors and percent good factors published by the Board for the majority of
appraisals concerning machinery and equipment, and fixtures. However, different methods of estimating depreciation and
value may be appropriate.
144
See AH 501, Basic Appraisal, Chapter 6, under the discussion of the cost approach for information regarding data
collection and analysis.
145
Using the market method, a combined factor may be estimated similar to the result of multiplying the index factor and the
percent good factor used from AH 581 tables discussed in this chapter.
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sale. The estimates are reduced to a table of value factors (similar to a depreciation table and/or the
percent good tables published by the Board) and arrayed on a scattergram. A best-fit curve, passing
through the entire mass of points, estimates average value factors at each age and the average decline in
value per year. (It is usually set to 100 percent at age 0 in order to correspond with the assumption that a
new asset is purchased at its market value when new.)
The Board used a similar market methodology to calculate the computer valuation schedules from market
data. (These tables are provided in the annual update of AH 581, Equipment Index and Percent Good
Factors.) The Board also recommends this method in AH 501, Basic Appraisal, as applied to real
property.146 When reliable, accurate, and representative data are available regarding machinery and
equipment, and fixtures, use of this approach (or a modified version) is the preferred method.
E Q U I P M E N T I N D E X F A C T O R S A N D P E R C E N T G O O D FACTORS
The valuation of personal property and business fixtures for assessment purposes most often involves the
use of a mass appraisal method. The property statement is organized to facilitate the use of such a
method, specifically equipment index and percent good factors. Property (normally equipment) is valued
based on information reported on property statements. Each piece of equipment is not identified and
valued separately, but rather, the equipment is valued as a group based on the type of business and the
classification of the property.147 The first step in the calculation process is to "trend" the historical cost of
the property to an estimated reproduction or replacement cost new (cost x index factor). This trending is
accomplished using an equipment index factor. The next step is to multiply the trended historical/original
cost by a percent good factor to estimate the market value of the property, reproduction or replacement
cost new less normal depreciation.
As explained in AH 581, Equipment Index and Percent Good Factors, and AH 582, Explanation of the
Derivation of Equipment Percent Good Factors, equipment index factors and percent good factors are
computed and published by the Board for use in estimating reproduction cost new and equipment value,
respectively. The tables provided in AH 581 are based upon data for different types of property. Percent
good factors in AH 581 use the present worth relationship principle. These factors also assume a constant
rate of net income decline. If a rate of income decline different from that assumed in the tables occurs and
can be demonstrated, a recomputation should be made by adjusting the income adjustment factor. This in
turn will alter the percent good factors to be used. A discussion of the factors, the equipment index factor
and the percent good factor, is included here in a general context. This discussion is not meant to
represent a study of the topic, but rather an overview to facilitate the application of the factors. For more
information, refer to AH 581 and AH 582.
146
AH 501,Chapter 6, under the heading "Measurement of Accrued Depreciation."
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An exception is Form AH 571-F (Agricultural Property Statement). Each piece is listed separately on this form. See Chapter
7 for a complete discussion of property statements.
147
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E Q U I P M E N T I N D E X FACTORS
Equipment index factors are developed for use in mass appraisals and are generally reliable and practical
for converting historical or original cost to estimates of reproduction cost new or replacement cost new for
mass appraisal purposes. Index factors are used to adjust a property's original cost for price level changes
since the property was acquired. The index factors recommended by the Board, updated and distributed
annually, include three separate index factor tables: Table 1, Commercial Equipment, Table 2, Industrial
Equipment, and Table 3, Agricultural and Construction Equipment. The tables rely on indexes published
by the U.S. Government Bureau of Labor Statistics (BLS) and on information published by Marshall &
Swift Publication Company.
The indexes published by the BLS and Marshall & Swift are intended to track price changes for an
identical product sold under identical terms over time, such that the indexes approximate an estimate of
reproduction cost new. Thus, when the original cost of property is multiplied by the Board's index factor
for the year of acquisition, the product typically approximates current reproduction cost new.
Reproduction cost is the cost to replace an existing property with an identical property, a replica.
Replacement cost is the cost to replace an existing property with a property of equivalent utility. The
significance of the difference between these two types of the cost approach arises when property has
experienced significant functional obsolescence. Functional obsolescence is the loss of value in a
property caused by the design of the property itself. In cases where the property has experienced
significant functional obsolescence, the original piece of equipment would not be replaced by an identical
substitute. The buyer would instead look for the best way to perform the same functions. In either case,
replacement cost or reproduction cost, the cost of equipment should be adjusted for depreciation to arrive
at an estimate of market value.
As indicated earlier, the index factors provided by the Board include three separate index factor tables –
commercial equipment index factors, industrial machinery and equipment index factors, and agricultural
and construction equipment index factors. Prior to 2002, the commercial equipment index factors (Table
1) were presented in AH 581 as 12 separate classes of equipment and the industrial equipment index
factors (Table 2) were presented as 6 separate groups of industries. Beginning with the January 1, 2002
lien date, the commercial equipment index factors were averaged into one table and the industrial
equipment index factors were averaged into one table. Averaging of the multiple categories of equipment
index factors continues to produce results within an acceptable band of value. In addition, the averaging
provides administrative benefits to assessors when assessing business property. The index factors in AH
581 are intended to be used to provide a time-efficient method of making reasonable estimates of
reproduction cost for typical properties; the factors are a tool for estimating fair market value.
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Price Changes
Price changes are usually an increasing factor (inflation). During those periods of time when the cost of
raw material and/or labor actually declines, however, price changes may be a decreasing factor (deflation).
Price changes are measured from a base year, in which a beginning index number is typically set at 100.
If raw materials, labor and other costs rise, the index will probably increase. In a period when the costs of
the factors of production decline, the index may decrease.
Effects of Technological Progress
If technological progress has occurred since the acquisition date of an asset, the cost of producing a
functionally superior but physically similar asset may now be lower. Consequently, the current
replacement cost new of previously existing assets will probably decline. High technology equipment, for
example, typically suffers greater than normal functional obsolescence due to technological progress.
In situations where equipment has undergone minimal changes in technology, reproduction cost and
replacement cost are likely to be similar. In industries where equipment is undergoing rapid changes in
technology, further adjustments are likely to be needed. Board staff has identified a few industries where
equipment has experienced rapid changes in technology. AH 581 includes separate tables for the
valuation of computers and related equipment, semi-conductor manufacturing equipment, and
biopharmaceutical industry equipment and fixtures.148 Indications of changes in technology may include
increased capacity of new equipment, changes in equipment design, material, or process, or lower costs
for new equipment. The effects of technological advance may include the increased capacity of new
equipment, changes in equipment design, materials and processes, and lower costs for new equipment.
Forces that may cause obsolescence include changes in taste in the marketplace and regulatory
requirements.
Assessees may present evidence to the assessor to support their estimation of market value when they
believe that application of the index factors does not produce results within an acceptable band of value.
Evidence presented to the assessor should be reviewed and considered. (Evidence presented to the
assessor at the time that the business property statement is filed allows the assessor time to review and
consider the evidence prior to the closing of the assessment roll.) The evidence may be presented in the
form of an independent appraisal, a market study, price lists for new equipment, and/or data from used
equipment price guides.
An independent appraisal is an appraisal conducted by an unrelated firm that specializes in the valuation
of personal property and fixtures. The appraisal typically includes a listing of all of the
148
In years 1997, 1998, and 1999 valuation tables for computer related and semi-conductor manufacturing equipment were
distributed via Letters To Assessors. Beginning in year 2000, the valuation tables were included in AH 581. The "interim"
biopharmaceutical industry valuation table, effective January 1, 1999, was distributed via LTA No. 99/54; this table is now also
included in AH 581. Index factors for state assessed properties are available upon request.
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property included in the valuation. The appraisal may include itemized valuations of each piece of
equipment or a total value estimate. The format presented must clearly identify the appraisal approach and
may vary depending on the appraisal approach (i.e., cost, comparative sales, and income) utilized by the
appraiser.
The evidence may also be presented in the format of a market study. An example of a market study is
described as the market method presented earlier in this chapter and in Appendix H. The market
method is any method of calculating value factors (and/or developing depreciation tables) which relies on
market data, with adjustments made for relevant property characteristics incorporated in the data. Data
used for the market study should include recent market sales that meet all conditions of an arms-length
transaction. Data from bankruptcy and/or liquidation sales would not provide indications of market value.
Price lists for new equipment and price guides for used equipment are other sources that may be used to
value personal property. When reliable evidence of current replacement costs is available in a viable
format, it is more appropriate to use market-indicated costs rather than trended historical costs. Price lists
and used equipment price guides provide market-indicated costs. If price lists for new equipment are
utilized, adjustments may be necessary if the equipment being valued is no longer available in the market.
In addition, depending on the technological advances in some industries, the price lists for new equipment
may not provide any benefit. With regard to used equipment price guides, if no market exists for used
equipment in a particular industry, such guides may not be a useful alternative.
The methods mentioned above are provided as examples of methods that may be utilized to determine fair
market value when it is necessary to test whether the application of index factors and percent good factors
in AH 581 provide an acceptable value indicator. Other methods may be presented depending on the type
of data available.
Some areas the assessor should consider when reviewing evidence presented include the following:
•
Are causes of rapid change of technology apparent in the industry?
•
Does the appraisal utilized by the assessee to estimate fair market value include
appropriate adjustments?
•
Are the data provided by the property owner verifiable?
•
Were the data applied/interpreted correctly?
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P E R C E N T G O O D FACTORS
In a mass appraisal program, percent good factors are frequently used in estimating depreciation. Percent
good, as a percentage, is the complement of depreciation. For example, if total depreciation is 20 percent,
then percent good is 80 percent. The percent good concept is used in the appraisal process for two
reasons: (1) it focuses the appraisal on the benefits remaining or the economic life remaining in the
property rather than the benefits used; and (2) it saves one arithmetical operation when estimating market
value.
Percent good factors are provided by the Board in AH 581, Equipment Index and Percent Good
Factors,149 for use in valuing personal property and fixtures. In general, an average service life150
estimate is needed in order to utilize the table. In mass appraisal situations, estimating life for each piece
of equipment is not practical; therefore, service life is not generally estimated on an individual basis. (It
may occur in practice, however, when the assessee files an appeal, when an audit is conducted, or when
equipment is self-constructed.) Average service life can be estimated by an appraiser based on a mortality
study of individual acquisitions and retirements (see Appendix I), historical usage of property, useful life
expectancy as reflected by the applicable industry, or other information as available. When an item is not
new, the tables may be applicable based on the item's remaining economic life151 since the remaining
economic life is usually greater than the original average service life minus age. This occurs because in
any group of equipment, some items "die" prematurely, so the life of the remaining items would generally
exceed the average service life.
Any percent good table or depreciation schedule, including those published by the Board, should be used
only as a guide in the estimation of value. They may reflect more or less depreciation than the actual
market indicates. If equipment has experienced abnormal, excessive, or even less-than-expected
depreciation, the percent good factors may not be reliable. In this case, a percent good factor could be
used in combination with another method of depreciation calculation, or it may be necessary to use
another approach to value altogether. This is also true if the equipment is unique, if limited cost
information is available, or if age or expected life estimates cannot be accurately determined. There may
be instances when an appraiser should verify reproduction or replacement cost new less depreciation by
other approaches before accepting a mass-appraisal indicator such as the indicator developed from an AH
581 table as the best indicator.
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149
AH 582 discusses derivation of the percent good factors included in AH 581.
150
The average life term of a group of items.
151
The expected remaining life of the property on the appraisal date.
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SAMPLING
Indexes published in AH 581 are based on government price indexes derived by market sampling. When
necessary, and resources are available, the assessor may conduct similar such studies to derive his or her
own indexes.
In order to promote uniformity in appraisal practices and values throughout the state, the Board issues
information and data relating to commercial and industrial property. This information includes, but is not
limited to, appropriate index factors and percent good factors. Most counties do not have the staff to
conduct independent and statistically sound sampling procedures to develop their own valuation factors.
Moreover, when counties develop and use different valuation factors for property, value inequities may
result between counties for the same type of property.
Most notably, where the equipment index and percent good factors provided by the Board and other
approaches to value and methods of estimating depreciation are not good indicators of value, an assessor
may wish to use some type of sampling methodology to develop his or her own factors. To use sampling,
assessors and auditors must develop and use recognized methods that will be accepted with confidence by
the Board and assessees. In developing a sample plan, technique, and program, an interested reader should
consult a textbook on statistics for information on the theory and application of sampling. For an
example, see the Board's Sales and Use Tax Audit Manual, Chapter 13: Statistical Sampling.
S T R A I G H T - L I N E O R A G E - L I F E METHOD
Under this approach, depreciation is estimated by dividing the actual or effective age of the property by
the estimated economic life. The straight-line or age-life method is based on the relationship between
physical age and estimated economic life. Physical life, or age, is the time the equipment has existed.
Economic life of a property represents the period of time during which the property has value.
Although straight-line depreciation may have little or no bearing on market value, effective age should be
recognized whenever data reasonably indicates that effective age is different than actual age. Effective age
is the "age indicated by the condition and utility of a structure"152 (or property). Because there may be a
large variation in the condition of property having the same age, the effective age (as opposed to the actual
age) is the best indicator of the market's perception of age.
This approach does not reflect the relationship between the present worth of the future earnings of the
property versus the present worth of future earnings of a new replacement property. It ignores the
principle that money has a time value (income earned in the near future has a greater value than the same
amount of income to be earned in the distant future). Thus it tends to understate the economic value of
older property that is producing a current income comparable to the current income that would be
produced by a new replacement. Conversely, this method
152
Appraisal Institute, The Dictionary of Real Estate Appraisal, s.v. "effective age."
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does not reflect additional depreciation that should be recognized if the existing property benefits are less
than the benefits that would be earned by a new replacement.
C O S T T O C U R E TECHNIQUE
This technique may be used to measure physical deterioration and curable functional obsolescence. It
requires the appraiser to estimate the cost to cure items of physical deterioration and functional
obsolescence that are in fact curable. However the cost to cure technique cannot measure incurable
functional obsolescence or external obsolescence.
P R O D U C T I O N O U T P U T O R S E R V I C E H O U R S METHOD
The Production Output Method is based on the assumption that an asset is acquired for production, and it
depreciates in relation to units produced. To use this method of calculation, an estimate of total ultimate
output is required. (The estimate can be in production units or service hours.) Full economic cost divided
by the estimate of total ultimate output gives the depreciation charge for each unit of output. Like the
straight-line method, this method ignores the economic value of future earnings and thus understates the
value of a property if net operating income is comparable to a new replacement property, and overstates
the value to the extent net operating income is less than a new replacement property.
U T I L I Z A T I O N ADJUSTMENT
A utilization adjustment to a Replacement Cost Less Normal Depreciation (RCLND) estimate may be
appropriate when equipment is significantly underutilized, that is, it may be appropriate when property is
not used at design or expected capacity. This condition of underutilization may exist because of functional
obsolescence, external obsolescence, or a combination of both, but usually originates with external forces.
These external forces diminish the demand for use of the property which results in the existence of
property with capacity that would not be replaced. The condition may also occur due to errors in initial
planning. The adjustment is analogous to an abnormally high vacancy factor used to calculate net
operating income for use in the capitalized income approach to value.
Utilization adjustments may be made when there is excess capacity that is beyond the control of a prudent
operator that is recognized by the market. Generally, the amount of obsolescence is a function of the
difference between the replacement cost new of the existing property versus the replacement cost new of a
property with a capacity that is adequate for the foreseen requirements. However, operation at below
design capacity will not always translate to an equivalent percentage amount of obsolescence (i.e.,
operating at 75 percent of design capacity may only equate to a 10 percent increase in obsolescence). An
explanation of this seeming incongruity is demonstrated in pipeline valuation. Much of the cost of
constructing a pipeline is the same regardless of the design capacity because installation charges do not
vary proportionally to the diameter of the pipe. Cost is much the same regardless of the design capacity.
Consequently, a pipeline with a physical utilization of 90 percent of design capacity is considered to be at
100 percent of economic utilization because the replacement cost new of a
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pipeline with the lower design capacity would cost essentially the same as the replacement cost new of the
existing capacity.
To make a utilization adjustment when appropriate, for excess capacity affecting value, information
should be gathered and an appropriate means for estimating the adjustment should be determined. The
Board's Valuation Division, for example, has a formula for reducing the RCLND of pipelines that are
clearly oversized for the foreseeable future. The calculation begins with knowledge of the level of the
foreseeable physical utilization of a pipeline segment (the "load" factor) which is expressed as a
percentage amount. This "load" factor is converted to a "utility" factor which is also expressed as a
percentage amount; this calculation is non-linear. The utility factor represents the ratio of needed capacity
to design capacity and it is applied to an RCLND estimate to reach an estimate of Replacement Cost Less
Depreciation (RCLD). In similar fashion, the American Society of Appraisers utilizes a calculation which
captures loss in value due to underutilization. The appraiser must use care in applying this
methodology.153
As mentioned above, this type of adjustment is not appropriate for all or even most types of properties (or
equipment). Even when a property operates significantly below design capacity, there may be no underutilization and a utilization adjustment would not be appropriate. However, when evidence reasonably
demonstrates that replacement property would have a lower capacity, a utilization adjustment may be
appropriate. Sound appraisal judgment is necessary to determine if such an adjustment is appropriate. A
study of the facts pertaining to that particular property is necessary to determine how to arrive at any
appropriate adjustment.
Following are some suggested items, but not a complete list, to consider if there is a question of excess
capacity.
•
Is full capacity ever needed or expected?
•
Does the definition of capacity take into consideration down time for repairs and
maintenance?
•
Does the capacity reflect intended product mix? (Different product mixes may create
different capacities. A finer product may take longer to mill than a coarser product, for example.)
•
What is the normal utilization for users of similar equipment (what utilization do
purchasers of new similar equipment anticipate, what is the property owner's definition of capacity)?
•
How does the current and future expected utilization compare with the utilization when
new?
•
What is the cause of the excess capacity? (External obsolescence is a valid reason;
normal seasonal or even daily variations do not constitute excess capacity.)
153
American Society of Appraisers, Appraising Machinery and Equipment, McGraw-Hill (1989) p. 104-105.
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•
Could a larger capacity machine have been installed to take advantage of off-peak utility
rates?
•
Is the problem industry-wide or is it the individual owner? (An industry-wide excess
capacity is indicative of external obsolescence; individual excess capacity may be a business enterprise
problem that should not be reflected in the value of the property.)
•
Is there evidence that the equipment would be replaced with substitute equipment of
lower capacity?
L I M I T A T I O N S O F T H E C O S T APPROACH
An appraiser cannot assume that the cost approach, or any approach, automatically provides the best
indicator of value. All available information must be analyzed to determine the best indicator of value.
When available or possible, it is best to compare the estimated value to actual market value of similar
property to verify accuracy of results.
The cost approach, like other approaches to value, is not valid unless it is made as of a specific date. The
fluctuating purchasing power of money, together with changes in the efficiency of labor and changing
techniques of production, and other economic factors cause costs and depreciation to vary over time. It is
therefore essential to specify that costs are as of a certain date (i.e., the appraisal date) in order for the
principle of substitution to be meaningful. The more current the costs, the newer the property, the more
reliable and valid the cost approach to value will be.
The cost approach is also limited by the accuracy of the information used. If the cost and depreciation
estimates are skewed or otherwise unrepresentative of the property, the resulting value will not be an
appropriate representation of the property's market value.
S U M M A R Y O F T H E C O S T A P P R O A C H : EXAMPLE
The following example illustrates the valuation of a piece of equipment using the cost approach method of
valuation. Keep in mind, however, when the cost approach is applied to personal property and fixtures it
is normally applied to groups of equipment and fixtures (rather than on a piece by piece basis) and such
detailed information may not be available. The example illustrates an application of the approach and is
used to summarize the discussion in the text. It is not controlling in all situations.
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EXAMPLE 4.5
USE OF THE COST APPROACH
Company C acquired a bookbinding machine in 2000. Details of the acquisition are as follows:
•
Invoice cost (including sales tax) $40,000.
•
A 1 percent discount was allowed because payment was made in cash within 30
days.
•
Company C's Transportation cost of $1,200 was paid to deliver the machine to the
factory.
•
Cost of installation was $2,430. This included labor, materials, including a raised
flooring to accommodate the new machine.
•
The engineer spent 2/3 of her time during July on trial runs of the new machine.
Her monthly salary is $9,000 per month.
•
An allowance of $5,500 was granted by the supplier because the machine proved
to be of less than standard performance.
•
One year extended service warranty included in purchase cost, retail value
$500.
One-year supplies (exempt as inventory) included in purchase cost, retail value
$500.
NO MAJOR TECHNOLOGICAL CHANGES HAVE BEEN MADE TO THIS TYPE OF PROPERTY SINCE ACQUISITION. WHAT
IS THE MACHINE'S ASSESSABLE VALUE ON THE 2002 LIEN DATE?
Computation of Full Economic Cost:
A.
$40,000 (
4
00)
Invoice Cost Less: Discount
Rebate/Allowance Non-property items
Add: Transportation Cost Installation Costs
( 5,500)
Machinery Testing Cost ($9,000 salary x 2/3)
( 1,000)
1,200
2,430
6,000
Full Economic Cost
$42,730
Computation of Value
B.
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Using the Board's index factors and percent good factors, the auditor-appraiser determined that the
equipment falls into Table 2: Industrial Machinery and Equipment Index Factors with an estimated
economic life of 15 years. From the tables, the index factor is 1.01 and the percent good factor is .90.
Using this information, the full cash value (assessable value) is estimated:
$43,730 x 1.01 x .90 =
$39,750
Computation of value using known current Replacement Cost New
C.
If the current replacement cost new of a comparable machine (including sales tax, freight, installation,
etc.) is known, that RCN should be used rather than the index factored original cost in the calculation
of value.
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C O M P A R A T I V E S A L E S APPROACH
The comparative sales approach may be defined as any approach that uses direct evidence of the market's
opinion of value of a property. It is based upon the principle of substitution, that is, the fair market value
of an item is closely and directly related to sales price (under the conditions of fair market value) of
comparable, competitive properties. Thus, this method presumes that the value of a property will
approximate the selling prices, listings, offers, the opinions of owners and appraisers, and appraisals of
competitive substitutes. Ideally, however, value is estimated based not only on an opinion of value (such
as list price), but measured by actual purchases of comparable properties.
Sale prices of comparable properties provide an indication of what the market is willing to pay for that
type of property at that time. For personal property, value guides and price schedules which reflect the
going market price for comparable equipment and which estimate the current value of specific types of
equipment can be used as the basis for determining market value of similar equipment. Adjustments
should be made when the condition of the subject property is above or below average. Additional
elements of value seldom reflected in sales comparison value guides are sales tax, freight, discounts, and
other costs unique to specific equipment. These costs must be added to (or subtracted from) the sales
price of equipment where appropriate to arrive at full cash value for property tax purposes.154
The comparative sales approach is limited in its application to personal property and business fixtures, and
is used less often than is the cost approach to value, because (1) most types of personal property and
business fixtures are resold infrequently (limited sales data are available),
(2) sales data, when available, are generally limited by comparability, and (3) in many cases, personal
property and business fixtures are not sold without affecting other property (whether real or personal
property). This approach is, however, applicable to personal property and business fixtures that are
frequently exchanged in the market when their exchange does not affect other items, such as agricultural
and construction equipment, boats, and airplanes. Sales comparables would usually not be good indicators
of value for other types of property that require extensive testing or considerable installation costs.
Sources of Information
The appraiser may utilize valuation guides in making the appraisal estimate when sufficient information
regarding the make, model, etc., of the equipment is reported on the property statement, or otherwise
available (such as through audit), and when such guides are available. When using the comparative sales
approach to value real property, numerous sources of data are available. When valuing personal property
and/or fixtures, this is not always the case. The following table includes a short list of valuation guides
available for use in valuing personal property. Other available publications, which may be helpful, are
listed in Appraising Machinery and Equipment.155
154
Xerox Corp. v Orange County (1977) 66 Cal.App.3d 746.
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155
American Society of Appraisers, Appraising Machinery and Equipment, pages 53-57.
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TABLE 4C SOURCES OF INFORMATION
Equipment Type
Name of Publication
Phone
Number
Agricultural
Equipment
National Farm Tractor and Implement Blue Book
800-654-6776
Agricultural
Equipment
Official Guide — Tractors and Farm Equipment
707-678-8859
Construction
Green Guide for Construction Equipment
800-669-3282
Vessels
BUC Used Boat Price Guide
800-327-6929
Vessels
N.A.D.A. Appraisal Guides
800-966-6232
Vessels
National Boat Book Official Used Marine Valuation
800-654-6776
Aircraft
Aircraft Bluebook Price Digest
800-654-6776
Aircraft
Vref Aircraft Value Reference
800-773-8733
Equipment
When reliable comparables are available, whether from sales in the market, value guides, or other sources,
the comparative sales approach may be preferable to other value approaches. Following is an example
where such sales are available and value is determined using the comparative sales approach as discussed
in this section.
EXAMPLE 4.6
USE OF THE COMPARATIVE SALES APPROACH
John Jetski purchased a new 1990 Bayliner boat with a 110 HP mercury engine and trailer in 1990 for
$15,000. On the 2002 lien date, this boat was located in the county and was assessable. The following information
was available to and gathered by the appraiser:
The assessee is planning to sell the boat to his brother next month for $1,000 because he
•
is
moving out of state.
A similar boat (with trailer) was seen advertised in the local newspaper for $9,000.
•
Research in two separate value guides found a value range from $6,500 to $8,000 for this
particular boat in average condition.
•
An inspection of the boat and a conversation with the assessee found the boat to be
in average condition for its age.
•
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The assessee argues that the boat's value is $1,000.
USING THE COMPARATIVE SALES APPROACH TO VALUE, WHAT IS THE ESTIMATED TAXABLE VALUE OF THIS VESSEL?
The estimated taxable value of the boat is between $6,500 - $8,000 using two separate used-boat value guides.
The assessee's estimate of value, $1,000, does not represent market because it is not an arm's length transaction,
has not occurred under normal circumstances, and is not a "sale" (the sale has not occurred yet). The appraiser in
this case estimates the value at $7,500, which includes sales tax.
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I N C O M E APPROACH
The income approach to value includes any method of converting an anticipated income stream into a
present value estimate. This approach can be considered as an approach to value when the subject
property meets three assumptions:
1.
Value is a function of income (i.e., the property is purchased for the income it will
produce).
2.
Value depends upon the quality and quantity of the income stream (i.e., the investor
demands a return of and on his/her investment in the property).
3.
Future income is less valuable than present income (i.e., the value of the property is
the sum of the present worth of its anticipated/future net benefits).
When any of these do not correspond to the reality of the property, the income approach to value should
not be given great weight as an indicator of the property's current market value.
The income approach has limited application to personal property and fixtures because it is often
extremely difficult to attribute an income stream directly to individual items of personal property and
fixtures. However, the income approach can be applied to leased personal property or other personal
property to which an income stream can be attributed. The approach can also be used to estimate
personal property as a residual amount. For example, the value of an entire manufacturing plant can be
estimated using the income approach, with the value of the constituent personal property then estimated as
a residual by subtracting out the (presumably) known values of any real property and other assets.
A general discussion and explanation of the income approach to value is included in AH 501, Basic
Appraisal, and the income approach chapter of AH 502, Advanced Appraisal. These sections will not be
repeated here. Below is a short discussion of how, and when, the approach can be applied to personal
property. When using this technique, refer to the above mentioned sections for additional in-depth
discussion of the income approach.
There are several aspects of appraising personal property that may differ from those encountered in the
valuation of real property. These include:
•
Verification that the income is truly attributable to the property. In many cases, the
"rental" or "lease" income is significantly influenced by business activity, personal services, sales or
services directly related to the rented property (the rental amount could be artificially high or artificially
low), or other non-property factors. In such cases, the income approach is unlikely to measure the value
of the personal property unless the income attributable to the property can be isolated.
•
Caution in the selection of the remaining economic life. Since personal property usually
has a much shorter economic life than real property, an error in the estimate of remaining economic life
will have a much greater impact than it will for real property.
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•
Difficulty in finding market evidence for capitalization rates for personal property as
compared to real property.
Despite the problems, where income(s), capitalization rates, and economic life estimates are available and
reliable, the income approach is equally valid for personal property as it is for real property.
The income approach is often most applicable in the case of leased personal property because an income
stream can often be directly attributable to leased personal property. Much of the following discussion is
in the context of leased personal property. As discussed below, other issues arise in an appraisal of leased
personal property under the income approach.
The components that make up the value of personal property are the costs of manufacturing the item,
transportation of the item, installation of the item, and profit markups. Additionally, a sales tax or a use
tax component must be added. The components of the value of personal property may be borne by either
the lessor or the lessee. Payment of expenses by the lessee does not diminish the value of the personal
property. The terms of the lease agreement or rental contract should be carefully analyzed to insure that
all costs are included in the valuation process. When the costs of transportation or installation are paid by
the lessee, the economic income may have to be adjusted to include a charge for these expenditures in the
valuation process, or the costs may be added as a lump sum to the capitalized earning ability of the income
stream. However it is done, all property expenditures must have been properly identified and included in
the value of the (leased) equipment.
Maintenance of the property, on the other hand, may make up part of the lease cost but is not a component
of value. For instance, if the lessor is charging the lessee for maintenance under the lease contract, the
auditor-appraiser must deduct a maintenance charge from the income stream. One method to estimate this
charge is to make an estimate of service time, and then relate this to prevailing labor rates, as shown:156
EXAMPLE 4.7
ADJUSTING INCOME FOR MAINTENANCE CHARGES
A machine requires 3 hours of service each month at a rate of $95 per hour:
A monthly cost of $285 ($95 x 3 = $285)
If the monthly rental is $1,500:
Then, the maintenance is 19% of gross income ($285 / $1,500 = .19, or 19%)
Gross annual income is then $18,000 ($1,500 x 12 = $18,000), annual expenses are $3,420
($285 x 12 = $3,420), and the net annual income is $14,580 ($18,000 - $3,420 = $14,580)
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Service time, rates, costs, and maintenance expenses estimates and percentages may be obtained from various sources in
the marketplace (for instance, the lessor may be able to supply the actual service time for the preceding year), and this could
serve as a guide when reconstructing the operating statement.
156
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P R O C E S S I N G T H E I N C O M E STREAM
The steps for processing the rental income stream for personal property are the same steps that are used
for processing real property income. The steps are as follows:
Potential Gross Income (PGI)
(less)
Effective Gross Income (EGI) (less)
Vacancy and Collection Losses (V & C)
Operating Expenses
Net Income Before Recapture and Property Taxes (NIBR&T)
(less)
Property Taxes
Net Income Before Recapture (NIBR) (less)
Allowance for Recapture
Net Income (Yield Income)
As with real property, it is the anticipated income stream of personal property that is processed when
deriving income multipliers and rates. In the valuation of personal property, the income stream cannot be
processed below NIBR&T.157
V A C A N C Y (I D L E T I M E ) A N D C O L L E C T I O N LOSSES
Personal property that is held for lease or sale by a retailer or wholesaler on the lien date may be exempt
from taxation. Because these items are exempt for the entire year, it can be argued that it is improper to
allow for vacancy (idle time) and collection losses. However, it is also reasonable to take the position that
an item may be out on lease on the lien date (and therefore taxable) but returned to the retailer or
wholesaler prior to the expiration of the lease period. Consequently, the retailer or wholesaler may very
well suffer a loss of income because of vacancy (idle time) or collection loss. An allowance made for
vacancy (idle time) and collection loss should be based on the actions of the market place.
EXPENSES
As with real property, all lessor-borne expenses that are necessary to maintain the equipment's income
stream should be deducted as an operating expense. If the expenses are paid by the lessee, they are not
deductible from the income stream. Maintenance expense is a good example. If the lessee pays the
maintenance charges, the lessor will generally charge a lesser rent and the expenses are not allowed. If the
lessor is responsible for maintenance, the rents will reflect this expense. An adjustment will be necessary
similar to that shown in Example 4.7.
Particular care must be given to analyzing expenses. They may have been paid by either the lessor or the
lessee, and therefore included on either or both books. The lessor's books may show an expense for
maintenance. If the lessee has purchased a maintenance contract from the
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157
When calculating NIBR&T for business property, status, category and trade level of the property are important factors to
consider.
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lessor, the price of the contract must be added to the rental fees before processing the income stream. If it
is not, then the expenses for maintaining the item are not deducted as an expense.
V A L U A T I O N METHODOLOGY
Both direct and yield capitalization methods can be used to value machinery and equipment. Yield
capitalization is often used. In the case of leased equipment, for example, the income to be capitalized can
be divided into two segments (1) the lease, or rental, payments (net of allowable expenses) over the term
of the lease, estimated as the present value of an annuity; and (2) a reversionary payment representing the
estimated market value of the property at the end of the lease, estimated as the present value of a single
payment. Thus:
Value of property = present value of an annuity + present value of the reversion
The reversion income is usually the salvage value of the property. Salvage value is the net amount the
owner expects to obtain when disposing of the property, which is not necessarily the residual value stated
in a lease contract. The stated residual value, sometimes called the "buy- out cost," is often not an
accurate indicator of the market value of the leased property at the end of the lease: for example, a $1 buyout cost usually does not represent market value. The reversion is usually positive, although it can be a
negative amount (i.e., representing a cash outflow). Sometimes it is zero or a nominal amount. The total
value of the property is as follows:
PV OF THE ANNUITY
+ PV OF THE REVERSION TOTAL VALUE
EXAMPLE 4.8
USING THE INCOME APPROACH TO VALUE PERSONAL PROPERTY
A manufacturer leases machines to various businesses within your county. The number of machines on
lease in the county as of the lien date is 50. The machines are leased for a one-year term. The average
annual gross income of each machine on lease is $2,700 per machine. The rental income includes a
component for sales tax.
You have determined that the machines have an average total life of seven years; however, the average
remaining economic life of the machines on lease, as of the lien date, is estimated at four years.
Property taxes are one percent of the full cash value. Yield rates derived from sales indicate a 13.5
percent return. The return on the investment is based on a constant terminal income stream premise.
The present worth of one per period (PW1PP) at 14.5 percent (13.5 + 1.0) = 2.88409.
Other pertinent information:
The salvage value per machine is $500.
Typical annual expenses of machine on lease are $500 for maintenance and $200 for insurance.
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EXAMPLE 4.8 (CONTINUED)
USING THE INCOME APPROACH TO VALUE PERSONAL PROPERTY
WHAT IS THE ESTIMATED TAXABLE VALUE OF THE MACHINES?
Per Machine
Total (50 Machines)
A. VALUATION OF THE RENTAL INCOME
Market Potential Gross Income
Less: Vacancy & Collection Loss
$2,700
0
$135,000
0
Effective Gross Income
$2,700
$135,000
Expenses: (Maintenance $500 + Insurance $200)
( 700)
( 35,000)
Net Income Before Recapture & Taxes (NIBR&T)
$2,000
$100,000
NIBR&T x PW1PP (2.88409)
$5,768
$288,409
$ 500
$ 25,000
PW $1 (13.5% Yield + 1% ETR)
0.581806
0.581806
Present Value of Salvage Income
$291
$14,545
Present Value of Rental Income
$5,768
$288,409
Present Value of Salvage Income
291
14,545
$6,059
$302,954
B. VALUATION OF THE SALVAGE VALUE
Salvage Price
158
C. TOTAL PROPERTY VALUE
TOTAL VALUE
S U M M A R Y O F T H E I N C O M E APPROACH
The income approach can be applied to leased equipment or other personal property appraisal units that
independently produce income because it converts expected rental income to a present value estimate, but
it is normally not applicable to most types of personal property. Personal property, in general, is not
purchased to independently produce income. It is often difficult to assign or estimate an expected income
to that individual property. The example above helps to illustrate how the income approach to value can
be used in the appraisal of personal property. In practice, each situation is different and this should be
taken into consideration by the auditor-appraiser.
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158
Present worth of $1 at 14.5%; factor from compound interest table.
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RECONCILIATION AND VALUE CONCLUSION
The final step in the appraisal process is to reconcile value indicators from the separate approaches
utilized into a final estimate of value, when more than one approach to value is applied. Resolving the
differences among the value indicators is called reconciliation. The result of the reconciliation is the final
value estimate.
In the reconciliation process, consideration should be given to any factors influencing value that are either
not reflected or only partially reflected in the indicators. The greatest weight should be given to that
approach or combination of approaches that best measures the type of benefits the subject property yields.
The reconciliation step should involve an analysis of: (1) the relative appropriateness of the approaches
applied; (2) the accuracy of the data collected and calculations made in each approach; (3) the quantity of
data available for each approach; and (4) the consistency in the manner in which the approaches to value
were applied.
For example, a cost estimate should be reviewed for the realism of the depreciation estimate and whether
it is supported by market data. If the sales comparison approach was used, a check should be made to
determine whether the indicator was based on sufficient market data or relies heavily upon only one sale.
In reviewing the income approach, the appraiser should reexamine the estimates of economic rent,
economic life, expenses, and capitalization rate. Alternative estimates should be considered. Additionally,
the appraiser should avoid estimates that are consistently optimistic or pessimistic.
Although containing an element of judgment, the analysis of value indicators should be based upon
indicators derived from objective data, plus general overall value influences (economic, physical, political,
and social factors). If a value indicator were perfect, it would already reflect these value influences.
However, in actual practice, any value indicator is usually far from perfect. As indicated above, if the
appraiser has adequate and reliable data, the greatest reliance should be placed on that indicator and
approach which best measures the type of benefits the subject property is expected to yield.
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C HAPTER 5: A SSESSMENT OF I MPROVEMENTS R ELATED TO
BUSINESS PROPERTY
Improvements related to business property include improvements reported on Schedule B of the Business
Property Statement and other improvements owned by or made for a business. Many variables exist
regarding the valuation of these improvements. Factors required to make a valid assessment—especially
property classification, identification of assessee, and valuation—may be difficult to determine.
Depending on the data source, the assessment can be processed by either the real property appraiser, the
auditor-appraiser or both, on either the secured or unsecured roll, creating a situation that may result in
duplicate or escape assessments. Assessment of improvements related to business property is, therefore,
an important topic for discussion within this section of the Assessors' Handbook. The discussion is
divided into five main sections: definitions of relevant terms, classification, appraisal, determination of
assessee, and suggested procedures. It is directed to both real property appraisers and auditor-appraisers.
DEFINITIONS OF RELEVANT TERMS
The purpose of this section is to define and describe the following relevant terms: improvements, building
improvements, landlord improvements, leasehold (or tenant) improvements, structure items, and fixtures
as used in the context of this section.
IMPROVEMENTS
As defined in section 105, improvements include:
(a)
All buildings, structures, fixtures, and fences erected on or affixed to the land.
(b)
All fruit, nut bearing, or ornamental trees and vines, not of natural growth, and not
exempt from taxation, except date palms under eight years of age.
Improvements within this statutory definition are reported, classified and subclassified on the Business
Property Statement, Schedule B.159 Examples of such improvements are provided in Rule 124(b).
B U I L D I N G IMPROVEMENTS
As used on the property statement, building improvements are all improvements to a structure. They may
include improvements made by the landlord and improvements made by or for the tenant. They can be
sub-classified as structure items and fixtures.
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159
No classification between structure items and fixtures is required for State assessed leasehold improvements.
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L A N D L O R D IMPROVEMENTS
For purposes of this discussion, building improvements made by the real property owner are referred to as
landlord improvements. This term includes improvements paid for by the landlord whether they benefit
the landlord or the tenant. A landlord improvement is either a structure item or a fixture, as discussed
below.
L E A S E H O L D ( O R T E N A N T ) IMPROVEMENTS
For purposes of this discussion, the terms leasehold improvement and tenant improvement are used
synonymously to mean all "improvements or additions to leased property that have been made by the
lessee."160 Leasehold improvements include structure items as well as fixtures paid for by the lessee.
For example, two tenants move into separate units,
•
Tenant A moves into a shell and makes basic improvements (e.g., a drop ceiling, floor
finish, floor to ceiling partitions for an office) to finish the interior of the structure.
•
Tenant B moves into a space ready for occupancy and only makes improvements
designed for a specific trade business, or profession (e.g., shelving attached to a wall or dressing rooms
in the case of retail apparel sales).
As the definitions below will indicate, Tenant A has made improvements classified as structure items.
Tenant B has made improvements classified as fixtures. However, in both cases, the improvements made
by the tenants are leasehold (or tenant) improvements.
S T R U C T U R E ITEMS
A structure may be defined as "an edifice or building; an improvement."161 Structure items are integral
parts of the structure by nature. The Business Property Statement further describes structure items:
An improvement will be classified as a structure when its primary use or purpose is for housing or
accommodation of personnel, personalty, or fixtures and has no direct application to the process or
function of the industry, trade, or profession.
Structure items are reported on the property statement on Schedule B, column 1, Structure Items. A
listing of items commonly reported and classified as structure items can be found in Appendix A and also
in Chapter 7 of AH 581, Equipment Index and Percent Good Factors.
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160
Appraisal Institute, The Dictionary of Real Estate Appraisal, s.v. "leasehold improvement."
161
Appraisal Institute, The Dictionary of Real Estate Appraisal, s.v. "structure."
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FIXTURES
Rule 122.5(a)(1) defines fixtures:162
A fixture is an item of tangible property, the nature of which was originally personalty, but which is
classified as realty for property tax purposes because it is physically or constructively annexed to realty
with the intent that it remain annexed indefinitely.
Rule 122.5(a)(2) sets forth three tests to determine what constitutes a fixture for property tax purposes:
The manner of annexation, the adaptability of the item to the purpose for which the realty is used, and the
intent with which the annexation is made are important elements in deciding whether an item has become
a fixture or remains personal property. Proper classification, as a fixture or as personal property, results
from a determination made by applying the criteria of this rule to the facts in each case.163
Fixtures are reported on the Business Property Statement, Schedule B, Column 2, Fixtures Only. A listing
of items commonly reported and classified as fixtures can be found in Appendix A and also in Chapter 7
of AH 581, Equipment Index and Percent Good Factors. It is important to note, however, that these items
are fixtures only when they are not an integral part of the building, but their "use or purpose directly
applies to or augments the process or function of a trade, industry, or profession."164
T Y P E S O F FIXTURES
Trade Fixtures
In the context of property tax, a trade fixture is merely a type of fixture that is "trade-related." All fixtures,
including trade fixtures, have received the same treatment by the courts. In the interest of uniformity,
neither the statutes nor the courts base the classification of fixtures on whether they are trade-related. As
expressed by the court in Trabue Pittman Corp., LTD. v. County of Los Angeles (1946) 29 Cal.2d 385,
To classify trade fixtures as real property is not to obliterate the distinction between fixtures and trade
fixtures for all purposes, nor to introduce an innovation into the law of trade fixtures. It is well settled
that for purposes of taxation the definitions of real property in the revenue and taxation laws of the state
control whether they conform to definitions used for other purposes or not. .
. . Section 104 of the Revenue and Taxation Code declares that real estate shall include "improvements,"
and section 105 defines improvements as "fixtures." No
162
See also Chapter 2 of this manual.
163
Intent is the primary test of classification. Rule 122.5(d).
164
Rule 463(c).
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exception is made in the case of trade fixtures. According to Burby, a trade fixture is merely a particular
type of fixture, one for which the law makes a special provision permitting its removal under certain
circumstances by a lessee from the lessor's real property to which it has been annexed. (See Burby
Hornbook of the Law of Real Property (1943) p.28.)
In a subsequent case deciding similar issues, the court held:
It follows [from Trabue Pittman above] that the applicable statutes do not permit the division of trade
fixtures into classes or distinctions contended for by defendants, and on the contrary require all fixtures or
trade fixtures to be taxed as improvements.165
Additionally, "trade fixture" in section 469 and "fixture" in Rule 192(a) are used synonymously in the
determination of a mandatory audit. Thus, trade fixtures are merely a particular type of fixture and must
be evaluated under the three-part test in Rule 122.5.
F I X E D M A C H I N E R Y A N D EQUIPMENT
Fixed machinery and equipment (FME) is another type of fixture. FME is equipment which is physically
or constructively annexed and intended to remain indefinitely with the realty. Rule 122.5(c) sets forth the
standard for constructive annexation and some examples are provided in subdivision (e). The concept of
constructive annexation of equipment has long been recognized by the courts.
In addressing the question of annexation, we initially observe that the common law test of technical
affixation of the article to the realty is no longer an absolute prerequisite to "fixture status." On the
contrary, the modern trend of case law underlines that fixtures include articles such as heavy machinery
whose permanent annexation is not manifested by the use of bolts, screws, and the like, but which are of
such weight that the mere retention in place of gravity is sufficient to give them the character of
permanency and therefore affixation to the realty.166
An assessee may erroneously report FME as personal property (i.e., machinery and equipment) on
Schedule A of the Business Property Statement. The assessee may report such property as machinery and
equipment because of its use/function as machinery or equipment. However, if the property's weight or
method of attachment and the intent as reasonably manifested by outward appearance is that the property
remain annexed indefinitely, then based on Rule 122.5, such equipment is actually FME, that is, a fixture.
Often, the incorrect classification is discovered by physical inspection.
165
Simms v. County of Los Angeles (1950) 35 Cal.2d 303.
166
M.P. Moller, Inc. v. Wilson (1936) 8 Cal.2d 31.
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CLASSIFICATION
C L A S S I F I C A T I O N O N T H E P R O P E R T Y STATEMENT
Schedule B (including the supplemental schedule) of the Business Property Statement requests
information regarding building improvements (landlord and leasehold improvements) in relation to a
specific property or business. It provides valuable information and may be used by both auditor-appraisers
and real property appraisers. Items reported in Column 1 and Column 2 are structure items and fixtures,
respectively, as defined earlier. Items reported in Column 3, Land Improvements, include such things as
blacktop, curbs, and fences; and items reported in Column 4, Land and Land Development, include such
things as fill and grading.
W H Y C L A S S I F I C A T I O N I S IMPORTANT
Property tax law requires that improvement value be shown separately from land value and personal
property value on the assessment roll. However, there is no requirement that fixtures value be shown as a
separate category of improvements.167 Nonetheless, it is necessary for the appraiser to make the
distinction between fixtures and other improvements prior to enrollment, because classification may affect
the audit procedures and valuation of property.
It is important to properly classify fixtures separate from other improvement items for several reasons:
1.
Fixtures are a separate appraisal unit when measuring declines in value (Rule
461(e)).168
2.
Fixtures are treated differently than other real property (i.e., structure items)
for supplemental roll purposes.
3.
Fixtures and personal property values are components in the value criterion
for determination of a mandatory audit.
F I X T U R E S A R E A S E P A R A T E A P P R A I S A L U N I T W H E N M E A S U R I N G D E C L I N E S I N VALUE
Proposition 8, amended article XIII A of the State Constitution to require the assessor to recognize
declines in value (of real property) if market value on the lien date falls below the property's factored base
year value. Section 51 requires that the assessor annually enroll the lower of either (1) a property's base
year value factored for inflation, or (2) its full, or market, value as of the lien date. Thus, declines in
value under Proposition 8 are determined by
167
Section 602.
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However, as exceptions to the general rule that fixtures are a separate appraisal unit for declines in value, Rules
469(e)(2)(C) and 473(e)(4)(C) – in the context of mineral and geothermal properties, respectively – provide that for the
purpose of declines in value, certain fixtures may be valued in an appraisal unit comprising land, improvements (other than
fixtures), and reserves, rather than valued as a separate appraisal unit. In terms of mineral properties, "[e]ach leach pad,
tailings facility, or settling pond shall be considered a separate appraisal unit for purposes of determining its taxable value on
each lien date subsequent to the lien date upon which its initial base year value was determined." (Rule 469(e)(2)(C).)
168
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comparing the current full value (i.e., current market value) of an appraisal unit to the factored base year
value of the unit on the lien date.169
Appraisal unit is defined in section 51(d) as the unit that (1) persons in the marketplace commonly buy
and sell as a unit or (2) that is normally valued separately. Land and improvements, for example, are an
appraisal unit because improvements are typically bought and sold with land. Fixtures not typically
bought and sold separately in the market are also considered a separate appraisal unit under this section,
because they are normally valued separately. Rule 461(e) provides that fixtures, and other machinery and
equipment classified as improvements, are a separate appraisal unit when measuring a decline in value.170
F I X T U R E S M A Y B E A S E P A R A T E A P P R A I S A L U N I T F O R S U P P L E M E N T A L R O L L PURPOSES
Generally, all property that changes ownership or is newly constructed after the lien date is assessed as of
the date of change in ownership or date of completion of new construction and is subject to supplemental
assessment. An exception to this requirement applies to certain fixtures and certain taxable possessory
interests. Section 75.5 removes from the definition of "property" subject to supplemental assessment,
"fixtures which are normally valued as a separate appraisal unit from a structure" and possessory
interests, as specifically identified in the section. Section
75.5 states:
"Property" means and includes manufactured homes subject to taxation under Part 13 (commencing with
Section 5800) and real property, other than the following:
(a)
Fixtures which are normally valued as a separate appraisal unit from a structure.
(b)
Newly created taxable possessory interests, established by month-to-month
agreements in publicly owned real property, having a full cash value of fifty thousand dollars ($50,000)
or less.
With regard to fixtures, this exclusion from supplemental assessment applies only to fixtures that are
normally valued as a separate appraisal unit from the land and other improvements on which they are
located. It does not apply to fixtures that are included with other property as part of a single appraisal unit
that changes ownership or is newly constructed. If an entire property containing land, structures, and
fixtures is valued as a single appraisal unit upon a change in ownership or new construction, the fixtures
included in the unit are subject to supplemental assessment.171
169
Rule 461.
170
See County of Orange v. Orange County Assessment Appeals Bd. (1993) 13 Cal.App.4th 524, where the appellate court
held that under Rule 461(e), "the components of taxable property may be separated for valuation purposes," and that section
51, subdivision (e) "states, albeit ungrammatically, that an appraisal unit can be that which are [sic] normally valued
separately. Taken as a whole, neither section 51 in general, nor subdivision (e) in particular, mandates appraisal of the
property as a single unit."
171
See LTA No. 91/59; section 75.15 also addresses the supplemental assessment of fixtures.
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F I X T U R E V A L U E I N C L U D E D I N V A L U E C R I T E R I O N F O R M A N D A T O R Y AUDIT
The combined total value of personal property and fixtures determines whether an audit is mandatory; the
value of structure items is not included in this determination. Section 469(a), in part, states:
In any case in which locally assessable trade fixtures172 and business tangible personal property owned,
claimed, possessed, or controlled by a taxpayer engaged in a profession, trade, or business has a full value
of four hundred thousand dollars ($400,000) or more, the assessor shall audit the books and records of that
profession, trade, or business at least once every four years.173 (Emphasis added.)
Caution should be exercised to avoid misclassification. If fixtures are misclassified—notably, if fixtures
are classified as structures or visa versa—the value criterion for mandatory audits cannot be applied
properly.
APPRAISAL OF IMPROVEMENTS RELATED TO BUSINESS PROPERTY
GENERAL
In general, improvements related to business property (i.e., landlord improvements, leasehold/tenant
improvements, structure items, and fixtures) are valued, as is other real property, in accordance with
section 51. As previously discussed, section 51 requires county assessors to value taxable real property at
the lesser of its factored base year or its full cash value as defined in section 110.174
In accordance with section 110.1, a property's base year value is its fair market value as of either the 1975
lien date or the date the property was newly constructed, or underwent a change in ownership after the
1975 lien date. Base year value is generally estimated using one or more of the generally accepted and
authorized approaches to value discussed in Rule 3 (i.e., the comparative sales approach, the cost
approach, or the income approach). The base year value can be adjusted for the effects of inflation up to a
maximum of 2 percent per year based on the California Consumer Price Index. For example, an
improvement with a 2001-2002 base year value of $100,000 (and a 2002 inflation factor of 2 percent)
has an adjusted base year value of
$102,000 in year 2002-2003.
Base Year Value x Inflation Factor = Indexed Base Year Value
$100,000 x 1.02 = $102,000
172
Fixtures and trade fixtures are synonymous terms in this context, as discussed earlier.
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The change in the threshold level for mandatory audits (from $300,000 to 400,000) was effective January 1,
2001.
173
174
Fixtures, although real property, are often valued in a manner similar to personal property.
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The full cash value on the lien date is the property's current market value. This value is also estimated by
one or more approaches to value allowed by Rule 3. If the current market value of a property is below its
factored base year value, the property is temporarily reassessed to reflect the lower value, that is, the
property's current market value or its full cash value on the lien date (section 51(a)). Properties valued
under Proposition 8 (Rule 461(e)) guidelines are reviewed annually. In some future year, if and when the
property's market value exceeds its factored base year value, the factored base year value is restored to the
assessment roll. Assume that the improvement mentioned above, with a factored base year value of
$102,000, has a current market value of $95,000. Since the market value ($95,000) on the 2002-2003 lien
date is less than the indexed based year value ($102,000), the market value is enrolled until such time that
the market value exceeds the factored base year value.
The valuation of structure items is normally conducted by the real property appraiser since he or she has
the market data, cost manuals, and requisite experience to properly value all real property. In certain
circumstances, however, the auditor-appraiser may be required to value this property. In other
circumstances, the real property appraiser may be required to value fixtures when they are commonly
bought and sold in the marketplace with the land and improvements and are so integrated with the realty
such that the highest and best use of the property depends on the valuation of the appraisal unit as a whole.
Fixtures are normally valued and assessed by the auditor-appraiser. Since fixtures are property that
directly apply to or augment the process or function of a trade, industry, or profession, it follows that
fixtures should be valued by the same appraiser (i.e., the auditor-appraiser) valuing other business
property.
In most cases concerning fixtures, the lower value is the full cash value on the lien date. This is the
current market value of the property estimated by the auditor-appraiser using an appropriate approach to
value (the cost approach, the comparative sales approach, or the income approach).
When determining the taxable value of new building improvements (i.e., landlord or tenant
improvements), the appraiser should ensure that the value of these improvements is not already included
in the existing assessment. For example, if an office building changes ownership and is valued using the
comparative sales and/or income approach, the value indicator and resulting assessment on the secured
roll may include some or all of the value of the building improvements. Such improvements should not
then be doubly assessed on the unsecured roll.
S O M E V A L U A T I O N ISSUES
In valuing improvements related to business property (i.e., landlord and leasehold (tenant) improvements,
both structure items and fixtures), careful consideration should be given to new construction, leasehold
improvements abandoned on the lien date, and fixtures which have declined in value. Several issues and
questions arise and should be addressed regarding these types of improvements. The following discussion
addresses these issues.
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N E W CONSTRUCTION
Property tax law governing the valuation of new construction is primarily contained in sections 70 through
74.6 and Rules 463 and 463.5. Also, AH 502, Chapter 6 discusses the subject of new construction; and
that discussion is generally applicable to new construction involving improvements related to business
property.
Rule 463(b) defines new construction to include (1) "any substantial addition to land or improvements,
including fixtures", (2) "any substantial physical alteration of land which constitutes a major rehabilitation
of the land or results in a change in the way the property is used", (3) "any physical alteration of any
improvement which converts the improvement or any portion thereof to the substantial equivalent of a
new structure or portion thereof or changes the way in which the portion of the structure that had been
altered is used", or (4) "any substantial physical rehabilitation, renovation or modernization of any fixture
which converts it to the substantial equivalent of a new fixture or any substitution of a new fixture."
Rule 463(b)(4) excludes construction or reconstruction performed for "the purpose of normal maintenance
and repair" from the definitions. Underground storage tanks that must be improved or replaced after
September 7, 1999 to comply with federal, state, and local regulations shall not be considered new
construction. These tanks shall be considered to be replaced for normal maintenance and repair.175
In the context of fixtures, rehabilitation, renovation, or modernization of a fixture that converts the fixture
to the substantial equivalent of new is new construction. Rule 463(b), relating to fixtures, provides that
"substantial equivalency shall be ascertained by comparing the productive capacity, normally expressed in
units per hour, of the rehabilitated fixture to its original productive capacity." Repair to a fixture does not
qualify as the substantial equivalent of new. Normal or routine maintenance in order to continue the use of
function of the unit (i.e., a new roller to replace the old one in a printing press) is also not considered new
construction.
Landlord and leasehold (tenant) improvements, both structure items and fixtures, are frequently renovated,
rehabilitated, or modernized. This is often done in order to provide an interior or exterior "facelift" for the
space. Existing improvements may be removed and new improvements added, even before the useful life
of the existing improvements is over. If such construction activity converts the existing improvements to
substantially equivalent to new or is the installation of a new fixture or the replacement of an existing
fixture, such activity is new construction.
When new construction of landlord and/or leasehold improvements occurs, relevant information may be
received by the assessor from different sources. Information may originate from (1) the Business
Property Statement (Schedule B) as reported by the assessee, (2) building permits,
(3) county health permits required for some types of construction, or (4) a lease agreement. The Business
Property Statement is received by the business property division, and building permits
175
Section 70(e).
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are received by the real property division. An assessee may report information on the property statement
that has also been provided to the real property appraiser in the form of a permit (and perhaps a follow-up
construction activity questionnaire submitted by the assessee). Since information is received by both
divisions, the landlord and/or leasehold improvements may be assessed by both divisions (or may escape
assessment) if a system of effective coordination is not in place. Methods for ensuring such coordination
are discussed later in this chapter and in Appendix B.
After the information regarding construction activity is received, improvements should be classified as a
structure item or fixture.176 The descriptions of additions and deletions should be reviewed by both an
auditor-appraiser and real property appraiser and valued appropriately. The appraiser should examine the
data received to determine whether any demolition costs have been excluded, whether some elements of
reported cost reflect normal maintenance and hence not new construction, and whether, and to what
extent, the new construction adds value.
The following example illustrates a fixture qualifying as new construction because it is an addition since
the last lien date.
EXAMPLE 5.1
VALUATION OF NEW CONSTRUCTION (FIXTURES)
On February 1, 2001, an assessee purchased and installed a new walk-in refrigerator (not an
integral part of the building). The total installed cost of the refrigerator was $10,000. At
acquisition, it had an estimated average service life of 12 years. The inflation factor for the
current year is 2%.
What is the assessed value on the 2002 lien date, January 1, 2002?
Percent
Fair
Inflatio
Index
Indexassessment
Costsupplemental
Good
Market
n
ed
What is the
value?
Factor
Factor177
Value
Factor
Value
No supplemental assessment applies to this fixture. The fixture is a separate appraisal unit, and
Total 2001
$10,00
100
.93
$9,300
Cost is not part of a0larger appraisal unit; therefore, the property is not subject to supplemental
Total 2001
Cost
$10,00
0
1.02
Enrolled
Value
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$10,2
00
$9,300
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V A L U A T I O N O F A B A N D O N E D L E A S E H O L D IMPROVEMENTS
Improvements installed by a tenant, but left at a vacant rental space are called abandoned leasehold
improvements. The real property appraiser and/or auditor-appraiser may encounter difficulties when
assessing this property. For example, to whom are the structure items and
176
See Why Classification is Important, which is discussed earlier in this section.
177
Percent good factor from "Table 4: Machinery and Equipment Percent Good Factors," 12 year life, AH 581, January
2002.
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fixtures assessed, and what is their value? No two cases will be the same. Facts related to each scenario
will differ and appraisal must be based on those facts.
Following is an example of one possible scenario involving abandoned leasehold improvements.
EXAMPLE 5.2
ABANDONED LEASEHOLD IMPROVEMENTS
•
A retail business moves into a new indoor mall in 2000. The mall space is leased to the tenant as
a shell. It is the tenant's responsibility, and expense, to finish the space to his or her specifications. The retail
business spends $20,000 to install leasehold improvements. The leasehold improvements, improvements paid for
by the lessee, include structure items (dropped ceiling, finished walls, lighting fixtures, and carpet) and fixtures
(burglar alarm system, and permanent partitions-less than floor to ceiling).
•
After two years at this location, the retail business moves out of the space to another mall. The
leasehold improvements installed two years earlier are abandoned and the space is left vacant on the lien date,
January 1, 2002.
Because the tenant has abandoned the improvements and the leased space in the scenario above, any
improvements left behind revert to the owner of the mall; therefore, the mall owner is the assessee. The structure
items and fixtures are assessable to the mall owner on the lien date.
The improvements may continue to have value because, in theory, another tenant using the same space and
improvements may not be required to spend the same amount of time and money in order to utilize the space for
his or her needs. The value, on the other hand, may be less than indicated by the cost approach, since a future
tenant may have different needs than the original tenant. Professional judgment is needed to determine whether
the abandoned improvements have the same value, lower value, or no value.
V A L U A T I O N O F F I X T U R E S U N D E R D E C L I N E I N VALUE
Measuring declines in value can be simple when only one appraisal unit is involved. Fixtures, for
example, as a separate appraisal unit are valued at current market value on the lien date and at the
indexed base year value, and the lower value is enrolled. However, measuring declines in values may
become more difficult in a total property appraisal because more than one appraisal unit is involved.
When a decline in value(s) of such property occurs, the first part of Rule 461(e) is extremely important
and must be applied.
Declines in value will be determined by comparing the current lien date full value of the appraisal unit to
the indexed base year full value of the same unit for the current lien date. (Emphasis added.)
In other words, each appraisal unit must be considered separately. The following example illustrates how
declines in value and appraisal units should be treated under Rule 461(e).
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EXAMPLE 5.3
TOTAL PROPERTY APPRAISAL UNDER DECLINE IN VALUE
Market Value
on the Lien
Date (Prop 8
Value)
Factored Base
Year Value
(Prop 13
Value)
$515,000
$100,000
60,000
85,000
$575,000
$185,000
40,000
52,000
$ 40,000
$ 52,000
Total Property
Value
(Assessed
Value)
Appraisal Unit 1
Land
Building
Unit 1 Value
$185,000
Appraisal Unit 2
Fixtures
Unit 2 Value
Total Property Value (Unit 1 + Unit
2)
$ 40,000
$225,000
As indicated in the above example, the proper unit values are "Appraisal Unit 1" (land and building)
value of $185,000 and the "Appraisal Unit 2" (fixtures) value of $40,000. The correct total value of
this property is $225,000. The appraisal units must be defined properly when applying Rule 461(e)
and recognizing declines in value. If the appraisal units are not defined properly, the assessed value
of the property would be erroneous and not in compliance with property tax law.
DETERMINATION OF ASSESSEE
When the owner of a business is also the owner of the land and building, there is no question as to the
proper assessee of the improvements related to business property (i.e., the landlord or tenant
improvements). In this case, taxable property is assessed to one account on the secured roll. In the case
where the owner of the real property (other than fixtures) does not own the business, however, other
possibilities arise. Improvements related to business property may be constructed and paid for by either
the landlord (landlord improvements) or the tenant (leasehold improvements) and in either case are
assessable to either party.
When new construction of landlord or tenant improvements occurs, the added value of the new
construction is typically assessed to the party who paid for the improvements. A tenant in a shopping
center, for example, is typically assessed on the unsecured roll for leasehold improvements—structure
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items and fixtures—since they are constructed at the tenant's expense. Such construction is generally
reported on the Business Property Statement. On the other hand, the landlord is typically assessed on the
secured roll for landlord improvements since they are constructed at the building owner's expense. (Such
new construction is usually discovered by a building permit.)
As a general rule, whether short-term or extended-term leases, if improvements are constructed on leased
land, and the ground lease provides that the lessee has the right to remove the improvements at the end of
the lease term per Civil Code section 1013, the "owner" of the improvements is
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presumed to be the ground lessee. On the other hand, if the lease states that the ground lessor retains
ownership of the improvements at the end of the lease term (and the ground lessee has no right of
removal), the "owner" of the improvements is the ground lessor."
However, the above procedure is not a legal requirement. Section 405 allows the assessor to assess
property to "the persons owning, claiming, possessing, or controlling it on the lien date." In the case of
landlord improvements and leasehold improvements, the courts have interpreted this to mean either the
lessor or lessee may be the assessee, even if the improvements have been paid for by the opposite party.178
COORDINATION IN THE ASSESSMENT OF LANDLORD IMPROVEMENTS AND
LEASEHOLD IMPROVEMENTS
Close cooperation between auditor-appraisers and real property appraisers is essential when valuing and
assessing landlord and leasehold improvements, because special difficulties arise concerning the uniform
assessment and proper enrollment of this type of property. Record management for accurate tracking of
base year values and ownership of this type of property may be complex and tedious but extremely
important in order to ensure correct valuation and assessment. As discussed earlier, information regarding
this type of property is received from various sources and may be submitted to either auditor-appraisers
and/or real property appraisers. The value may be enrolled on either the secured roll or the unsecured
roll, and the assessee may be either the landlord or the tenant.
Internal procedures in assessors' offices should be designed to ensure that all landlord improvements and
leasehold improvements are (1) valued on and at the appropriate date and amount, (2) not assessed on
multiple accounts, (3) assessed on the proper roll (i.e., secured or unsecured), and (4) assessed to the
proper assessee. The means by which this coordination is accomplished may differ from county to county,
but general guidelines for coordination should be maintained in all assessment programs.
ESTABLISH A COMPREHENSIVE SET OF WRITTEN PROCEDURES REGARDING ASSESSMENT OF LANDLORD AND
LEASEHOLD IMPROVEMENTS
A comprehensive set of written procedures that describes how to systematically identify and assess
landlord and leasehold improvements can help promote uniform assessment. As noted above, the
assessment of landlord and leasehold improvements requires record management for proper tracking of
base year values and ownership. Written procedures clarify each staff member's responsibilities in the
valuation process for this type of property, making appraisal and record management easier to maintain.
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Valley Fair Fashions, Inc. v. Valley Fair (1966) 245 Cal.App.2d 614, Tele-Vue Systems, Inc. v. Contra Costa County (1972)
25 Cal.App.3d 340, and Ventura County v. Channel Islands State Bank (1967) 251 Cal.App.2d 240.
178
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C L E A R L Y I D E N T I F Y L A N D L O R D A N D L E A S E H O L D I M P R O V E M E N T S O N A P P R A I S A L RECORDS
Proper notes on appraisal records concerning the establishment of value is an important step in the
appraisal process. Appraisal notes should include information regarding the existence of landlord and
leasehold improvements, a description of the improvements, and the basis for valuation. If the
improvements involve more than one account, the appraisal records should indicate in what manner the
improvements are assessed (i.e., to whom, secured or unsecured roll, and assessor's parcel number or
business property account number). This information will not only assist appraisers and auditor-appraisers
who may work on the subject parcel or related business account(s) in the future, but will also help to avoid
duplicate or escape assessments.
C O O R D I N A T I O N O F L A N D L O R D A N D L E A S E H O L D I M P R O V E M E N T APPRAISAL
Appendix B describes and suggests one method of coordinating the appraisal of landlord and leasehold
improvements that is used in some assessors' offices. It is not the only proper method. An example is
included as illustration. The example starts with the source documents and goes through several steps
including classification, determination of assessee, valuation, and enrollment of value.
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C HAPTER 6: S PECIAL ISSUES
V ALUATI ON OF O THER T YPES OF P ERSONAL PROPERTY
L E A S E D EQUIPMENT
Valuation and assessment of leased equipment can be one of the more difficult tasks an auditor- appraiser
encounters.179 Many impediments are generated by a lack of complete, up-to-date information. Other
problems are based on the nature of the property. Leased equipment is usually easily movable, and it may
change ownership (or possession) and situs frequently. This can make it difficult to analyze the factors
(assessability, assessee, situs, description, and classification) necessary to make an appropriate opinion of
value and a valid assessment.
ASSESSABILITY
Assessability of leased equipment, or equipment intended for lease, is the first consideration an appraiser
encounters. As discussed in Chapter 1, personal property leased on the lien date is assessable unless
exempt. However, personal property held for lease on the lien date is inventory. Leased equipment, or
property intended for lease, is assessable when:180
•
property is actually leased or rented on the lien date.
•
property is being used by the owner for purposes not directly associated with
the prospective sale or lease of that property.
•
property has been used by the owner prior to the lien date, even though "held for
lease" on the lien date.
•
property is intended to be used by the lessor after being leased (or during
intervals between leases), even though "held for lease" on the lien date.
ASSESSEE
A person who owns, claims, possesses, or controls property on the lien date is the assessee of that
property. This is either the lessor or the lessee. Under section 405, the assessor may assess leased
property to either, or both, whether or not there is a private agreement between the parties to the lease.
Section 405 specifically states, in part:
(b)
The assessor may assess all taxable property in his county on the unsecured roll jointly
to both the lessee and lessor of such property.
(c)
Notices of assessment and tax bills relating to jointly assessed property on the unsecured
roll shall be mailed to both the lessee and the lessor at their latest addresses known to the assessor.
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Leased equipment reported to the State Board of Equalization by public utility companies is assessed at the state level.
However, the Board may delegate to a local assessor the duty to assess a property used but not owned by a state assessee on
which the taxes are to be paid by a local assessee.
179
180
See Rule 133(b), Business Inventory Exemption, Exclusions.
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However broad this statute, the courts and most counties have reasonably construed the language.181 That
is, property is generally not assessed jointly although the assessor has that option pursuant to section 405.
Property under true lease is usually assessed only to the lessor and property under conditional sales
contract only to the lessee. Exceptions to this rule mainly occur when the lessor requests to be assessed to
ensure the taxes are paid or one of the parties to the lease is an exempt entity.
L E A S I N G W I T H E X E M P T ENTITIES
B A N K S A N D F I N A N C I A L INSTITUTIONS
Tangible personal property owned by banks and financial corporations (commonly referred to as financial
institutions or financials) is exempt from property taxation by the in-lieu tax provisions under article XIII,
section 27 of the California Constitution, and sections 23154, and 23181 through 23183 of the Revenue
and Taxation Code, improvements or fixtures are assessable however. These businesses pay an in-lieu
"franchise tax on net income" instead. A listing of banks and financials qualified under these sections is
maintained by the Franchise Tax Board with confidential copies distributed to assessors annually by the
Board of Equalization.182 The in-lieu exemption does not apply to banks and financial corporations whose
principal activity consists of leasing tangible personal property (see section 23183(b)). Generally such
corporations are not shown on the list. Any questions in this regard should be directed to the Franchise
Tax Board.
If a lessor bank or financial is shown in the listing of banks and financials, the leased property is
assessable to the lessee (unless the lessee is also exempt from property taxation) pursuant to section 235.
Section 235 states:
For purposes of this division, the lessee of tangible personal property owned by a bank or financial
corporation shall be conclusively presumed the owner of that property.
However, where personal property is leased to an exempt bank or financial, it is assessable to the
owner/lessor (unless the owner/lessor is also exempt from property taxation). The owner/lessor holds title
to the property and does not benefit from the lessee's in-lieu exemption.
181
61 Ops.Cal.Atty.Gen. 472, 475 (1978).
182
As of year 2000, state chartered credit unions are exempt from paying the bank and corporate in-lieu franchise tax
(section 23701y). Therefore, state chartered credit unions no longer appear on the Confidential List of Banks and Financial
Corporations. Assessors need to independently evaluate, on a case by case basis, whether these entities qualify as a financial
corporation for assessment purposes. The personal property of those qualifying as financial corporations remains exempt
from property tax. Generally, state-chartered credit unions are (1) not subject to the bank and corporation in-lieu tax, (2)
subject to real property tax, and (3) not subject to personal property tax. Federally-chartered credit unions are (1) not
subject to the bank and corporation in-lieu tax, (2) subject to real property tax, and (3) subject to personal property tax.
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I N S U R A N C E COMPANIES
Personal property owned by insurance companies is exempt from property taxation, regardless of how the
property is used by that insurance company, pursuant to article XIII, section 28, of the California
Constitution.183 Property leased to insurance companies, rather than owned by them, however, remains
assessable to the lessor (unless the lessor is also exempt from property taxation).
G O V E R N M E N T ENTITIES
Property leased to or from a federal, state (California), or local governmental (county, city, district in
California) entity is not taxable to that entity, although the property may remain taxable to another party.
It is not taxable to the governmental entity because:
•
The federal government is immune from taxation pursuant to the United States
Constitution. It is a "governing constitutional principle that the properties, functions, and
instrumentalities of the federal government are immune from taxation by state and local
governments."184
•
The California Constitution, article XIII, sections 3 and 5 expressly exempt from taxation
all property owned by the state or local governments, except as provided in section 11(a) of the
California Constitution, article XIII (which applies only to land and improvements outside the boundaries
of the local government).
Personal Property
Personal property owned by the government is immune (federal) or exempt (state or local) from all
taxation, as discussed above, and it is not subject to possessory interest as is real property (with one
exception).185 "The legislature has not defined personal property as including a right to its possession as
it has real property."186
Privately owned personal property leased to and held by the government is not immune (federal) or
exempt (state or local) where title remains with the lessor. In such cases, the property is taxable to the
owner/lessor, even if its situs is located on government-owned land. (The exceptions are Congressional
grants of immunity for the privately held personal property of Indians located on Indian reservations and
personal property located on federal enclaves.)
Frequently, in cases where federal immunity or state/local exemption is claimed regarding leases of
property with the government, the question is who "owns" the property? In one case, for example, a court
found that title to tools, equipment, and material owned by federal government but used by a private
contractor doing government construction remained with the government
183
Mutual Life Insurance of New York v. City of Los Angeles (1990) 50 Cal.3d 402 overturned Massachusetts Mutual Life
Ins. Co. v. City and County of San Francisco (1982) 129 Cal.App.3d 876
184
TRW Space & Defense Sector v. County of Los Angeles (1996) 50 Cal.App.4th 1703, 1710.
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185
See section 201.5.
186
General Dynamics Corp. v. County of Los Angeles (1958) 51 Cal.2d 59. An exception is set forth in section
201.5 for personal property owned by or for the California Pollution Control Financing Authority.
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and were therefore immune from taxation.187 In another case, a court found that title to personal property
consisting of materials and inventory used by a private contractor doing government construction never
vested in the government, even though the government fully reimbursed the costs to the contractor. The
nature of the property involved was mere overhead, "the common staples of any ongoing business; the
contractor was the owner."188 In a subsequent case, however, a court found that title to overhead property
vested in the government, pursuant to the terms of the contract, and was not assessable to the contractor.189
Where the question of ownership is not clear, proper analysis of the lease agreements and other sales or
financing documents is important. In establishing ownership for tax assessment purposes, the assessor
should determine who holds the essential indicia of ownership.190
A title clause standing alone is not conclusive of ownership for tax purposes when it appears that the
taxpayer retains the essential indicia of ownership. . . Accordingly, it is necessary to examine the terms of
the contracts to determine whether plaintiffs retained rights in the property inconsistent with its ownership
by the United States for tax purposes.191 (Italics added.)
Several factors have been identified by the court(s) under the essential indicia of ownership test as
evidence that the government holds title. The tests can be applied when the government is either the lessor
or the lessee and title is not physically held by the government. When the government is a lessee, for
example, essential indicia of ownership may be apparent if:
1.
title automatically passes to the government (lessee) at the end of the lease term (the
title clause of the lease agreement);
2.
the property itself is used as security for any unpaid lease payments (in the event of
default, the lessor would sell the property to pay off the debt and the remainder would go to the
government);
3.
the government (lessee) has full authority to alter the property at will;
4.
the government (lessee) is required to maintain the property.
Again, no one factor standing alone is indicative of essential indicia of ownership, or proper owner for
assessment purposes. The ultimate decision must be made upon consideration of all the facts.
187
General Dynamics Corp. v. County of Los Angeles (1958) 51 Cal.2d 59.
188
TRW Space & Defense Sector v. County of Los Angeles (1996) 50 Cal.App.4th 1703.
189
Hughes Aircraft Co. v. County of Orange (2002) 96 Cal.App.4th 540.
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190
Mayhew Tech Center Phase II v. County of Sacramento (1992) 4 Cal.App.4th 497.
191
General Dynamics Corp. v. County of Los Angeles (1958) 51 Cal.2d 59.
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Fixtures (and Other Real Property)
Fixtures owned by the federal government and leased to a private party are immune (federal) or exempt
(state or local) from property taxation, to the same extent as other real property. Fixtures are not
assessable to the government owning the property, but the possessory interest in the fixtures is assessable
to the lessee as any other type of real property leased from the government. The assessment is on the
entire interest of the lessee. It is a possessory interest in real property.192 A possessory interest within an
area in which the United States has exclusive jurisdiction (so-called "federal enclaves") is excluded from
the meaning of "taxable possessory interest" and is immune from taxation.
Thus, determination of ownership becomes less of an issue; the property is either assessable as an
improvement or a possessory interest. If, however, ownership does become an issue, it should be
determined based on the essential indicia of ownership as discussed earlier.
S U M M A R Y O F L E A S E S I T U A T I O N S W I T H A G O V E R N M E N T A L A G E N C Y A S E I T H E R L E S S O R O F LESSEE
The following table summarizes the discussion regarding the assessability of leased property wherein the
federal, state, or a local government agency is either the lessor or lessee. The table is not controlling in
all situations and, again, essential indicia of ownership (referred to as owner (title with) in the table)
should be determined based on all facts.
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192
Section 107.
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TABLE 6A
ASSESSABILITY OF LEASES INVOLVING GOVERNMENT
LESSOR
LESSEE
OWNER
(TITLE
WITH)
Private Party
Government
Private Party
Government
TYPE OF
PROPERTY
ASSESSEE
Lessor
Personal Property
Private Party
Lessee
Personal Property
No assessment
(Immune or
Exempt)
Private Party
Government
Lessor
Fixtures
Private Party
(and other real property)
Private Party
Government
Government
Private Party
Lessee
Lessor
Fixtures
Private Party
(and other real property)
(Possessory
Interest)
Personal Property
No assessment
(Immune or
Exempt)
Government
Private Party
Lessee
Personal Property
Private Party
Government
Private Party
Lessor
Fixtures
Private Party
(and other real property)
(Possessory
Interest)
Fixtures
Private Party
Government
Private Party
Lessee
(and other real property)
O T H E R E X E M P T E N T I T I E S O R INSTITUTIONS
Property leased to other exempt entities and institutions may be eligible for exemption, but each situation
must be considered individually. In some cases, the property may be automatically exempted; in others,
claim forms must be filed in order for the applicable exemption or reduction to be granted. For example, a
lessor who leases equipment to public libraries, museums, schools, community colleges, state colleges,
and the University of California is not automatically exempt from taxation on the property. The lessor
may file a claim for exemption if (1) the leased equipment is "used exclusively" by an aforementioned
entity as lessee and (2) it is demonstrated that the benefit of the exemption has inured to the lessee
institution. A lessor's exemption claim should only be filed when the lease has been adjusted for taxes and
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the public entity has already received the benefit of the reduction. Where the lessor does not claim the
exemption, the lessee must file a claim in order to receive the refund of tax that the lessor has paid to the
county.
A discussion of exemptions is located in Assessors' Handbook Section 267, Welfare, Church and
Religious Exemptions. Reference to code sections governing exemptions (sections 202 et seq., 203, 214 et
seq.) is also necessary to determine whether equipment leased to qualifying entities is deemed eligible or
if a claim must be filed.
SITUS
Physical situs of leased equipment may change frequently, as previously discussed in Chapter 3.
Determination of tax situs for this type of property is generally governed by Rule 204 and section 623.
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Prior to January 1, 1996, Rule 204, Leased Equipment, was the sole authority governing situs
determination. It requires a determination of a precise situs for each piece of leased equipment (a time
consuming process in many cases). However, section 623 has made precise situs of leased equipment less
important by allowing a single assessment for leased personal property assessed to the same assessee:
The assessor may place a single assessment on the roll for all leased personal property in the county that is
assessed with respect to the same taxpayer. Any property assessed pursuant to this section shall, in the
absence of evidence establishing otherwise, be deemed to be located at the taxpayer's primary place of
business within the county. (Italics added.)
D E S C R I P T I O N : T Y P E S O F LEASES
A lease is generally defined as any contract that gives rise to a lessor and lessee relationship in real or
personal property. There are many different types of leases and lease situations. To properly determine
property tax reporting and assessment questions, it is important to define and consider each type of lease,
and the terms associated with them: short-term leases, extended-term leases, true leases, and financing
leases or conditional sales contracts.
S H O R T -T E R M LEASES
Leases or rentals of property on a daily, weekly, or other short-term basis (defined as a period of six
months or less) are short-term leases. The property is assessable to the lessor at the lessor's principal
location, regardless of actual location or control on the lien date.193 The lessor is considered the owner,
and value is estimated by reference to the owner's cost of the property.194
E X T E N D E D -T E R M LEASES
An extended-term lease (commonly referred to as long-term lease) is any lease whose duration is more
than six months, or for an unspecified period. In many cases, property leased under this type of lease
eventually becomes property of the lessee. For example, a lessee leases a computer for five years. At the
end of the five-year lease period, the lessee has the option to buy the computer for $1. Essentially, from
the start of the lease, the lessee is the owner of the equipment whether or not title has actually passed.
During the lease term the assessor may assess this equipment to either the lessor or the lessee, and situs for
assessment purposes is generally the actual location of the leased equipment, subject to the provisions of
section 623 as discussed above.
Extended-term leases, business property leased for a term of more than six months or for an extended
(even though unspecified) period, must be valued as if in the hands of the lessee, after all costs of
production, including marketing costs, profit, sales tax, freight, and installation costs have been added.
The lessee is considered the consumer of the property, and the property is
193
Rule 204.
194
See trade level discussion in Chapter 4.
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therefore valued at the consumer trade level. In the example, the lessee may record a $1 buy-out cost on
his or her books. The actual value for assessment purposes should be based on the total acquisition cost at
the inception of the lease (if the cost approach is utilized) or the present value of the lease payments made
during the lease (if the income approach is utilized).
T R U E LEASES
True leases, whether short-term or extended-term as defined earlier, are agreements under which an owner
gives up possession and use of his/her property for valuable consideration and for a definite term and at
the end of the term, the owner has the absolute right to retake, control, or convey the property. It is an
agreement under which there is no intention of transferring ownership. At termination of the lease, the
property will be returned to the lessor.
C O N D I T I O N A L S A L E S C O N T R A C T S O R F I N A N C I N G LEASES
Conditional sales contracts or financing leases (agreements) are purchases rather than true leases. They
can be short-term or extended-term agreements whereby the seller (vendor) accepts periodic payments for
the purchase price while retaining title to the property for security purposes. Possession of the property
transfers to the buyer (vendee) without full legal title until payment of the purchase price or a
predetermined date occurs.195
These contracts provide possession, use and control to the buyer. The buyer or lessee is the beneficial
owner of the property, and therefore becomes the assessee, regardless of whether or not they hold title.
D I F F E R E N T I A T I N G B E T W E E N A T R U E L E A S E A N D A C O N D I T I O N A L S A L E S CONTRACT
It is often difficult to distinguish between a true lease and a conditional sales contract, and no precise
formula has been devised for separating the two types of contractual arrangements.196 An agreement
identifying itself as a lease may, in actuality, be a conditional sales contract and vice-versa. Proper
distinction is of prime importance because assessability, exempt status, appropriate assessee, and value
depend on this distinction.
According to the Uniform Commercial Code, in determining whether an instrument is a lease or a sales
contract, the contract form is not as important as the intent of the parties. Following are some issues
related to the lease contract that will help determine the intent of the parties of the contract. In any
contract, some of the issues may be indicative of a true lease while others may be indicative of a
conditional sales contract. The intent of the parties should be determined by the express terms of the
contract. Some terms such as liability for insurance, taxes, and other expenses may not establish
ownership. These terms are, therefore, not considered in the table below.
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195
Miller & Starr, California Real Estate, 2d "Specific Real Estate Contracts," section 2:42.
196
61 Ops.Cal.Atty.Gen. 472 (1978).
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TABLE 6B
ISSUES TO REVIEW WHEN VERIFYING LEASE TYPE (TRUE LEASE V. CONDITIONAL SALES
CONTRACT)
True
Lease
Issue
Lease Period
Condition
al Sale
XX
•
Lease period is approximately the same as
the anticipated life of the property.
•
Lease is for a fixed period with a nominal
option payment (i.e., $1) required to transfer title.
•
Lease is cancelable on a monthly or annual basis.
XX
•
Rent
Optional purchase clause is at market value.
•
Present value of contractual rental payments
is considerably less than the purchase price.
Ownership
Terms
X
•
Present value of contractual rental payments is
equal to or greater than the current purchase price.
•
The contract contains specific provisions
retaining ownership with the lessor.
X
X
•
The contract transfers all ownership
responsibility, with the exception of title, to the lessee.
Accounting
Treatment
by Lessor
or Lessee
(FASB 13)
•
Lessor is treating the property as a depreciating
asset.
•
Lessor is treating the property as a note, contract,
or account receivable.
•
Lessee is treating the property as a depreciating
asset.
X
X
X
X
As mentioned earlier, like any factual determination, analysis of any one item cannot determine lease type.
All evidence must be weighed. Reliance on any one factor may lead an appraiser to the wrong conclusion.
For instance, treatment (by either the lessor or the lessee) for financial accounting purposes can be
misleading.
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S T A T E M E N T O F F I N A N C I A L A C C O U N T I N G S T A N D A R D S N O . 13 (FASB 13)
Accounting for leases can be a controversial area of financial accounting. Many lessees structure their
lease agreements to avoid capitalization for financial accounting purposes or to improve their financial
position. The Statement of Financial Accounting Standards No. 13 (FASB 13) was developed to govern
accounting for leases. This standard, FASB 13, provides
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lessees and lessors with established criteria for classifying leases and also requires reporting and
disclosure of leases on financial statements based on the classification made by the lessor and/or the
lessee. Thus, when an audit is conducted, or taxpayer's records are reviewed, leased equipment can be
identified. The nature of the leasing arrangement and activities must be disclosed regardless of the lease
type.
Recognition of these requirements for classifying and reporting leases for financial accounting purposes
under FASB 13 is useful in that a substantial amount of information about the property may be discerned.
However, such information does not necessarily determine property tax classification, assessability, or
value. Accounting records alone are not conclusive, although they may greatly assist the auditorappraiser in gathering and evaluating all the facts. A lease, for example, does not necessarily need to be
capitalized for it to be assessed to the lessee. Possession, claim, or control in itself may determine the
assessee (section 405).
V A L U A T I O N O F L E A S E D EQUIPMENT
When valuing leased equipment, all three approaches to value should be considered: the replacement or
reproduction cost approach, the comparative sales approach, and the income approach. Each approach,
when appropriate, should be applied as discussed in Chapter 4 of this section.
Regardless of which approach(es) is used, leased property must be valued at the proper trade level. The
proper trade level depends on the term of the lease. Under extended-term leases (more than six months),
the lessee is considered to be the consumer of the equipment and thus is assessable at that level, the
consumer trade level. The appraiser should determine the selling price new of the equipment to
consumers, plus sales tax and delivery and installation costs, then adjust for depreciation. In short-term
leases or rentals (six months or less), the lessor is considered to be the consumer of the equipment, and the
value is determined at the lessor's trade level.
SUPPLIES
Supplies are classified as personal property.197 The historical cost of supplies on hand as of the lien date is
reportable by the assessee on the Business Property Statement.
Normally, the value of supplies can be based on cost information and/or physical examination of supplies
on hand. The cost approach is an appropriate approach to value because of the relatively short economic
life of the property. Current purchase price often reflects value. In some cases it is necessary to adjust the
purchase price or recorded cost to include supplies not included in the assessee's books, to adjust for trade
level or discounts, or to reflect general price level changes. These adjustments usually are addressed
primarily as a result of an audit.198
197
See discussion of supplies in Chapter 2 for determination of items included in assessable supplies.
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198
See discussion of auditing for assessment purposes in Chapter 8.
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It is important, when utilizing the cost approach and the assessee's accounting records, to ensure that
inventory is not misclassified or reported as supplies. Supplies should not be confused with inventory.
Supplies are items used in the ordinary course of business but not incorporated into the product sold or
held for lease. Inventory, on the other hand, are products held for sale or lease, which include items
incorporated into the product or transferred with the product when sold. An in-depth discussion of this
topic is included in Chapter 2, Classification, of this section.
The cost and value of assessable supplies may be estimated by the percentage of annual purchases method.
This method summarizes total yearly supplies purchased, and estimates the supplies turnover rate based on
frequency and quantities of supplies purchased during the year. Total annual supplies purchased divided
by this supplies turnover rate (Total Annual Supplies / Turnover Rate = Estimated Supplies on Hand)
generally results in a reasonable estimate of the value of the supplies on the lien date. The reasonableness
of this estimate can often be verified during the physical inspection of the business when an audit is
conducted. Caution should be used if supplies are seasonal when using the percentage of annual purchases
method.
C O N S T R U C T I O N I N PROGRESS
Construction in progress (CIP) is also an item required to be reported on the Business Property Statement.
CIP is assessable at full cash value on the lien date.199 The income and sales comparison approach are of
limited use because property under construction is typically not producing any income, and it is difficult to
find comparable sales of partially completed projects. For this reason, the cost approach is nearly always
used to value this type of property. Costs incurred as of the lien date represent total costs, including
preliminary direct and indirect costs such as planning and engineering charges. These costs may or may
not represent actual market value on the lien date. Ultimately, the value should be based on what the
property in its partially-constructed condition would bring in the market place involving a willing buyer
and seller. The seller would attempt to recover all costs if the equipment under construction was sold in a
partially constructed state.
The instructions on the Business Property Statement request an attachment of an itemized listing of costs
for construction in progress for improvements to land, machinery, equipment, furniture, buildings or other
improvements, or leasehold improvements. Reported CIP may include both real property and personal
property items that may be hard to distinguish depending on the stage of completion. Reported costs may
also include direct and indirect costs that were discussed earlier in Chapter 4, Valuation of Personal
Property, which may or may not influence value. Review of the costs included in CIP is important to
determine assessability, classification, and contribution to value. Coordination between the real property
appraiser and the auditor- appraiser is equally important to correctly classify building and leasehold
improvements, and avoid duplicate and escaped assessments (see Chapter 5 for more information on this
topic).
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Construction in progress regarding personal property is assessable only when actual construction has begun by the lien
date. If actual construction has not yet begun, any costs incurred (i.e., engineering fees) are exempt from taxation for the
entire year.
199
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C O M P U T E R A N D R E L A T E D EQUIPMENT
Non-production computers and related equipment must be reported separately from other types of
personal property on the Business Property Statements. This equipment includes non- production
computers (excluding computer-operated machinery and equipment), monitors, printers, scanners, disk
drives, and cables. These items have relatively short-lives, and are influenced by rapidly changing
technology and user needs.
Production computers (computer operated machinery and equipment or computers embedded in
machinery) are not reported, considered, or valued with non-production computer equipment on Schedule
A, Column 5, Computers. They are valued as other types of machinery and equipment specific to an
industry, and are normally reported on Schedule A, Column 1, Machinery and Equipment for Industry,
Profession, or Trade. When computerized equipment is encountered, a special study of the equipment and
the industry it serves may be required to determine the appropriate valuation method.
G E N E R A L VALUATION
Valuation of non-production computers and related equipment has become increasingly difficult, yet
important, due to rapid changes in technology and changing needs of users. Because of typically shorter
lives, rapid depreciation, and little salvage value in many circumstances, the Board has provided three
separate valuation tables to aid the appraiser using the cost approach to value. These tables segregate
computers by original cost, and apply different factors based on past value trends. As with most
equipment, these factors are not appropriate for all computers. In some cases, other approaches to value
will be more appropriate. Sound appraisal judgment is necessary to determine the appropriateness of
applying the factors to specific computers and estimating the accuracy of the resulting value.
S T O R A G E M E D I A F O R C O M P U T E R PROGRAMS
Section 995 provides that storage media for computer programs are to be valued as if there were no
computer programs on such media except basic operational programs. Otherwise, computer programs
shall not be valued for purposes of property taxation. Section 995.2 defines the terms "basic operational
program" and "processing program." Rule 152 explains how to properly determine the classification of
computer software.
B A S I C O P E R A T I N G PROGRAMS
Basic operational programs are those programs that are "fundamental and necessary to the functioning of a
computer." They are, according to section 995.2:
. . . that part of an operating system including supervisors, monitors, executives, and control or master
programs that consist of the control program elements of that system.
A basic operational program is a control program, as defined in section 995.2, that is included in the sale
or lease price of the computer equipment. The assessable value of storage media
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containing basic operational programs includes the value of the storage media and the value of the
program embedded on it. The basic operational programs in personal computers and mainframe
computers are the basic input output system (BIOS) and licensed internal code (LIC or microcode).
Often, computer equipment is purchased or leased at a single price. When the price is not segregated, or
not able to be segregated, between taxable and nontaxable property and programs, the total purchase price
may be used as an indicator of taxable value.200 Pursuant to Rule 152(f), when an assessee can identify
and segregate the costs (and supply information to support such separation) the value must be adjusted
appropriately.
The assessee is determined by the ownership and control of the storage media. The value of the storage
media is assessable to "the person owning, claiming, possessing, or controlling the storage media on the
lien date."201 Storage media shall not be assessed to the owner of the copyright of the computer program
embodied or stored on the media unless the owner of the copyright also owns, claims, possesses, or
controls the storage media on the lien date. If the licensee of a basic operational program owns the storage
media on which a program is stored, then the licensee is the assessee. If the storage media is leased, then
the assessor has the option of making the assessment to the owner (lessor), the lessee, or to both according
to section 405(b).
P R O C E S S I N G PROGRAMS
A processing program is a program used to develop and implement the specific applications that the
computer is to perform. It consists of:
. . . language translators, including, but not limited to, assemblers and compilers; service programs,
including, but not limited to, data set utilities, sort/merge utilities, and emulators; data management
systems, also known as generalized file-processing software, and application programs, including, but not
limited to, payroll, inventory control, and production control. Also excluded from the term "basic
operational program" are programs or parts of programs developed for or by a user if they were developed
solely for the solution of an individual operational problem of the user. 202
Its operation is possible only through the facilities provided by the basic operational program (or control
program). By itself, however, a processing program is not fundamental and necessary to the functioning
of a computer.
200
Rule 152(e).
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201
Section 405.
202
Section 995.2.
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Only the storage media for processing programs are assessable and they are valued as if there were no
computer programs on them. This value is assessable to "the persons owning, claiming, possessing, or
controlling on the lien date."203
SPECIAL CONSIDERATIONS
I D L E , U N U S E D , O R O B S O L E T E EQUIPMENT
Idle, unused, or obsolete equipment has value, even if only salvage or scrap value.204 Therefore, the
auditor-appraiser must estimate value and assess this type of equipment. Idle, unused, or obsolete
equipment may need to be valued separately from in-use, active equipment of a similar type.
First, an auditor-appraiser must consider all the reasons why equipment is idle on the lien date. This may
or may not influence value for assessment purposes. For example, consider a printing press no longer in
use because it was replaced by a newer model. The old press is stored in the office break room because
there is no other place to put it until sold, donated, or otherwise disposed of. The older model has value
although not in productive use and the value can be computed in the same manner as a similar piece of
equipment that is in productive use. On the other hand, consider a second example of a printing press no
longer in use because it needs repair. Assume the part needed to repair the press is no longer
manufactured; there is no way to repair the part or the printing press; and it would not interface with
modern equipment in use if it were repaired. This printing press has value, but the value may only be the
salvage value of the property, or the value of the tangible materials since the printing press in essence is
unusable or obsolete. As illustrated here, to value idle, unused, or obsolete equipment, an appraiser must
determine the reason(s) for non-use. It influences value and the resulting assessment.
E Q U I P M E N T P U R C H A S E D USED
Valuation of equipment purchased used is peculiar in that the equipment index and percent good factors,
normally utilized by the assessor in mass appraisal, may or may not produce results reflective of market
value. This may be due to differences between total economic life and remaining economic life, and
between historical cost (cost to the original owner) and acquisition cost (cost to current owner). The
equipment index factors provided by the Board (in AH 581) include separate tables for new and used
agricultural and construction equipment, but does not include separate tables (new and used) for other
types of equipment. An appraiser should take care to determine how the results of applying factors, both
trending and estimation of depreciation, relate to the actual market value of equipment purchased used. If
the results are not indicative of market value, another method of estimating depreciation, as discussed in
Chapter 4, or another valuation approach should be utilized.
203
Section 405.
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This discussion could also be applied to the valuation of equipment that is abandoned in place, and back up
equipment.
204
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Another method of estimating cost and implementing the equipment index factors and percent good
factors, used infrequently but one which may have validity in certain situations, is reverse trending.
Where application of table factors does not accurately represent market, index factors can be applied (to
acquisition cost) in a reverse sense in order to estimate the historical cost (cost to the original owner).
Then, the appraiser can apply traditional methodology to estimate value. In order to utilize this approach,
an auditor-appraiser should be assured that the results are indicative of market value on the lien date.
Reverse trending is a method of recognizing, and removing from the final valuation conclusion, assets that
are still recorded on the assessee's books, but no longer exist, and have been replaced. This method is
particularly useful for hotel/motel or retail businesses, where periodic refurbishing occurs, but layers of
prior costs are still recorded on the books of the property owner.
S T E P S I N T H E R E V E R S E T R E N D I N G PROCESS
1.
Verify that in fact the books and records, and reported costs, appear to lack periodic
updating for disposed assets. Such an inference can be drawn when the original reported costs for each
initial acquisition year indicate little or no change from lien date to lien date.
2.
Verify that costs of new replacements have actually been reported. Assessees do not
always report replacement costs.
3.
Determine year original asset(s) acquired. If original acquisition year unknown, remove
the estimated original cost from the earliest year, and then the next earliest year, etc., until all of the
cost is deleted.
4.
Find appropriate price index factor(s) for the original asset's acquisition years.
5.
Divide the new replacement cost(s) by the price index factor(s) determined in step 4.
6.
Subtract the cost(s) determined in step 5 from the total cost(s) reported for the original
assets' acquisition years.
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EXAMPLE 6.1 REVERSE
TRENDING
An assessee owns a machine shop and the start-up costs in 1987 for all equipment was $535,981. Over
the years the assessee has consistently reported $535,981 as 1987 acquisition costs.
The original acquisition in 1987 included the cost of a Bridgeport Mill, but the assessee does not know
how much it cost in 1987, and does not have any other records to substantiate its cost. In 2001 the
assessee replaced the old Bridgeport Mill with a new one that cost $81,763, including sales tax, freight,
and installation.
Use the following method to estimate the original cost to be deducted from the total recorded 1987
acquisition costs:
From the AH 581, Equipment Index and Percent Good Factors, January 2002, Industrial
Machinery and Equipment Table, , the 1987 price index factor is 134.
Divide the new replacement cost, $81,763 by 1.34; the result is an estimated base cost for
a Bridgeport Mill in 1987 of $61,017.
Subtract $61,017, from the reported 1987 acquisition costs of $535,981.
EXAMPLE 6.2 REVERSE
TRENDING
A hotel owner expended $3,203,102 in 2001 for the refurbishment of 150 rooms in a 500room complex.
Although some costs have been deleted from the records over time, the property owner has
not deducted any original costs relative to the 150 refurbished rooms.
To estimate the cost adjustment, index the earliest historical costs, and begin deleting costs, until an
amount equivalent to the current dollar expenditure is removed. (The commercial equipment index
factors are taken from AH 581, January 2002.)
Begin with the audited fixed asset machinery and equipment costs (column titled F/A Cost), and adjust
the indexed 2002 lien date assessable historical costs as shown on the following table.
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EXAMPLE 6.2 (CONTINUED) REVERSE TRENDING
Index
Facto
r
Restated in
2002 $s
Cost to
Remove
Full
Economic
Cost
Yea
r
F/A Cost
2001
$ 3,203,102
$ 3,203,102
2000
123,784
123,784
1999
56,223
56,223
1998
72,358
72,358
1997
1,225,488
1,225,488
1996
2,789,321
2,789,321
1995
698,354
698,354
1994
3,579,684
3,579,684
1993
7,899,642
114
$9,005,592
$414,823
1992
467,892
116
542,755
542,755
1991
1,325,879
118
1,564,537
1,564,537
1990
567,489
120
680,987
680,987
Tota
l
$22,009,216
$ 3,203,102
*7,535,762
$ 19,233,133
*2002$s 9,005,592 – 414,823 = 8,590,769 1993$s 8,590,769/1.14 = 7,535,762
VEHICLES
Vehicles subject to license by the Department of Motor Vehicles (DMV) for on road use are not subject to
property tax assessment. The license fee imposed is in lieu of all property taxes levied for State and local
purposes. However, vehicles exempt from DMV registration and license fee are subject to assessment by
the assessor. They are considered "implements of husbandry" or "special vehicles" and are specifically
exempted from DMV registration under Vehicle Code Sections 4000-4020.
"Implements of husbandry" include, but are not limited to, any tool, machine, equipment, appliance,
device or apparatus used in the conduct of agricultural operations, and any additional items defined by the
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Vehicle Code.205 "Special vehicles" include steel-wheeled, track-laying, and rubber-tired equipment, and
other vehicles which are not subject to the license fees by DMV.206 Also exempt from registration is
special equipment, "special construction equipment"
205
Section 411.
206
Section 994.
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and "special mobile equipment", as defined by the Vehicle Code. Section 565 of the Vehicle Code, states:
"Special construction equipment" is:
(a)
Any vehicle used primarily off the highways for construction purposes and which
moves only occasionally over the highways and which because of the length, height, width, or unladen
weight may not move over the public highways unladen without the permit specified in Section 35780.
(b)
Any vehicle which is designed and used primarily either for grading of highways,
paving of highways, earth moving, and other construction work on highways, or for construction or
maintenance work on railroad rights-of-way, and which is not designed or used primarily for the
transportation of persons or property and which is only incidentally operated or moved over the
highway. It includes, but is not limited to, road and railroad construction and maintenance machinery so
designed and used such as portable air compressors, air drills, asphalt spreaders, bituminous mixers,
bucket loaders, tracktype tractors, crawler tractors, ditchers, leveling graders, finishing machines, motor
graders, paving mixers, road rollers, scarifiers, earth moving scrapers and carryalls, lighting plants,
welders, pumps, water wagons, power shovels and draglines, speed swings, skip loaders, weed mowers,
self-propelled and tractor-drawn earth moving equipment and machinery, including dump trucks and
tractor-dump trailer combinations which either (1) are in excess of 96 inches in width or (2) which,
because of their length, height or unladen weight, may not be moved on a public highway without the
permit specified in Section 35780 of this [Vehicle] code and which are not operated laden except within
the boundaries of the job construction site, and other similar types of construction equipment.207
"Special mobile equipment" is defined as "a vehicle, not self-propelled, not designed or used primarily for
the transportation of persons or property, and only incidentally operated or moved over a highway,
excepting implements of husbandry."208
All of these are subject to assessment by the assessor because they are exempt from license fees by DMV,
except by one-trip or special permit. Although identification plates may be found on these vehicles, they
are not evidence that the vehicle is registered and the DMV license fee paid. Vehicles bearing these
identification plates are exempt from registration and should be assessed.209 The value should be
determined using the same standards and guides used to value
207
"Special construction equipment" does not include a vehicle originally designed for the transportation of persons or
property to which machinery has been attached (unless specifically designated in section 565 of the Vehicle Code) or dump
trucks originally designed to comply with the size and weight provisions of the Vehicle Code. (Section 570 of the Vehicle
Code.)
208
Section 575 of the Vehicle Code.
209
Identification plates are obtained from DMV for a minimal fee, similar to the fee paid to register a vessel with a CF number.
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other types of personal property according to section 413. However, in some cases, the assessee of such
property may be allowed to deduct from the amount of property tax any fee paid on such vehicle (i.e.,
temporary licenses or special permits including a fee for property tax).210 For example, if a permit costing
$20 (paid for prior to the lien date for the calendar year in which the lien date occurs) included $5 for a
registration or service fee and $15 for an in-lieu property tax, it may be appropriate for the total property
tax dollar amount as determined by the tax collector (based on the assessor's estimated value) to be
reduced by the amount of the in-lieu property tax paid ($15).
Other types of property, sometimes used in the ordinary course of business, that may be required to be
registered by DMV include truck mounted equipment and relocatable offices. Equipment that is
permanently attached to a licensed vehicle is not subject to local property taxation because it is considered
part of the vehicle. When this equipment is attached to the vehicle the assessee is required to notify DMV
so that the value of the vehicle can be adjusted. (However, it is not assessable regardless of whether it is
actually registered with DMV.) Similarly owners of relocatable offices, usually utilized by construction
companies, may register the trailer with DMV.211 These trailers are classified as commercial coaches by
DMV, and the license can be verified with the yearly DMV (or HCD, the Department of Housing and
Community Development) registration. Since the assessee pays an annual "in-lieu fee" for these trailers to
DMV, they are not subject to local property taxation.
E X P E N S E D EQUIPMENT
Equipment expensed by an assessee for accounting purposes is assessable personal property as is any
personal property used in the ordinary course of business. Expensed equipment may include any type of
equipment from small hand tools such as a screwdriver to large machinery. Expensed equipment should
be reported on the property statement yearly until disposed, but may go unreported. In the course of an
audit, an auditor-appraiser should investigate to determine reporting, classification, and assessment of
these items. When discovered, all valuation and assessment procedures are the same as those used for
similar types of property.
CONTAINERS
Compressed gas cylinders, beer barrels, and steel drums are examples of types of containers that are
typically returned for refill and reuse.212 A deposit may be required, but there is generally no intention by
the buyer to sell the containers but only the product contained within that container. The value of such
items is most often determined using the cost approach (cost less
210
Section 994.
211
The relocatable office may be registered with either DMV, HCD, or may be assessable by the assessor similar to mobile
homes. See Vehicle Code section 4010 and Mobilease Corp v. County of Orange (1974) 42 Cal.App.3d 461, where the court
held that relocatable office trailers leased to various companies and registered with DMV were not subject to property tax.
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212
Chapter 6
See Chapter 2 for discussion of situs of containers.
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depreciation). In some cases, a trade level adjustment may be appropriate. However, the value shall not
be less than the deposit or similar charge paid by the buyer.213
L I Q U E F I E D P E T R O L E U M G A S TANKS
To promote assessment uniformity of liquefied petroleum gas tanks (commonly referred to as propane
tanks), Rule 153 was adopted regulating the assessment and valuation of liquefied petroleum gas tanks.
Rule 153 defines liquefied petroleum gas tanks (LPG tanks), includes guidelines to determine if the
property is leased or rented, identifies the ultimate consumer of the tanks, and describes valuation
procedures. An LPG tank is defined as:
…a tank used as a means of storage, delivery, or transfer of liquefied petroleum gas products. The term
also includes related equipment, apparatus, gauges and meters, attached to or installed on the tank.214
The LPG tank defined is considered leased or rented "if the purchaser of the liquefied petroleum gas is
required to pay: (1) sales or use tax measured by the purchase price or a separately stated lease or rental
price of tank, or (2) installation fees or charges, maintenance fees or charges, rent, or any other separately
stated periodic charge on the LPG tank." The ultimate consumer of the tank is determined based on the
length of the lease215 or, if not leased or rented, the ultimate consumer of the property is considered to be
the owner of the tank. Once the ultimate consumer is defined, the assessor can value the tank accordingly.
O A K BARRELS
Oak barrels are often used in the manufacturing of wine or brandy. This property may be assessable;
however, in many cases oak barrels qualify as business inventory. Rule 133(a)(2)(B) states, in part, that
"business inventories" include:
New and used oak barrels used in the manufacturing process that physically incorporate the flavor- and
aroma-enhancing chemical compounds of the oak into wine or brandy to be sold, when used for this
purpose. However, an oak barrel is no longer business inventory once it loses the ability to impart the
chemical compounds that enhance the flavor and aroma of the wine or brandy. An "oak barrel" used in the
manufacturing process is defined as having a capacity of 212 gallons or less. Oak barrels not used in the
manufacturing process but held for sale in the ordinary course of business are also considered business
inventory.
When oak barrels qualify as business inventory as indicated by Rule 133, the property is exempt from
taxation.
213
Section 996.
214
Rule 153(a).
215
A lessee or renter is the ultimate consumer of the tank if the property is leased or rented for an extended period over six
months (Rule 153(c)(1)). The owner of the LPG tank is the ultimate consumer of the tank if the property is leased or rented
for six months or less (Rule 153(c)(2)).
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A N I M A L S A N D M I G R A T O R Y LIVESTOCK
Animals and livestock, where classified as personal property and not exempt as business inventory, pets,
or otherwise, are assessable at full cash value on the lien date in the county where they have established
situs. Taxable animals include those used in riding stables, pack station operations, or rodeos, stallions or
broodmares held for breeding, and registered or show horses even when located on premises which belong
to a person other than the property owner. Animals involved in the production of food and fiber, such as
dairy cattle and bulls, beef cattle and bulls, draft animals, swine, sheep, and poultry, and animals held for
sale or lease on the lien date are exempt from taxation as inventory.
Determining location, or situs, may be difficult due to the constant movement of the "property." It often
moves from city to city, county to county, or even state to state. The rules of situs apply. In the case of
livestock, location may include more than one county; livestock may graze on land that is on the county
line, or the livestock may be physically moved from field to field between counties.216 Where this occurs
in significant proportions, section 990 allows for proration by the assessors' concerned. Section 990 states:
Where migratory livestock are ranged in two or more counties during the year, the assessors of the
counties interested may meet and prorate the number of stock to be assessed in each county, taking into
consideration the time such stock ranged in each county.
Racehorses are also taxable as personal property. However, valuation is not required. Unlike other types
of property, the owner computes and reports the tax due based on section 5722. The statement is then
filed directly with the tax collector.217 See Chapter 7, Property Statements, for more information on the
assessment of racehorses.
S P E C I A L V A L U E ALLOWANCES
W O R K S O F ART
The value of a work of art still owned by the artist who created it that has never been sold nor exhibited
for profit, for assessment purposes, is the "full value of the materials which constitute the work of art."218
Works of art, antiques, and other decorations used in conjunction with a business and not otherwise
exempt, should be assessed at their full cash value.
216
For other types of animals, situs should be determined based on the situs rules discussed in Chapter 3, Situs. 217The
assessor must mail Board prescribed forms to owners of racehorses although the assessees file the statements with the tax
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collector (Rule 1045(a)(2)). The assessor must also audit the records of any racehorse owner who had a gross tax liability
that exceeds $2,000 for each of four consecutive years pursuant to Rule 1045(a)(3).
218
Section 986.
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M O T I O N PICTURES219
The value of motion pictures (including the negatives, prints, and videocassettes), for property tax
assessment purposes, is "the full value of only the tangible materials upon which such motion pictures are
recorded." Section 988 states:
. . . Such full value does not include the value of, or any value based upon, any intangible rights, such as
the copyright or the right to reproduce, copy, exhibit or otherwise exploit motion pictures or the negatives
or prints thereof.
B U S I N E S S RECORDS
The assessment of business records (records of persons engaged in a business or profession) is governed
by section 997. The value of this property, for assessment purposes, is "the cash value only of the tangible
material upon which, or in which, such records are recorded, maintained, or stored" (section 997(a)).
Similar to motion pictures, the value must be "determined without inclusion of or consideration of the
intangible value of the information or data so recorded, maintained or stored, nor the intangible right to
utilize such information or data."
O N E -W A Y P A G I N G COMPANIES
For the 1996 lien date and thereafter, one-way paging service companies utilizing facilities that are
licensed by the Federal Communications Commission (FCC) are assessable by the county assessors. This
is due to deregulation of the industry that prompted amendment to section 234 of the Public Utilities
Code.220 Previous to 1996 and this deregulation, these companies were assessed by the State Board of
Equalization. Assessors now have jurisdiction over the one-way paging companies; while the Board
continues to have assessment jurisdiction over the radio telephone companies regulated by the California
Public Utilities Commission (CPUC).221
Most often, equipment owned by these companies is valued using the cost approach (Reproduction Cost
New Less Depreciation - RCNLD). It is important to have a general knowledge of the equipment to be
valued in order to apply appropriate equipment index and percent good factors. Following is a listing of
equipment normally applicable and assessable to one-way paging companies. This equipment should be
reported on the Business Property Statement when applicable, to the county, and should be looked for
when conducting audits of these types of accounts.
Control and Message Center Equipment
Radio-telephone control consoles
Equipment and wiring
•
•
219
Assessment of motion picture negatives. Michael Todd Co. v. County of Los Angeles (1962) 57 Cal.2d 684.
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A telephone corporation (company) does not include any one-way paging service utilizing facilities that are licensed by the
Federal Communications Commission, including but not limited to, narrow-band personal communications services described
in Section 24.100, Part 24 of Title 47 of the Code of Federal Regulations in effect on June 13, 1995.
220
221
The Board's Valuation Division maintains a list of state assessed companies.
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•
Interconnect equipment, and associated apparatus used in receiving, forwarding,
and terminating calls and messages and for other control purposes
•
Monitoring and measurement equipment installed for regular control purposes
Fixed Station Equipment
Transmitters
Receivers
Antennas
Associated equipment and wiring used in base station and repeater operations
Microwave facilities
Other equipment used for control of base station operations
•
•
•
•
•
•
Mobile Equipment for One-Way Radio Service, Signaling, or Paging
•
Receivers
•
Decoders
•
Mobile antennas
•
Associated apparatus that is mounted in vehicles or is hand portable (Note: mobile units
in stock may be subject to the business inventory exemption.)
Shop and Test Equipment222
•
Instruments
•
Tools
•
Other equipment located in offices, shops, or vehicles and used in testing,
maintaining, and constructing a radio-telephone plant.
B I O P H A R M A C E U T I C A L I N D U S T R Y E Q U I P M E N T A N D FIXTURES
Effective January 1, 1999, the Board adopted guidelines pertaining to the assessment of specific property
owned and/or used by the biopharmaceutical industry.223 The biopharmaceutical industry is defined as:
Firms engaged in research and/or manufacturing activities that use organisms, or materials derived from
organisms, and their cellular subcellular and molecular components to discover and/or provide products
for human or animal therapeutics and diagnostics. Biopharmaceutical activities make use of living
organisms to develop and/or produce commercial products, as opposed to conventional pharmaceutical
activities, that make use of chemical compounds to develop and/or produce commercial products.
Firms engaging in agriculture, animal
222
Note that in many cases, paging companies charge small tools and instruments or other equipment costing $50 or less
directly to operating expense at the time of purchase.
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223
Chapter 6
LTA 99/54.
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husbandry, and pharmaceutical delivery in the area of research and/or manufacturing are
specifically excluded.
The guidelines adopted by the Board include direction regarding reporting of equipment and fixtures on
property statements (i.e., Form 571-L), a sample listing of equipment covered by the guidelines, and a
suggested valuation table for use in mass appraisals of reported equipment. When appraising property
owned and/or used by a biopharmaceutical company, reference to LTA 99/54 for specific information is
helpful.
P O S S E S S O R Y INTERESTS
As discussed earlier regarding leases with governmental entities, except for property not exempt pursuant
to section 201.5 (California Pollution Control Financing Authority), the Legislature has not defined
"taxable possessory interest" as applicable to personal property.224 With the exception of the air pollution
control provision, there is no possessory interest in personal property. Possessory interest is applicable to
real property, including property that was formerly personal property but is now classified as fixtures.225
The value of the taxable possessory interest is based on the value of the right to possess or use publiclyowned real property.
When an auditor-appraiser encounters leased real property (structure items or fixtures) owned by an
exempt public entity, the real property division should be consulted to determine whether a taxable
possessory interest exists. The value of this interest is assessable to the lessee on the same basis or
percentage of value as other property under section 107.1.
P A W N SHOPS
Property in possession of a pawnbroker, for sale or held for sale by the pawnbroker, is not assessable to
him or her.226 This is exempt inventory to him/her whether or not the property is owned by him/her unless
used in the ordinary course of business.
V ALUATI ON OF A I RCRAFT AND VESSELS
Valuation of aircraft and vessels is unique. Unlike other personal property, this property is normally
valued using the comparative sales approach. Sales of similar types of property are usually the best
indicators of value. Valuation of both aircraft and vessels is discussed in-depth in separate Assessors'
Handbook sections.
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224
General Dynamics Corp. v. County of Los Angeles (1958) 51 Cal.2d 59. Section 201.5
225
Section 107.
226
Section 989.
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BANKRUPTCY
Bankruptcy is a legal process under federal law with the most common provisions being:
•
Chapter 7 – A complete cessation of business and almost complete liquidation of assets
of the petitioner to provide for the satisfaction of creditor claims. Certain assets may be allowed
exemption from liquidation.
•
Chapter 11 – Allows a reorganization of a business to promote and facilitate a
rehabilitation or restructuring it finances in order to continue operations and avoid liquidation. The filing
of a Chapter 11 petition automatically institutes a stay of debt collections and lien enforcement while a
reorganization plan is negotiated with creditors based on the future earning capacity of the business.
The stay on the bankruptcy estate are terminated when the plan is confirmed by the court.
•
Chapter 13 – Allows individual debtors the opportunity to develop a new repayment
program for financial obligations. Debtors receive protection from creditors' collections while their debt
adjustment plan is being developed. Once the plan is approved by the court, the bankruptcy estate
terminates and the plan is executed.
Each type of bankruptcy provides a measure of protection to the petitioner by prohibiting legal action by
creditors against the petitioner. In the case of petitions under both Chapter 11 and Chapter 13, the
petitioner usually retains possession and control of the assets.
A S S E S S E E O F A B U S I N E S S I N B A N K R U P T C Y PROTECTION
Although the filing of a petition for bankruptcy under Chapters 7, 11, or 13 creates a separate and distinct
estate, the estate of the bankrupt, the beneficial use of the bankrupt's assets is not transferred upon the
creation of the estate. Therefore, the assets do not undergo a reappraisable change in ownership upon the
creation of the estate.
Property in an estate should be enrolled, whether the assessment is a regular one or an escape, in the name
of the estate or in the name of the beneficiary who will receive the particular property. If the property has
been distributed, the assessment, regular or escape, should be in the name of the beneficiary only since the
executor's/administrator's liability to pay taxes ceases once the estate is distributed.
Frequently, the State Board of Equalization discovers information concerning bankruptcy filings in
conjunction with the Policy, Planning, and Standards Division's Legal Entity Ownership Program (LEOP).
This information is forwarded to the county assessors upon discovery.
S P E C I A L V A L U A T I O N I S S U E S S U R R O U N D I N G B A N K R U P T ENTITIES
Once a bankruptcy petition is filed, the federal bankruptcy court assumes jurisdiction, and can determine
the assessed value of property under certain circumstances. Since taxes take
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precedence over some other claims, interested parties may seek to have the court reduce the assessed
value, thus affecting the related taxes that are due. In this manner, other unsecured creditors will receive a
larger share of the funds available.
Sales of assets from a bankruptcy estate should not necessarily be considered valid indicators of market
value under the definition of Revenue and Taxation Code section 110. The buyer of property from a
bankrupt's estate has the ability to take advantage of the exigencies of the seller. Frequently, the trustee's
desire to liquidate the assets in an abbreviated period of time further impinges on the concept of "open
market transaction."
A write-down of the assets after a discharge in bankruptcy to net book value, or some other amount,
should also be carefully reviewed. The newly recorded amounts may not represent historical costs, or fair
market value, as defined for property tax purposes.
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C HAPTER 7: P ROPERTY STATEMENTS
Property statements are declarations of assessable property signed under penalty of perjury. The property
statements filed by assessees are used by assessors to gather information and ultimately determine the
assessable value of property.227
The property statement shall show all information as of 12:01 a.m. on the lien date.228
Except as otherwise specifically provided, all tax liens attach annually as of 12:01 a.m. on the first day of
January preceding the fiscal year for which the taxes are levied.229
The statement shall show "all taxable property owned, claimed, possessed, controlled, or managed by the
person filing it and required to be reported thereon."230 The property statement shall also show the situs of
the property,231 and a description of the property in the detail required.232
In compliance with section 451, the information on a property statement filed by assessees is confidential
information. This section reads:
All information requested by the assessor or furnished in the property statement shall be held secret by the
assessor. The statement is not a public document and is not open to inspection, except as provided in
Section 408.
In general, property statements are similar from county to county. All property statements are prescribed
by the Board as set forth under Rule 171, which reads in part:
Except as specifically authorized by the board with respect to heading, name and address of the taxpayer,
location of the property, assessor's use columns, and the like, the assessor shall not change, add to, or
delete the specific wording of property statement forms or mineral production report forms prescribed by
the board or change the sequence of the questions, but he may otherwise arrange the content and alter the
size and design of a property statement or mineral production report form to meet the needs of his office
procedures and facilities.
Each year, the Board prescribes the property statements that are available for use by assessors for the
forthcoming assessment year. The assessor is required to notify the Board of the forms
227
There are several types of property statements based on type of property: business property, agricultural property,
apartments, vessels, aircraft, etc. Most of these property statements are prescribed by the Board. For state assessed
properties, property statements are governed by Part 2, Chapter 4, Article 5 commencing with section 826 through 834.
228
Section 448.
229
Section 2192.
230
Section 442.
231
Section 443.
232
Section 445.
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Chapter 7
(including exemption claim forms, which are also prescribed by the Board) that will be reproduced using
the Board's template, the forms that will not be used, and forms originated by the Board that may have
been rearranged by the assessor. Rearranged forms must be submitted to the Board for approval. A
checklist provided by the Board accompanies a copy of the forms and instructions submitted to the Board
by the assessor.
Assessors commonly develop their own forms to supplement the use of property statements. Such forms
or questionnaires may be used in lieu of property statements unless the assessee is required by law to file a
property statement. For example, section 441(a) requires that every person who owns taxable personal
property (other than a manufactured home) in the county that costs $100,000 or more must file a property
statement. For smaller accounts, the assessor may require the person to file a property statement or may
use a questionnaire instead. The key difference between property statements (which must be prescribed by
the Board) and questionnaires is that the assessee is subject to a 10 percent penalty for failure to file a
property statement timely,233 but the assessor cannot impose a penalty for failure to respond to a
questionnaire. The only exception is that in the case of general aircraft, section 5365 provides that the
assessor may ask the owner to file a statement (not Board-prescribed) setting forth the make, model, and
year of manufacture of the aircraft, and section 5367 provides for a 10 percent penalty for failure to file
the statement timely.
The assessor may request any person within his county to file a property statement.234 It is, however,
much more efficient to request a statement only from those actually owning, possessing, or controlling
personal property. An assessor, therefore, should have a program to
(1) discover assessable personal property, (2) obtain declarations (or property statements) and (3) process
these statements once filed. This chapter will discuss each of these aspects.
DISCOVERING ASSESSABLE PERSONAL PROPERTY
The business climate is ever changing with businesses opening, closing, transferring, and changing
locations constantly. (Other types of personal property, vessels and aircraft for example, also exist in ever
changing environments.) Therefore, the assessment roll regarding personal property and fixtures must be
continually updated. Developing a program for discovering information regarding taxable personal
property and fixtures, and for verifying new and existing information, is the best assurance that the
assessment roll is complete, accurate, and valid.
Discovery methods may differ from county to county. These methods may involve procedures tracking
property transfers, city and county business permits, sales tax permits, business questionnaires, telephone
and reverse telephone directories, newspapers, BOE Forms 600B and 600R, FAA (Federal Aviation
Association), California Race Horse Association, and Department of Motor Vehicle (DMV) records. It
may also include conducting a field canvass and field
233
Section 463.
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234
Chapter 7
Section 453.
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Chapter 7
checks. Due to budgetary and time constraints, an assessor may use any or all of these methods depending
upon what works best and is most cost effective in that particular county.
Property Transfers
If a business or property transfer is processed through escrow, a statement of bulk sale or tax clearance
from the county tax collector may be required. These statements contain helpful information regarding the
existing business and ownership in addition to information regarding the buyer. If a sale does not go
through escrow, information regarding the sale may be provided by the seller. In some situations, to
prevent future tax liability, sellers notify the assessor when their business is sold. Whether obtained from
the tax collector, the seller, the buyer or another source, the information regarding the sale of a business
can be used to update the assessor's inventory of assessees who may have taxable personal property or
fixtures in the county.
Business Permits
If a business operates (or is planning to operate) within city or county limits, the owner may be required to
apply for a business permit. The application normally requests, in addition to other information, the
business name, owner's name, business location, and phone number. Therefore, business permit records
can provide a valuable source of information to the assessor for property tax purposes. Some cities and
counties have monthly summaries of new businesses that they make available to the assessor. (It is in the
city's best interest to aid the county assessor since a portion of collected tax dollars are allocated to them.)
Sales Tax Permits
On a monthly basis, the Board of Equalization prepares sales tax permit registration information for
counties.235 This information includes owner and business names, D.B.A. (Doing Business As), address,
type of business, and other information pertinent for a business acquiring or updating a sales or use tax
permit in the county. The information can be used to update and/or verify business information. In
respect to the type of business, the classification code provides a description of the business. A listing of
the classification codes is included in Appendix C for reference purposes.
Business Questionnaires
Business questionnaires can be a low-cost, yet valuable tool, for following up on other source documents
and public records. If data received from other sources do not provide all information required to initiate a
new account, or verify information on an existing account, a questionnaire specifically designed by an
assessor's business division to request pertinent information may save the time of the field visit (field
check).
235
In the past, this information has been supplied on 3" x 5" cards, but is now also available on computer disc. (To receive the
information on computer disc, call the State Board of Equalization's Local Revenue Allocation Section at (916) 324-1321.)
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Telephone Directory and Reverse Telephone Directory
A telephone directory or a reverse telephone directory, especially if published near the lien date, can be a
useful resource for discovery of businesses. Basic information found here can be used to send business
questionnaires or arrange field checks in order to gather enough data to establish or update business
accounts.
Newspapers
Useful information concerning business formations, dissolutions, transfers and other changes are found in
newspapers. Items referring to newly established businesses or closings are helpful to update the
assessment roll. In addition, items regarding new products, or acquisition of a new subsidiary are helpful
when establishing an audit list or preparing for an audit.
Valuation Form 600B and 600R
Forms 600B and 600R are forms sent from the Valuation Division of the Board of Equalization to the
county assessors. The forms include lists of equipment leased by State-assessed companies that should be
locally assessed. State-assessed companies, such as public utilities, are assessed by the Board, but the
Board may delegate to county assessors the duty to assess property used but not owned by the state
assessee.236
Department of Motor Vehicles (DMV)
The DMV is a good source for verifying information regarding vessels, special vehicles, or other
licensable equipment. Based on the vehicle license number (i.e., CF number for a boat), DMV can
provide information such as owner's name, mailing address, location of the property, date of purchase, and
purchase price.
Field Canvas
Field canvassing is a technique that involves physically viewing every business location. It is used to
confirm current business information in comparison to the assessor's roll, and it can be a reliable technique
for discovery. However, the field canvas method of discovery is very time consuming and thus may be
inappropriate for frequent use.
Field Checks
A field check is a modified version of the field canvas. Instead of visiting every business, an appraiser
visits only those where information, or partial information, is already available. For example, field checks
can be used as a follow-up on undelivered Business Property Statements and when property statements are
not filed for an account in consecutive years.
Valuable information may be discovered when the auditor-appraiser is physically at the business location.
In addition to obtaining information regarding the owner, the auditor-appraiser can
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236
Article XIII, section 19.
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secure data necessary to estimate the value of the business property. Such data, and the value estimate,
becomes essential if the assessee does not file the Business Property Statement.
Other Sources of Information
Other sources of information that are available to assessors for the discovery of new businesses include,
but are not limited to: change in ownership statements, building permits, certificates of occupancy, health
permits, documents filed with the Secretary of State, and business web sites. Each may provide valuable
information that is necessary to make a valid assessment. Discovery methods differ from county to county
and each county should determine the most effective means of discovering new businesses and updating
information on existing businesses.
OBTAINING STATEMENTS
F I L I N G REQUIREMENTS
Some assessees are required to file property statements. Others are required to file only upon request of
the assessor. Section 441(a) identifies the requirements, as follows:
Each person owning taxable personal property, other than a mobilehome subject to Part 13 (commencing
with Section 5800), having an aggregate cost of one hundred thousand dollars ($100,000) or more for any
assessment year shall file a signed property statement with the assessor. Every person owning personal
property that does not require the filing of a property statement or real property shall, upon request of the
assessor, file a signed property statement. Failure of the assessor to request or secure the property
statement does not render any assessment invalid.
When the county assessor mails or otherwise provides a property statement to an assessee, the assessor has
thereby requested the assessee to file. These statements must then be filed timely and signed under
penalty of perjury by the deadline as prescribed under section 441.237 If a property statement is filed by
May 7, as required by section 441, a property owner may amend the statement for errors or omissions that
were not the result of willful intent to erroneously report until May 31.
If the assessee does not file the property statement by May 7, the assessor shall estimate a value and add a
10 percent penalty to that estimated assessed value.238 For existing businesses, this value might be the
value from the previous roll year. For new businesses, this value may be estimated by the appraiser based
on similar businesses or based on the initial information received when the business was originally added
to the assessment roll. No matter what method
237
Property statements should be filed with the assessor between the lien date (January 1) and 5 p.m. on April 1. A late
penalty applies if the statement is filed after May 7.
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Section 501 and section 463.
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is used to estimate the current roll value, it should be a reasonable estimate of market value based on
available information.239
When a property statement is filed timely in duplicate (on or before the prescribed deadline), the assessee
may request the assessor to provide the full value computed by the assessor for each category (supplies,
equipment, etc.). Under section 443.1, the assessor has the obligation to comply. Further, the assessor is
required to return the duplicate, with the full value for each category, to the assessee by July 15th of the
year in which the statement was filed.
D I R E C T BILLING
For smaller businesses and other selected accounts, assessors may use direct billing.240 Direct billing
systems select accounts to appraise periodically, normally once every three or four years, in lieu of annual
property statements. When the total (personal property and fixture) value of a business changes very little
from year to year, direct billing can have a number of advantages over annually sending a property
statement. The advantages for both the assessor and the property owner are efficiency and cost savings.
The process (1) reduces the number of property statements mailed out, received, and processed each year,
thus reducing administrative costs, and
(2) deletes the filing requirement for the assessee (unless material changes are made to taxable property in
that year).
Accounts appropriate for direct billing are usually established (older) businesses, having tangible personal
property costing less than $100,000, and minor changes in equipment holdings from year to year. Small
barbershops and small retail stores with minimal equipment holdings are good examples. The total
personal property and fixture value of these businesses usually does not change much annually.
Many accounts are not appropriate for direct billing. Direct billing cannot, for example, be used for
accounts whose tangible personal property cost is $100,000 or more, since these accounts are required to
file in accordance with section 441. New businesses, no matter what the value, should not be put on direct
billing. New businesses tend to acquire equipment more often than do older businesses of similar type.
Even if a new business seems to fit the description of a business that could appropriately be put onto the
direct billing system, the assessor may wish to have property statements for the first year(s) in the business
file. These property statements would establish a starting point for determining a valid assessment and
confirm that the account is a good candidate for direct billing due to little or no change in property
acquisitions or disposals.
239
Section 501.
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Direct billing is not mandated or even discussed in the statutes. Direct billing is a system of assessment developed by the
counties. Taxpayers cannot be required to participate in a direct billing system. In addition, the assessor is not precluded
from processing roll corrections if applicable.
240
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PROCESSING PROPERTY STATEMENTS
P R E L I M I N A R Y R E V I E W : R E Q U I R E D INFORMATION
Upon receipt of a property statement, the statement should be logged as received and verified as complete.
If the statement is not complete, an accurate assessment cannot be accomplished. The guidelines used in
the determination of a complete property statement are identified in the statutes and are discussed below.
To verify completeness pursuant to these sections, and to aid in processing a statement, it may be helpful
to use a checklist. An example of a property statement checklist is found later in this chapter.
In lieu of completing the property statement provided by the assessor, an assessee may furnish information
as attachments to the property statement (i.e., assessee prepared computerized version of the property
statement). This filing is acceptable provided that the property statement attachments (1) are in a format
specified by the assessor, (2) include one copy of the property statement, as printed by the assessor and
executed by the taxpayer, and (3) include appropriate reference to the data. The property statement (and
attachments) should be reviewed, as is any other property statement pursuant to guidelines discussed
below.
C O N T E N T S O F STATEMENT
"The property statement shall show all taxable property owned, claimed, possessed, controlled, or
managed by the person filing it and required to be reported thereon."241 The property statement is made
up of several sections, titled "parts" in addition to Schedule A and Schedule B. Each section requests
information necessary for a valid assessment. It is important to review each section of the statement for
possible errors.
SITUS
A valid assessment requires a specific location; property must be assessed in the appropriate county, city,
and district. Therefore, the property statement shall also show: (a) the county where the property is taxable
and (b) if taxable in the county where the statement is made, any city or revenue district where it is
situated.242 This generally requires the assessee to report the physical address of the property or the
assessor's parcel number on which it is located. The statement is not complete if the location of the
property, as specified in section 443, is not shown.
It is not only important to verify that the situs of the property is reported, but that the property is reported
to the appropriate county. It is not uncommon for an assessee, owning several businesses at various
locations in California, to file a statement with the wrong county. At times, erroneous assessment(s) can
be avoided simply by reviewing the reported situs on the property statement. (Other times, however, situs
errors may not be identified until an audit is conducted.)
241
Section 442.
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242
Section 443. Each city or district may have different tax rates within the jurisdiction.
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D E S C R I P T I O N O F PROPERTY
"The property statement shall show a description of property, in the detail required."243 Such detail shall
include the cost of the property, if the information is within the knowledge of the assessee or is available
from his or her own or other records, and the classification of the equipment (the physical description).244
The property statement instructs the assessee to report the equipment by category (machinery and
equipment, office equipment, computer equipment, etc.) year of acquisition, and cost. Further description
(other than total cost by year and classification) is required for reported additions and deletions of
improvements and construction in progress.
It is important to determine whether the property is properly described in order to make an accurate
assessment. Some statements, for example, are received with the total cost reported on the front sheet, but
without costs classified or reported by year of acquisition on Schedule A. Others are received with a valid
signature but no costs reported anywhere on the form (or with a statement "same as last year"). Still other
statements may be filed with costs which appear inappropriate (i.e., the rendition does not resemble the
costs that were reported in the previous year). Review of property statements filed in previous years or a
phone call to the assessee, or both, may clear up some discrepancies or inconsistencies in the current
property statement. In some cases it is necessary to mail the statement back to the assessee to request that
the omitted information be submitted. (It may be advisable for the assessor to keep a copy of the
statement prior to sending the statement back.) In these situations, the statement is not considered filed by
the assessee unless the deficiencies are corrected and the completed statement is returned prior to the filing
deadline.
T A X DAY
As previously noted, a property statement shall show all information as of 12:01 a.m. on the lien date.245
The lien date, pursuant to sections 2192 and 722, is January 1.246
It is important to remind assessees that an assessment is based on information (as reported on the property
statement) and value of property owned on the preceding lien date, although the tax bill may not be
received until either July247 or November248 of that same year. An assessee filing a 2002 property
statement (which declares property owned as of 12:01 a.m. January 1, 2002), for
243
Section 445.
244
As noted earlier the statement is signed under penalty of perjury. Therefore, unless additional information indicates
otherwise, it must be assumed that the taxpayer classified the property accurately.
245
Section 448.
246
Prior to January 1, 1997, the lien date was 12:01 a.m. March 1 pursuant to these sections.
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In general, section 2910.1 requires that the tax collector mail or electronically transmit the tax bills (or copies) for property
on the unsecured roll no later than 30 days prior to the date on which taxes are delinquent. Unsecured taxes are delinquent
on August 31 (section 2922).
247
248
In general, section 2610.5 requires that the tax collector mail or electronically transmit tax bills (or copies) for property on
the secured roll on or before November 1.
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example, will receive a tax bill for:
an unsecured account by mid-July 2002 for the fiscal year July 1, 2002 - June 30, 2003.249
a secured account in November 2002 for the fiscal year July 1, 2002 - June 30, 2003.
•
•
The tax bills, in both cases, reflect property reported on 2002 property statements as of the lien date,
January 1, 2002; the cost of all taxable property acquired and owned or controlled as of or through
December 31, 2001. Sale or disposal of the personal property (business property, vessels, and aircraft)
between the lien date and start of the fiscal year does not relieve the assessee of any tax liability250 unless
the assessment is secured and the new real property owner does not own, claim, possess, or control the
personal property at any time between the lien date and the date the assessment was made.251 Personal
property taxes are not prorated and are assessed to the owner on the lien date.
A U T H O R I Z E D SIGNATURE
Property statements and mineral production report forms prescribed by the Board, and filed with the
assessor or the Board, must be signed by the assessee, a partner, a duly appointed fiduciary, or an
authorized agent.252 Statements filed on behalf of a corporate assessee must be signed by an officer or by
an employee or agent for whom the board of directors has submitted written authorization to sign on
behalf of the corporation. When signed by an agent who is not a member of the bar, a certified public
accountant, a public accountant, an enrolled agent, or a duly appointed fiduciary, then the assessee must
authorize appointed agents by filing a statement with the assessor's office.
Facsimiles or copies of original signatures are not acceptable as valid signatures. A copy of the original
may be accepted, but the original document and signature should be provided timely to constitute a valid
filing since facsimiles and copies merely represent the likeness of the original. A property statement that is
unsigned, or signed by an unauthorized agent, does not constitute a valid filing.253 Such a statement is
incomplete and invalid, and should be returned to the assessee. (It may be advisable to keep a copy of the
statement prior to sending the statement back.)
S P E C I F I C S E C T I O N S O F T H E P R O P E R T Y STATEMENT
When it is concluded that a property statement is complete, it is a valid filing. The next phase is reviewing
the reported information and processing the data into an estimate of value. The appraiser should initially
review sections on the form that may require extra attention or where the assessee needs to be contacted
for additional information or clarification. For example, costs
249
Unsecured taxes are due on January 1: therefore, some counties mail the unsecured tax bills as soon as the
assessments are prepared.
250
See Example 1.1.
251
Section 2189 provides that in such a case the assessment of the personal property must be transferred to the
unsecured roll.
252
Rule 172.
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Rule 172.
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reported as construction in progress and costs reported on Schedule B usually require review and
coordination by both a real property appraiser and auditor-appraiser. If the itemized and detailed
descriptions of these costs are missing from the filing, the assessee may need to be contacted.
Besides reviewing specific areas that may require special attention or follow up work, it is also important
to focus on the statement in whole. That is, does the total reported cost for this type of business seem
appropriate? Review (and processing) of specific parts of the property statements are discussed below.
The Business Property Statement is used as an example, although there are other statements filed with the
business division of the assessor's office.254 In all cases, the statements request data on the owner,
location, and cost of the property.
P A R T I: G E N E R A L INFORMATION
This section of the property statement provides general information on the business and indicates
(a) the type of business, (b) the telephone number, (c) if the assessee owns the realty where the business is
located, (d) when the business started at this location, (e) confirms the business location, (f) where the
records are located, (g) if a change in ownership or control has occurred during the last year, and (h) if the
company or business has any related business entities in the county.
(a)
Type of business: Business type (retail, manufacturing, service, etc.) is information
useful when applying appropriate valuation factors and for gauging whether the reported costs appear
reasonable for that type of business.
(b)
Telephone number: The phone number provides a convenient way to contact the
assessee in the event questions arise during the review and processing of the statement.
(c)
Owner of realty: Business personal property can be secured to realty if in fact the
owners of the personal property and the real property are one in the same. It is, therefore, important to
determine the ownership of the realty where the business is located. Business personal property held by
a corporation, for example, cannot be secured to real property if held in the name of an individual.
(d)
Date business started at current location: It is important to know when the business
started at the current business location. It is possible that the business was at a different location within
the county, operating in another county or escaped assessment in prior years.
(e)
Business location: The business location, or situs of property, indicates whether the
business is physically located in the county and it is used to designate the appropriate tax rate area.
(f)
Location of records: If an audit is required or needed, the audit is normally conducted
at the location of the original books and accounting records (which may or may not be at the business
location within the county).
254
A sample of a Business Property Statement is included in the appendix for reference purposes.
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(g)
Change in ownership or control during the last fiscal year: A change in ownership of
the real property or a change in control of the partnership, corporation or legal entity owning the
property is important information that must be conveyed to the real property division. An appraiser
should also note how this section is completed because it may affect the costs reported in Part II of the
statement.
(h)
Related business entities in the county: If the assessee owns other businesses in the
county, all the assessments of personal property and fixtures must be accumulated to determine
whether the business is subject to mandatory audit. It could also be a source of information in the
discovery of new businesses, and other related businesses.
P A R T II: D E C L A R A T I O N O F P R O P E R T Y B E L O N G I N G T O YOU
This is the section of the statement where the assessee reports property owned by the business. The
property is reported by type including (a) supplies, (b) equipment, (c) equipment out on lease or rent to
others, (d) buildings, building improvements, and/or leasehold improvements, land improvements, land
and land development, and (e) construction in progress.
With the exception of supplies and construction in progress (discussed below), property reported by the
assessee should be classified and reported by year of acquisition. The statement gives instructions to the
assessee on classification of the property and applicable costs to be included in the reported cost of the
property. However, the assessee is not required to value the property.255 Valuation is conducted by the
assessor's office.256
SUPPLIES
Supplies are a category of personal property that is frequently not reported, although the majority of
assessees have at least minimal taxable supplies. Many times the cost is low and it is simply forgotten by
the assessee. In reviewing the statement, an auditor-appraiser should check the reported supplies figure. Is
a supplies cost reported? If so, is it appropriate for that type of business? If not, what should it be?
Following is an example of supplies reported on a Business Property Statement.
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255
Clunie v. Siebe (1896) 112 Cal. 593.
256
Classification and valuation are discussed in other chapters of this manual.
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EXAMPLE 7.1
SUPPLY COSTS REPORTED ON THE BUSINESS PROPERTY STATEMENT
The owner of a small video rental store reports $21,500 of supplies, $15,000 of equipment, and $5,000
of leasehold improvements.
DOES THE REPORTED SUPPLIES COST APPEAR REASONABLE (IN TERMS OF QUANTITY, COST, AND TYPE) IN RELATIONSHIP TO
THE SIZE, LOCATION, AND TYPICAL OPERATION OF A VIDEO STORE?
No. The reported supplies cost does not appear reasonable based on a "typical" video store. It appears
that the assessee either misclassified property, or reported property that is considered business
inventory for property tax purposes. The assessee may have reported the total cost of the movies in
the rental stock. If so, supplies are overreported. Only the movies out on rent on the lien date are
reportable and assessable. The movies "held for rent" are exempt inventory. The appraiser should
contact the assessee to clarify what cost items are included in the $21,500 cost reported as supplies on
As shown in the example above, it is important to review reported supplies for reasonableness and contact
the assessee or other sources for more information if necessary.
C O N S T R U C T I O N -I N -P R O G R E S S (CIP)
The instructions require the assessee to attach a schedule supporting CIP reported on the property
statement. This schedule should identify all of the costs which make-up the reported CIP total. Using this
schedule, the costs can be classified; the total may include costs that are not assessable, and/or costs that
should be allocated between the secured or real property assessment and the personal property assessment.
It is important to coordinate the classification and assessment of these items with a real property appraiser
to avoid duplicate or under assessment.
Schedule A257
On the Business Property Statement, Form 571-L, Schedule A includes seven categories of equipment: (1)
machinery and equipment for industry, profession, or trade, (2) office furniture and equipment, (3) other
equipment, (4) tools, molds, dies, jigs, (5) computers (component cost of $25,000.00 or less), (6)
computers (component cost of $25,000.01 to $500,000.00), and (7) computers (components costing
$500,000.01 or more). All equipment should be reported here at the proper trade level, including shortlived and expensed equipment, and equipment acquired through lease-purchase agreement at the
selling price effective at the inception of the lease.
S C H E D U L E B: P R O P E R C L A S S I F I C A T I O N O F F I X T U R E A N D S T R U C T U R E I T E M S (S C H E D U L E B)
Schedule B includes four categories of improvements: structure items only, fixtures only, land
improvements, and land and land development.258 These costs should be reviewed to avoid
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257
The Agricultural Property Statement includes similar schedules, but also includes Schedule D, Movable Farm Equipment.
This schedule requests each piece of equipment to be reported separately. See Form 571-F, Agricultural Property Statement.
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erroneous assessments. Not only should proper classification be verified (i.e., reported in the appropriate
column?), but coordination between the real property appraiser and the auditor- appraiser must take place
to ensure that an accurate and valid assessment is made. Chapter 5 of this manual provides a discussion on
the classification and valuation of improvements related to a business property.
S U P P L E M E N T A L SCHEDULE
BOE-571-D, Supplemental Schedule for Reporting Monthly Acquisitions and Disposals of the Business
Property Statement, usually furnished with the annual Business Property Statement, provides an
opportunity for businesses to provide detail as indicated. A careful review of this information should
assist in this important task of coordination and classification.
P A R T III: D E C L A R A T I O N O F P R O P E R T Y B E L O N G I N G T O OTHERS
Part III, Declaration of Property Belonging to Others, on the Business Property Statement applies to
equipment that may be assessable to an assessee other than the one filing the statement. As discussed in
Chapter 6, title to the property may be held by a party other than the one who files the statement and it
may be assessable to that other party.
Equipment reported in this section is reported by type: leased equipment, lease-purchase option
equipment, capitalized leased equipment, vending equipment, other businesses, and government- owned
property. They are also reported by tax obligation: lessor or lessee. Each lease should be cross-referenced
with renditions received from the lessors to avoid duplicate assessments or escaped assessments, and to
ensure accurate assessment of the equipment. For example, the assessee (lessee) may classify a lease as a
capitalized lease assessable to the lessee. Referencing the statement received from the lessor indicates it is
a true lease assessable to the lessor. Reconciling these differences prior to assessment, and close of the
roll, will help to avoid subsequent roll changes.
Cross-referencing may involve an additional step when there are changes in ownership: e.g., when one
leasing company buys the portfolio of another or when a lessee experiences an ownership or name change.
The lessee(s) may continue to reference the former company in Part III of their statement; the lessor may
continue to reference the former lessee's name in his or her reporting. In such cases, the assessor's system
of cross-referencing is extremely important to minimize erroneous, duplicate, and escape assessments.
I N C O N S I S T E N T REPORTING
Sometimes costs reported on property statements are not consistent with costs reported in previous years.
Differences may be due to equipment transfers or dispositions within the last year, a buyout of previously
leased equipment, or simply misreporting. Differences, particularly changes other than dispositions,
should be researched and analyzed as much as possible prior to enrolling an assessed value.
258
For thorough discussion of classification, see Chapter 2, Classification and Chapter 5, Assessment of
Improvements Related to Business Property.
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When it is found that inconsistencies affect past assessment years, roll changes may be necessary. In
most instances, these roll changes will be done at the close of the current year's roll. These changes are
discussed further in Chapter 9, Roll Procedures.
R E V I E W O F P R E V I O U S A U D I T FINDINGS
When an audit is conducted it is important to use the audited costs, or incorporate audit findings as
appropriate, in subsequent years when a property statement is processed. Although a property statement
as filed may reflect costs as reported in the previous year, rather than recommendations made through the
audit, an appraiser should make an effort to identify and correct problems prior to enrollment.
P R O P E R T Y S T A T E M E N T CHECKLIST
Following is a sample property statement checklist that may be used to verify completeness of a property
statement. The checklist also provides a summary of the information discussed in this section.
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TABLE 7A
SAMPLE PROPERTY STATEMENT PROCESSING CHECKLIST
Log property statement as received.
□
Check signature, if not authorized signature property statement not valid (some counties retain a
copy prior to returning original for signature).
□
Check statement for any changes to situs, mailing address, and/or business name; make any
necessary changes.
□
Check for any change of ownership regarding business and/or real property. Make any
necessary changes (e.g., notify the real property division, make changes to unsecured account).
□
Confirm that the account is appropriately classified as secured or unsecured (review responses to
Part I: General Information questions).
□
Confirm that property is reported and described as required.
□
Are costs summarized on the front of the form classified and broken down by year of
acquisition on schedules A and B?
□
Does the statement include a description of costs reported as construction in progress, and costs
added to or deleted from Schedule B?
□
Did the assessee report supplies? If yes, does the reported cost seem reasonable. If it is not
reasonable, estimate supplies on hand on lien date. (For suggested method of estimating supplies, see the section
on Supplies in Chapter 6.)
□
Did the assessee report leased equipment? If yes, cross-reference to lessor files to confirm
reported information and to prevent duplicate assessment or escaped assessments.
□
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Check current reported costs with costs reported in previous years. Are the costs consistent? If
not, a phone call to the assessee may be required.
□
Are CIP (construction in progress) costs reported? If yes, reference description of costs provided
by assessee and coordinate assessment with real property appraiser.
□
Are CIP costs from the previous year accounted for on the current year's property statement?
□
Are additions (or deletions) reported on Schedule B, Buildings, Building Improvements, and/or
Leasehold Improvements, Land Improvements, Land and Land Development? If yes, reference description of
additions/deletions provided by assessee and coordinate assessment with real property appraiser.
□
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VALUATION
Finally, after the property statement has been reviewed and is considered complete, the auditor- appraiser
must value the taxable property reported on the statement. As discussed earlier, in most cases, this
involves using the cost approach to value and the application of equipment index factors and percent good
factors. Sound appraisal judgment is required to determine which factors or approach(es) applies in each
situation. For new accounts, reviewing the factors or approach adopted by the assessor's business division
and reviewing lives given to the equipment used by similar businesses will help with this process. For
older or existing accounts, and statements that show little or no change from previous assessment years,
the same approach, table and/or economic life estimate as previously assigned are usually appropriate.
Referring to the previous year's property statement electronically or in the physical file will verify the
factors used. Additionally, refer to equipment index and percent good factors included in AH 581,
Equipment and Percent Good Factors.
In some cases, as the result of physical inspections, audits, assessment appeals, income approach
estimates, sales data, or other data gathered in prior years, the assessor's office has agreed that the
standard cost approach is not appropriate for specific accounts. The agreed upon approach should be
reviewed and used, when appropriate, in subsequent years. This will avoid the same problem from
occurring year after year.
L A T E F I L I N G S A N D N O N -FILINGS
If any person who is required by law or is requested by the assessor to make an annual property statement
fails to file an annual property statement within the time limit specified by Section 441 or make and
subscribe the affidavit respecting his or her name and place of residence, a penalty of 10 percent of the
assessed value of the unreported taxable tangible property of that person placed on the current roll shall be
259
added to the assessment made on the current roll
The penalty of 10 percent applies if the property statement is filed after May 7. If that date falls on a
Saturday, Sunday, or legal holiday, property statements filed on the next business day are considered
timely filed. The postmark date as affixed by the United States Postal Service, or a date certified by a
bona fide private courier service, shall serve as the date filed.260
In the case of late filings, the 10 percent penalty is added to the value computed using the reported costs
on the property statement filed late. If a statement is not filed, the 10 percent penalty is applied to the
auditor-appraiser's best estimate of value based on the best information available.
V E R I F I C A T I O N O F E X I S T I N G BUSINESS
If a statement is not filed for one or more years (time period at the discretion of the assessor), existence of
the business should be verified. Verification may be accomplished with a phone call
259
Section 463.
260
Section 441.
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or a field check of the business. If the verification process indicates that the business is no longer in
operation, the next step is to confirm when the business ceased operation to prevent any erroneous
assessments. Confirmation of the closing date can be accomplished by contacting the subject business
owner (if possible), landlord, neighboring tenants, or the current tenant of the same location.
B U S I N E S S C L O S E -OUTS
Information regarding business close-outs may come from any one of the sources indicated earlier, or
from the business owner who uses the property statement to notify the assessor that the business is no
longer in operation in the county. This is also an opportunity to identify new businesses. Is a new
business at the site, or is the site vacant? What happened to the assessable property?
L O W V A L U E P R O P E R T Y (L O W V A L U E ORDINANCE)
When a property statement is processed, resulting in classes261 of (1) personal property with a value so
low that, if not exempt, the total taxes, special assessments, and applicable subventions on the property
would amount to less than the cost of assessing and collecting them and/or (2) real property/fixtures base
year value or full value of $5,000 or less, the assessment may be exempt if authorized by the county board
of supervisors.262 Pursuant to section 155.20, Exemption of property having a low value, the board of
supervisors may adopt an ordinance implementing these low value provisions in that county. Most
counties have enacted a low value ordinance (section 155.20) using various minimum values. Others have
not enacted the ordinance at all, and therefore have no value minimum.
P R O P E R T Y S T A T E M E N T S F O R S P E C I A L T Y P E S O F PROPERTY
Other property statements that are filed and processed in the business division of an assessor's office
include agricultural, apartment, aircraft, and vessel property statements. One type of property statement,
the racehorse property statement, is filed with the tax collector. The format of the forms is different, the
type of property that is reported is different, but the purpose of the forms is the same. The forms are filed
by the assessee, and signed under penalty of perjury, and used by the assessor (or the tax collector) to
determine the assessable value (and/or tax) of the property located in the county on the lien date.
The steps in processing the agricultural and apartment statements are similar to the processing of the
business return. Thus, a discussion of each individual statement will not be included here. The aircraft,
vessel, and racehorse property statements, however, are unique and require mention.
261
For purposes of section 155.20, "class" is defined as a statutory class of property or other class of property
separately enrolled and designated by the board of supervisors as eligible for exemption.
262
This limitation is increased to $50,000 "in the case of a possessory interest, for a temporary and transitory use, in a publicly
owned fairground, fairground facility, convention facility, or cultural facility." (Section 155.20(b)).
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AIRCRAFT
Section 5365 specifically discusses the aircraft statement. "Upon request of the assessor of the county in
which an aircraft is habitually based, the owner shall file with him a statement setting forth the make,
model and year of manufacture of the aircraft." As previously discussed, this is the one statement that is
not Board-prescribed but a penalty is applicable if the owner does not return the statement timely.
In addition, section 5366 requires airport owners and/or operators to file statements reporting aircraft
located at their airports. This section of the code, in part, states:
Owners, as well as operators, of private and public airports shall, within 15 days following the lien date of
each year, provide the assessor of the county in which the airport is situated with a statement containing a
list of names and addresses of the owners, and the make, model, and aircraft registration number, of all
aircraft which were using the airport as a base.
For the most part, the discovery of aircraft located in a county is through the statements filed by the airport
owners and/or operators. After the discovery of an aircraft (in a particular) county, an account is
established by the assessor's office and an aircraft statement is mailed to the owner of the aircraft. Two
basic sets of forms are used for the assessment of aircraft; one is designed by the assessor for the
assessment of general aircraft, and several Board-prescribed statements are designed for certificated
aircraft. Specific statutes exist for each type. Thorough discussions of aircraft assessment are contained in
AH 570, Assessment of Commercial Aircraft, and AH 577, Assessment of General Aircraft. A discussion
on situs of aircraft is included in Chapter 3, Situs, of this manual.
VESSELS
The requirements set forth in section 441, Property statement; other information, also apply to property
statements filed for vessels. A standard property statement used for all types of vessels includes questions
that require the assessee to describe the vessel in a manner sufficient for an accurate assessment. Similar
to other types of personal property, vessels are assessed at market value each year. The information
received from the assessee on the vessel property statement identifies the vessel type, the cost, the age,
and the size, and it significantly aids in the valuation of the property. Many assessors use questionnaires
in lieu of property statements for smaller vessels (less than $100,000 cost).
Sources and methods that may be used to discover vessels located in the county on the lien date include
records from the DMV, Certificates of Documentation, referrals from other counties, the use of field
canvassing, reports from marinas, and reports from other types of boat storage facilities. Registration
information is received monthly from DMV regarding (1) vessels moved in and out of the county, and (2)
sales of new or used boats to assessees that claim situs in the county. Many assessors have also
established an on-line communication link to the DMV's database. Operators of marinas and other boat
storage facilities are requested by the assessor to annually file reports that list boats located at their
facilities on the lien date. For further
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information on vessels see Chapter 3 of this manual (situs of vessels) and AH 576, Assessment of Vessels.
RACEHORSES
"Property statements" utilized for taxation of racehorses are unique and are treated differently than other
types of property statements.263 Most significantly, as provided in section 5782, this Board prescribed
form, AH 571-J, Annual Racehorse Tax Return (provided by the assessor) is filed with the tax collector's
office rather than the assessor. No valuation is required by the assessor because the assessee reports an
annual tax due based on a schedule in the statute.264 The lien date regarding the assessment of racehorses
is the same as other types of personal property, January 1, but unlike other types of property, the tax
becomes delinquent at 5 p.m. February 15 of the same calendar year.265
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263
The taxation of racehorses is discussed in sections 5701 through 5790 (Part 12) and Rules 1045 through 1047.
264
Section 5722.
265
Section 5762.
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C HAPTER 8: P ROPERTY T AX AUDITS
A UDI T OBJECTIVE
A property tax audit is a means of collecting data relevant to the determination of taxability, situs, and
value of property.266 It is used to verify an assessee's reported cost and other information that may
influence the assessment of all items that are taxable under property tax law. An audit program is a
system used to select and conduct these audits. Both are used to sample property tax assessments to
ensure that taxable property and related information have been reported accurately by the assessee and
have been assessed properly by the assessor.
The primary objective of a property tax audit is to confirm that taxable property is being assessed properly
and uniformly. Although most assessees report their taxable property in good faith, errors do occur on the
part of both the assessee and the assessor. Audits, and the audit program as a whole, help to identify
problems, correct inaccurate existing assessments, and increase the likelihood that future assessments will
be accurate through improved reporting by the assessee and improved understanding of the property by
the assessor's office.
The purpose of this chapter is to provide helpful information regarding the audit procedures employed by
auditor-appraisers, thereby improving the post-audit program and assessments made to business personal
property and fixtures. An auditor-appraiser's experience, training, and good judgment are not meant to be
replaced. The discussion should assist in making an audit complete and accurate, and/or aid the assessor
in the development or improvement of his or her own auditing procedures and manuals.
STATUTORY PROVISIONS
Statutes not only authorize the assessor to conduct audits, but require audits in certain circumstances.
Sections 441(d), 469, and 470, and Rules 191, 192, and 193 provide the assessor with the basic statutory
authority to review an assessee's records. For assessees owning or possessing tangible business personal
property and fixtures with a full cash value of $400,000 or more, section 469 requires an audit at least
once in each four-year period.267
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266
Rule 191.
267
Audits of racehorse owners are also required, pursuant to Rule 1045, when the taxpayer had a gross tax liability that
exceeds $2,000 for each of four consecutive calendar years.
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When an auditor-appraiser contacts an assessee, to make an audit appointment for any type of audit, the
assessee may question the auditor-appraiser's authority and may be reluctant to provide records. An
auditor-appraiser should assure the assessee that the audit is:
•
routine (i.e., certain audits are mandated under section 469)
•
beneficial (i.e., an audit is an assessee's best opportunity to verify the accuracy of
past assessments)
•
helpful (i.e., the audit results will be made available to the assessee)
•
corrective (i.e., if the results indicate an overassessment, the assessee may be entitled
to a cancellation of tax or the right to file a claim for refund)
•
fair (i.e., if the results indicate that property is subject to an escape assessment,
the assessee has the right to file an appeal on the escape assessment)
It is also helpful to inform the assessee of any relevant statutory provisions authorizing audits under
the Revenue and Taxation Code.
Section 441(d) states:
At any time, as required by the assessor for assessment purposes, every person shall make available for
examination information or records regarding his or her property or any other personal property located on
premises he or she owns or controls. (Italics added.)
Section 470 states:
Upon request of an assessor, a person owning, claiming, possessing or controlling property subject to local
assessment shall make available . . . a true copy of business records relevant to the amount, cost, and
value of all property that he or she owns, claims, possesses, or controls within the county. (Italics added.)
And section 469, as quoted earlier, requires an audit by stating:
. . . a taxpayer engaged in a profession, trade, or business has a full value of four hundred thousand dollars
($400,000) or more, the assessor shall audit the books and records of that profession, trade, or business at
least once each four years. . . . (Italics added.)
Many assessees and/or their agents are especially reluctant to show an auditor copies of income tax
returns. The auditor can further cite section 462, which provides:
Every person is guilty of a misdemeanor who, after written request of the assessor does any of the
following:
(a) Refuses to make available to the assessor any information which is required by Section 441(d).
................................................................. (Italics added.)
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The auditor can also refer the assessee to Lyons v. Estes (1969) 6 Cal.App.3d 979, where the court upheld
legislative history and the statute authorizing assessor review of taxpayer's records. The court specifically
stated that the county assessor is a tax official, as defined by the Revenue and Taxation Code, who may
inspect income tax returns to assist him/her in assessing property.
In extreme cases, where an assessee cannot be persuaded to make records available, records may be
subpoenaed. Sections 468 and 454 provide the assessor the power to subpoena. Section 468, Failure to
furnish information; assessor's remedy, authorizes the assessor to apply to the superior court to order the
person to appear before the court. Section 454, Examinations, states that the assessor may subpoena and
examine any person in relation to assessable personal property and fixtures in his or her county.
Alternatively, the assessor is authorized to estimate the value of the property. If, after written request, any
person has failed to comply with the requirements to make available information on the property statement
under section 441 or pursuant to audit under section 470, the assessor is authorized to estimate value based
on the information in his/her possession.268
Following is a summary of Revenue and Taxation Code sections and Rules related to audits, concerning
both the assessee's and assessor's rights and responsibilities. These sections will also be discussed in the
remainder of the chapter.
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268
Section 501.
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TABLE 8A
SUMMARY OF REVENUE & TAXATION CODE SECTIONS RELATED TO AUDITS
R&T Reference
Remarks
Section 408(e)(1)
Assessor's Records. The assessor shall, upon request, permit the assessee or
assessee's designated representative to inspect or copy all documents, including but
not limited to audit narratives and work papers, relative to the appraisal and
assessment of the assessee's property.
Section 441(d)
Property statement; other information.
available upon assessor request.
Section 454
Examinations. The assessor may subpoena and examine a person regarding any
statement furnished him, or any statement disclosing property stored, possessed, or
controlled by that person.
Section 462
Refusal to give information. A person is guilty of a misdemeanor who refuses
to make information available as required by section 441(d).
Section 468
Failure to furnish information; assessor's remedy.
If a person fails to
furnish requested information, the assessor has the power to subpoena that
information.
Section 469
Audit of profession, trade, or business. A profession, trade, or business which has
a full value (personal property and fixtures) of $400,000 or more shall be audited
at least once every 4 years. (See also Rules 191, 192, and 193.) With respect to an
audit, regardless of the full value (i.e., mandatory or nonmandatory), an assessor
may discover property that is subject to an escape assessment for any year under
review. Upon discovery of such escaped property, the assessee has a right to
appeal the assessed value of all the property, except property previously equalized,
at the location of the profession, trade, or business that is the subject of the audit,
regardless of whether the assessor actually enrolls an escape assessment.269
NOTE: If there is a refund only and there is no property subject to an escape
assessment at the location for that year, the assessee has no appeal rights. (For
additional information regarding appeals, see the Board's Assessment Appeals
Manual.)
Section 470
Business Records. A taxpayer shall make records available, upon assessor request,
at his or her principle place of business or at a mutually agreeable place. For out
of state audits, the taxpayer may be required to reimburse the county the
reasonable and ordinary expenses incurred performing the audit. Authorizes
nonmandatory audits.
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A taxpayer shall make records
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269
Rule 305.3.
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TABLE 8A (CONTINUED)
SUMMARY OF REVENUE & TAXATION CODE SECTIONS RELATED TO AUDITS
R&T Reference
Remarks
Section 501
Failure to furnish information. If after written request by the assessor, any person
fails to comply with sections 441 and/or 470 (i.e., provide information), the
assessor shall estimate value based on the information available.
Section 532
Statute of Limitations. Eight year statute of limitations where 25% penalty applies.
Four year statute of limitations where no penalty, or the 10% penalty, applies.
Section 532.1
Extension of time for making escape assessment. Extends the time period specified
in section 532 for making an escape assessment.
Rule 191
Property Tax Audits, General. Defines the purpose of an audit in general and
gives requirements regarding notification of findings to taxpayers and taxpayers
rights following an audit.
Rule 192
Mandatory Audits. Defines Mandatory Audit. See also section 469. (Rule 192(e)
also refers to nonmandatory audits. See also section 470.)
Rule 193
Scope of Audit. Rule 193(a) authorizes "sampling" of one year within the fouryear audit period. Rule 193(b) discusses use of audit findings resulting from a
Board assessment practices survey.
Rule 305.3
Application for Equalization Under Revenue and Taxation Code Section 469.
Discusses assessment appeal rights if the audit results with property subject to an
escape assessment. Includes definitions of relevant terms and examples.
Rule 1045
Administration of the Annual Racehorse Tax. Discusses assessors', tax collectors',
and auditors' responsibilities concerning the racehorse tax. Requires the assessor
to audit the records of any racehorse owner who had a gross tax liability that
exceeds
$2,000 for each of four consecutive calendar years.
GENERALLY ACCEPTED STANDARDS
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Property tax audits must be conducted in a professional manner. The auditors are called upon to exercise
their highest skill and best and most impartial judgments throughout the performance of their official
duties. Sound professional judgment must be exercised in developing procedures and conducting tests that
meet the scope and achieve the audit objectives.
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The primary objective of the property tax audit is to determine that a correct assessment has been made.
The auditor, therefore, must apply generally accepted auditing standards and utilize generally accepted
accounting, and appraisal principles. There may be instances when these concepts conflict. Application
of the trade level requirement of Rule 10 is an example. Under such circumstances, the auditor may need
to supplement application of generally accepted accounting principles and generally accepted auditing
standards with sound appraisal principles to arrive at a correct assessment as required by law. Since these
audits are done for property tax assessment purposes, appraisal principles may take precedence.
Following are standards set forth by the American Institute of Certified Public Accountants (AICPA) as
applied to the property tax auditor. These standards should guide the auditor in all audit situations.
G E N E R A L STANDARDS
1.
An auditor should have adequate technical training and proficiency as an auditor (and
270
as an appraiser).
2.
In all matters relating to an assignment, an independence in mental attitude should be
maintained by the auditor.
3.
Due professional care should be exercised in the performance of the examination, in
the preparation of the report, and in the maintenance of confidentiality.
S T A N D A R D S O F F I E L D WORK
1.
The work should be adequately planned, and supervised as appropriate.
2.
There should be a proper evaluation of existing internal controls as a basis for reliance.
This will determine and restrict the auditing procedures.
3.
Sufficient competent evidential matter should be obtained through inspection,
observation, inquiry, and confirmation to afford a reasonable basis for an opinion regarding the financial
statements under examination.
A UDI T SELECTION
An important part of the audit program is the selection of accounts to be audited. As discussed earlier,
some audits are required by law (mandatory) while additional audits (commonly referred to as
nonmandatory) can be selected by the assessor as a means of sampling the system as a whole. Each can
be conducted in a variety of ways. Several categories of audits and means for conducting audits are
discussed briefly in the following section.
270
This standard, as set forth by the AICPA, did not refer to appraisers. It has been applied to the property tax auditorappraiser. Certification as appraiser and auditor must be maintained pursuant to section 670 and section 671.
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T Y P E S O F AUDITS
M A N D A T O R Y AUDITS
Audits required by law, mandatory audits, are the most important for an auditor to complete in a timely
manner. As required by section 469 and Rule 192, for assessees owning, controlling, or possessing
tangible business personal property and fixtures with a full cash value of $400,000 or more, these audits
must be completed at least once in each four-year period. For any racehorse owner who had a gross tax
liability that exceeds $2,000 for four consecutive calendar years, Rule 1045 requires an audit within 5
years of the date on which the annual tax first became due.
However, an in-depth audit is not always required for each year in the four-year period. The auditor is
allowed to "sample" one year in the four-year audit period.271 If no material discrepancy or irregularity is
found, there is no requirement to audit the remaining years. If a discrepancy is found, the auditor must
continue and audit the remaining years unless (1) the discrepancy or irregularity in the "sample" year is
peculiar to that year and (2) the discrepancy or irregularity did not result in an escape assessment.
N O N M A N D A T O R Y AUDITS
Nonmandatory audits are audits not required by law, but are authorized by sections 469 and 470 and Rule
192(e). They should be done in addition to mandatory audits, and are selected at the discretion of the
assessor because an audit program is not complete unless it includes a representative sample from all sizes
and types of property. Performance of nonmandatory audits is part of the representative sample.
The assessor is not prohibited from auditing any assessee during any period allowed under the statute of
limitations. The assessor may audit a taxpayer every year if it is necessary. However, this would not be
prudent or efficient for either the taxpayer or the assessor in most situations.
Depending on the resources available, it may be difficult to complete a large number of nonmandatory
audits. Counties may therefore develop criteria for selecting these audits rather than just random selection.
Examples of criteria appropriate for selection may include: identified discrepancies, accounts just below
the mandatory audit cut-off, inconsistent, incomplete, or nonfiled property statements, taxpayer's request
for audit, and/or selection by type of business.
W A I V E R E D A U D I T S (W A I V E R O F S T A T U T E O F LIMITATIONS)
In most cases, audits must be completed within four years after July 1 of the assessment year the property
escaped assessment (i.e., an escape assessment for the year 1999-2000 must be enrolled prior to July 1,
2003) because roll changes resulting from audits are subject to the statute of limitations pursuant to
section 532.272 If any audit (mandatory or nonmandatory) cannot be
271
Rule 193.
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If conditions exist that warrant a penalty application of 25 percent, as provided in sections 502 and 504 (section 863 for
state assessed property) the time limit is extended to 8 years. (Section 532(b) for locally assessed property and section 866
for state assessed property.)
272
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completed prior to that time, the assessee may agree to waive the statute of limitations (i.e., extend the
allowable time period) by signing a waiver.
Section 532.1 allows for the extension of time when the assessee and the assessor have agreed in writing
to extend the time allowed for making an escape assessment, correction, and refund.273 Section 532.1,
Extension of time for making escape assessment, in part reads:
(a) If, before the expiration of the period specified in Section 532 for making an escape assessment, the
taxpayer and the assessor have agreed in writing to extend the time for making an assessment, correction,
or claim for refund, the assessment may be made at any time prior to the expiration of the period agreed
upon. The period may be extended by subsequent agreements in writing made before the expiration of the
period previously agreed upon.
E X E M P T O R G A N I Z A T I O N AUDITS
Exempt organizations are subject to audit as are any other type of business under section 470 and
469. The provisions of section 470 require any person "owning, claiming, possessing, or controlling
property subject to local assessment" to make available a copy of business records. An exempt
organization is a "person" owning or possessing property that is subject to assessment. The provisions of
section 469 apply to a taxpayer who has locally assessable fixtures and personal property and is engaged
in a profession, trade, or business. It is proper to consider an exempt organization (such as a church or a
nonprofit hospital) as a taxpayer since the organization would be assessed and taxed on the value of
such property, but for the exemption.
Property owned by an exempt organization is assessable, even though there may not be a net taxable
value.274 However, the type of audit performed for an exempt organization should focus primarily on (1)
whether the property is used exclusively for religious, hospital, scientific, or charitable purposes per
section 214 and (2) whether the property is owned and operated by the charitable organization. If the
exemption has been properly granted, the books and records should receive a limited review. The relevant
items to audit and the extent (thoroughness) of such an audit should be determined in cooperation with the
assessor's exemption department.
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A waiver which does not specifically state that it extends the time for corrections and refunds only extends the time
allowed for an escape assessment.
273
274
An exempt organization may pay taxes in certain circumstances and they may have possession of property taxable to
another assessee. For example, many exempt organizations pay taxes on non-qualifying property. Some may pay taxes
because they filed an exemption claim late, and in other cases they may be contractually required to pay taxes on leased
equipment. Commonly, exempt organizations lease equipment from non-exempt lessors. Also, the land and buildings of
exempt organizations are subject to special assessment levies even though the property qualifies for exemption from general
property taxes.
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C A L I F O R N I A C O U N T I E S C O O P E R A T I V E A U D I T S E R V I C E S E X C H A N G E (CCCASE)
Many counties conduct audits through the intercounty cooperative audit program. This program is called
the California Counties Cooperative Audit Services Exchange (CCCASE). It can be an efficient and
effective means of audit for both the assessor and the assessee. Using this program, the assessor's staff in
the county where the assessee is headquartered gathers information for the audit for all participating
counties, but makes no value judgment. A similar arrangement is used for assessees headquartered out-ofstate. One auditor may go to a particular state or city and gather information for all counties who have
audit accounts there.
A U D I T S B Y CORRESPONDENCE
As indicated earlier, section 470 requires the assessee to make records available upon request of the
assessor at the assessee's principal place of business in California, or at a mutually agreeable location.
This may be difficult if the business records and/or the business headquarters are out- of-state or out-ofcounty. In this case, the assessor may use the intercounty cooperative audit program (as discussed earlier)
or the taxpayer may pay the county for the auditor's travel expenses.275 Another solution is to conduct the
audit by correspondence, whether mandatory or nonmandatory. Although audit by correspondence is an
option, it may only be feasible for specific types of audits (e.g., accounts audited in the past with minimal
changes in the current period). Policy on conducting audits by correspondence should be determined by
each individual assessor and department.
O F F I C E AUDITS
Another alternative for performing either mandatory or nonmandatory audits is to conduct office audits.
Using this system, the assessee is requested to bring applicable records and information to the assessor
rather than the assessor going to the assessee's location. The assessor may find this has limited use
however. When volumes of information are needed, it is not logical for the assessee to physically
transport his or her records.
P REPARATI ON FOR AUDIT
R E V I E W O F INFORMATION
An auditor should review all applicable information available prior to an audit appointment in order to
become familiar with the assessee, the nature of the business, and the potential problems that may be
encountered. This review may include, but is not limited to:
1.
Review of property statements and attachments as filed (or change of
ownership statements, if applicable)
2.
Review of prior audit (if any)
3.
Review of real property land and structure records
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Section 470(b).
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4.
Review of applicable Revenue and Taxation Code sections
5.
Identification of suspected problems needing attention (e.g., trade level adjustments,
reporting inconsistencies, possibility of double assessment, etc.)
6.
Review of lessor files for lease, cost, and assessment information if the subject
company leases equipment
7.
Review of assessment roll for associated entities276
8.
Review of prior owner's property statements, if the business has undergone a change
in ownership recently or if a change in ownership affects the current owner's reported cost and/or value
9.
Review of assessment appeal files, correspondence, and other data that identifies past
and current issues regarding the appraisal and assessment of the property
The review will give the auditor-appraiser a preview of the audit ahead and will promote a smoother audit
appointment. In some cases, the auditor will find no obvious problems or areas of concern. In other
cases, potential problems will be clearly evident. In such cases, the auditor can concentrate on these
potential problems and/or discuss them with the assessee during the initial phases of the audit. The review
will also help determine what specific records may be needed for pre-identified problem areas.
C O N T A C T ASSESSEE
An auditor-appraiser representing the assessor shall contact the assessee to inform he/she that an audit will
be conducted pursuant to Rule 191, and arrange a place and time where and when the audit will be
conducted. (It is also helpful to determine with whom the audit will be conducted.) An audit appointment
should be scheduled to give the assessee (or his or her agent) sufficient time to prepare for the visit.
Setting an appropriate and convenient date for both parties can help to avoid canceled appointments and/or
second visits to an assessee's office.
It is also critical to inform the assessee of what records will be necessary and to verify that the records will
be available for audit prior to arriving on site. This allows the assessee to schedule accordingly and also
aids in avoiding unnecessary delay.277 Basic records to be available on site include:
Chart of Accounts
General ledger and subsidiary ledgers supporting the general ledger
Detailed fixed asset list or depreciation schedule
1.
2.
3.
276
If there are associated entities, it may be proper to audit all associated accounts.
277
A follow-up letter can also help by confirming the appointment and by providing a more detailed list of the records
which will be required.
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4.
Income tax returns
5.
Invoices and other source documents (purchase orders, receiving records, lease
agreements, appropriation records and work orders for construction projects, etc.)
6.
Financial statements and/or annual reports
7.
Accounting procedures manuals
8.
Independent audit reports (if any)
9.
Insurance policy(ies)
10.
sales tax audit report(s) (if any)
11.
Assessee's work papers reconciling books and records to property statement filing(s)
12.
Articles of incorporation and amendments, as applicable
This list can be expanded based on the preliminary review, and discussions with the assessee. If the
assessee has more than one account or location in the county, or if property owned by others is at the situs
of the business, the list and the audit may include records for more than one company and/or assessor's
account numbers. If the assessee is unique, such as a leasing company, the assessee may have "unique"
records. These records may be necessary for review in addition to the typical records listed above.
C ONDUCTI NG AN AUDIT
Professionalism is important when conducting an audit. The pre-audit review, as discussed earlier, helps
to organize the auditor and contributes to a professional attitude and image. In addition, some basic audit
rules should always be observed:
1.
Maintain confidentiality of any information obtained
2.
Be professional, courteous, and cooperative
3.
Decline offers of gratuity
4.
Avoid conversations unrelated to the audit, such as: political, religious, or
argumentative discussions
5.
Avoid drawing premature conclusions
6.
Disrupt the assessee as little as possible. Wait until you have several items to
discuss before approaching them.
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At the audit appointment, the auditors should accomplish three main tasks: (1) gather general information
regarding the company, (2) review records pertaining to the valuation of property, and (3) take a tour of
the facility and equipment being audited.
G A T H E R G E N E R A L I N F O R M A T I O N R E G A R D I N G COMPANY
A short initial interview with the assessee (or agent) at the beginning of an audit appointment can help to
quickly acquaint the auditor with the books and records and the company's concerns. This generally
facilitates the remainder of the audit, and allows the assessee to continue business with fewer
interruptions.
A pre-audit review and the audit checklist278 help to determine relevant questions that should be asked at
this interview. Such questions may include inquiries pertaining to:
1.
Ownership type – sole proprietor, partnership, corporation, or other
2.
Explanation of records provided – year-ending, organization of records, etc.
3.
Control – verification if there has been a change in control during the audit period
(Legal Entity Ownership Program (LEOP) section 64, compare state tax returns)
4.
Type of accounting system – (Accrual Basis v. Cash Basis)
Accrual Basis
The accrual system of accounting gives recognition to income items during the fiscal period in which they
were earned although the cash may not have been received. Expenses are recorded when incurred even
though the actual payment has not been made. The accrual system theoretically provides for the timely
recording of accounting data by the assessee and is generally acceptable for purposes of audit. However,
late postings are common. Actual posting practices should be verified.
Cash Basis
The cash basis of accounting gives recognition to income and expense only when actually received or
paid. When a cash basis system is encountered, the auditor-appraiser may need to make adjustments to the
accounting data for assessment purposes. For example, the assessee may only be capitalizing cash
payments actually made instead of the total purchase price.
5.
Capitalization policy: What is the capitalization policy (including lease buy-outs)?
When are capitalized assets recorded? (Important in determining if all assets are booked on lien date.)
What is the minimum value for capitalizing assets? How are cost components treated: sales/use tax,
installation charges, freight, trade-in allowance, repairs, etc.?
278
See sample audit checklist in Appendix E.
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6.
Construction in progress: How is construction in progress treated in the accounting
records? Is it reported? What is included? Are expenditures posted when incurred, when invoiced
(frequently contractors do not send a bill until weeks or months after some of the work has been
completed), or when paid (even "accrual basis" companies sometimes use "cash basis" for construction
in progress). Is overhead recorded? Is construction interest recorded? How are change orders
recorded?
7.
Policy of writing off assets: How are fully depreciated assets treated? Are they listed on
the depreciation schedule and on the books? How are scrapped or sold assets treated? How often are
they taken off the books and the depreciation schedule? How often is a physical inventory of fixed
assets conducted?
Note: An assessee's policy and procedure for recording disposals aids an auditor in determining how
accurately an asset listing represents the assets owned and possessed by the assessee. However, it is
significant to note that the process of retirement and disposal is generally not as rigid as the purchase.
There may be assets on the books that have been disposed of. It may be necessary to request supporting
documentation from the assessee if this is a contention.
8.
Situs: Where are assets located? Are all the assets located at one location? Are all the
assets in the county? Are all the assets in the state?
9.
Recording trade in allowances: How are trade-in allowances treated on the books and
on the depreciation schedule?
10.
Internal control – A company's system of internal control, including EDP (electronic data
processing) data entry and retrieval and software controls, is vital evidence in support of the recorded
transactions and financial statements. Basic characteristics of sound internal control include:
appropriate segregation of responsibilities, reasonable accounting control over assets, liabilities,
revenues, and expenses, and sound practices followed by quality personnel in the performance of duties
and functions in each department.
These questions should be expanded upon and altered based on the auditor's review of information prior to
the audit, the assessee's responses provided during the interview, and as further information is gathered.
Answers to these questions will allow the auditor to focus more research into identified problems from the
start.
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R E V I E W RECORDS
The records requested from and provided by the assessee are related to the company's financial statements
and position as asserted by management.279 Once these records are gathered, the auditor must identify all
data pertinent to the audit in order to verify full economic cost and/or full cash value on each lien date.
V E R I F I C A T I O N O F M A C H I N E R Y A N D EQUIPMENT
Reconciliation of Sources
In the verification of machinery and equipment, the auditor is primarily concerned that full economic
property costs and years of acquisition were properly reported. This information is normally found in two
sets of sources (1) general ledger fixed asset accounts or subsidiary ledgers, and (2) on depreciation
schedules or fixed asset listings.
When two sources are available, they should be reconciled. This reconciliation can aid in compiling a
complete and accurate asset list, cost summary, or a complete listing of revenue and expenses, as needed,
that can be used as a basis for the audit. An example of reconciliation of sources is listed below:
EXAMPLE 8.1 RECONCILIATION OF SOURCES
DEPRECIATION SCHEDULE AND GENERAL LEDGER ACCOUNT
Total Depreciable Asset Cost Per Depreciation Schedule (FYE 2002) Machinery &
$ 125,000
Equipment Asset Account #XX1 Per General Ledger (FYE 2002) Difference
(100,000)
Depreciation Schedule – General Ledger
$ 25,000
Less: Non-assessable Licensed Vehicles (included in General Ledger Account #XX2)
( 15,000)
Goodwill (included in General Ledger Account #XX3)
(
Disposals Unrecorded on Depreciation Schedule
0)
5,00
(
Difference Depreciation Schedule – General Ledger
5,00
0)
$
0
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When both cost totals (cost per depreciation schedule and cost per general ledger fixed asset accounts) are
reconcilable, as in Example 8.1 above, the auditor can use the depreciation schedule (which contains
specific equipment information) as a basis for the audited cost and
279
Based on generally accepted accounting principles (GAAP) the financial statements are implied or expressed
representations by management. Management makes, in these financial statements, assertions regarding (1) existence and
occurrence of assets, obligations, and equities, (2) completeness of the statements, (3) rights and obligations (i.e., assets are
the rights of the company and liabilities are the obligation of the company), (4) valuation and allocation (i.e., asset, liability,
equity, revenue, and expense have been included in the financial statements at the proper amount under GAAP), and (5)
presentation and disclosure (i.e., the financial statements are classified, described, and disclosed properly).
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make adjustments as necessary. When the cost totals are not reconcilable, the auditor should make an
effort to determine why there is a difference before using audited cost as a basis for the cost approach or
before utilizing another method of appraisal (e.g., comparative sales or income approach). For instance, in
Example 8.1 three adjustments were made to the cost per books. If any one of those had not been
identified (non-assessable licensed vehicles, goodwill, or unrecorded disposals), a difference would have
resulted. An auditor would then need to (or attempt to) determine what adjustment was missed.
S A M P L I N G T O C O N F I R M ACCURACY
An auditor can also use the compiled asset or cost listing (or revenue and expense summary) to select
source documents to sample and compare to the booked cost. This may include such items as purchase
invoices, transportation invoices, and receiving reports. This sampling serves two purposes. First, it
enables an auditor to verify correctness of acquisition date as recorded on the asset listing or accounting
records. Second, it enables an auditor to verify that the property's full economic cost is equal to the cost
reported on the asset listing or accounting records. The recorded cost may not include all cost components
necessary to use the cost approach. The cost components (sales tax, freight, trade-in allowances, etc.)
should be verified to include all cost items necessary to put the equipment to use.280
O T H E R ADJUSTMENTS
After reviewing the source documents selected for sampling and determining accurate cost and acquisition
date information, an auditor should also determine if any other machinery and equipment or other personal
property and fixtures exist (including self-constructed assets) that are not on the depreciation schedule or
in the fixed asset accounts. Small, short-lived equipment is an example of equipment which may not be
included here (i.e., on the depreciation schedule, in the general ledger asset accounts) since this equipment
may not be capitalized. Equipment such as hand tools are commonly expensed rather than capitalized,
depending upon the assessee's capitalization policy. Expense accounts should be reviewed for these types
of items as well as leased equipment. Leased equipment may not be physically identifiable in most cases,
but can be located by reviewing accounting records. Payments for these leases may be noted in Notes
Payable and/or Expense Accounts and can be easily missed, if an auditor is not careful to identify them.
Farm audits, in particular, require special attention to items that may have been sold, traded-in, junked, or
otherwise abandoned. Farm asset lists tend to be out-of-date more often than other types of business and
can be more difficult to reconcile. While the assessee should in all situations substantiate any and all
changes and deletions not indicated on the books, the auditor should attempt to identify problems and
discuss them as soon as possible. This will make for easier post-audit work and audit recommendations.
280
See also Chapter 4, Valuation of Personal Property, Valid Cost Components.
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CLASSIFICATION
The auditor should also verify that the property was classified correctly when reported by the assessee.
For example, were computers and printers reported in the proper column on the property statement and
properly classified or were they erroneously reported as office equipment and therefore incorrectly
valued? Classification is important, since value relies upon it.281
Equipment should not necessarily be classified based solely on the classification groups provided on the
property statement (equipment, office equipment, tools, molds, and dies, etc.). The asset listing of a
business may include several different groups of equipment and the business may operate distinct units
(manufacturing, packaging, warehousing, etc.), whose values fluctuate independently. Thus, it may be
necessary for each group of equipment to be classified and valued separately.
V E R I F I C A T I O N O F IMPROVEMENTS
Verification of improvement and building accounts is similar to verification of machinery and equipment.
As with machinery and equipment, the auditor must make sure that reported costs, acquisition dates, and
classifications are accurate. Improvements are frequently included with machinery and equipment on the
depreciation schedule, but will generally be separated in the general ledger accounts.
When it is determined that information gathered regarding improvements is accurate and that proper
classifications have been made, the auditor should also verify that (1) improvements were not also
assessed with the real property assessment, and (2) all improvements were assessed (i.e., no escapes).
This usually involves coordination with a real property appraiser and/or review of the real property
appraisal record.
V E R I F I C A T I O N O F SUPPLIES
The audit of supplies consists primarily of ensuring that supplies on hand on the lien date have been
properly reported by the assessee. "Properly reported" means that (1) exempt inventory items were
excluded, and (2) all assessable supply items were included.
Where the assessee maintains a supply inventory account in the general ledger, the auditor must verify that
the account is properly maintained and contains all purchases received prior to the lien date. A review of
inventory accounts for supply items is often warranted also, as some items booked as inventory may be
assessable supply items. Where supplies are expensed, the auditor must review the supply expense
accounts over the prior year. Based on this review, discussions with the assessee regarding the amount of
supplies on hand and observation during the facility tour, an auditor should be able to effectively estimate
a lien date supply amount.
V E R I F I C A T I O N O F C O N S T R U C T I O N I N PROGRESS
The verification of construction in progress (CIP) involves matching expenditures to the existence of
physical property as well as properly classifying that property. Where progress
281
Chapter 2, Classification, discusses classification in detail.
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payments are being made, the assessee's books may reflect a considerable amount of expenditures in the
construction in progress account. However, the assessee may not yet have possession of the property, or
the property may not have existed on the lien date or, as mentioned earlier, the property may have been
received or constructed well before the expenditures were posted. Existence and ownership of the items
on the lien date are required elements for proper assessment. For example, if construction has not started
as of the lien date, no value is assessable, assuming any material on hand belongs to the contractor and is
classified as business inventory. If construction has started, an assessment of CIP is appropriate.282
Similar to verification of leasehold improvements, verification of construction in progress also involves
proper classification. Coordination between the auditor and the real property appraiser is necessary to
avoid duplicate assessments and escape assessments.
V E R I F I C A T I O N A N D I D E N T I F I C A T I O N O F L E A S E D EQUIPMENT
Errors in reporting and assessing leased equipment frequently occur as discussed in Chapter 6. Thus, an
audit should include testing for leased equipment.
By reviewing the various records and accounts maintained by an assessee, an auditor can discover,
identify, and verify all leases or security arrangements. The principal sources of obtaining information for
leased equipment are:
1.
General Ledger – Accounts (such as lease and rental expense, accounts payable, and
notes payable) in the general ledger will indicate whether the assessee was making lease or rental
payments on the lien date.
2.
Cash Disbursements Journal – This record will indicate the amounts and payees of
lease and rental payments.
3.
Lease Contracts – The monthly lease payment indicated on the lease contract should
be compared to the amounts shown in the expense accounts. This will verify that all leases are
accounted for and what costs are included in the lease payment/cost.
4.
Financial Statements – The financial statements may indicate not only the existence of
leases but may also give important information associated with such leases. The footnotes give a
summary of the rental and lease commitments regarding operating leases (short-term or cancelable
leases, which the risks of ownership lie with the lessor, FASB 13). The balance sheet gives information
regarding leases similar to that found in the general ledger accounts.
5.
Other Sources – Discussions with the assessee and/or physical inspection of the
premises may indicate the existence of leased equipment.
282
Determination of value should be based on market value on the lien date. See Chapter 7, Special Issues, for further
discussion of construction in progress valuation.
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When the auditor has identified all leases, a comparison should be made between the lessor and the lessee
accounts maintained by the assessor to confirm accurate reporting (i.e., was the appropriate cost(s)
reported at the appropriate trade level) and correct assessment (i.e., was valued correctly, no duplicate
assessment occurred, and no proper assessment was omitted).
I T E M S O R A U D I T S R E Q U I R I N G S P E C I A L ATTENTION
In General
Certain items tend to cause problems in reporting and valuations. In reviewing an assessee's records and
reported costs, an auditor may avoid some problems by discovering information sufficient to answer the
following questions:
1.
Does the reported or booked cost include all property costs? (sales/use tax, freight,
installation, etc.)
2.
Is all taxable property listed in the accounting records? (fully-depreciated equipment,
leased equipment, property belonging to other entities, expensed personal property, equipment
purchased near lien date, interest during construction, etc.)
3.
Do all booked costs contribute to assessable value? (goodwill, covenant not to
compete, unrecorded disposals, exempt property, rental equipment not on rent on the lien date,
inventory, licensed vehicles, commercial coaches, etc.)
To determine other items that may require special attention in certain circumstances, reference should
be made to the three valuation chapters in this section: Chapter 4, Valuation of Personal Property,
Chapter 5, Assessments of Improvements Related to Business Property, and Chapter 6, Special Issues.
S P E C I A L SITUATIONS
Equipment located at an assessee's place of business, but not owned by the assessee needs special
attention and consideration. This equipment may not be capitalized. Vending equipment, loaned
equipment, and government-owned equipment are good examples.283 A discussion regarding auditing for
this type of property is discussed below since different audit procedures are necessary in discovery and
valuation.
V E N D I N G EQUIPMENT
Vending equipment may or may not involve a written contract between the owner and the possessor. The
possessor does not normally incur any expenses regarding the equipment but may derive income from the
source. Therefore, miscellaneous income accounts should be analyzed to obtain information regarding
this type of income and property.
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Leased equipment is also equipment located at an assessee's business location that may not be owned by them.
Verification and identification of leased equipment was discussed earlier in the chapter.
283
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L O A N E D EQUIPMENT
Discovery of loaned or borrowed equipment is a particularly difficult area in terms of discovery because
the possessor of the property, the assessee under audit, may or may not derive any income or incur any
expense from the property. The following items may aid the auditor in the discovery and assessment of
such equipment:
Capitalized installation charges
Royalty payments for items produced on loaned equipment
Expensed maintenance or repairs on the equipment
Memorandum entries
Insurance policies
Contract or other written agreement(s) between the owner and the possessor
1.
2.
3.
4.
5.
6.
G O V E R N M E N T - O W N E D EQUIPMENT
Another item to consider when conducting an audit is government-owned property. Property owned by
the government and used by a taxable entity may be subject to a possessory interest assessment only, but
the property remains an item under audit (see also Leases With Exempt Entities (Government Entities) in
Chapter 6). The primary sources for discovering and obtaining information regarding government-owned
property and contracts with the government are:
1.
Facilities Contracts and/or Supplies and Services Contracts – companies holding
government-owned equipment will generally have a Facilities Contract and/or a Supplies and Services
Contract with the government. These contracts require the firm to maintain accounting and property
controls for the equipment and to make periodic status reports to the controlling governmental agency.
These records will generally identify each equipment item and the specific location.
2.
Physical Inspection of the Premises – most government-owned property is required to
be tagged, or otherwise visually identifiable as being government property.
3.
Capitalized Installation or Other Costs – the assessee may have capitalized installation
or other costs in connection with government-owned equipment. An analysis of the structures,
leasehold improvement and equipment accounts may alert the auditor of the existence of governmentowned equipment.
When government-owned property is identified, it is imperative that the auditor ascertains which items
should be classified as fixtures and which items are personal property. Only fixtures and other real
property, owned by the government but possessed by a taxable entity, are subject to
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assessment (possessory interest).284 Possessory interests in personal property are not taxable.285 As
discussed in detail in Chapter 2, Classification, this classification should be based on:
The manner of annexation
The adaptability to the use and purpose for which the realty is used
The intention of the party making the annexation as indicated by the physical facts
1.
2.
3.
T O T A L P R O P E R T Y AUDITS
Total property appraisals refer to appraisals in which the entire property (consisting of land, building, and
equipment) is appraised as "one appraisal unit," normally in concert with the real property appraiser. Total
property appraisals typically involve the most complex and valuable properties. All three approaches to
value may be considered in arriving at the final appraised value.
A total property audit, therefore, involves the verification of considerably more information than a typical
audit that focuses primarily on equipment and supplies. It is important to verify all information that is
relevant to the appraisal of the entire property. In addition to basic records, the auditor will also need to
focus on:
1.
Profit and Loss Statements – for use in income approach
2.
Production Data – (A) Units produced and units sold (B) F.O.B. Plant selling price and
units (C) Selling price and units (D) Other distributors –for use in income approach
3.
Tenant Improvements – costs included in a total property appraisal
4.
Lease Agreements – important in certain operations such as shopping centers and
office building rentals. The essential terms of the contract must be extracted (lease term, monthly rent,
maintenance provisions, tax provisions, etc.). Where possible, a copy of the entire contract may be
helpful.
5.
Construction Contracts – furnish a general description of the type of construction and
also identify any special items such as special foundations not readily discernible through a physical
inspection. Also, excess costs of construction, if any, might be indicated.
6.
Plant Utilization – data concerning whether the facilities – especially the structures and
fixed equipment – are being used for purposes originally intended. Also, whether there is unused
capacity.
284
Taxable possessory interests are defined in section 107.
285
There is one exception. Section 201.5 specifies that possessory interests in pollution control property--whether real
property or personal property--acquired by or for the California Pollution Control Financing Authority are taxable.
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7.
Market Studies and Forecast – supply the expectation of future business for the
firm. May indicate how soon any unused capacity might be utilized.
8.
Plot Plan – detailed plot plans should be received from all total property assessees.
A U D I T S O F L E A S I N G COMPANIES
Audits of leasing companies involve unusual and distinct problems. The auditor must verify that:
1.
All equipment owned by the company located in the county has been reported.
2.
The correct location of the equipment has been furnished on the property statement.
3.
The correct cost and sales information has been reported by the lessor.
4.
The costs reported correspond with the appropriate level of trade at which the
equipment is situated on the lien date (i.e., the cost is reported at the proper trade level).
In addition to the books of original entry and property records found in most types of businesses, the
following items may be required to gather the necessary information for an audit of a leasing company:
1.
Lease Contracts – furnish complete information on lease costs and lease dates. A
primary requirement of leasing company audits is that the auditor obtain (at least) several copies of
invoices and executed lease contracts including purchase contracts for lessees in the County.
2.
Audit Referrals – in addition to the accounting records of the lessor, use of leased
equipment referral forms (resulting from processing property statements or conducting audits of
lessees), may be helpful. The referrals will contain information from property statements filed by
lessee(s) and information extracted during audits of lessees. This information can be compared to the
lessor's records to determine whether the lessor has reported all equipment.
3.
Control Records – geographic controls for sales and use tax purposes which can be
utilized to verify leases in a particular county. This is particularly critical since in many cases, lessors
record their leases at the lessee's headquarters but in fact the lessee may relocate the equipment to a
different situs.
4.
Accounts Receivable Ledger and/or Billing List – furnishes names and other information
about customers, which may aid in discovery. In some cases, such as short-term leases or rentals, this
may be the most reliable source of information.
5.
Retail Pricing Lists – furnishes current selling prices of similar equipment, which may aid
in verification of estimated value and determination of proper trade level cost.
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The auditor is responsible for establishing the total in place replacement or reproduction cost new of
leased equipment in order to implement the cost approach to value. For review, the total cost may include
(but is not limited to):
1.
Purchase price of equipment
2.
Sales or use tax
3.
Freight
4.
Installation and set up costs
5.
Machinery foundation costs
6.
Cost of major repairs that extend the useful life of the equipment or materially
increase its capacity
7.
Trade level adjustments where applicable
Each of these costs should be verified. It may be necessary to also review the lessee's accounting records
to gather all applicable information (e.g., situs) and costs, and ultimately determine total cost subject to
assessment.
In determining this total cost and reviewing an assessee's property statement, an auditor should take care
to look for common problems listed below.
COMMON PROBLEM AREAS REGARDING AUDITS OF LEASING COMPANIES:
Situs Dates
1.
Some companies consider an item leased only when the item is operational or when the monthly billings
commence. Monthly billing may not start until after long extensive testing is completed, especially on
complex types of equipment. To determine proper treatment on the lien date, it is important to ascertain
the various dates an assessee uses (i.e., define the term such as date of installation, rental date, effective
date, termination date, shipping date, acceptance date, and date of manufacture).
Recognition and Reporting of Proper Trade Level
2.
A leasing company may be reporting booked cost of an asset that does not correspond to the level at which
the property is being used on the lien date. For example, when the lessor is also the manufacturer of the
leased equipment, the booked (and reported) cost may be the manufactured cost. The actual value of the
equipment to the user/lessee on the lien date may be more than that manufacturer's cost (to include profit
margin, sales tax, etc.). The auditor should determine what the proper trade level cost is per Rule 10, and
whether it is being reported. (See also trade level and leased equipment valuation discussions in Chapter 4
and Chapter 6.)
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Assignment of Leases and Lease Rights
3.
An assignment occurs when one lessor (the assignor) "transfers" or sells property out on lease to another
lessor (the assignee). Assigned leases may not be reported by either party (the assignor or the assignee),
and may not be reported by the lessee holding the property. An audit of a leasing company should include
a review of records concerning assignments to ensure that all such equipment is reported.
Lease Purchase
4.
A leasing company may or may not report Purchase-Option Leases. These are leases which are essentially
sales, rather than "true leases" as defined in Chapter 6. When purchase-option leases are not reported by
the leasing company, neither the lessor nor the lessee may be reporting the equipment. A review of the
lessor's records may identify such unreported property.
Sales-Lease Backs
5.
Many companies advance money to customers using existing equipment as collateral. These "leases" may
or may not reflect the true cost of the equipment because many of these arrangements are based on the
lessee's ability to pay, and not on the cost of the equipment. Documents concerning sale-lease backs,
including the original purchase documents, should be reviewed to estimate the full economic cost. A
physical inspection of the property may also be necessary to confirm the appropriate value.
Service and Warranty Contracts
6.
Leases may include costs for non-assessable service items. These costs should be deducted when they do
not influence the value of the property, and they can be estimated.
Computer Software
7.
Leases may include costs for non-assessable software. These costs should be deducted where appropriate
under the exemption of section 995 and Rule 152 as discussed in Chapter 6.
Special Leases
8.
Many lessors have separate controls for those items that are special purpose leases or are not currently
active. The auditor should make certain that the following categories of leases have been accounted for:
Leases in litigation
Terminated leases
Lease purchases
Government Service Administration (GSA) leases
•
•
•
•
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Education leases
Local Government leases
Software Leases
Sub-Leases
•
•
•
•
I NSPECTI ON OF PROPERTY
At some point during an audit, the auditor should take a tour of the premises to physically inspect the
property being appraised. This is an important part of the audit process. A tour and inspection of the
property being audited (appraised) contributes to the audit in the following ways: (1) confirms the
existence and the location of the property, (2) confirms the correct classification of the property, (3)
verifies the condition of the property, (4) verifies that all property is recorded in the books and/or reported
on the property statement, (5) verifies that all property on the books actually exists at the location, and (6)
verifies that valuation of the property as a whole is reasonable and accurate.
It is not necessary for the auditor to specifically identify each and every piece of equipment. It is;
however, important to compare and reconcile a sample of the assets compiled based on review of the
records against actual existing assets viewed during the tour and vice versa. This sample should be large
enough to reasonably conclude the accuracy and completeness of the records being used as a basis for the
assessable value.
A UDI T V ALUATI ON AND S UMMARI ZED FINDINGS
When all information is gathered and reviewed, an auditor must analyze the data and summarize the
results. Within this portion of the audit, an auditor will (1) compare audited cost, classification, and
acquisition dates to reported information and/or revenue and expense information, (2) appraise the
property and estimate audited value, (3) compare audited value to assessed value, and finally, (4) produce
findings in audit work papers.
C O M P A R E A U D I T E D C O S T T O R E P O R T E D COST
Comparing audited cost to assessee's reported cost (and/or assessed value based on cost if different from
reported cost) by year of acquisition and classification type is the first step in the summarization process.
This will determine where and how costs were misreported, if at all, and will provide insight into how the
overall value may be affected.
For complex audits, a reconciliation of audited cost to assessee's reported cost may be appropriate.
Following is an example that illustrates how the difference between audited cost and reported cost can be
reconciled. The example is for illustration purposes only. In practice, the reconciliation of audited cost to
reported cost may include more detailed explanations of the
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difference, such as acquisition years of property listed under the differences section of the worksheet and
audit years affected by the differences. In other circumstances, the cause of a difference may not be
identifiable.
EXAMPLE 8.2
RECONCILIATION OF REPORTED COST TO AUDITED COST
Office
Machinery
Equip.
Reported Cost (FYE 2002)
$ 100,000
Audited Cost (FYE 2002)
Difference
Compute
rs
Fixtures
Total
$
25,000
0
$
25,000
$
150,00
0
120,000
20,000
5,000
25,000
170,00
0
$ 20,000
($
5,000)
$ 5,000
$ 10,000
$ 5,000
$
0
$
20,000
Difference due to:
Unreported freight & installation
Misclassified equipment
(5,000)
Exempt software
(5,000)
$
15,000
5,000
0
(5,000)
Unrecorded assets acquired and
received prior to lien date
10,000
10,000
Total Difference
$ 20,000
($
5,000)
$ 5,000
$
0
$
20,000
A U D I T E D VALUE
Once the auditor-appraiser has determined through the audit process that all assessable property has been
reported on the property statement or identified as having escaped assessment or identified as having been
assessed in error, an audited value for each class of property is estimated and/or a total audited value (of
all these classes) is computed. The auditor-appraiser should determine the best approach to utilize in the
valuation process. Most often this is the cost approach and mass appraisal techniques; however, the audit
process may disclose other relevant information that may lead the auditor-appraiser to consider a valuation
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method other than the cost approach (i.e., comparative sales or income approach) or to consider
obsolescence factors (functional, technological, or external) in addition to valuation techniques already
used. The audit process is an opportunity to arrive at or confirm that the assessable value is as close as
possible to the constitutionally-mandated value. For a thorough discussion of value see Chapter 4.
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C O M P A R E A U D I T E D V A L U E T O A S S E S S E D VALUE
The audited value is compared to the original assessed (enrolled) value. The difference determines the net
value change (escape assessment or correction) appropriate for that year.286 Following is an example of a
format used for this comparison:
EXAMPLE 8.3 ASSESSMENT YEAR XXXX
As Enrolled
Asset
Cost
Per Audit
Full
Value
Cost
Difference
Full
Value
Cost
Full
Value
Supplies
CIP
Machinery/Equipment
Office Equipment
Other Equipment
Tools, Molds, Dies
Computer Related
Real Property (except
fixtures)
Fixtures
Total
(1)
(1) Ties to original Tax Bill
F I N A L P R O D U C T : A U D I T W O R K PAPERS
Every audit, regardless of its complexity or its size, should contain certain basic information in the form of
working papers that flow logically. These working papers include schedules of analysis and supporting
documents that are a summary of the events of the audit and a summary of the audit findings. Without
organization, the audit cannot be used by the auditor, by a reviewer, by the assessee, or by others to ensure
that the audit results are reasonable and for purposes of appraising the property in the future.
Minimum contents of an audit should include (1) a table of contents, (2) a summary of findings,
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(3) audit checklist, (4) a written narrative summarizing the events and audit process, and (5) other
working papers. The format and/or order of these documents should be determined by each individual
county, but should be consistent for each audit within that county.
T A B L E O F CONTENTS
A table of contents, with a description of the audit documents and their corresponding page numbers,
should be included for quick and easy reference especially on the more complex audits.
286
Roll procedures for processing escape assessments and corrections are discussed in Chapter 9.
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S U M M A R Y O F FINDINGS
A summary of findings should be included in the first few pages of an audit. This is where the audited
cost and value are compared with the original cost and value, and the net differences (escapes, correction,
or refunds) are noted for each year audited.
A U D I T CHECKLIST
An audit checklist is vital for an audit to be thorough, efficient, and complete. It contains questions
pertinent to the assessee as well as reminders relating to the various segments of the audit. In the case of
an audit that is limited in scope, the checklist clarifies that only specific items were examined. These
reminders may be checked off as covered. A sample checklist is included in Appendix E of this manual.
A U D I T NARRATIVE
The audit narrative is a key feature of an audit in that it allows the audit to be quickly reviewed or used by
others (users may include the audit supervisor, the assessee, another auditor or appraiser, the appeals
board, etc.) in the future. It details and explains the summary of findings (including the areas of
discrepancy and their causes), the auditor's conclusions as a result of the findings, and the
recommendations made for or against penalties. The narrative must describe in sufficient detail the work
performed, and the auditing standards and procedures used to support the conclusion(s). All of these facts
must be presented in a concise manner without eliminating significant substantive matter, and should
logically follow the sequence of the working papers. It is particularly important to report clearly any
unusual adjustment to cost or valuation procedures to guide the assessee and appraisers for making future
reporting and assessments.
O T H E R W O R K I N G PAPERS
Other working papers included in an audit package will consist of all documents necessary to support the
information on the summary sheets and in the narrative to make the audit complete. These papers will
differ from county to county and even between audits. But in all cases, they serve to:
•
Provide support for the audit report
•
Aid in the planning, performance, and review of audits
•
Document whether the audit objectives were achieved
•
Provide support in the event that an assessee disputes or appeals
•
Demonstrate compliance with property tax laws and state guidelines
•
Provide clear directions on adjustments made to costs, for trade level, for obsolescence,
and other items so that problems encountered in the audit are less likely to be repeated by the assessee
and/or assessor's staff.
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Audit working papers should be complete and include support for all audit conclusions reached. Among
other things, audit working papers may include:
•
Audit contact person, location and date of the audit
•
Audit report and assessee responses
•
Control questionnaires, flowcharts, checklists, and narratives
•
Value calculations, assumptions, and conclusions
•
Analysis and tests of transactions, processes, and account balances (i.e.,
spreadsheets developed by the auditor)
•
Copies of depreciation schedules (or asset lists), invoices, etc.
•
Sampling method utilized
•
Audit correspondence if it documents audit conclusions reached
•
Information about operating and financial policies
•
Planning documents and audit programs
•
Notes resulting from interviews
Regardless of the type of papers included in this section, the audit should be logically organized and, if
lengthy, clearly indexed. A reader should be able to follow the progression and use the audit to determine
how the final conclusion was reached.
R E V I E W B Y SUPERVISOR
After the fieldwork is completed and the audit write-up is finalized, the audit is submitted to an
appropriate reviewer for verification of technical and legal correctness. The audit report, audit findings,
and all working papers are reviewed to ensure that the proper audit procedures have been performed, and
that the findings are supported by evidence and substantiating documents. Upon completion of review, the
supervisor will return the audit for further explanations or corrections deemed necessary. At this point,
the audit is essentially complete. The next step is to notify the assessee of findings, and process roll
corrections.
N O T I F Y A S S E S S E E O F FINDINGS
Pursuant to Rule 191 and section 469(b)(1), the assessor is required to notify the assessee, in writing, of
audit results "with respect to data that would alter any previously enrolled assessment." Rule 305.3
requires the assessor to notify the assessee in writing if the audit discloses property subject to an escape
assessment. Additionally, section 408(e)(1) permits the assessee or representative "to inspect or copy all
information, documents, and records, including auditors' narrations and workpapers…".
Audit findings should include an explanation of differences found, problems identified, and the net result,
if any. If there are differences that would change the previously enrolled assessment, the findings should
include an audit summary, similar to the one in Example 8.3, which shows a
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comparison between the original full value assessment of all classifications of equipment and
improvements at the location as assessed per the original tax bill, to the audited full value of these
classifications of equipment and improvements. In addition, if any individual item was underassessed or
not assessed, the audit findings must disclose that escape even in situations when the escape is offset by an
overassessment of other property. Property subject to an escape assessment is defined in Rule 305.3 as
follows:
"Property subject to an escape assessment" means any individual item of a assessee's property that was
underassessed or not assessed at all when the assessor made the original assessment of the assessee's
property, and which has not been previously equalized by an appeals board, regardless of whether the
assessor actually makes or enrolls an escape assessment. Property is subject to an escape assessment even
if the audit discloses an overassessment of another portion of an item of the property, and the amount of
the underassessment could be offset completely by the amount of overassessment. If the audit discloses
that any property was subject to an escape assessment, the assessor shall include that fact as a finding
presented to the taxpayer as required by Rule 191. If no such finding is made by the assessor, the taxpayer
may file an application and present evidence to the board of the existence and disclosure of property
subject to escape assessment. If the board determines that property subject to escape assessment was
disclosed as a result of an audit, the board shall permit the taxpayer's section 469 appeal.
As indicated earlier, the summary and/or description of property subject to an escape assessment shall be
communicated in writing to the taxpayer. Where an escape assessment applies, a Notice of Proposed
Escape Assessment must also be sent at least 10 days prior to entry on the roll as required by section
531.8.287
Rule 191 states, in pertinent part, as follows:
After having considered the results of the audit, including discussions with and written comments of the
taxpayer, the assessor shall inform the taxpayer of his conclusions as to the value of the property and may
(1) cause an escape assessment to be made, (2) make an assessment subject to penalty, or (3) inform the
taxpayer of his right to a cancellation of assessment or refund of taxes.288
It is not required under the rule or statutes, but it is advisable for the auditor-appraiser to explain the audit
findings and conclusions to the assessee and/or his or her agent in some situations.
The assessee then has the option to agree, dispute, or request amendment to the audit. When the assessee
agrees to the audit findings, roll corrections are processed as necessary. When the
287
See Chapter 9 for more discussion of section 531.8.
288
Rule 191.
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assessee disputes the findings, the assessee and the assessor should try to (and in some cases can) resolve
areas of disagreement before the audit results are enrolled.
A P P E A L A F T E R A N AUDIT
In the case where disagreements cannot be resolved and the audit discloses property subject to an escape,
the assessee may file an application for changed assessment.289 Rule 305.3(a) states:
In addition to any rights of appeal of escape or supplemental assessments as described in Rule 305(d)(2)
of this subchapter, if the result of an audit discloses property subject to an escape assessment for any year
covered by the audit, then, pursuant to section 1605 of the Revenue and Taxation Code, an application
may be filed for review, equalization, and adjustment of the original assessment of all property of the
assessee at the location of the profession, trade, or business for that year, except any property that has
previously been equalized for the year in question. (Italics added.)
If the auditor discovers property subject to an escape assessment, that fact must be disclosed to the
assessee. Property subject to an escape assessment means "any individual item of the assessee's property
that was underassessed or not assessed at all when the assessor made the original assessment of the
assessee's property, and which has not been previously equalized by an appeals board, regardless of
whether the assessor actually makes or enrolls an escape assessment."290 Property subject to an escape
assessment in terms of "not assessed at all" is self- explanatory. Property subject to an escape assessment
in terms of an "underassessment" may be due to
•
misclassification of the property by the assessee that resulted in an underassessment,
•
the reported cost of the property did not include all market costs, both direct and
indirect, necessary to purchase or construct equipment and make it ready for its intended use, or
•
a processing error by the assessor's staff that resulted in an underassessment.
If the audit discloses property subject to an escape assessment but an escape assessment is not made due to
an offset of an overassessment, the assessee has the right to file an assessment appeal for the original
assessment of all property of the assessee at that location for the year that property was subject to an
escape assessment. If the assessor does not present audit work papers to the assessee illustrating that the
audit disclosed property subject to an escape assessment, the assessee may present such evidence to the
appeals board so the board may determine whether it has jurisdiction to hear the matter.
289
See sections 469 and 1605, and Rule 305.3 for information pertaining to filing an application for appeal following an audit.
290
Rule 305.3(b)(2). Property shall be deemed previously equalized for the year in question only if the board previously made
a final determination of full value for that item, category, or class of property that was the subject of an assessment appeals
hearing or was the subject of a stipulated agreement approved by the board and specifically identified. (Rule 305.3(b)(7)).
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"'All property of the assessee' means any property, real or personal, assessed to the assessee, or the
assessee's statutory or legal predecessor in interest, at the location of the profession, trade, or business for
the year of the audit."291 If computer equipment is discovered (through an audit) that was not previously
assessed and the assessee owned the personal property and fixtures at the location audited, the assessee
has the right to appeal the original assessment of the personal property and fixtures. If the assessee did
not own and was not assessed property taxes for the land and building, he/she does not have the right to
appeal the original assessment of the land and building.292
The definition of location is as follows:
"Location of the profession, trade, or business" means a site, as determined by the board, where the
property subject to the escape assessment is located. Site includes all property within the same appraisal
unit as the property that is subject to escape assessment.
Site also includes other property not within the same appraisal unit as the property that is subject to escape
assessment, when the other property and the property that escaped assessment function as part of the same
economic unit of the profession, trade, or business. A "location of the profession, trade, or business" may
include multiple parcels of real property, noncontiguous parcels, parcels with separate addressees, and
parcels in separate revenue districts within the county. (Italics added.)293
Mandatory audits must be completed at least once in each four-year period. Typically, when
nonmandatory audits are conducted, a four-year audit is also completed. In situations when the audit
(mandatory or nonmandatory) discloses property subject to an escape assessment, the assessee can only
file an assessment appeal (on the original assessment of all property of the assessee at the location) for the
year that the property escaped assessment, not all years covered in the audit period (unless property
escaped assessment in all years).294
N O T I C E F O R F I L I N G A N APPLICATION
If the results from an audit disclose property subject to an escape assessment, an application must be filed
with the clerk within 60 days of the date the notice is mailed to the assessee. The mailing date of the
notice is the date printed on the notice or the postmark on the notice, whichever is later. The notice
necessary for filing an application is dependent on whether the assessor makes an escape assessment and
whether the escape assessment is enrolled.
291
Rule 305.3(b)(5).
292
See Rule 305.3(c) examples 1 and 2 for more information on who may file an appeal after an audit.
293
Rule 305.3(b)(6). In addition, Rule 305.3(e), examples 3, 4, and 5 provide clarification in regards to what is meant by
"location of the profession, trade, or business."
294
In addition, if the assessor discovers property that escaped assessment but not through an audit, the assessee can not
appeal the original assessed value of all property at the location. The right to appeal the original assessment of all property of
the assessee at the location applies only when property subject to an escape assessment is discovered through an audit.
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•
If an escape assessment is enrolled by counties of the first class or counties that have
adopted a resolution pursuant to section 1605(c), the notice is the tax bill. A formal appeal must be filed
within 60 days of the date of mailing printed on the tax bill or the postmark date on the envelope in
which the tax bill was mailed, whichever is later.
•
If an escape assessment is enrolled by counties that are not counties of the first class and
not a county that adopted a resolution pursuant to section 1605(c), the notice of escape assessment
pursuant to section 534 shall serve as the notice.295 A formal appeal must be filed within 60 days after
the date of the notice or the postmark date on the envelope in which the notice was mailed, whichever
is later.
•
If an escape assessment is not enrolled, the notice shall be the audit results showing the
property subject to an escape assessment. A formal appeal must be filed within 60 days after the date
noted on the audit results or the postmark date on the envelope in which the audit results were mailed,
whichever is later.
P R O C E S S I N G R O L L CHANGES
Roll changes are the final step in the audit process. As discussed earlier in the chapter, escape assessments
or corrections must normally be completed within four years after July 1 of the assessment year the
property escaped assessment or otherwise pursuant to sections 532 and
532.1. They must also be processed at the tax rate applicable to the year they should have been originally
assessed. Chapter 9 discusses this topic.
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295
The notice given by the assessor as required by section 531.8 shall not serve as the notice required for filing an application
for changed assessment.
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C HAPTER 9: R OLL PROCEDURES
IDENTIFYING ROLL ERRORS
For a wide variety of reasons, the initial assessment roll inevitably contains errors. Common errors
include errors in value judgment, "clerical" (calculation) errors, errors caused by the failure of property
owners to report correctly (or to report at all), and various misunderstandings. Typical examples specific
to the business division include:
•
A property statement disclosing information erroneously omitted in previous year(s)
(either by the assessee when reported or by the assessor when processing)
•
An audit resulting in a net change (increase or decrease) in assessed value
•
An assessee failing to inform the assessor that a business was closed and/or assets were
disposed of prior to the lien date
•
An assessor discovering a business owning taxable property after the initial year of
operation and assessability
Such errors result in overassessments, underassessments, misclassifications, assessments to the wrong
assessees, assessments assigned to the wrong tax-rate jurisdictions, and other problems that result in
incorrect assessments.
In general, California law provides procedures for correcting errors and omissions on the assessment roll,
regardless of the cause of the error or omission and regardless of whether the error resulted in an
overassessment or an underassessment. If the value of property that should be on the roll is determined to
be different than the enrolled value (an audit resulting in a net increase, for example), the enrolled value
must be corrected according to statutory provisions. Both the limitation on time (i.e., statute of
limitations), if applicable, and the procedure for making a correction vary greatly according to the nature
and the cause of the error. The procedures set forth in the statutes must be followed.
E SCAPE ASSESSMENTS
An escape assessment is an assessment made after the completion of the regular assessment roll, as an
addition to that roll. The regular assessment roll is complete after the assessor has certified the completion
of the local roll prepared pursuant to section 601.296 An escape assessment is any addition to that roll
regardless of the reason.
Section 531 requires the assessor to make an escape assessment if (1) the assessee does not file a property
statement and the result is no assessment, or (2) upon discovery of any other
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296
Escape assessments for state assessed properties may either be added to the fiscal year in which it is discovered or
included with the assessments for the succeeding fiscal year (section 864).
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underassessment of property. When an escape is based on failure to file a property statement (including
circumstances where the statement is incomplete when filed and returned to the assessee), the assessor is
also required to add penalties and interest to the assessment. Section 531 states:
If any property belonging on the local roll has escaped assessment, the assessor shall assess the property
on discovery at its value on the lien date for the year for which it escaped assessment. It shall be subject to
the tax rate in effect in the year of its escape except as provided in Section 2905 of this code.
Property shall be deemed to have escaped assessment when its owner fails to file a property statement
pursuant to the provisions of Section 441, to the extent that this failure results in no assessment or an
assessment at a valuation lower than would have obtained had the property been properly reported.
Escape assessments made as the result of an owner's failure to file a property statement as herein provided
shall be subject to the penalty and interest imposed by Sections 463 and 506, respectively. This paragraph
shall not constitute a limitation on any other provision of this article.
Escape assessments are also required when it is discovered that an exemption was granted in error,297 and
when the business inventory exemption was incorrectly applied.298 The statutes also provide for escape
assessments when assessees do not provide accurate information requested by the assessor necessary to
compute a valid assessment. When accurate information is available to the assessor that indicates a higher
assessment is required than that originally enrolled, the additional value is enrolled as an escape
assessment. Sections 531.3 and 531.4 both provide for escape of the property incorrectly reported.
Section 531.3 provides, in part:
If the assessor requires an assessee to describe personal property in such detail as shows the cost thereof
but the assessee omits to report the cost of the property accurately, notwithstanding that this information is
available to the assessee, to the extent that this omission on the part of the assessee causes the assessor not
to assess the property or to assess it at a lower valuation than he would enter upon the roll were the cost
reported to him accurately, that portion of the property as to which the cost is unreported, in whole or in
part, shall be assessed as required by law. . . .
Section 531.4 specifically discusses escape assessments in terms of inaccurate property statements. In
part, it reads:
When an assessee files with the assessor a property statement or report on a form prescribed by the board
with respect to property held or used in a profession, trade or business and the statement fails to
report any taxable tangible property
297
Section 531.1.
298
Section 531.5.
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accurately, regardless of whether this information is available to the assessee, to the extent that this failure
causes the assessor not to assess the property or to assess it at a lower valuation than he would enter on the
roll if the property had been reported to him accurately, that portion of the property which is not reported
accurately, in whole or in part, shall be assessed as required by law. (Italics added.)
In addition, both sections 531.3 and 531.4 discuss the application of penalties and interest as provided in
sections 504 and 506. When it is discovered that an additional assessment is required for a previous roll
year, it is important to determine the reason for the missed assessment. For example, the missed
assessment may be due to either an assessor or assessee error. If it is an assessee error, the failure to report
costs accurately may be due to an unintentional mistake or willful misreporting. Provisions in the code
allow for penalties and interest depending in part on the reason for the escape assessment.
T A X R A T E A N D INTEREST
Section 506 indicates the appropriate tax rate and interest to be applied to escape assessments. The
language provides that the tax rate applicable to any escape assessment shall be:
. . . the tax rate to which the property would have been subject if it appeared upon the roll in the year when
it should have been lawfully assessed. To the tax there shall be added interest at the rate of three-fourths
of 1 percent per month from the date or dates the taxes would have become delinquent if they had been
timely assessed to the date the additional assessment is added to the assessment roll.
Basically, the tax rate is the rate of the year of escape, and the delinquency date is the date the taxes would
have become delinquent if the property was reported timely. The date the escape assessment is entered on
the roll (the date of enrollment) is important in terms of the interest computation. The date of enrollment
of the escape is the date the interest computation stops (interest computation starting with delinquency
date if the property was reported and assessed timely). The interest rate is applied for the number of
months from delinquency date to roll entry date (three-fourths of 1 percent per month).
PENALTY
Penalties are applied to escape assessments under certain conditions. If the property statement is not filed
or was not filed timely in accordance with sections 441 and 463, a 10 percent penalty must be applied to
the assessed value. The application of the penalty may only be abated by the county board of equalization
or assessment appeals board. Therefore, if an assessee does not agree with the penalty and wishes to have
the penalty abated, an application for changed assessment (appeal) must be filed.
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A 25 percent penalty may be applied to the assessed value if the assessor discovers that the assessee or
agent willfully concealed information that resulted in a lower assessed value.299 Section 503 provides for
the application of a 75 percent penalty to the assessed value if it is discovered that the property is
underassessed due to a fraudulent act or omission, or fraudulent collusion between the assessee (or the
assessee's agent) and the assessor (or the assessor's deputy). The interest and the penalties (if appropriate)
of the additional assessed value are added to escape assessments calculated on that additional assessed
value.
S T A T U T E O F LIMITATIONS
In most cases, escape assessments must be made within four years after July 1 of the assessment year the
property escaped assessment. This time period is extended to eight years if conditions exist that warrant
the 25 percent penalty application in sections 502 and 504.300
The statutory time period for making an escape assessment is also extended if the assessee and the
assessor agree in writing to extend the time. Section 532.1 in part reads:
If, before the expiration of the period specified in Section 532 for making an escape assessment, the
taxpayer and the assessor have agreed in writing to extend the time for making an assessment, correction,
or claim for refund, the assessment may be made at any time prior to the expiration of the period agreed
upon. The period may be extended by subsequent agreements in writing made before the expiration of the
period previously agreed upon.
This agreement in writing may also be known as a waiver. Each county develops its own form; therefore
the titles of the forms, in addition to the actual agreements, may be different.301 In all cases, however, the
waiver should indicate that it extends the time allowed for making an escape assessment, correction, and
refund. If the waiver does not specifically state that it extends the time for corrections and refunds, then it
only extends the time for making an escape assessment.
N O T I C E O F P R O P O S E D E S C A P E ASSESSMENT
It is required that the assessee be notified using a Notice of Proposed Escape Assessment at least 10 days
prior to the entry of a value on the roll, pursuant to section 531.8. In relevant part, section 531.8 reads:
No escape assessment shall be enrolled under this article before 10 days after the assessor has mailed or
otherwise delivered to the affected taxpayer a "Notice of Proposed Escape Assessment" with respect to
one or more specified tax years.
The intent is to provide assessees with advance notice of an escape assessment before its enrollment,
thereby increasing their opportunity to ask questions and prepare to file an appeal.
299
Sections 502 and 504.
300
Section 532.
301
The form with the agreement that extends the time limitation for processing an escape is not a Board-prescribed form.
The format and title of the form may differ between counties.
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The notice may differ in appearance and content from county to county (as it is not required on a Boardprescribed form), but certain information must be included in order to meet the statutory requirements.
For example, every Notice of Proposed Escape Assessment must show the amount of any escape
assessment as estimated by the assessor; provide a name and phone number of a person at the assessor's
office who is knowledgeable with respect to the proposed escape assessment and to whom the assessee
can voice any concerns, submit additional information, or otherwise discuss the assessment; and have a
prominent heading stating the statutory title of the Notice. This notice must be sent by the assessor prior
to enrolling any escape. Absent such notice, no escape assessment may be levied and if levied is invalid
and void. When an audit results in escape assessments, the Notice of Proposed Escape Assessment may be
attached to audit findings or may be sent independently along with other sources of information.
E N T R Y O N ROLL
When an escape assessment is made, the entry on the roll must reference the year the property escaped
assessment and applicable sections of the Revenue and Taxation Code. Section 533 gives specific
wording that must be entered on the roll. In part, the section states:
. . . if this is not the roll for the assessment year in which the property escaped assessment, the entry shall
be followed with "Escaped assessment for year 19 pursuant to Sections of the Revenue and Taxation
Code."
Since appropriate sections of the Revenue and Taxation Code must be referenced when the entry on the
roll is made, it is important to determine if the missed assessment was due to an assessee error or an
assessor error and/or concealment or fraud. The cause of the escape determines the appropriate section
references.
As indicated earlier, an escape assessment shall not be enrolled unless the assessor has mailed or delivered
a Notice of Proposed Escape Assessment at least 10 days prior to the entry of the value on the roll.302
After an escape assessment is enrolled, section 534 requires that the assessor mail a Board-prescribed
notice to the assessee to notify the assessee that the escape assessment was enrolled.303
R OLL CORRECTIONS
Errors and omissions not involving the assessor's value judgment must be corrected within four years after
making the original assessment. A change to the original entry on the assessment roll is a roll correction
when:
•
A clerical error is caused by the assessor or another county official, whether the
error resulted in an increase or a decrease to the original entry on the roll (section 4831).
302
Section 531.8.
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See section 534, Rule 305.3, and the section titled Notice for Filing an Application in Chapter 8 for more
information.
303
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•
A clerical error is caused by an assessee, based on a defect of description or other
information discovered upon an audit, and the error resulted in an assessment at a higher valuation than
would have otherwise been entered on the roll (section 4831.5).304
Roll corrections are different from escape assessments in several respects.
•
No penalties are involved with roll corrections.
•
While escape assessments may result from a roll correction, a roll correction cannot be
made for escape assessments when caused by the assessee's failure to report the information required
under section 441.
•
Roll corrections are limited to clerical errors only, and cannot be made for errors or
omissions involving the exercise of value judgment except in limited circumstances per section 4831(b).
•
The roll correction could result in a refund to the assessee, and if based on an assessor
error, the assessee is entitled to interest.305
REFUNDS
If a roll correction decreases the amount of taxes because of an error by either the assessee or the assessor,
a refund of the overpayment of taxes is possible. Refunds of taxes paid are authorized solely under the
conditions described in sections 5096 through 5180. While a thorough discussion of these sections
(sections 5096 through 5180) is not within the realm of this manual, it is important to note that it is the
assessor's duty to deliver the corrected entry to the auditor, who is required by section 4834 to implement
correction procedures. The tax collector is required to notify the assessee of the right to file a refund
claim.
It may be appropriate for taxes to be offset by the auditor and the tax collector pursuant to section 533. In
part, the section reads:
If the assessments are made as a result of an audit which discloses that property assessed to the party
audited has been incorrectly assessed either for a past tax year for which taxes have been paid and a claim
for refund is not barred by Section 5097 or for any tax year for which the taxes are unpaid, the tax refunds
resulting from the incorrect assessments shall be an offset against proposed tax liabilities, including
accumulated penalties and interest, resulting from escaped assessments for any tax year covered by the
audit.
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304
Assessee error that results with an addition to the roll is an escape assessment, see sections 501 to 534.
305
Section 5151.
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B ASE Y EAR V ALUE CORRECTIONS
Although applicable only to real property (including fixtures) valued under article XIII A, it is important
to make the distinction between roll corrections and base year value corrections. Roll corrections and
base year value corrections are not identical.
Section 51.5 provides authority for assessors to make corrections to a base year value whenever it is
discovered that a base year value does not reflect applicable constitutional or statutory valuation standards
or the base year value was omitted. If an error or omission involves the exercise of the assessor's
judgment as to value, the error can be corrected only if it is placed on the current roll or roll being
prepared within four years after July 1 of the assessment year for which the base year value was
established. Escape assessments, refunds or the cancellations of taxes are authorized where appropriate as
the result of a base year value correction.
S UMMARY OF R EVENUE AND T AXATI ON C ODE S ECTI ONS R EGARDI NG R OLL PROCEDURES
The following table represents a summary of the Revenue and Taxation Code sections referenced
regarding roll procedures (escape assessments, corrections, refunds, and base year value corrections). This
table is supplied as a reference tool only. It does not quote the sections listed, but rather provides a brief
synopsis of each section for quick reference to the authoritative law on each subject.
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TABLE 9A
REVENUE AND TAXATION CODE SECTIONS APPLICABLE TO ROLL PROCEDURES
R&T Reference
AH 504
Remarks
Section 463
Penalty for failure to file statement. A penalty, 10 percent of assessed value, is
applied when a property statement is not filed in accordance with filing
requirements and deadlines as identified in sections 441 and 463, respectively.
The penalty may be applied to the regular roll, or applied to additions made to the
roll after originally completed and published. It may only be abated by the county
board of equalization or assessment appeals board.
Section 502
Concealment, etc., of tangible personal property. A penalty, 25 percent of the
additional assessed value as provided in section 504, is applied if the taxpayer or
agent willfully conceals information that results with a lower assessed value. The
penalty is applied to additions made to the roll after originally completed and
published.
Section 503
Fraudulent act, collusion, causing escape of taxable tangible property. A penalty,
75 percent of the additional assessed value, is applied if through a fraudulent act or
omission, or fraudulent collusion, the property is underassessed in whole or in
part. The penalty is applied to additions made to the roll after originally completed
and published.
Section 504
Penalty assessments; amounts. Indicates percentage of penalty added if required
per section 502 (25 percent).
Section 506
Tax rate applicable, interest. The tax rate is the rate of the year of escape. Apply
interest for the number of months from delinquency date to roll entry date.
Interest is applied at the rate of three-fourths of 1 percent per month from the date
the taxes would have become delinquent if filed timely.
Section 531
Escaped Property. Property is deemed to have escaped assessment under this
section when its owner fails to file a property statement per section 441 resulting
in no assessment or an underassessment. No willful or fraudulent act is involved.
Section 531.1
Escaped property, incorrect exemption. If it is discovered that an exemption
was incorrectly allowed, an escape assessment shall be made.
Section 531.3
Escaped personal property, failure to report cost accurately. Escape assessment
due to inaccurate report of personal property cost when assessor required a cost
report.
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Section 531.4
Escaped business property, inaccurate statement or report. Escape assessment
due to inaccurate business property statement or report.
Section 531.5
Escaped property, business inventory exemption.
Escape assessment due to
the application of an incorrect business inventory exemption.
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TABLE 9A
REVENUE AND TAXATION CODE SECTIONS APPLICABLE TO ROLL PROCEDURES
R&T Reference
Remarks
Section 531.8
Notice of Proposed Escape Assessment. Requires 10 day notice to taxpayer prior
to enrollment of escape assessment.
Section 532
Statute of limitations. Eight year statute of limitations where 25 percent (sections
502 and 504) nondisclosure or fraud penalty applies. Four year statute of
limitations where no penalty involved.
Section 532.1
Extension of time for making escape assessment. Extends the time period
specified in section 532 for making an escape assessment, correction, or claim for
refund. (Extension only applies to corrections and refunds if specifically stated in
the written agreement between the taxpayer and assessor.)
Section 533
Entry on roll. For assessments made pursuant to article 3 or 4 (commencing with
sections 501 and 531 respectively), the entry on the roll is to state: "Escaped
assessment for year 19
pursuant to Sections
of the Revenue
and Taxation Code."
If the assessments are made as a result of an audit which discloses that property
assessed to the party audited has been incorrectly assessed either for a past tax year
for which taxes have been paid and a claim for refund is not barred by section
5097 or for any tax year for which the taxes are unpaid, the tax refunds resulting
from the incorrect assessments shall be an offset against proposed tax liabilities,
including accumulated penalties and interest, resulting from escaped assessments
for any tax year covered by the audit.
AH 504
Section 534
Procedure after assessment. Tax rate to be applied: same rate as used for year of
escape. (See also section 506.) Notification to the assessee of an escape
assessment shall be on a form prescribed by the State Board of Equalization.
Section 4831
Incorrect entries; transfers to unsecured roll. Any assessor error. Result of
an incorrect entry on the roll or clerical error.
Section 4831.5
Correction of errors caused by the assessee. Correction to the roll when
information furnished to the assessor resulted with an overassessment of the
property.
Sections 50965180
Refunds. Various code sections related to refunds.
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October 2002
Errors and omissions in determination of base year value. Provides authority
to correct base year values.
Sections 830,
862
Failure to File Statement, Escape Assessments of State-Assessed Property; Errors
on the Board Roll. Code sections governing roll changes for state-assessed
property.
– 866, 4876 –
4880
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Section 51.5
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C HAPTER 10: M ORGAN P ROPERTY T AXPAYERS ' B ILL OF R IGHTS
LEGISLATIVE INTENT
The Morgan Property Taxpayers' Bill of Rights, sections 5900 through 5911, was designed and added to
the Code to promote fair administration of property tax in regard to the rights and duties of taxpayers, and
specifically in reference to taxpayer questions, appeals, and roll changes when errors have occurred.306
The Legislature specifically stated its intent in section 5911 by stating:
It is the intent of the Legislature in enacting this part to ensure that:
(a)
Taxpayers are provided fair and understandable explanations of their rights and
duties with respect to property taxation, prompt resolution of legitimate questions and appeals
regarding their property taxes, and prompt corrections when errors have occurred in property tax
assessments.
(b)
The board designate a taxpayer's advocate position independent of, but not
duplicative of, the board's existing property tax programs, to be specifically responsible for reviewing
property tax matters from the viewpoint of the taxpayer, and to review and report on, and to
recommend to the board's executive officer any necessary changes with respect to, property tax matters
as described in this part.
As described in subdivision (b) above, the Property Taxpayers' Rights Advocate is responsible for
implementing the Taxpayers' Bill of Rights. The advocate is appointed by the Board and serves to review
the effectiveness of the Board's property tax programs, including those affecting local assessment, from
the taxpayers' viewpoint, by (1) providing clearly-written informational materials to property taxpayers,
(2) prompt and adequate resolution of inquiries, complaints, and other problems, and (3) identification of
areas of recurring conflict between taxpayers and property tax assessment officials.
Related specifically to personal property (and fixtures) and roll procedures, the Taxpayers' Bill of Rights
initiated legislation in three other important sections of the code: section 531.8, Notice of Proposed
Escape Assessment, requiring additional taxpayer notice of escape assessments, section 469, Audit of
profession, trade, or business, and section 408, Assessor's records, dealing with records available to the
assessee.
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306
Effective January 1, 1994.
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N OTI CE OF P ROPOSED E SCAPE ASSESSMENT
As discussed earlier, section 531.8 was added January 1, 1994 with the Taxpayers' Bill of Rights to aid in
the taxpayers' understanding of their rights and duties with respect to property taxation, and to promote
fairness. This notice must be sent by the assessor prior to enrolling any escape assessment.
R ECORDS A VAI LABLE TO THE ASSESSEE
The rights of taxpayers and the public to inspect public records of all types are prescribed by law, the
majority of which is found in the Public Records Act (Government Code sections 6250- 6260). In
Government Code section 6254(i), the Public Records Act prohibits from public disclosure any taxpayer
information which is received in confidence and the disclosure of which would result in unfair competitive
disadvantage to the taxpayer.
However, the Legislature has adopted specific Revenue and Taxation Code provisions (sections 408408.3) granting both the public at large and assessees rights to inspect specific types of information in the
assessors' records. As to the public rights, the assessment roll and its index, owners' maps and assessors'
maps, property characteristic information, claims for exemption (except homeowner's) and other forms
must be disclosed. For the assessee or his/her representative, all information related to the appraisal and
assessment of his/her own property, including audit and roll change information, must be disclosed.
Under section 408(e):
. . . the assessor shall, upon request of an assessee of property, or his or her designated representative,
permit the assessee or representative to inspect or copy all information, documents, and records, including
auditors' narrations and workpapers. . . relating to the appraisal and assessment of the assessee's property,
and any penalties and interest 307
As part of the amendments to the Taxpayers' Bill of Rights, section 408 was expanded, increasing the
taxpayers' rights to inspect or copy various types of documents including "auditors' narrations and work
papers, whether or not required to be kept or prepared by the assessor."
Pursuant to further amendments under the Taxpayers' Bill of Rights, section 469 was also modified to
guarantee the taxpayer a copy of the assessor's findings upon the completion of an audit. Upon
completion of an audit of the assessee's book and records, the assessee shall be given the assessor's
findings in writing with respect to data that would alter any previously enrolled assessment. The assessor
must provide information under section 469, whether or not the taxpayer requests the information as
required under section 408. In addition, "if the audit discloses that any property was subject to an escape
assessment, the assessor shall include that
307
Section 408(e).
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fact as a finding presented to the taxpayer as required by Rule 191."308 (See the discussion in Chapter 8
under the heading "Appeal after an Audit.")
R I GHT TO APPEAL
The assessee has two means of protesting a property tax assessment. The first is to contact the assessor
(i.e., the appraiser or the auditor-appraiser) prior to enrollment of the assessment and explain why they
believe the value is incorrect. Once enrolled, the assessee's option is to file an application for assessment
appeal. An assessee may request this application and information regarding the appeals process from
either the assessor or the clerk of the county board of supervisors.
An appeal may be filed on an assessment only within the applicable filing periods, according to statutory
provisions related to the particular assessment in question.309 Whether the property be real or personal
property, in general appeal applications for assessments on the regular assessment roll310 must be filed
with the county assessment appeals board as described in section 1603. Assessments made outside the
regular assessment period (usually based on an escape assessment due to audit or late filings of property
statements) must be appealed according to statutory provisions found in sections 469 and 1605. Pursuant
to these sections, an appeal must be filed no later than 60 days after the date of mailing printed on the
notice or the postmark date, whichever is later.311
When an application for assessment appeal is filed timely regarding an escape assessment resulting from
an audit, all property owned for the year of escape by an assessee at the location is opened up for appeal.
This includes the real property on which the personal property is located, even if the original appeal
deadline was missed (unless previously equalized). The following provision in section 1605(e) states:
If an audit of the books and records of any profession, trade, or business pursuant to Section 469 discloses
property subject to an escaped assessment for any year, then the original assessment of all property of the
assessee at the location of the profession, trade, or business for that year shall be subject to review,
equalization and adjustment by the county board of equalization or assessment appeals board. .
. .312 (Italics added.)
308
Rule 305.3(b)(2).
309
An appeal cannot be filed at the county level on a claim for exemption. A county assessment appeals board does not have
authority to grant or deny an exemption (Rule 302).
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The regular assessment roll is that roll processed during the period from January 1 to and including July 1 of the calendar
year in which the assessment should have been enrolled if it had been timely made (section 1605(f)).
310
311
Section 1605. See Rule 305.3 for more information on Notice for Filing an Application.
312
Section 1605(e), in part.
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The legislative intent of this provision is to afford the assessee a similar right to "open up" past
assessments as the assessor has.313
For more information regarding assessment appeals and the statutory provisions governing the appeals
process and procedures, refer to the Assessment Appeals Manual published by the Board of Equalization.
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313
Section 469.
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Appendix A
A PPENDIX A: I MPROVEMENTS AS S TRUCTURE I TEMS VERSUS
FIXTURES
The following list includes a variety of improvements and their typical classifications as structure items
or fixtures. As discussed in the text, an improvement will be classified as a structure item when its
primary use or purpose is for housing or accommodation of personnel, personalty, or fixtures, or when the
improvement has no direct application to the process or function of the trade, industry, or profession. An
improvement will be classified as a fixture if its use or purpose directly applies to or augments the process
or function of a trade, industry, or profession. Items which have a dual purpose will be classified
according to their primary purpose.
It must be emphasized that the listing is illustrative as a guide only. Proper classification as structure item
or fixture is determined according to the actual use or purpose of the property and intent as "reasonably
manifested by outward appearances." Appraisal responsibility is determined by an assessor's internal
procedures.
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Appendix A
STRUCTURE ITEMS
FIXTURES
Air conditioning—office and building cooling
Air conditioning—process cooling
Auxiliary power generation equipment—for
building purposes
Air lines
Awnings
or production purposes
Auxiliary power generation equipment—for trade
Batch plants—buildings, fences, paving, yard lights,
and spur tracks
Back bars
Boilers—office and building heating
Batch plant—scales, silos, hoppers, bins,
machinery
Building renovations
Boilers—for manufacturing process
Butane and propane installations—used for
heating buildings
Bowling lanes
Car washes—all buildings, canopies, interior and
exterior walls, fences, paving, and normal plumbing
Burglar alarm systems
Carpets and floor coverings affixed to floor— wallto-wall carpeting and specially installed strip or area
carpeting, tile, terrazzo coverings
Butane and propane installations—used for trade or production
purposes
Central heating and cooling plants
Car washes—special plumbing, wiring, and car
washing equipment
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Appendix A
Chutes—built-in
Coin-operated laundries—restroom, sanitary
plumbing fixtures
Compressors—air
Conveyors—for moving materials and products
Conveyors—for moving people
process
Cooling towers—other than used in a trade or
production process
Cooling towers—used in a trade or production
Counters
Crane ways
Cranes—traveling
Dock elevators
production process
Environmental control devices—used in the
Elevators—including machinery and power wiring
AH 504
Fans and ducts—used for processing
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Appendix A
STRUCTURE ITEMS
FIXTURES
Environmental control devices—if an integral part of
the structure
Fences and railings—inside of buildings
Escalators
Furnaces—process
External window coverings
Furnishings—built-in, i.e., wall-hung desks
Fans and ducts—which are part of an air circulation
or exhaust system for the building
Heating—boilers—for the manufacturing process
Fences—outside of building
Hoists
Flagpoles
Incinerators—commercial and industrial
Heating—boilers—used in office or building heating
Ice dispensers—coin operated
Kiosk—permanently attached
equipment
Kilns—beehive, tunnel, or cylinder type, and
Movie sets—which are a complete building
Kilns—lumber
Paint spray rooms—if an integral part of the
building
Laundromat—plumbing, wiring, and concrete work for equipment
Parking lot gates
commercial or industrial process
Lighting fixtures—lighting associated with a
Partitions—floor to ceiling
normal flooring or foundation
Machinery foundations and pits—not part of
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Appendix A
Pipelines and pipe supports—used to convey air,
water, steam, oil, or gas to operate the facilities in
a building
Miniature golf courses
Pits—not used in the trade or process
Movie sets—which are not a complete building
Pneumatic tube systems
Ovens
Radiators—steam
Paint spray booths
Railroad spurs
Partitions—annexed—less than floor to ceiling
Refrigeration systems—that are an integral part
of the building
AH 504
Pipelines and pipe supports—used to convey air, water, steam, oil, or
gas to equipment used in the production process
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Appendix A
STRUCTURE ITEMS
FIXTURES
Refrigerators—walk in—which are an integral part of
the building—excluding operating equipment
Pits—used as wine and sugar clarifiers, skimming pits, grease
pits, sump pits, and pits used to house machinery in the
manufacturing
Restaurants—rough plumbing to fixtures
Plumbing—special purpose
Renovations to building structures
Power wiring, switch gear, and power panels—
for manufacturing process
Security—Banks and Financial Fire alarm
systems
Refrigeration systems—that are not an integral part of the building
Safes-embedded
Night depository (if integral part of building)
Teller cages
Vault alarm system Vaults
Service stations—canopies, paving, sign, pylons
Refrigerators—walk in—unitized—including operating equipment
Shelving—originally designed as integral part of the
building
Restaurant equipment—plumbing fixtures, stainless steel or
galvanized sinks in kitchens, bars, soda fountains, garbage
disposals, dishwashers, hoods, etc.
Shielded or clean rooms—if an integral part of the
building
Roller skating surface
Signs—include supporting structure that forms an
integral part of the building, including sign blades,
pylons, or marquee structures serving as canopies.
Exclude sign cabinet (face) and lettering
Scales—including platform and pit
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Silos or tanks—whose primary function or intent is to
store property for a time period, such as storage tank
farms and grain and liquid petroleum storage
facilities
Security—Banks and Financial
Cameras (surveillance) attached to walls or columns
Drive-up and walk-up windows unitized security type
Night depository (if not an integral part of the building)
Man traps Vault doors
Smog control devices—when attached to
incinerator or building heating plant
AH 504
Service stations—gasoline storage tanks, pumps, air and water wells,
signs
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Appendix A
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Appendix B
A PPENDIX B: C OORDINATION OF L ANDLORD AND L EASEHOLD I MPROVEMENT
A PPRAISALS
DEVELOP AN INTER-DEPARTMENTAL MEMORANDUM FOR COORDINATION
Transferring information between the real property and business property divisions within an assessor's
office can help to avoid duplicate or escape assessment of landlord and leasehold improvements–both of
which may include structure items and fixtures. One method used to track and monitor this transfer of
information in some assessors' offices is an inter-departmental memorandum. This memorandum is sent
between departments (i.e., between the real property division and business division) with a copy of the
improvement source document (e.g., building permit, change in ownership statement, etc.). As shown in
the table below, the memorandum includes three copies: one copy kept by the originator to verify
completion of the assessment, one copy for the real property file, and one copy for the business property
file.
The intent of the memorandum is to provide a complete record of the appraisal, including classification,
valuation, and assessee. It summarizes all appraisal information for the business file and real property
record. The following table illustrates how an inter-departmental memorandum may be used in practice.
EXAMPLE B.1
INTER-DEPARTMENTAL MEMORANDUM
The business property division receives a property statement reporting additions on Schedule B.
After reviewing the property statement, the auditor-appraiser initiates a memorandum to the real
property division addressing these additions.
The originator (auditor-appraiser) keeps the original memorandum (copy #1). Next, the auditorappraiser attaches copies #2 and #3 to a copy of Schedule B and forwards that information to the
real property division. The auditor-appraiser retains the original (copy #1) to track the appraisal of
the improvements.
Using the memorandum and its attachments, the real property appraiser determines any applicable
value changes. After valuing the property, the real property appraiser places copy #2 in the real
property file.
Using the final copy (#3), the real property appraiser notifies the business property division of the
D E S C R I P T I O N O F METHOD
The following steps describe one method of coordinating the appraisal of landlord and leasehold
improvements as it is used by some assessors' offices. Under this method, information regarding landlord
or leasehold improvements is referred to and from the real property and personal property divisions for
evaluation and appropriate action.
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Appendix B
After proper classification, the real property appraiser values the property reported in Columns 1, 3, and 4
(i.e., Structure Items Only, Land Improvements, Land and Land Development), while the auditor-appraiser
values the property reported in Column 2 (i.e., Fixtures Only).314 This method requires that the business
division provides a copy of Schedule B (and the Supplemental Schedule) from the Business Property
Statement to the real property appraiser each year, or whenever a change is reported from the prior year's
schedule.
As discussed above, a memorandum should be attached to this documentation. After a review of the
statement and/or inspection of the property, the real property appraiser notifies the auditor-appraiser
of the action taken (on copy #3 of the memorandum). In the event that the assessee does not correctly
classify the improvements, the real property appraiser's review should include consideration of both nonfixture real property items (Columns 1, 3, and 4) and fixtures (Column 2). Based on a building permit
received earlier in the year, for instance, the real property appraiser may add value to real property,
believing those improvements to be structure items. However, the assessee may report the same
improvements on the property statement as fixtures. If the real property appraiser does not receive a copy
of Schedule B of this statement, and review the costs as they were reported, a duplicate assessment may
occur.
This communication process works both directions. Although the memorandum could originate from
either division, it more often it originates from the business division.
EXAMPLE
Following is an example of an assessment of leasehold improvements using the suggested procedures
outlined above. The example demonstrates only one method to coordinate the assessment of leasehold
improvements; it is not the only proper method.
EXAMPLE B.2
ASSESSMENT OF LEASEHOLD IMPROVEMENTS
In August 2001, a tenant obtained a building permit valued at $60,000 to install restaurant
improvements in a new strip mall. During September 2001, the real property division received a
copy of this building permit. The real property appraiser copied the permit and forwarded it to the
business division with an attached memorandum. Since this was done in a timely manner, a copy of
the permit was in the business file prior to receipt of the Business Property Statement.
In April 2002, the business division received a property statement from the assessee (the tenant)
reporting the actual cost of the improvements as $48,000. The assessee classified and reported all
leasehold improvements as fixtures on Schedule B, Column 2. No items were reported in Columns 1,
3, and 4.
The property statement included a supplemental schedule that broke down the total cost additions
on Schedule B. Following is the list of additions and their cost are shown below:
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Appendix B
314
On Schedule B of the Business Property Statement.
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Appendix B
EXAMPLE B.2 (CONTINUED) SUPPLEMENTAL SCHEDULE (SCHEDULE
B)
Description
Electrical wiring to restaurant equipment
Cost
$ 2,500
Flooring
5,000
Rough plumbing to restaurant equipment
5,000
Walk-in refrigerator
10,000
Store front
2,500
Sign in front of restaurant
500
Interior wall paint
1,000
Light fixtures & ceiling fans
3,500
Stainless steel sink in kitchen
1,000
Booths
10,000
Counters
3,000
Dishwasher
2,500
Hood
1,500
Total
$ 48,000
S T E P 1 : V E R I F I C A T I O N O F COSTS
Since the amount on the building permit did not match the actual cost reported by the business owner, it
was appropriate to verify actual costs. It is important to note when the value indicated on a building
permit varies from the total costs reported on a property statement. In general, this variance may occur
due to several reasons: (1) the tenant may have overestimated the cost of improvements; (2) the landlord
and tenant may have split the cost of the improvements; or (3) the business owner may have
underreported the cost of the leasehold improvements.
In this case, the auditor-appraiser contacted the business owner prior to sending a copy of the property
statement to the real property appraiser. The auditor-appraiser found that the business owner
overestimated the cost of improvements when applying for the permit. Thus, the property statement
represented actual cost.
S T E P 2 : T R A N S F E R O F INFORMATION
The business property division forwarded a memorandum to the real property division with copies of
Schedule B and the supplemental schedule. On the memorandum, the auditor- appraiser referenced (1)
AH 504
238
October 2002
Appendix B
the September 2001 memorandum received from the real property division and (2) the information
received from the assessee in step 1. Utilizing all information available aids in the proper classification of
improvements.
AH 504
239
October 2002
Appendix B
S T E P 3 : CLASSIFICATION
Depending upon the established policy of the assessor's office, either the auditor-appraiser or real property
appraiser may classify the property. For this example, the real property appraiser classified the leasehold
improvements. The real property appraiser classified the property as follows:
EXAMPLE B.3
CLASSIFICATION BY REAL PROPERTY APPRAISER
Cost
Structur
e
Fixture
Electrical wiring to restaurant equipment
$
2,500
Flooring
5,000
Rough plumbing to restaurant equipment
5,000
5,000
Walk-in refrigerator – not integral part of
building
10,000
$ 10,000
Store front
2,500
Sign in front of restaurant
$ 2,500
$ 5,000
2,500
500
500
Interior wall paint
1,000
1,000
Light fixtures and ceiling fans
3,500
3,500
Stainless steel sink in kitchen
1,000
1,000
Booths
10,000
10,000
Counters
3,000
3,000
Dishwasher
2,500
2,500
Hood
1,500
1,500
Total
$
48,000
$12,000
$ 36,000
S T E P 4 : D E T E R M I N A T I O N O F ASSESSEE
In this example, the assessee was determined to be the tenant. As discussed earlier, improvements can be
assessed to either the landlord or the tenant, on either the secured or unsecured roll. Commonly, as in this
example, they are assessed to the party that paid for the improvements.
S T E P 5 : VALUATION
Valuation of Structure Items
AH 504
240
October 2002
Appendix B
After classification, the real property appraiser determined the value of the structure items listed above. If
land improvements, land, and land development were reported (Columns 3 and 4 of Schedule B), the real
property appraiser would have valued these improvements as well.
V A L U A T I O N O F FIXTURES
After valuing the structure items, the real property appraiser forwarded a copy of Schedule B along with
copy #3 of the memorandum—detailing the action taken—to the auditor-appraiser. Using that
information, the auditor-appraiser must then value the fixtures. As discussed earlier, fixtures are real
property; they must be valued, at the lesser of (1) their full cash value or fair
AH 504
241
October 2002
Appendix B
market value or (2) their factored base year value. The auditor-appraiser valued and enrolled the fixtures
as shown below:
EXAMPLE B.4 VALUATION OF FIXTURES
Total 2001 Cost of
Fixtures
Cost
Inde
x
Fact
or
$ 36,000
100
Enrolled Value
Percen
t Good
Factor3
Fair
Market
Value
Indexed Value
(2% Inflation)
.93
$ 33,480
$ 36,720
15
$ 33,480
S T E P 6 : E N R O L L M E N T O F VALUE
In general, the assessed value can be enrolled to either the secured or unsecured roll account depending on
how the assessor's office enrolls leasehold improvements (i.e., on the secured roll to the land and building
owner or on the unsecured roll to the tenant who paid for improvements). As discussed in step 4, the
tenant was determined to be the assessee, both values (structure value and fixture value) were enrolled on
an unsecured account with the business personal property. Since the value of fixtures is used in the
determination of a mandatory audit, separation of the structure and fixture values on the unsecured
account is necessary.
S T E P 7 : C L E A R L Y I D E N T I F Y T H E L E A S E H O L D I M P R O V E M E N T S O N T H E A P P R A I S A L RECORDS
The final step documents the assessment on appraisal records. Notes regarding the leasehold
improvements in both the real property appraisal records and in the business property files will assist in
verification of the assessment(s) and can help to avoid efforts in future assessment years. These notes
summarize the information relied upon during the appraisal and identify the actions taken. The memo(s)
and attached copies of source documents are kept in the appraisal records as support.
AH 504
242
October 2002
Appendix B
315
The appraiser in this example has determined an average 12-year service life for these types of fixtures.
AH 504
243
October 2002
Appendix C
A PPENDIX C: D EFINITION OF S ALES T AX B USINESS C LASSIFICATION C ODES
The following codes are duplicated from the Business Taxes Code Book (section 203.028, pages 2-5
and 2-6) and are provided here to aid the assessor in proper classification of new businesses.
AH 504
Retail Trade Group
Retail Trade Group
01
Women's Apparel
3
0
Home Furnishing Stores
02
Men's Apparel
3
1
Appliance
03
Family Apparel
3
2
Second-Hand Stores
04
Shoe Stores
3
3
Grocery Stores with Beer and Wine
05
Variety Stores
07
Department Stores
09
General Stores
10
News and Magazine Stands
11
Art, Gift and Novelty Stores
12
Sporting Goods and Bicycle
Stores
13
Florist Shops
14
Camera Stores
4
0
Farm and Construction Equipment Stores
15
Music Stores
4
1
Garden Stores
16
Stationery and Book Stores
4
6
Fuel and Ice
17
Jewelry Stores
5
0
Building Material
18
Office, Store, and School
Furniture
5
1
Hardwares
and Equipment Stores
5
Plumbing and Electrical Supply Stores
Licenses "20"
3
4
Grocery Stores with General Liquor
Licenses "21"
3
5
Eating and Drinking Places with Beer and
Wine Licenses "40" or "41"
3
6
Eating and Drinking Places with General
On-Sale Licenses
244
October 2002
Appendix C
2
19
Full-Time Specialty Stores
5
3
Paint, Glass and Wallpaper Stores
20
Grocery Stores without Alcoholic
5
8
Cigarette Vending Machine Operators
Beverages
6
0
New Car Dealers
21
Specialty Food Stores
6
1
Automotive Supply Stores
22
Package Liquor Stores
6
2
Service Stations
24
Eating and Drinking Places
without
6
3
Auto Trailer and Supply Stores
Alcoholic Beverages
6
4
Used Car Dealers
25
Confectionery Stores
6
6
Boat and Motorcycle and Supply Stores
26
Cigar Stores and Stands
6
7
Aircraft and Supply Stores
27
Drug Stores
Non-Store Retailers
AH 504
28
Non-Store Retailers (Full-Time)
29
Part-Time Permittees
245
October 2002
Appendix C
Service Groups
Producers, Manufacturers and Wholesalers
Group
70
9
0
Hotels, Motels and Boarding
Houses without On-Sale General
Farm, Tobacco, Alcoholic Beverages, Food
and Food Processing Equipment
Licenses
9
1
Textile Products with Household Goods
71
Automotive Repair
9
2
Drugs, Chemicals and Allied Products
72
Repair and Hand-Trade Shops
9
3
Motion Pictures, Equipment and Supplies
73
Portrait Studio
9
4
Automotive Vehicles, Trailers, Parts,
75
Hotel with On-Sale General
Equipment and Supplies Other Than
Licenses
Petroleum
76
9
5
Clubs and Places of Amusement
With On-Sale General Licenses
77
Shoe Repair Shops
78
Undertaking Parlors and
Cemeteries
79
Personal Service Shops,
Transportation Equipment Other Than
Automotive
9
6
Petroleum, Petroleum Products, Oil Well
Refining and Service Station Equipment
9
8
Amusement Places without OnSale
Heavy Industrial Equipment and
Miscellaneous Machinery
9
9
General Licenses
Publishers, Light Industrial Equipment and
All Other Permittees N.E.C.
Construction Contractors Group
82
Construction Contractors and
Manufacturers and Wholesalers of
Building Materials
AH 504
246
October 2002
Appendix C
Producers, Manufacturers and
Wholesalers Group
83
Store and Office Equipment
86
Electronic and Electrical
Equipment
Service Groups
84
Health Services
85
Public Utilities, Transportation
and
Allied Services
AH 504
87
Government, Business, and Social
88
Auctioneers
89
Business Service Concerns
247
October 2002
Appendix D
A PPENDIX D: S AMPLE B USINESS P ROPERTY STATEMENT
Roots of Progress
BOE-571-L (S1F) REV. 7 (8-02)
BUSINESS PROPERTY STATEMENT FOR 2003
(Declaration of costs and other related property information as of 12:01 A.M., January 1, 2003)
RETURN THIS ORIGINAL FORM. COPIES WILL NOT BE ACCEPTED.
(Make necessary corrections to the printed name and mailing address.)
RETURN THIS COPY BY APRIL 1, 2003
LOCATION OF THE PROPERTY STREET
CITY
(File a separate statement for each location.)
PART I:
GENERAL INFORMATION
f.
Enter name and telephone number of authorized person to contact at location of
accounting records:
COMPLETE (a) THRU (g)
a.
Enter type of business:
b.
Enter local telephone number (
g.
(1)
)
FAX number (
Has all or part of this real property been subject to a change in ownership?
)
Yes
E-Mail Address (optional)
c.
During the period of January 1, 2002 through December 31, 2002:
(2)
Do you own the land at this business location?
Yes
Are any related entities conducting business in the county?
No
No
Yes
No
If yes, provide name, mailing address, and locations:
If yes, is the name on your deed recorded
as shown on this statement?
d.
When did you start business at this location?
Yes
No
(3)
DATE:
If you leased this real property, has it been the subject of a lease agreement
for a period of 35 years or more (including options)?
Yes
No
If your business name or location has changed from last year, enter the former name
and/or location:
(4)
e. Enter location of general ledger and all related accounting records (include zip
code):
PART II:
(5)
(From line 35)
3.
(Attach
Schedule)
(From line 71)
6.
Alternate Schedule A
AH 504
ASSESSOR’S USE ONLY
Nov. 6, 2023
2. Equipment
Construction In Progress
No
(see instructions)
1. Supplies
5.
Did another person or entity acquire “control” through acquisition of stock or
otherwise of this corporation or entity?
Yes
(omit cents)
(attach schedule for any adjustment to cost)
4. Bldgs., Bldg. Impr., and/or Leasehold Impr., Land Impr.,
Land
No
COST
DECLARATION OF PROPERTY BELONGING TO YOU
Equipment out on lease or rent to others
Did you acquire “control” through acquisition of stock or otherwise of a legal
entity which owns real property in this county?
Yes
(Attach
Schedule)
(See
instructions)
248
October 2002
Appendix D
PART III: DECLARATION OF PROPERTY BELONGING TO OTHERS – IF NONE WRITE “NONE”
* Agent: See page S4B for Declaration by Assessee for instructions.
AH 504
249
October 2002
Appendix D
BOE-571-L (S1B) REV. 7 (8-02)
SCHEDULE A — COST DETAIL: EQUIPMENT (Do not include property reported in Part III.)
Include expensed equipment and fully depreciated items. Include sales or use tax, freight and installation costs.
Attach schedules as needed. Lines 18, 31, 33, and 42 “Prior”–– Report detail by year(s) of acquisition on a separate schedule.
L
I
N
E
1
N
1
O
1
2
1
3
1
4
C
a
l
e
n
-
1.
2.
3.
MACHINERY AND EQUIPMENT FOR
INDUSTRY, PROFESSION, OR TRADE
COST
ASSESSOR’S USE ONLY
OFFICE FURNITURE
AND EQUIPMENT
ASSESSO
COST
R’S USE
ONLY
OTHER EQUIPMENT
ASSESSO
COST
R’S USE
(describe)
ONLY
(do not include licensed vehicles)
d
2
a
0
r
0
2
Y
2
0
C
a
l
e
n
-
1
0
o
f0
1
0
9
9
1
7
9
9
1
7
9
1
8
9
1
6
9
9
P
r6
1
9
2
0
9
1
5
9
9
1
4
9
i
T
o
o
tr
2
1
9
1
3
9
2
2
9
1
2
9
2
3
9
1
1
9
C
a
l
e
n
-
2
4
2
5
9
1
0
9
8
1
9
9
2
6
8
1
8
9
2
7
8
1
7
9
2
8
8
1
6
9
2
9
3
0
8
1
5
9
8
1
4
9
3
1
8
1
3
9
9
P
5
r
3
2
8
1
2
9
3
3
8
P
1
r
iT
o
o
rt
i
T
o
o
rC
t
3
8
3
9
4
0
4
1
4
2
4
3
4
4
4
5
.
9
1
8
9
a
l
& equipment
Office
furniture &
equipment
Tools, molds, dies
& jigs
ASSESSOR’
Component
cost of
S
USE ONLY
$25,000.00 or less
0
9
A
9
1
c
9
9
q
.9
1
8
9
9
1
7
9
9
1
6
9
C
O
L
.
1
FULL VALUE
BASE
FULL
VALUE
PERS.
PROP.
RCLND
PERS.
PROP.
ADJUSTME
NT
a
a
l
l
e
n
A
c2
q
d
.
0
a
0
r2
Schedule B –
Fixtures
3
AH 504
–
COST
ASSESSOR’
S
USE
cost of $25,000.01
to ONLY
$500,000.00
2
0
Y
r
0
2
.
1
0
o
f0
1
0
9
9
1
9
9
9
P
5
r
5
b
5
c
COMPUTERS—Component
9
1
6
9
5
a
Other equipment
PERS.
PROP.
FULL
VALUE
5b.
9
1
8
9
9
1
7
9
2
4
Computers
COST
COMPUTERS
Y
0
r
2
.1
0
o
f0
1
ASSESSOR’S USE ONLY
Machinery
5
a
.
2
d
0
a
0
r
2
2
0
a
lAdd TOTALS on lines 19, 32, 34, 43, 46 and any additional schedules. ENTER HERE AND ON PART II, LINE 2
CLASSIFICATION
ASSESSOR’
S USE
ONLY
0
1
0
9
A
c1
9
q
9
9
1
7
3
5
3
6
3
7
TOOLS, MOLDS,
DIES, JIGS
r
0
.2
1
o
0
f
r
0
.
2
1
6
3
4
COST
d
2
a
0
r
0
2
Y
2
0
A
9
1
c9
9
q
.1
9
8
9
1
5
4
.
i
T
o
o
5c.
rt
250
a
COMPUTERS—Provide total cost
l
of components costing
$500,000.01 or more and attach
detailed schedule by year of
acquisition
October 2002
Appendix D
4
6
T
O
T
A
L
TOTALS
C
O
S
T
AH 504
251
October 2002
Appendix D
BOE-571-L (S2) REV. 7 (8-02)
SCHEDULE B — COST DETAIL: BUILDINGS, BUILDING IMPROVEMENTS, AND/OR LEASEHOLD IMPROVEMENTS, LAND
IMPROVEMENTS, LAND AND
L
I
N
E
Calendar
Yr.
of
(e.g., fill, grading)
LAND DEVELOPMENTAttach schedules as needed. Line 69 “Prior”–– Report detail by year(s) of acquisition on a separate schedule.
AH 504
252
October 2002
Appendix D
AH 504
253
October 2002
Appendix E
A PPENDIX E: S AMPLE A UDIT CHECKLIST
AUDIT CHECKLIST COUNTY ASSESSOR
AUDIT INTERVIEW AND CHECKLIST
Name
Parcel No.
Situs Address
Auditor
Audit Date
Class #
Title
Phone #
Audit Contact:
Name
Location of Records
RECORDS EXAMINED
[ ] Chart of Accounts
[ ] General Ledger
[ ] Location Listing/Coding Chart
[ ] Property Ledger
[ ] Federal/State Tax Returns
[ ] Financial Statements
Change in ownership:
[ ] Journals (list)
[ ] Sch. E/FTB Form 100 (Corp.)
[ ] Purchase Invoices
[ ] Sch. K-1/FTB Form 565 (Prtnr)
[ ] Depreciation Schedules
[ ] Other
[ ] Business Property Statements (other counties)
GENERAL COMMENTS FROM ASSESSEE
1.
A
Date business started at this situs
B.
Number of locations in the County
C.
D.
Fiscal year end
Type of business
AH 504
254
October 2002
Appendix E
E.
Type of organization:
Sole Proprietorship [ ] Partnership [ ] Corporation [ ]
Any change in real estate ownership or change in control or more that 50 percent of stock ownership in the last
four years?
Yes [ ] No [ ]
F.
Any changes in technology/process?
Yes [ ] No [ ]
Any effect on equipment? Yes [ ] No [ ]
If yes, explain:
Capitalization policy
G.
AH 504
255
October 2002
Appendix E
Any affiliates or subsidiaries located here or elsewhere within the
H.
county?
Yes [ ] No [ ]
If yes, please provide:
Name
Address
I.
Method of accounting:
Accrual [ ]
Cash [ ]
J.
Does assessee have improvements/fixtures on leased land?
so, please refer to item 5.
K.
Comment on its use:
Hybrid [ ]
Yes [ ] No [ ] If
Is a suspense, clearing or capital account used?
Yes [ ] No [ ]
SUPPLIES
2.
G.L. Acct. numbers
[ ] Office
[ ] Shop
[ ] Maintenance
[ ] Pallets/Bins
[ ] Medical/Dental
[ ] Printing
[ ] Photography
[ ] Janitorial
[ ] Samples
Are supplies expensed as purchased? [ ]
A.
As consumed? [ ]
If expensed when purchased, how many weeks/months are kept on hand?
B.
What is included in supplies?
C.
yes, when?
Was a physical inventory of supplies taken:
Yes [ ] No [ ] If
D.
Have "supply type" items been classified as inventory?
Yes [ ] No [ ]
AH 504
256
October 2002
Appendix E
E.
Have "supply type" items been classified as prepaid accounts?
F.
Does the company have chemical storage/holding tanks?
(Gasoline, propane, oil, etc.)
Yes [ ] No [ ]
Yes [ ] No [ ]
If yes, how are levels on hand determined for reporting purposes?
OTHER ASSESSABLE ASSETS
3.
G.L. Acct. Numbers
[ ] Containers
[ ] Small Tools
[ ] Molds, Dies, Jigs
[ ] China, Glassware, Flatware
[ ] Art works, Antiques
[ ] Other
[ ] Library [ ] Updates, expensed
[ ] Operational Software
[ ] If application software (not assessed), describe
AH 504
257
October 2002
Appendix E
4.
EQUIPMENT
A.
Y
E
S
Is equipment primarily purchased new?
[Verify that full costs have been capitalized: cost, sales tax, freight and installation.
Sample invoices to verify both cost and cut-off.]
B.
equipment?
Have any equipment acquisitions involved a trade-in of existing
C.
Is fully depreciated equipment still on the books? Is it reported?
D.
Are disposed/scrapped assets written off the books?
E.
Has previously leased equipment which is now purchased been
capitalized at the full original invoice cost and acquisition date?
F.
Does the company manufacture and use their own equipment?
If yes, are all costs capitalized?
(Equipment depreciation or capitalized interest if project extends beyond one year,
labor, overhead, sales tax on materials)
If yes, verify/establish trade level.
G.
Is there a vehicle account which includes non-licensed vehicles [or
vehicles not covered by an annual license fee ("se" license)]
H.
Do any officers, employees, or any related companies lease, an lease,
or loan equipment to this company?
If so, please refer to item 7.
I.
Does this company have idle equipment on its premises? If yes, how
is it accounted for in the general ledger?
5.
AH 504
EQUIPMENT OUT ON LEASE OR RENT TO OTHERS
258
October 2002
N
O
Appendix E
A.
Does this company lease or rent equipment to others?
If so: Type of equipment?
Standard lease/rental period?
Reported at property trade level?
Costs includes: [ ] Sales Tax
B.
AH 504
[ ] Freight
[ ] Installation
Is the leased equipment reported to all California counties?
259
October 2002
Appendix E
C.
Do they lease equipment to "related" entities at a lower value
Y
E
S
than those unrelated?
D.
Do they lease equipment originally purchased from a parent or
subsidiary company in which they receive a discounted purchase price?
E.
6.
Were lease contract agreements reviewed?
BUILDING, LAND, AND LEASEHOLD IMPROVEMENTS
A.
Was the appraisal record reviewed while on a situs review?
B.
Was a detailed schedule of these items obtained?
C.
Were trade fixtures identified?
D.
Was a determination made whether expensed items should have been
capitalized as real property additions or trade fixtures?
E.
additions?
Was it noted whether capitalized items were repairs and/or new
F.
appraisal?
Have items been posted to the real estate account since the last
G.
the appraisal?
Do leasehold improvement items left from the previous tenant affect
H.
Are any fixtures included in the real property appraisal?
I.
Have any leased trade fixtures been reflected on the books as
purchased after the lease terminated?
AH 504
260
October 2002
N
O
Appendix E
J.
If the property is tenant-occupied, do there appear to be trade
fixtures which should be reported by the real property owner?
7.
AH 504
CONSTRUCTION-IN-PROGRESS
A.
Do the books reflect CIP on any of the lien dates?
B.
off?
If there was CIP, are the payables accrued properly for the lien cut
C.
Are there periodic progress billings from the contractor?
D.
Were any invoice reviewed which were paid after lien date?
261
October 2002
Appendix E
YES
E.
Was the contract reviewed for the new addition(s)?
What does the CIP represent?
[ ] Real Property
[ ] Fixtures/Equipment
F.
Is CIP self-constructed?
If so, are all costs properly capitalized?
(Equipment depreciation or capitalized interest if project extends
beyond one year, labor, overhead, sales tax on material)
8.
A.
PROPERTY BELONGING TO OTHERS
Does the company have on its premises property belonging to others?
B.
Did they indicate property belonging to others on their business
property statement?
C.
Has that property been assessed? If so, complete the following:
Assessee:
Parcel #
If not assessed, please provide the following:
Name:
Situs:
AH 504
Mailing:
262
October 2002
NO
Appendix F
A PPENDIX F: S AMPLE S TATUTE OF L IMITATIONS WAIVER
WAIVER OF STATUTE OF LIMITATIONS
AGREEMENT TO EXTEND STATUTE OF LIMITATIONS REVENUE & TAXATION CODE SECTIONS 532
AND 75.11( D )
The period of limitations for enrolling escape assessments on the regular roll (specified in section 532 of
the California Revenue and Taxation Code) and the period of limitations for enrolling supplemental
assessments on the supplemental roll (specified in section 75.11(d) of the California Revenue and
Taxation Code) will expire for tax year 1999-2000 after June 30, 2003.
Pursuant to Revenue and Taxation Code sections 532.1 and 75.11(e), the assessor and the undersigned
taxpayer agree to extend the period for making escape assessments, supplemental assessments,
corrections, and claims for refund until June 30, 2004.
Legal Name of Business:
Address:
Signed:
Date:
Title:
Assessor, County of
By
AH 504
Date:
263
October 2002
Appendix G
A PPENDIX G: SAMPLING
GENERAL
When an assessor, assessee, or third party chooses to use some type of sampling methodology to develop
their own factors for determining percent good or depreciation, it is important to be familiar with some of
the basic concepts of statistical sampling in order to properly analyze the results. Sampling is a statistical
method which enables one to make observations regarding an entire group of items (population) based on
a study of a smaller sub-set (sample) of this group. It is a powerful tool in studying large populations. The
advantage of a statistical sample is that sound inferences can be drawn regarding a population at only a
fraction of the cost of investigating each item in the population. In some cases, a thorough investigation
of a sample can actually produce more reliable results than a cursory enumeration of the entire population.
In the valuation of a group of items for assessment purposes, for example, sampling may be applied to:
Derive valuation schedules by analyzing market values
Derive replacement cost new (RCN) factors and indexes
Derive physical deterioration, and functional and economic obsolescence indexes
Estimate economic lifetime and survival characteristics of a population of assets
Calculate appropriate trade level adjustments
•
•
•
•
•
Sampling design, potential pitfalls, and the reasonable expectations as to the confidence associated with
various samples will vary greatly depending upon the population being sampled. Therefore, few rigid
rules apply in all situations. Independent professional judgment is necessary in selecting testing
techniques and/or selecting or developing a sampling plan. However, certain principles are encountered
and/or applied in nearly all sampling situations. For example, in every case, the sample result must be
objective and defensible. The following discussion is an introductory summary of some of the more
important aspects that should be considered in designing and conducting a sample. For a more thorough
understanding of the subject, it is advisable to consult a textbook on sampling and/or statistics, some of
which are referenced at the conclusion of this text.
REPRESENTATIVENESS
Accepted sampling theory requires that a sample be drawn randomly from a population in order to make
true statistical inferences regarding that population. In statistics, a population is a set of all objects or units
to be measured or studied. A sample is a subset of a given population. A random sample is a sample
selected in such a manner that every unit of the population has an equal chance of being included in the
sample.
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Ideally, the population that is sampled should coincide with the entire population under study. Sometimes,
usually for practicality or convenience, they will not coincide. If so, any statistical inferences drawn from
the sample apply to the sampled population only. The extent to which those inferences can be applied to a
target population which is different from the sampled population will be a question of judgment.
In many cases it is not possible, or practical, to draw a random sample; the sample drawn will be nonrandom or "biased."316 Deviating from the theoretical approach is not necessarily wrong, nor does it
necessarily invalidate conclusions regarding a target population drawn from a sample, providing that if
potential bias is identified, it is not large and/or there are no practical alternatives available. However, if
bias does exist great care needs to be taken to avoid reaching invalid conclusions.
For example, the set of assets for which sales transactions have occurred is not at all a random selection,
as it excludes items that no buyer would want (zero or even negative value) and also items an owner
would be unlikely to sell. Such a "sample" might be representative of the inventory of certain used
equipment dealers, but not representative of the totality of assets held by an industrial firm.
S A M P L E SIZE
The sample size needed to obtain a certain degree of confidence in the results is largely independent of the
size of the population. Sample sizes must be large enough to provide meaningful results, but not so large
as to create wasteful effort. Needed sample sizes will vary greatly, depending upon the nature of the
population being sampled. As the size of the population increases, the needed sample size expressed as a
percentage of the population decreases. A sample consisting of far less than 1 percent of the population is
often appropriate for large populations.
The most important factor in determining the appropriate sample size is the variability (or variance) within
the population of the characteristic being sampled. The larger the variability, the larger the sample size
needed. For example, a particular sample size could be satisfactory for the study of one population, but be
quite inadequate for the study of a second population with a substantially larger variance than the first.
One aspect of applying sampling to the field of valuation that will tend to increase needed sample size is
that many populations are effectively comprised of subpopulations, each of which requiring a separate
finding. For example, in conducting a sample to establish a table of valuation factors to apply to a
particular type of equipment, a sample size of n might be sufficient to estimate the average value of all
such equipment as a percent of its original cost. However, the resultant value estimate would have no
usefulness since (1) it would be an average across all years of acquisition and (2) factors are needed for
each year of acquisition. Establishing a reliable table would require for each year a sample size large
enough to allow one to draw
316
Inferences may be drawn from a biased sample, but it must be remembered that the conclusions will be based on the
assumption of a random sample model and will not reflect the influence of the bias.
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Appendix G
meaningful conclusions regarding that year. The variance of each of the subpopulations of individual
years would not be as large as the variance of the population of all years considered together. Therefore,
the needed sample size for each of the individual years would be something less than n. However, the
total needed sample size for all of the years would probably be much larger than the n that would be
sufficient to estimate the population when considered as a whole.
Due to large variances within some subpopulations subject to sampling and the scarcity of sample item
observations, results that are not completely consistent among subpopulations may occur. Raw data
indicating 60% depreciation after 3 years, 40% after 4 years, and 50% after 5 years, for example, would
not be reasonable. A 60% – 59% – 49% pattern, although not as inconsistent, would not be acceptable
either. When such inconsistencies occur, there will be a need to fit a nonlinear curve to the findings for
the subpopulations by selecting the appropriate standard curve or set of curves or by constructing a bestfitting curve.
If the general form of the curve is known, or can be assumed, in advance, it may be reasonable to establish
a table of factors by fitting a curve to a sample of individual data points rather than formally dividing the
population into subpopulations. However, in order for the curve to yield reliable estimates for each year,
the sample would need to contain a sufficient number of items for each year. The effect could be close to
the same as dividing the population into subpopulations to begin with, although some reduction in sample
size will result from being able to utilize the relationships among years as an indicator for any given year.
STRATIFICATION
Stratification is the segregation of a population into smaller homogeneous groups, with the expressed
purpose of improving sample efficiency and/or sample reliability. For populations with a large variance
among their elements, sampling efficiency and reliability may be increased by dividing the population into
strata, sampling the strata separately, projecting the sample of each stratum to estimate the entire stratum,
and combining the projections of the strata based on the weight each stratum contributes toward the total
population. This process can often be effective by ensuring that infrequently occurring items are
represented in the sample in the same proportion as in the population.
It should be noted that although separating a population into subpopulations (discussed under Sample
Size) and dividing it into strata appear to be similar, the two actions are quite different and are done for
different reasons. Subpopulations are formed when a separate estimate is needed for each of the
subpopulations. Taking this action increases the total number of sample items compared to what would be
required if a single estimate for the population as a whole were needed. Stratification is used in order to
increase the efficiency and reliability of a sample that is being used to make a single estimate for the
overall population. It tends to reduce the standard error of the sample in contrast to the resultant errors
that would occur without stratification. Stratification also allows one to make an estimate for the
population, using a smaller sample than would be required without stratification, but still achieves the
same degree of confidence.
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Appendix G
MEASUREMENT
A random sample of adequate size with improperly measured observations would be of no more validity
than a biased sample of inadequate size. It is quite possible that the observable value for the items in a
sample will not be the value that is the true focus of the study. The true focus of many studies will be the
market value of a certain type of equipment. The observable value may need to be adjusted for factors
such as trade level or quantity discounts to estimate this market value. Although adjustments may be
appropriate in some circumstances, care needs to be taken in making any such adjustments. For example,
if retirements are not promptly reflected on an assessee's books, then those records may be a poor
reflection of economic life. However, attempting to adjust those records for non-recorded retirements
could reduce the study to a level little better than guesswork. Similarly, when studying the retirement
pattern of equipment that is of a type so new that the length of time period studied is less than the total
useful life of the equipment, substituting someone's opinion as to when a piece of equipment will be
retired would be of questionable validity.
OUTLIERS
One of the most difficult areas of judgment in the practical application of statistics is the handling of
outliers. Outliers are sample items with extreme values that do not appear to be representative of the
population from which they were drawn (or at least not in the same proportion as indicated by the
sampling frequency). Various guidelines for the identification of outliers can be found in statistical texts.
Sometimes those guidelines are expressed in terms of statistical parameters (e.g. more than three standard
deviations from the sample mean). These guidelines give the appearance of a precise means of identifying
outliers; however, this is somewhat illusory. Identifying outliers is always a question of judgment.
Rejecting a sample item as an outlier means that the sample that will be projected is not random. A truly
unrepresentative item that seriously distorts the projection of the sample needs to be rejected, but the
number of such occurrences should be very small. If more than just a few observations have to pass the
test of being representative in the eyes of the party conducting the sampling, the entire sampling process is
reduced to a question of judgement.
V ALI DI TY OF RESULTS
Whether the sampling is performed by an assessor, an assessee, or another party, it is important that all of
the involved parties have confidence in the results. To this end it is desirable that there be a discussion
among the parties before the sampling is started. Methodology should be discussed and, to the extent
possible, agreed upon. A clear audit trail must be maintained in order that all parties can be satisfied that
the sample was selected and projected properly.
The party conducting the sampling study should be prepared to make a confidence statement, which
consists of both a confidence level and a confidence interval. The interval estimate of a parameter is
called a confidence interval, and the lower and upper values of the interval are the confidence limits. The
confidence level indicates the probability that the interval will contain the
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Appendix G
true value of the parameter. (If the sample is not random, these will not be true confidence intervals.
However, they will serve to indicate the relative variability within the sample.)
Because of large differences among populations it is difficult to recommend a particular degree of
confidence that must be reached in order for the results to be considered meaningful. A finding that a
class of property had depreciated by 50% after five years with an 80% confidence level and an interval
bounded by 0% and 100% would have little meaning. On the other hand, a confidence interval bounded
by 49.5% and 50.5% would be of almost remarkable precision. Actual results will tend to fall between
these two extremes.
The confidence interval is a measure of the variability of the units included in the sample. In and of itself,
it is not a measure of whether a sample is acceptable or unacceptable. However, the smaller the interval
the more reliable the results of the sample will be. When a large interval is disclosed the assessor,
assessee, and/or a third party must make a decision regarding the acceptability of the sample based upon
the best information available. Some of the options to be considered in making this decision include:
Accept the sample
Increase the sample size
Stratification
Do not accept the sample
•
•
•
•
SUMMARY
This appendix is provided to afford the reader with a basic understanding of sampling and its possible
application in the context of property tax. For further information on sampling theory and application, it is
recommended that an interested reader consult a textbook on statistics. The following are among the
books offering further information and additional examples:
Cochran, William G., Sampling Techniques, 3rd Edition, John Wiley & Sons, 1977.
Freund, Rudolf J. and Wilson, William J., Statistical Methods Revised Edition, Academic Press, 1997.
Arkin, Herbert, Handbook of Sampling for Auditing and Accounting 2nd Edition, McGraw-Hill Book Company, 1974.
Arens, Alvin A. and Loebbecke, James K., Applications of Statistical Sampling to Auditing,
Prentice-Hall, Englewood Cliffs, New Jersey, 1981.
Neter, John and Loebbecke, James K., Behavior of Major Statistical Estimators in Sampling Accounting Populations:
An Empirical Study, American Institute of Certified Public Accountants, New York, New York, 1975.
Also recommended, as an example, is the Sales and Use Tax Audit Manual, California State Board of
Equalization, Department of Business Taxes, Chapter 13: Statistical Sampling.
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Appendix H
A PPENDIX H: A PPLICATION OF THE M ARKET METHOD
As stated in Chapter 4, the market method is any method of calculating value factors (and/or developing
depreciation tables) which relies on market data, with adjustments made for relevant property
characteristics incorporated in the data.317 Using a variation of this methodology, an appraiser may gather
market data for identical or similar property to compare the price of a used asset to the original price new
of that same asset. Market data (i.e., prices new and/or used) may come from actual invoices, other
reliable records of sales of used equipment, or reliable price guides (blue books, etc.) in some cases, with
adjustments as appropriate. The price used and original price new of the asset is used by the appraiser to
estimate the value factor (used price / new price = value factor)318 at the age it was at the time of sale. The
estimates are reduced to a table of value factors (similar to a depreciation table and/or the percent good
tables published by the Board) and arrayed on a scattergram. A best-fit curve, passing through the entire
mass of points, estimates average value factors at each age and the average decline in value per year. (It is
usually, but not always, set to 100% at age 0 in order to correspond with the assumption that a new asset is
purchased at its market value when new.)
This appendix does not include all the possible opportunities and problems involved in developing
valuation factors by any methodology. Thus, the examples provided should not be deemed the only proper
models. The models do not represent methods that are appropriate, and necessarily complete for all
circumstances. A large group of representative assets or an explicit random sample of assets can be used
to develop the depreciation factors. Sound judgment and accepted statistical methods should be used in
developing and applying the methodology in each individual situation where a market method is
considered appropriate.
The following list is provided to illustrate the basic methodology.
•
Obtain the sales prices of used assets that are similar to the assets to be valued
(for example, assets of the same type, age and price range), on or close to the lien date.
•
Obtain the average selling prices new for the same asset during each previous year
(or quarter, if available).
•
Adjust selling prices new and/or used as required to account for such factors as
features, upgrades, trade level, volume discounts etc.
•
Calculate the percent good of this used asset as a fraction of its price new for each of
the ages represented.
•
Perform these same steps for as many assets as possible to obtain a database of prices
of used versus new assets.
•
Reduce the database to a single schedule of value factors that relate age to value
as a percent of price new.
317
Sampling should be used when gathering market data, see Appendix G on sampling.
318
Using the market method, a combined factor may be estimated similar to the result of multiplying the index factor
and the percent good factor used from AH 581 tables discussed in this chapter.
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Appendix H
DEVELOPING COMBINED FACTORS
A combined factor, as used in this text, is (1) the product of multiplying the replacement cost index factor
and the percent good factor, or (2) can be derived directly, without computing the replacement cost index
and the percent good factors individually, using a market method. When such factors are derived directly,
one arithmetic step is saved. A combined factor is a product of the replacement index factor and percent
good factor. Examples of methods to compute combined factors directly from a market method are
included below. These methods create several data points for each asset in the sample or group of assets
to be studied. All data points combined for all assets should then be reduced to a single schedule.
M E T H O D 1: C O M P U T E C H A N G E S B E T W E E N C U R R E N T L I E N D A T E A N D P R E V I O U S YEARS
The methodology illustrated in the example below is the most theoretically accurate method for
developing combined factors; it is the method used to develop percent good factors for real property. It
requires annual updating to be useful and reliable.
EXAMPLE
A rapidly depreciating item of equipment was selling used on January 1, 1998 for $1,000. The average
selling prices new of comparable equipment were as follows in previous years, and the resulting factors
derived from this data are shown:
YEA
R
SELLING
PRICE NEW
1998
FACTOR (%)
100
(1000/1000
)
1997
$1,200
83
(1000/1200
)
1996
$1,500
67
(1000/1500
)
1995
$1,900
53
(1000/1900
)
1994
$2,300
43
(1000/2300
)
1993
$3,000
33
(1000/3000
)
Note that for this item, selling prices new declined over time as technological improvements occurred.
M E T H O D 2: C O M P U T E H I S T O R I C A L C H A N G E S I N PRICE
Factors derived using the methodology illustrated in the example below are easily verifiable when prices
can be determined at specific points in time and data are available. Care must taken when applying factors
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Appendix H
derived using this method in subsequent years. These markets are not static. Several problems that may
occur when this method is used include the following:
1.
When value is measured over a long period, the earliest data points are several years old
and possibly inaccurate.
2.
It may be difficult to locate data for one-year-old equipment.
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Appendix H
3.
If the equipment is of the type that is subject to rapid technological changes, it is difficult
to find old equipment that is functionally identical to new equipment.
EXAMPLE
An item is selling new for $1,000 on January 1, 1993. Following are selling prices of comparable used
equipment on the same date in subsequent years, and the resulting factors derived from this data:
DATE
AGE
(in years)
SELLING
PRICE USED
FACTOR (%)
01/01/93
0
$1000 (new)
100
(1000/1000
)
01/01/94
1
$900
90
(900/1000)
01/01/95
2
$790
79
(790/1000)
01/01/96
3
$720
72
(720/1000)
01/01/97
4
$670
67
(670/1000)
01/01/98
5
$580
58
(580/1000)
SUMMARY
The foregoing discussion does not include all the possible opportunities and problems involved in
developing valuation tables for machinery and equipment for use in the cost approach to value. This
appendix is meant only to give a basic background on different methods that may be used to develop cost
approach tables using current market data.
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Appendix I
A PPENDIX I: L IFING STUDIES
As discussed generally in Chapter 4 and more specifically in Assessors' Handbook Section 582 (AH 582),
Explanation of the Derivation of Percent Good Factors, an average service life estimate is necessary in
order to effectively utilize equipment index and percent good tables. Mortality studies are statistical
studies, typically based upon a sample of a population, which estimate a percentage of items that live at
any given age and their life expectancy at any given age. A mortality study identifies a group of items,
records the life term of each item in the group, and averages the life term or probable life expectancy of
the items when new, by summing the life terms of all items in the group and dividing by the total number
in the group. The probable total life expectancy of survivors of the group is similarly calculated by
summing their total life expectancies and dividing by the number of survivors at that age. The result is a
"forecast" of the total life expectancy as time passes.
Mortality studies may come in many forms. Actuarial tables compiled by insurance companies to predict
the life expectancy of humans at all ages are probably the most common. Similar studies of personal
property and various types of equipment are often referred to as lifing studies.
The Iowa State University, Department of Engineering mortality (or lifing) studies, published in the form
of a series of graphs and tables for various types of industrial machinery and equipment are useful for
assessment purposes.319 However, other studies and/or methods of conducting lifing studies may also be
appropriate for assessment purposes, provided that they are timely, properly designed, appropriately
conducted, and carefully evaluated. In such circumstances these studies may, in some cases, provide
extremely accurate results.
The following is a general discussion of lifing study methodology. Although not intended to be directly
applicable to any one fact situation, this information may be helpful in evaluating lifing studies submitted
by assessees in various circumstances. In contrast to the Iowa State University study discussed in AH 582,
the methodology explained here is modeled after a brief treatise set forth in Engineering Valuation and
Depreciation.320 In practice, those designing and conducting a lifing study using the concepts of this
methodology may employ numerous variations of it, either expanding upon it, or interposing other
methods deemed more appropriate for the particular property involved.
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Appendix I
319
A brief discussion of the Iowa State University study is included in AH 582.
320
Marston, Winfrey, and Hemstead, McGraw-Hill, 1953, pages 154-155.
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Appendix I
D ATA SOURCES
Every lifing study reflects the particular data sources inputted. Generally, the most reliable sources of data
for a lifing study are the retirement records of assessees, related to the specific category of property
subject to study. Generally, recorded retirements contain data that are more complete and verifiable than
other data sources. Accordingly, this type of data source should be given greater weight in the study than a
less reliable source, such as, unrecorded retirements. For example, if one business owner seldom conducts
physical inventories and/or has significant unrecorded retirements, those data should be given little
weight, except as an indication of an upper bound of lifetime, since it is incomplete and unverified.
When verifying the accuracy of retirement records or determining the existence of unrecorded retirements,
it may be necessary to conduct a complete inventory or review of all records related to the property.
Relevant data to be reviewed and evaluated consists of the following information for each asset in the
group studied:
•
Original in-service date
•
Original acquisition date
•
Date of retirement, if any
•
Proceeds at retirement, if any (if significant proceeds were realized at retirement, the
appraiser should verify that a true retirement occurred).
While information obtained from Business Property Statements should be considered, it may be
incomplete from the standpoint of the statistical data required here and may not always be reliable for use
in a lifing study. Furthermore, acquisitions and retirements of the property are not the only events that
affect the reported totals on these statements. All of the following may impact totals for a given category:
Transfers in
Transfers out
Lease buy-outs
Purchases of used equipment
Reclassifications of assets
Consolidations
Differences in recording information
Conversions of information systems
•
•
•
•
•
•
•
•
Only studies based on reliable and complete records specific to individual assets can give reliable
estimates of lifetime. Therefore, a review of the records specific to each asset is appropriate and generally
necessary when such a specific study is conducted.
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Appendix I
GENERAL STEPS
Lifing studies consist of three general steps:
•
Calculating the survivor curve of known assets
•
Matching the survivor curve to known standard curves (by average lifetime and shape of
curve)
•
Applying the parameters of the matching curve to determine probable remaining
economic lifetime at each age
C A L C U L A T I N G T H E S U R V I V O R CURVE
As discussed in AH 582, a "survivor curve" expresses the percentage or number of survivors of an original
group of items for each year of existence in the group. From the mathematician's viewpoint, "Survivor
curves and their derived curves expressing the service age in percent of average life are useful in
classifying curves by their shapes, in using standard or type curves for extending and smoothing original
data curves, and in predicting the probable service life of a particular unit by use of group experience."321
The objective of this methodology is to find the curve and its parameters most accurately representing the
actual observed survivor curve relative to the specific property studied.
To calculate the survivor curve, the analyst/appraiser conducting the study first computes the total dollar
amount of the original cost of assets and the surviving costs after retirements for each year assets were put
into service.322 The costs are entered on a spreadsheet with the latest year to the left (see Exhibit 1).
In the second step, the analyst calculates the total amount of dollars for the surviving assets and the total
amount of dollars for the assets actually exposed to retirement for each year (see Exhibit 2). The
percentage of assets surviving for each year is the ratio of surviving costs to exposed costs. The exposed
cost at each age is the total amount of assets for which the survivors are known. The surviving costs at
each age are the total amount of assets for which the exposed costs are known after retirements for that
year. (This calculation combines the totals for all in- service years.)
The plotted points on the survivor curve are determined by multiplying the value for each preceding point
on the curve by the percentage surviving for the succeeding year (see Exhibit 3). The computed curve is
usually not complete and is called a "stub survivor curve."
321
Marston, Winfrey, and Hempstead, McGraw-Hill, Engineering Valuation and Depreciation, 1953, page 149.
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Appendix I
Item counts may be used in lieu of dollar costs in calculating a survivor curve in certain situations, consistent with
Engineering Valuation and Depreciation, Marston, Winfrey, Hempstead, Ninth printing, 1982, page 154. For example, when
similar objects with similar costs are studied use of item counts may provide accurate results.
322
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Appendix I
M A T C H I N G T O K N O W N P A T T E R N S O F SURVIVAL
There are several well-known families of "standard curves" that are useful for lifing study analysis. As
discussed above, the Iowa State University Engineering Department developed a series of 18 standard
curves with a variety of different characteristics in conducting economic studies of utility properties. Most
survivor curves fit one of the Iowa curves, and lifing studies traditionally attempt to match the calculated
survivor curve to one of the set of the standard Iowa curves.323
By matching the known portion of a standard statistical curve with the survival characteristics of a certain
group of assets, the analyst can estimate the remaining economic lifetime at any given age. This is
because the standard curves are well understood and tabulated. This third step of the appraiser's study
rests on the assumption that if survival characteristics of a group of assets match some standard curve for
certain ages, then those characteristics will match the standard curve for the rest of the ages in question.
A P P L Y I N G T H E P A R A M E T E R S O F T H E M A T C H I N G CURVE
Whatever family of curves is utilized, the final step in the analysis is to find the curve and parameters that
best fit the actual real observed survivor curve. Two methods may be utilized. The traditional method is
known as the "least squares fit method." In this method, various curves and combinations of parameters
are tried and tested, and for each combination, the sum of the squares of the differences between the
known data and the theoretical curve is calculated. The combination "curve and parameter set" which
produces the lowest sum of squared differences is said to be the "best fit," i.e., the most reliable
complement (see Exhibits 4 and 5). The example compares two Iowa curves (L-0 and S-0) to the
calculated survival data, for different lifetimes. In practice, the remaining curves should also be examined
for goodness of fit, and all curves should be tested to find the best fitting curves for each.
Another method for finding the curve and parameters that best fit the actual real observed survivor curve
is the "maximum likelihood estimation." In this method, the arithmetic differences are not squared and
summed, but the ratios of the real data and the fitted curve data (i.e., the "likelihoods") are squared and
multiplied together. The combination curve and parameter set that produces the maximum combined
"likelihood" is the best fit. Although the "least squares fitting method" is more easily understood, the
"maximum likelihood estimation method" is more reliable.
323
In cases where two or more Iowa curves provide almost equally good matches to observed data, the appraiser/analyst
should use great care to assure a reasonable result, as use of different curves can give widely different valuation results.
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Appendix I
Once the best-fitting standard, matching survivor curve is identified, its characteristics can easily be
determined and employed in the methodology for finding the percent good for the particular type of
property under study. Therefore, the analyst's subsequent steps should follow the methods discussed in
AH 582, Explanation of the Derivation of Equipment Percent Good Factors.
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AH 504
EXHIBIT 1
COMPANY NAME
TOTAL PRODUCTION EQUIPMENT
REPORTI
NG YEAR
230
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1997
98,964,070
1996
153,448,28
8
169,990,
761
1995
182,580,04
8
208,876,
140
231,759,
101
1994
96,031,282
110,243,
378
118,136,
366
132,197,
405
1993
57,805,330
69,696,4
84
87,949,2
90
91,810,6
52
104,702,
302
1992
56,079,852
70,599,1
83
82,243,7
50
85,447,8
03
92,756,1
27
95,649,6
87
1991
51,106,528
63,819,0
36
69,034,7
21
78,924,7
65
83,566,2
90
84,899,1
67
87,264,4
11
1990
37,973,937
44,224,0
12
47,105,7
79
50,586,7
86
58,450,2
17
61,020,9
61
64,714,9
26
83,918,3
14
1989
23,499,363
29,803,5
41
31,294,9
17
41,324,4
87
48,782,8
29
49,794,9
62
50,468,0
73
56,681,6
56
60,314,73
9
1988
8,462,511
9,211,30
5
10,302,9
78
11,942,4
92
12,119,4
45
16,957,5
80
17,829,9
25
21,614,9
75
27,712,60
8
29,596,8
47
1987
4,399,738
5,968,13
9
9,788,39
3
10,127,8
46
11,486,8
46
13,435,7
64
13,980,6
42
16,797,1
58
18,445,04
1
20,382,4
24
1987
Appendix I
October 2002
ACQ
YEAR
20,552,
152
TOTAL
S
770,350,94
7
782,431,
979
687,615,
295
502,362,
236
411,864,
056
321,758,
121
234,257,
977
179,012,
103
106,472,3
88
49,979,2
71
20,552,
152
AH 504
EXHIBIT 2
COMPANY NAME
TOTAL PRODUCTION EQUIPMENT
AGE:
231
ACQ
YEAR
1997
0
1
2
3
4
5
6
7
8
9
10
98,964,07
0
169,990,7
61
153,448,
288
1995
231,759,1
01
208,876,
140
182,580,
048
1994
132,197,4
05
118,136,
366
110,243,
378
96,031,2
82
1993
104,702,3
02
91,810,6
52
87,949,2
90
69,696,4
84
57,805,3
30
1992
95,649,68
7
92,756,1
27
85,447,8
03
82,243,7
50
70,599,1
83
56,079,8
52
1991
87,264,41
1
84,899,1
67
83,566,2
90
78,924,7
65
69,034,7
21
63,819,0
36
51,106,52
8
1990
83,918,31
4
64,714,9
26
61,020,9
61
58,450,2
17
50,586,7
86
47,105,7
79
44,224,01
2
37,973,9
37
1989
60,314,73
9
56,681,6
56
50,468,0
73
49,794,9
62
48,782,8
29
41,324,4
87
31,294,91
7
29,803,5
41
23,499,3
63
1988
29,596,84
7
27,712,6
08
21,614,9
75
17,829,9
25
16,957,5
80
12,119,4
45
11,942,49
2
10,302,9
78
9,211,30
5
8,462,511
1987
20,552,15
2
20,382,4
24
18,445,0
41
16,797,1
58
13,980,6
42
13,435,7
64
11,486,84
6
10,127,8
46
9,788,39
3
5,968,139
Appendix I
October 2002
1996
4,399,7
38
$'s Surviving
1,114,909,789
$'s Exposed
919,418,
354
1,015,945,719
701,335,
859
469,768,
543
327,747,
071
233,884,
363
150,054,7
95
88,208,3
02
42,499,0
61
14,430,65
0
4,399,7
38
765,970,
066
518,755,
811
373,737,
261
269,941,
741
177,804,5
11
98,948,2
67
50,234,3
65
18,999,69
8
5,968,1
39
AH 504
EXHIBIT 3
COMPANY NAME PRODUCTION EQUIPMENT
232
Exposed
Age
Surviving
Year %
Surviv
or
Curve
Costs
Costs
Surviving
Curve
1,114,909,789
100.00%
100.00
%
1,015,945,71
9
1
919,418,354
90.50%
90.50%
765,970,066
2
701,335,859
91.56%
82.86%
518,755,811
3
469,768,543
90.56%
75.04%
373,737,261
4
327,747,071
87.69%
65.80%
269,941,741
5
233,884,363
86.64%
57.01%
177,804,511
6
150,054,795
84.39%
48.12%
98,948,267
7
88,208,302
89.15%
42.89%
50,234,365
8
42,499,061
84.60%
36.29%
18,999,698
9
14,430,650
75.95%
27.56%
Appendix I
October 2002
0
5,968,139
10
4,399,738
73.72%
20.32%
Appendix I
EXHIBIT 4
Company Name
Data Analysis Percent Surviving
Curve>
LO
LO
LO
LO
LO
LO
3
4
5
Lifetime
Year
Test
Data
1997
100.00%
100.00%
0
100.00% 100.00% 100.00%
100.00% 100.00%
1996
90.5
1
44.81
74.74
85.17
89.78
92.45
93.98
1995
82.86
2
7.73
44.81
64.8
74.74
80.95
85.17
1994
75.04
3
0.24
21.53
44.81
59.3
68.51
74.74
1993
65.8
4
0
7.73
29.76
44.81
56.3
64.39
1992
57.01
5
0
1.85
15.78
32.05
44.81
54.31
1991
48.12
6
0
0.24
7.73
21.53
34.44
44.81
1990
42.89
36.08
7
0
0
3.18
13.46
25.45
1989
36.29
28.28
8
0
0
0.97
7.73
18.01
1988
27.56
21.53
9
0
0
0.24
4.02
12.13
1987
20.32
15.89
10
0
0
0
1.85
7.73
AGE
1
2
6
1986
0
11.31
11
0
0
0
0.73
4.02
1985
0
7.73
12
0
0
0
0.24
1.85
1984
0
5.07
13
0
0
0
0.06
0.73
1983
0
3.16
14
0
0
0
0
0.24
1982
0
1.85
15
0
0
0
0
0.06
1981
0
1.02
16
0
0
0
AH 504
233
0
October 2002
Appendix I
Data Fit Sum of Least Squares
1997
100.00%
0.00%
0
0.00%
0.00%
0.00%
0.00%
0.00%
1996
90.5
1
20.87
2.48
0.28
0.01
0.04
0.12
1995
82.86
2
56.44
14.47
3.26
0.66
0.04
0.05
1994
75.04
3
55.95
28.63
9.14
2.48
0.43
0
1993
65.8
4
43.3
33.72
12.99
4.4
0.9
0.02
1992
57.01
5
32.5
30.43
17
6.23
1.49
0.07
1991
48.12
6
23.15
22.92
16.31
7.07
1.87
0.11
1990
42.89
7
18.4
18.4
15.77
8.66
3.04
0.46
1989
36.29
8
13.17
13.17
12.47
8.15
3.34
0.64
1988
27.56
9
7.6
7.6
7.46
5.54
2.38
0.36
1987
20.32
10
4.13
4.13
4.13
3.41
1.58
0.2
1986
0
1.28
11
0
0
0
0
0.16
1985
0
12
0
0
0
0
0.03
1984
0
0.26
13
0
0
0
0
0
1983
0
14
0
0
0
0
0
1982
0
0.03
15
0
0
0
0
0
1981
0
0.01
16
0
0
0
0
0
275.51% 175.95%
98.81%
4.31%
46.61%
15.30%
16.21%
10.35%
0.25%
5.81%
2.74%
0.90%
40.26%
32.17%
5.00%
24.10%
16.55%
9.49%
Total Avg.
Square Root
AH 504
234
0.6
0.1
October 2002
Appendix I
EXHIBIT 5
Company Name
Data Analysis Percent Surviving
CUR
VE>
S0
0
S
S0
S0
S0
S0
4
5
6
Lifetime
Year
Test
AGE
1
1997
Data
100.00
%
0
100.00%
100.00%
1996
90.5
1
50
54
1995
82.86
2
0
2
82.
50
3
100.00
%
100.00%
100.00%
90.98
94.44
8
72.51
82.54
5
1994
75.04
3
0
45
1993
65.8
4
0
17.
0
50
67.1
8
27.48
50
6
1992
57.01
5
0
0
9.01
32.83
1991
48.12
6
0
0
0
17.45
3
1990
42.89
7
0
0
0
5.55
1
1989
36.29
8
0
0
0
0
4
1988
27.56
9
0
0
0
0
1
100.0
0%
96.1
87.8
76.6
63.7
50
36.2
23.3
12.1
3.8
97.17
90.98
82.54
72.51
61.49
50
38.43
27.47
17.45
1987
20.32
10
0
0
0
0
0
9.01
1986
0
11
0
0
0
0
0
2.8
1985
0
12
0
0
0
0
0
0
1984
0
13
0
0
0
0
0
0
AH 504
235
October 2002
Appendix I
1983
0
14
0
0
0
0
0
0
1982
0
15
0
0
0
0
0
0
0.0
0.00
%
Data Fit Sum of Least Squares
1997
100.00
0
0.00%
0%
1996
90.5
1
16.4
3
1995
82.86
2
68.66
9
1994
75.04
3
56.31
7
1993
65.8
4
43.3
0.0
0.6
10.7
33.1
43.3
0.00%
0.00%
0%
0.002
0.15
2
1.07
0
5
6.27
0.63
3
14.68
2.5
4
1992
57.01
5
32.5
32.5
23.04
5.85
9
1991
48.12
6
23.16
6
1990
42.89
7
18.4
23.1
18.4
23.16
9.41
1
18.4
13.94
3
1989
36.29
8
13.17
7
1988
27.56
9
7.6
13.1
7.6
13.17
13.17
3
7.6
7.6
4
1987
20.32
10
4.13
3
4.1
4.13
4.13
3
0.3
0.2
0.0
0.0
0.4
1.4
3.8
5.8
5.6
4.1
0.44
0.66
0.56
0.45
0.2
0.03
0.2
0.78
1.02
1.28
1986
0
11
0
0
0
0
0
0.08
1985
0
12
0
0
0
0
0
0
1984
0
13
0
0
0
0
0
0
1983
0
14
0
0
0
0
0
0
AH 504
236
October 2002
Appendix I
1982
0
Total
15
0
0
283.63%
186.85%
0
111.52
%
0
0
0
21.9
5.70
%
61.3
0.36
%
11.7
6.00
%
57.38%
7%
Avg.
17.73%
11.6
6.97%
8%
Square Root
7%
42.10%
34.1
8%
AH 504
3.59%
26.40
%
18.95%
0%
237
October 2002
Appendix J
A PPENDIX J: S UMMARY OF C OURT CASES
Allstate Insurance Co. v. County of Los Angeles (1984) 161 Cal.App.3d 877. The Court held
that "standardized off-the-shelf, general purpose computers and computer components, placed in
general purpose office buildings, and connected to a power source by means of standardized
plugs, and to each other by means of standardized cables, are and remain personalty regardless of
whether or not use of a computer is essential to efficient and competitive operation of the
business in which they are employed. The key factors determinative of whether a computer
system is personalty are that the system can be removed from the realty without damage to itself
or to the realty and without diminishing the value of the realty, and the objective reality is that
ownership of the computer is unrelated to ownership of the land or a leasehold interest in it."
Beckman Instruments, Inc. v. County of Orange (1975) 53 Cal.App.3d 767. Interdivisional
transfers of manufactured goods with an accompanying markup in value, for purposes of
delivery or to facilitate marketing, result in a trade level increase and corresponding increase in
value in accord with Property Tax Rule 10.
Bell v. Bank of Perris (1942) 52 Cal.App.2d 66. "The mere fact that pumps annexed to realty
were removed on one occasion for the purpose of being overhauled and then put back in place
does not show that their installation was not intended to be permanent. In order to make an
article a permanent accession to land its annexation need not be perpetual; it is sufficient if the
article shall appear to be intended to remain where fastened until worn out or until it is
superseded by another article more suitable for the purpose."
Brock & Co. v. Board of Supervisors (1937) 8 Cal.2d 286. The term "situated" connotes a more
or less permanent location or situs and the requirement of permanency must attach before
tangible property which has been removed from the domicile of the owner will attain a situs
elsewhere. Thus, where personal property was removed from the state shortly prior to the first
Monday in March lien date for the purpose of sale and of reducing the owner's personal property
tax and returned shortly thereafter, it remained taxable at its permanent situs in the State. The
State's jurisdiction was not lost by virtue of the temporary excursion out of the State.
Clunie v. Siebe (1896) 112 Cal. 593. The taxpayer is not required to affix a valuation to any part
of his property.
Coe v. Errol (1885) 116 U.S. 517. Delivery of California-grown rice to, and its storage in, the
port district's elevators were no part of the process of exportation which begins when the goods
cross the water's edge. Delivery to a common carrier and subsequent handling of the rice at the
port was no part of the export process. Coe v. Errol makes it clear that it is only entry with a
common carrier for transportation to the goods' ultimate destination, that will suffice.
AH 504
238
October 2002
Appendix J
Crocker National Bank v. City and County of San Francisco (1989) 49 Cal.3d 881. The
California Supreme Court held that bank electronic data processing equipment not physically
attached to the building by permanent connections, but merely by standardized "quick
disconnect" plugs inserted into the power source, was not a fixture but personalty where: (1)
neither the equipment nor the building was designed or modified for each other and factors
showing a lack of annexation; and (2) adaptability were not outweighed by other objective
manifestations of permanence (i.e., the interrelation between the purpose and structural form of
the building and the capacity and physical characteristics of the equipment, and the equipment's
weight and size.
De Luz Homes Inc. v. County of San Diego (1955) 45 Cal.2d 546. The absence of an actual
market for a particular type of property does not mean that it has no value or that it may escape
from the mandate of Constitution, article XIII, §1, that all property shall be taxed in proportion to
its value, but only that the assessor must then use such pertinent factors as replacement costs and
analyses for determining valuation. In valuing a leasehold interest in exempt lands and
improvements by the capitalization of income method it is improper, in computing the
anticipated net income to be capitalized, to deduct from anticipated gross income the lessee's
charges for rent, amortization of his investment, or payments of principal and interest on his
mortgage debt. The proper method of valuing a possessory interest in a housing project at a
permanent military installation is to deduct from annual anticipated gross income the operating
and maintenance expenses and the amount required by the leased to be deposited to a
replacement reserve, and to capitalize the difference for the remaining years of the lease at a rate
which will allow for risk, interest, and taxes.
Dennis v. County of Santa Clara (1989) 215 Cal.App.3d 1019. Under section 110, an arm's
length, open market sale for a price that is not influenced by an exigency of either buyer or seller
permits the assessor to presume fair market value from the purchase price, but the presumption
may nevertheless be rebutted by evidence that the fair market value of the property is otherwise.
Flying Tiger Line Inc. v. County of Los Angeles (1958) 51 Cal.2d 314. Taxation of aircraft
owned by a domiciliary airline and used in the Korean airlift was found to violate the federal
constitution since taxable situs was not established. The decision was rendered by the California
Supreme Court without a majority opinion.
General Dynamics Corp. v. County of Los Angeles (1958) 51 Cal.2d 59. A possessory interest in
government-owned personal property is not a taxable possessory interest in the absence of
legislative authority.
GeoMetrics v. County of Santa Clara (1982) 127 Cal.App.3d 940. A county may not impose an
unapportioned tax on aircraft located physically in foreign countries and engaged in foreign
commerce for all or part of a tax year, as such a tax is barred by the Commerce Clause of the
United States Constitution. Taxation of the aircraft according to the number of days the aircraft
was located in the county is permissible, however.
AH 504
239
October 2002
Appendix J
GTE Sprint Communications Corp. v. Alameda County (1994) 26 Cal.App.4th 992. Unit
taxation of public utilities and railroads is properly characterized as the taxation of property as a
going concern, not as the taxation of real property or personal property, or even a combination of
both. Under the unit taxation method, the Board considers the earnings of the property as a
whole, and does not consider, less still assess, the value of any single real or personal asset.
Ice Capades Inc. v. County of Los Angeles (1976) 56 Cal.App.3d 745. Where the movable
property of a domiciliary corporation engaged in interstate commerce has acquired an out of state
tax situs, the county of domicile must apportion the tax by excluding such property values that
are subject to potential out of state taxation.
Japan Line, Ltd. v. County of Los Angeles (1979) 441 U.S. 434. "If a state tax is applied to an
activity with a substantial nexus with the taxing state, is fairly apportioned, does not discriminate
against interstate commerce, and is fairly related to the services provided by the state, no
impermissible burden on interstate commerce will be found; however, a more elaborate inquiry
is necessary when a state seeks to tax the instrumentalities of foreign rather than interstate,
commerce."
Kaiser Co. v. Reid (1947) 30 Cal.2d 610. The lessor's right under a lease to remove shipyard
facilities does not fix their status as personalty for tax purposes and preclude the assessor from
classifying the property as improvements to realty in accordance with the physical facts of their
annexation to the land.
Lyons v. Estes (1969) 6 Cal.App.3d 979. The county assessor is a tax official of the state within
the meaning of section 19286 of this code and may inspect income tax returns to assist him in
assessing taxpayer's property.
Massachusetts Mutual Life Ins. Co. v. City and County of San Francisco (1982) 129 Cal.App.3d
876. The court held that in light of the purpose and objective of former article XII, § 14-4/5, the
"in lieu" tax exemption should not and did not apply to personal property owned by an
insurance company but used in an unrelated business.
Mayhew Tech Center Phase II v. County of Sacramento (1992) 4 Cal.App.4th 497. Land and
improvements occupied by the Franchise Tax Board under a lease-purchase agreement were
exempt under this Article since, despite the lease agreement, the state held the essential indicia of
ownership. The financing arrangement closely resembled the financing of a purchase through a
loan secured by a deed of trust on the subject property, most of the property rights were vested in
the state, and the lease provided for automatic vesting of title in the state at the expiration of the
lease if all rental payments were made. The state thus occupied the property as a beneficial
owner and would eventually hold all incidents of ownership if it so chose. State property is not
to be taxed unless there is express authority for taxation.
AH 504
240
October 2002
Appendix J
Minnesota v. Blasius (1933) 290 U.S. 1. Under the Commerce Clause of the U.S. Constitution,
"property which has come to rest within a state, being held there at the pleasure of the owner, for
disposal or use, so that he may dispose of it either within the state, or for shipment elsewhere, as
his interest dictates, is deemed to be part of the general mass of the property within the state and
thus subject to its taxing power."
Mobilease Corp. v. County of Orange (1974) 42 Cal.App.3d 461. Since 1935, the Legislature
has expressly declared that there shall be no local ad valorem taxation on vehicles subject to
registration under the Vehicle Code. Section 10758, Revenue and Taxation Code, provides in
pertinent part as follows: "The license fee imposed under this part is in lieu of all taxes
according to value levied for state or local purposes on vehicles of a type to registration under
the Vehicle Code whether or not the vehicles are registered under Vehicles Code section 4000. . .
"Local taxation of vehicles as personal property under the Revenue and Taxation Code is
authorized by finding that they are special mobile equipment and, therefore, under Vehicle Code,
section 4010, exempt from registration by the DMV.
Morse Signal Devices v. County of Los Angeles (1984) 161 Cal.App.3d 570. In determining
whether an article is a fixture, there are three tests under Rule 122.5: the manner of its
annexation, its adaptability to the use and purpose for which the realty is used, and the intention
of the party making the annexation. The manner of annexation and the use to which the realty is
put are relevant in determining the crucial element of intention to make the article a permanent
part of the realty. Great expense or difficulty in removal is indicative of intended permanence.
Mutual Life Insurance of New York v. City of Los Angeles (1990) 50 Cal.3d 402. The Court
ruled that by virtue of the "in lieu" provision of subdivision (f), section 28, article XIII of the
California Constitution, the personal property owned by insurance companies is exempt from
property taxation regardless of whether the property is used for insurance related business or not
and that the controlling factor in determining whether the exemption applies is ownership of the
personal property.
M.P. Moller Inc. v. Wilson (1936) 8 Cal.2d 31. Whether an article has lost its character as
personal property and becomes a fixture is a question of fact and whether the article is or was
physically affixed to the building is only one of the criteria in determining whether there was an
intention to make it a permanent accession to the real property; and annexation by weight and
gravity is not always alone a sufficient indication of an intent to make the article a permanent
fixture and part of the realty, but it must appear from the nature of the chattel that if used for the
purpose for which it was designed it would naturally and necessarily be annexed to and become a
permanent and integral part of some realty, in that it would become essential to the ordinary and
convenient use of the property to which it was annexed."
People v. Niles (1868) 35 Cal. 282. "To authorize the taxing of personal property in any other
county than that in which the owner resides, it must appear that such property is kept or
maintained in such county, and is not here casually, or in transit, or temporarily, in the ordinary
course of business or commerce."
AH 504
241
October 2002
Appendix J
Rinaldi v. Goller (1957) 48 Cal.2d 276. "A building need not be physically anchored to the land
to be considered realty; it may be found to be a fixture though it is secured to the realty by force
of gravity alone."
Rosasco v. County of Tuolumne (1904) 143 Cal. 430. Permanent situs, as distinguished from
place of temporary sojourn, is the controlling force in the assessment of property in transit,
migrating herds, or rolling stock. When cattle are brought permanently into one county, they are
to be assessed there irrespective of the residence of the owner.
San Diego County v. Assessment Appeals Bd. No. 2 (1983) 140 Cal.App.3d 52. Under the trade
level theory of assessment, if the owner of property at the consumer level is subject to
application of a sales tax element in the valuation of the property, the lessor of the same kind of
property at the consumer level is subject to the same sales tax element.
San Diego County v. Lafayette Steel (1985) 164 Cal.App.3d 690. In determining whether an
article is a fixture, there are three tests: the manner of its annexation, its adaptability to the use
and purpose for which the realty is used, and the intention of the party making the annexation.
The manner of annexation and the use to which the realty is put are relevant in determining the
crucial element of intention to make the article a permanent part of the realty. Great expense or
difficulty in removal is indicative of intended permanence.
San Diego Trust & Savings Bank v. San Diego County (1940) 16 Cal.2d 142. Bank vaults and vault
doors, including those installed by lessees, have been held to constitute improvements.
San Francisco v. Talbot (1883) 63 Cal. 485. "Plying" the waters in a particular location implies
regularity, and is not the term used to express the character of the irregular and transient
visitations of a ship to a port.
Sea-Land Services, Inc. v. County of Alameda (1974) 12 Cal.3d 772. Cargo containers used
exclusively for transportation of cargo for hire in interstate and foreign commerce are subject to
an apportioned local tax. The habitual presence of such containers creates a taxable situs, even
though the identical containers are not within the county every day and even though none of the
containers is continuously within the county. Note: all ocean-going cargo containers of 1,000
cubic feet or more are now exempt under section 232. This exemption does not affect the
principle of tax situs due to habitual or average presence.
Seatrain Terminals of California, Inc. v. County of Alameda (1978) 83 Cal.App.3d 69.
Exclusive use of two 750 ton cargo cranes, mounted on rails specially installed on the wharf,
constitutes a taxable possessory interest. The cranes were properly classified as fixtures since
they were intended to be a permanent part of the wharf.
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October 2002
Appendix J
Security Pacific National Bank v. Los Angeles County (1984) 161 Cal.App.3d 877. In
determining whether an article is a fixture, there are three tests under Rule 122.5: the manner of
its annexation, its adaptability to the use and purpose for which the realty is used, and the
intention of the party making the annexation. The manner of annexation and the use to which the
realty is put are relevant in determining the crucial element of intention to make the article a
permanent part of the realty. Great expense or difficulty in removal is indicative of intended
permanence.
Seegmiller v. County of Nevada (1997) 53 Cal.App.4th 1397. A taxpayer requested the
apportionment of the property tax on his machine shop, which he had moved from Truckee
(California) to Reno, Nevada, subsequent to July 1st on the new fiscal year. The court held that
the situs of this property (movable business personal property) on the lien date was controlling
for the assessment of the entire year. The taxpayer is not entitled to apportionment based on the
actual amount of time the property was located in California because the lien date is the method
adopted for determining that the taxpayer has enjoyed the benefit of governmental services
during the year preceding the assessment.
Simms v. County of Los Angeles (1950) 35 Cal.2d 303. In determining whether articles
constitute fixtures, and therefore improvements, within the meaning of section 105, the
determining factor is whether there was an intention to make a permanent accession to the real
property as reasonably manifested by outward appearances. Neither the status of the party by
whom the articles have been installed, nor the length of the lease under which party is in
possession of the property, is controlling. The fact that the fixtures are removable pursuant to
express or implied contract between the landlord and tenant does not necessarily negate the
element of permanence, nor is the contract binding upon the taxing authority.
Southern California Telephone Co. v. State Board of Equalization (1938) 12 Cal.2d 127. The
central office equipment of a telephone company installed in a building owned by the company
and especially designed for its use constitutes an improvement. This includes such items as
headsets, operators' stools, etc., which although readily detachable, are usable only with the
attached items with which they constitute a single unit.
Specialty Restaurants, Corp. v. County of Los Angeles (1980) 111 Cal.App.3d 607 (Queen Mary
case). The use of a special wharf area, developed as a tourist attraction by the city, manifested
the intent to make a vessel (the Queen Mary) a permanent addition to realty.
Tele-Vue Systems, Inc v. County of Contra Costa (1972) 25 Cal.App.3d 340. A permanently
affixed interior household connection to a cable television system installed by the system owner
who neither owns nor controls the connection constitutes a fixture and is assessable to the owner
of the realty rather than to the system owner.
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October 2002
Appendix J
Trabue Pittman Corp. v. County of Los Angeles (1946) 29 Cal.2d 385. For purposes of taxation,
the definitions of real property in the revenue and taxation laws of the state control irrespective
of whether they conform to definitions used for other purposes. In determining whether articles
constitute fixtures, and therefore improvements, within the meaning of section 105, the
determining factor is whether there was an intention to make a permanent accession to the real
property as reasonably manifested by outward appearances. Neither the status of the party by
whom the articles have been installed, nor the length of the lease under which party is in
possession of the property, is controlling. The fact that the fixtures are removable pursuant to
express or implied contract between the landlord and tenant does not necessarily negate the
element of permanence, nor is the contract binding upon the taxing authority. Bank vaults and
vault doors, including those installed by lessees, were held to constitute improvements.
Similarly, tellers' cages, partitions, coupon booths and counters installed by a lessee bank have
been held to be improvements taxable to the owner of the building in which they were installed.
Travelers Indemnity Co. v. Colonial Ins. Co. (1966) 242 Cal.App.2d 227. "Not all motor
vehicles are required to be registered and exemption of a motor vehicle from registration does
not make it any less a motor vehicle or signify its removal from all other applicable sections of
the Vehicle Code."
TRW Space & Defense Sector v. County of Los Angeles (1996) 50 Cal.App.4th 1703. Federal
government cost-reimbursement and fixed-price contracts which provided that title to property
acquired in the performance of those contracts passed to the federal government did not establish
federal government ownership of overhead personal property such as consumable supplies and
low-value office and plant equipment, and this was not immune from state property taxation.
The title provision in the cost-reimbursement contracts applied only to property subject to
controlling regulations, which did not include overhead personal property wherein the
government acquired title solely because of partial, advance, or progress payments. With regard
to fixed-price contracts, the title provision applied only to enumerated types of property, which
did not include overhead personal property.
Valley Fair Fashions, Inc. v. Valley Fair (1966) 245 Cal.2d 614. An assessment of
improvements to the lessee in possession and control was not erroneous even though the land
was assessed to the landlord and he owned the improvements.
Ventura, County of v. Channel Islands State Bank (1967) 251 Cal.App.2d 240. A sign and a
night depository constituting trade fixtures, owned by a bank and installed on a leased premises
were properly classified as improvements under section 105 and real property under section 104
even though assessed to the lessee and placed on the unsecured roll. The lessee-bank (owning
trade fixtures attached to landlord's realty) was the proper assessee. Where a statement of
separate ownership as provided in section 2188.2 is not filed, the assessor is not required to
assess lessee-owned trade fixtures to the landlord.
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Appendix J
Weyse v. Crawford (1890) 85 Cal. 196. Property in a warehouse is not assessable to the
warehouseman as the person in possession. If the owner is not known, the property should be
assessed to unknown owners and the tax collected by seizure and sale.
Xerox Corporation v. County of Orange (1977) 66 Cal.App.3d 746. Under the market value
concept, where price is the basis of value, the sales tax and freight charges are elements of value.
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Glossary
G LOSSARY OF TERMS
TERM
DEFINITION
Air Taxi
Aircraft used by an air carrier which (1) does not utilize aircraft
having a maximum passenger capacity of more than 30 seats, (2) does not have a maximum
payload capacity of more than 7,500 pounds in air transportation, and (3) which does not hold a
certificate of public convenience and necessity or other economic authority issued by the Civil
Aeronautics Board of the United States, or its successor, or by the California Public Utilities
Commission, or its successor.
Aircraft
Also referred to as general aircraft. Any contrivance used or designed
for the navigation of or for flight in the air which has been flown at least once. It is not a
parachute or similar emergency safety device, rockets or missiles, or certificated aircraft or
scheduled air taxis.
Annuity
A periodic series of obligatory payments; an annuity can be level,
increasing, decreasing, or a combination thereof.
Apportionment
Process used to allocate or eliminate, based on the time of presence,
the assessments or the taxes for time spent out of state.
Appraisal Unit
The unit that (1) people in the market typically buy and sell or (2) that
is normally valued separately.
Assessed Value
The taxable value of a property against which the tax rate is applied.
Assessee
lien date.
Person who owns, claims, possesses, or controls the property on the
Assessment Roll
A listing of all taxable property within a county. It identifies, at a
minimum: (1) the property (usually by assessor's parcel number), (2) the tax-rate area where the
property is located, (3) the name (if known) and mailing address of the assessee, (4) the assessed
value of the property, including separate assessed values for land, improvements, and personal
property, (5) penalties (if any), and (6) the amount (if any) of specified exemptions (e.g.,
Homeowners', Church, Welfare, etc.). Distinct assessment rolls include the locally-assessed
secured and unsecured regular assessment rolls, the locally-assessed supplemental assessment
roll, and the state-assessed roll (which is added to the locally-assessed secured roll).
Audit
Means of collecting data relevant to the determination of taxability,
situs, and value of property.
Audit Program
System used to select and conduct audits.
Average Service Life The average life term of a group of items.
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Glossary
TERM
DEFINITION
Base Year Value
In accordance with section 110.1, a property's base year value is its
fair market value as of either the 1975 lien date or the date the property was last purchased,
newly constructed, or underwent a change in ownership after the 1975 lien date.
BASIC
OPERATIONAL
PROGRAMS
(SOFTWARE)
Programs that are fundamental and necessary to the functioning of a
computer. The part of the operating system including supervisors,
monitors, executives and control or master programs which consist of
the control program elements of that system.
Board Roll
Part of the secured roll, containing State assessed property.
Book Value
Capitalized cost less depreciation as estimated by the accountant.
BUILDING
IMPROVEMENTS
Improvements to a structure.
Capitalization
Any method of converting expected future benefits into an indicator of
present value; the discounting of projected income to a present value.
Capitalization Rate
Any rate used to convert income into an indicator of value; a ratio that
expresses a relationship between income and value.
Capitalized Cost
Recorded cost of asset in assessee's books and records.
Capitalized Interest Cost associated with use of money during construction of an asset
whether the source of funds is debt or equity and whether or not the interest is actually incurred.
Certificated Aircraft Aircraft operated by an air carrier or foreign air carrier engaged in air
transportation while there is in force a certificate or permit issued by the Civil Aeronautics Board
of the United States, or its successor, or a certificate by the California Public Utilities
Commission authorizing such air carrier to engage in such transportation.
CHANGE IN
OWNERSHIP
A transfer of a present interest in property, including the beneficial use
thereof, the value of which is substantially equal to the value of the fee
interest.
COMPARATIVE
S A L E S APPROACH
An approach to value by reference to sale prices of the subject property
or comparable properties.
Compound Interest
Interest on the sum of principal and the accrued interest, combined
at regular intervals; interest on interest.
CONDITIONAL
S A L E CONTRACT
AH 504
Form of sales contract in which seller reserves title until buyer pays for
goods or land, at which time, the condition having been fulfilled, title
passes to buyer. Such contract under Uniform Commercial Code is a
purchase money security agreement. UCC Section 9-105(h). (See also
financing lease.)
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October 2002
Glossary
TERM
DEFINITION
Confidence Interval Describes the limits of accuracy of an inference. This precision interval
is a statistical measure of the inability to predict the true population error because the test is
based on a sample rather than a census.
Confidence Level An inference from a sample that tells the proportion of times a statement
about the population is likely to be true in the long run.
Confidence Limits Confidence interval expressed as a range, the lower and upper bound on
the confidence interval.
Cost
The expenditure required to develop and construct an improvement or
acquire personal property.
Cost Approach
A value approach using the following procedures to derive a value
indicator: (1) estimate the current cost to reproduce or replace an existing property without
untimely delays, (2) deduct for all accrued depreciation, and (3) add an amount to compensate
for entrepreneurial profit (if present).
Data
Factual information used as a basis for analysis.
Depreciation
A decrease in utility resulting in a loss in property value; the
difference between estimated replacement or reproduction cost new as of a given date and
market value as of the same date. There are three principal categories of depreciation: physical
deterioration, functional obsolescence, and external obsolescence.
Direct Billing
System developed and implemented by an assessor to appraise
selected accounts periodically, in lieu of annual property statements.
DIRECT
CAPITALIZATION
A capitalization method used to convert a single year's income
expectancy into an indicator of value, either by dividing the income
estimate by an appropriate rate or by multiplying the income estimate
by an appropriate factor.
Direct Costs
Expenditures required for the labor and materials necessary to develop
and construct an improvement (or personal property); sometimes referred to as "hard costs."
Documented Vessel Any vessel which is required to have and does have a valid marine
document issued by the Bureau of Customs of the United States or any federal agency successor
or DMV.
Economic Life
physical life.
ECONOMIC
OBSOLESCENCE
AH 504
Useful or profitable life of property, which may be shorter than the
See External Obsolescence.
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October 2002
Glossary
TERM
DEFINITION
Economic Rent
The amount of rental income that could be expected from a property if
available for rent on the open market, as indicated by the prevailing rental rates for comparable
properties under similar terms and conditions; economic rent is distinguished from contract rent,
which is the actual rental income for the subject property as specified in a lease; economic rent is
also referred to as market rent.
Effective Age
The age indicated by the condition and utility of the property.
EFFECTIVE GROSS
INCOME
The estimated potential gross income less allowances for vacancy and
collection losses.
Equipment
Index Factor
Multiplier used to "trend" the historical cost of property to an estimated
reproduction or replacement cost new.
Escape Assessment
Assessment made after the completion of the regular assessment roll.
Exposed Costs
Cost of property in service at the beginning of each age interval that
are exposed to retirement.
EXTENDED
T E R M LEASE
Lease with duration of more than six months. (Commonly referred to
as
External
Obsolescence
long-term lease.)
Form of depreciation. Also referred to as Economic Obsolescence. The
loss in utility and value due to an incurable defect caused by external
negative influences outside the property itself.
Factor
One of two or more numbers that when multiplied together produce a
third number, a multiplier. A capitalization factor is the reciprocal of a capitalization rate.
FINANCIAL
CORPORATION
Financing Lease
FIXED
MACHINERY AND
EQUIPMENT
Banks and financial institutions exempt from property taxation by the
California Constitution, article XIII, section 28 and section 23182.
See Conditional Sale Contract.
A type of fixture.
Equipment which is physically or
constructively annexed and intended to remain indefinitely with the
realty.
Fixture
An item of tangible property, the nature of which was originally
personal property, but which is classified as real property for assessment purposes because it is
physically or constructively annexed to real property with the intent that it remain annexed
indefinitely.
Full Cash Value
AH 504
See Market Value.
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October 2002
Glossary
Full Economic Cost Cost for appraisal purposes. Includes all market costs (direct and
indirect) necessary to purchase or construct equipment and make it ready for its intended use.
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October 2002
Glossary
TERM
Functional
Obsolescen
ce
DEFINITION
Form of depreciation. The loss in utility and value due to changes in
the desirability of the property; attributable to changes in tastes and
style or the result of a poor original design. Functional obsolescence is
curable if the cost to cure it is equal to or less than the value added by
curing it.
General Aircraft Also referred to as aircraft. Any contrivance used or designed for the
navigation of or for flight in the air which has been flown at least once. It is not a parachute or
similar emergency safety device, rockets or missiles, or certificated aircraft or scheduled air
taxis.
Historical Cost
purchased.
The total cost of a property when it was originally constructed or
Improvements
All buildings, structures, fixtures, and fences erected on or affixed to
the land; all fruit, nut bearing, ornamental trees and vines, not of natural growth, and not exempt
form taxation, except date palms under eight years of age.
Income Approach
Any method of converting an income stream or a series of future
income payments into an indicator of present value.
Indirect Costs
The outlay for items, other than labor and materials, required to
develop and construct an improvement or personal property; includes such costs as (1) legal fees,
property taxes, construction financing, administrative expenses, appraisal fees, and lease-up
expenses for real property and/or
(2) freight, installation, interest on borrowed funds, and testing costs for personal property.
Sometimes referred to as "soft costs."
Inference
Act of passing from statistical sample data to generalizations (as of the
value of population parameters) usually with calculated degrees of certainty.
Interest Rate
The rate of return on debt capital; the price paid for borrowing money.
Inventory
Exempt items of personalty that become part of the product or are
themselves a product that is held for sale or lease in the ordinary course of business.
Land
Real estate, or real property, except improvements. It includes: the
possession of, claim to, ownership of, or right to possession of land, and all mines, minerals, and
quarries in the land, all standing timber whether or not belonging to the owner of the land, and all
rights and privileges appertaining thereto.
LANDLORD
IMPROVEMENTS
AH 504
Leasehold/Tenant Improvements
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October 2002
Glossary
Improvements
made by the real
property owner.
Improvements
made by the
lessee/tenant.
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October 2002
Glossary
TERM
DEFINITION
Lessee
One who has the right to use (or occupy) property under a lease
agreement. (In terms of real property a tenant.)
Lessor
One who conveys the right to use (and/or occupy) property under a
lease agreement. (In terms of real property a landlord.)
Lien Date
All taxable property (both state and locally assessed) is assessed
annually for property tax purposes as of 12:01 a.m. on January 1, which is called the lien date. It
is referred to as the lien date because on this date the taxes become a lien against all real property
assessed on the secured roll.
Note: Taxes on the unsecured roll are not a lien on property; they are a personal obligation of the
assessee.
Lifing Studies
Long-Term Lease
See Mortality Studies
See Extended-Term Lease.
Mandatory Audit Audits required by law. For taxpayers owning or possessing tangible
business personal property and fixtures with a full cash value of
$400,000 or more, section 469 requires an audit at lease once in each four-year period.
Market Value
Also referred to as full cash value or fair market value. It means the
amount of cash or its equivalent that property would bring if exposed for sale in the open market
under conditions in which neither buyer nor seller could take advantage of the exigencies of the
other and both with knowledge of all the uses and purposes to which the property is adapted and
for which it is capable of being used and of the enforceable restrictions upon those uses and
purposes.
Mortality Studies Statistical studies, typically based upon a sample of a population, whose
results estimate the percentage of things which live at any given age the life expectancy of those
things at any given age (also known as lifing studies).
Movable Property
All property which is intended to be, and is, moved from time to time
from one location to another.
NET INCOME
BEFORE
RECAPTURE AND
T A X E S (NIBR&T)
The annual net income remaining after deducting all operating
expenses but before deducting other charges such as recapture, debt
service, and property taxes. For property tax appraisal purposes,
NIBR&T is capitalized into an indicator of value using various income
capitalization techniques.
New Construction Any addition to real property, whether land or improvements (including
fixtures) since the last lien date; any alteration of land or improvements (including fixtures) since
the last lien date that constitutes a major rehabilitation thereof or which converts the property to a
different use.
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October 2002
Glossary
Term
Nondocumente
d Vessel
Nonmandatory
Audit
Definition
Any vessel not required to be documented.
Audits not required by law, but authorized by section 470 and
Rule 192 (e).
Operating Expenses The periodic expenditures necessary to maintain the real/personal
property and continue production of the effective gross income, assuming prudent and competent
management; sometimes referred to as "allowable expenses."
Outliers
Sample items with extreme values that do not appear to be
representative of the population from which they were drawn (or not in the same proportion as
indicated by the sampling frequency).
Parameters
Set of physical properties that describes a population such as the
mean, number of transactions in the population, standard deviation, etc.
Percent Good
The complement of depreciation; if a property is 20 percent
depreciated, its percent good is 80 percent. Percent good refers to the portion of benefits
remaining in an asset compared to the total benefits when new.
Personal Property
All property except real property (section 106).
PHYSICAL
DETERIORATION
Form of depreciation. The loss in utility and value due to some
physical deterioration in the property; considered curable if the cost to
cure it is equal to or less than the value added by curing it.
Population
A group of units with some characteristics in common. The total units
from which the sample is drawn.
POTENTIAL
G R O S S INCOME
The total income of a property before deducting vacancy and collection
losses or operating expenses.
Processing Program Software used to develop and implement the specific applications which
the computer is to perform. Its operation is possible only through the facilities provided by the
basic operational program (or control program). It is not fundamental to the functioning of the
computer.
Property
Property includes all matters and things—real, personal, and mixed—
that are capable of private ownership.
Random Sample
Sample where every unit still remaining in the population has an equal
chance of selection on each draw.
Real Property
The possession of, claim to, ownership of, or right to the possession of
land, all mines, minerals, and quarries in the land, all standing timber whether or not belonging
AH 504
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October 2002
Glossary
to the owner of the land, and all rights and privileges appertaining thereto, and improvements; in
California property tax law, the term is synonymous with "real estate."
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October 2002
Glossary
TERM
DEFINITION
Recapture
The return of invested capital; in real estate investments, capital may
be returned gradually as part of the annual income; it may be recaptured all or in part through
resale of the property, or through a combinations of both. The variety of the methods of
recapture require the various capitalization techniques.
REGULAR
A S S E S S M E N T ROLL
Roll covering period starting July 1 of the current calendar year to June
30 of the next year. Assessment period for the regular roll must be
completed on or before July 1.
Replacement Cost
The cost required to replace an existing property with a property that
has equivalent utility.
Reproduction Cost
The cost required to reproduce an exact replica of an existing property.
Reversion
A lump-sum benefit in property that an investor receives or expects to
receive at the termination of an investment.
Sale Price
The amount of money a buyer agrees to pay and a seller agrees to
accept in an exchange of property rights; sale price is based on a particular transaction, not
necessarily on what the typical buyer would pay or the typical seller would accept.
Sales Tax
A state or local-level tax on the retail sale of specified property or
services. It is a percentage of the cost of such. Generally, the purchaser pays the tax, but the
seller collects it, as an agent for the government. Various taxing jurisdictions allow exemptions
for purchases of specified items, including certain foods, services, and manufacturing equipment.
If the purchaser and seller are in different states, a use tax usually applies.
Salvage Value
The value of property at the end of its economic life in its present use.
Sample
population.
Subset of a given population; any number of units drawn from a
Sampling
Statistical method which enables one to make observations regarding
an entire group of items (population) based on a study of a smaller sub-set (sample) of this
group.
Scarcity
demand for it.
Secured Property
The present or anticipated under-supply of an item relative to the
Property on the secured roll.
Secured Roll
That part of the assessment roll containing state assessed property and
property the taxes on which are a lien on real property sufficient, in the opinion of the assessor,
to secure payment of taxes.
Service Life
Period of time (or service) extending from the date of installation to
the date of retirement from service.
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October 2002
Glossary
TERM
DEFINITION
Short-Term Lease
Lease of property on a daily, weekly, or other short-term basis (defined
as a period of six months or less).
Situs
The place where property is legally situated, the more or less
permanent location of the property.
Statistical Sample
Sample where the selection of the items to be included is independent of
the sample and one that provides a means of establishing the sample size objectively and a
means of objectively appraising the sample results.
STATUTE
Time period during which an assessment can be made. See section 532.
OF
LIMITATIONS
Stratification
Physical segregation of the population into homogeneous groups with
the expressed purpose of improving sample efficiency and/or sample reliability.
Structure
An edifice or building, an improvement whose primary use or purpose
is for housing or accommodation of personnel, personalty, or fixtures and has no direct
application to the process or function of the industry, trade, or profession.
Structure Items
Integral parts of the structure. Improvement that has a primary use or
purpose for housing or accommodation of personnel, personalty, or fixtures and has no direct
application to the process or function of the industry, trade, or profession.
STUB
SURVIVOR
CURVE
An incomplete survivor curve, that is, one which does not extend to
zero percent surviving because of a lack of retirement data.
Supplement
al
Assessment
An assessment of the full cash value of property as of the date a change
in ownership occurs or new construction is completed which
establishes a new base year value for the property or for the new
construction.
Supplies
Property used up in the normal operation of a business, but which are
not intended for sale or lease.
Survivor Curve
Curve showing the property surviving in service at successive
ages. The ordinates to the curve give, at any particular age, the percentage (or the actual number)
surviving in service.
Taxable Value
For real property subject to article XIII A of the California
Constitution, the base year full value adjusted for any given lien date as required by law or the
full cash value for the same date, whichever is less, as set forth in section 51(a). For personal
property, the full cash value (market value) on the lien date each year.
TENANT
IMPROVEMENTS
AH 504
See Leasehold Improvements.
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October 2002
Glossary
Trade Fixture
AH 504
A type of fixture which is "trade-related."
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October 2002
Glossary
TERM
DEFINITION
Trade Level
Property normally increases in value as it progresses through
production and distribution channels.
Trade-in Allowance Property used for payment in whole or in part for acquisition of other
property (usually older property used as partial payment for new property).
True Lease
Agreement under which an owner gives up possession and use of
his/her property for valuable consideration and for a definite term and at the end of the term, the
owner has the absolute right to retake, control, or convey the property.
UNDOCUMENTED
VESSEL
Any vessel not required to be documented as defined in the context of
property tax. (See Documented Vessel.)
Unsecured Property
Property on the unsecured roll.
Unsecured Roll
See definition of secured roll. Remainder of the roll is the unsecured
roll. The taxes are a personal liability of the owner.
Use Tax
A sales tax that is collectible by the seller where the purchaser is
domiciled in a different state. A tax on the use, consumption, or storage of tangible property,
usually at the same rate as the sales tax, and levied for the purpose of preventing tax avoidance
by the purchase of articles in a state or taxing jurisdiction which does not levy sales taxes or has
a lower rate.
A levy on privilege of using, within taxing state, property purchases outside the state, if the
property would have been subject to the sales tax had it been purchased at home. Such tax
ordinarily serves to complement sales tax by eliminating incentive to make major purchases in
states with lower sales taxes; it requires resident who shops out-of- state to pay use tax equal to
sales tax savings.
Utility
want-satisfying power.
The capacity of goods to evoke a desire for possession, wantedness,
Value
The power of one commodity to command other commodities in
exchange, a ratio of exchange, present worth of future net benefits.
Vehicle
A device by which any person or property may be propelled, moved,
or drawn upon a highway, excepting a device moved exclusively by human power or used
exclusively upon stationary rails or tracks. See text for discussion of assessable and exempt
vehicles.
Vessel
Every description of watercraft used or capable of being used as a
means of transportation on water.
Yield
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The return on investment.
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October 2002
Glossary
TERM
DEFINITION
Yield Capitalization A capitalization method used to convert future benefits to present value
by discounting each future benefit at an appropriate yield rate or by developing an overall rate
that reflects the investment's income pattern, value change, and yield rate.
Yield Rate
A measure of investment return (usually annualized) that is applied to
a series of incomes to obtain the present value of each; examples are the interest rate, the
discount rate, the internal rate of return, and the equity yield rate.
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October 2002
Bibliography
BIBLIOGRAPHY
American Society of Appraisers. Appraising Machinery and Equipment: American Society of
Appraisers, 1989.
Appraisal Institute.
The Dictionary of Real Estate Appraisal. 3rd ed.
Appraisal Institute, 1993.
Chicago:
California State Board of Equalization, Sales & Use Tax Manual, September 1999.
Ehrman, Kenneth A., Esq. and Flavin, Sean, Esq. Taxing California Property. 3rd ed. 3 vols.
New York: Clark Boardman Callaghan, 1989.
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Marston, Winfrey, and Hemstead, Engineering Valuation and Depreciation, McGraw-Hill, 1953.
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AH 504
261
October 2002