Start Date
10-12-2015 1:00 PM
End Date
10-12-2015 2:00 PM
Description
California law requires the valuation and taxation of “operational” software essential to the operation of machinery and equipment, and excludes “application” software that is not essential but intended to enhance the performance of the equipment. Corporate taxpayers are required to annually report to assessors the acquisition cost of machinery and equipment as if it contained only “basic operational” programs, and to provide documentation to support the reported costs. As a result there is a growing, multi-billion dollar dispute before local assessment appeals boards and courts over whether software “embedded” in high-tech equipment might actually include “application” software and therefore excluded from valuation. Taxpayers and assessors are faced with the challenge of determining the cost and value of equipment that is not commonly sold in the manner prescribed by law. With the exponential growth in the variety of sophisticated machinery and equipment requiring specially-designed software, how California manages this issue will have implications for the nation. The panel will be comprised of the assessor from Silicon Valley, and the nation’s leading embedded software academician. They will provide an overview from an assessor’s perspective, in addition to an in-depth discussion on how engineers and technologists separate essential operational software from non-essential application software.
Recommended Citation
Stone, Lawrence E. and Wolf, Marilyn PhD, "Assessing high-tech equipment and the software inside: What's assessable and what's not?" (2015). IAAO Annual Legal Seminar. 5.
https://researchexchange.iaao.org/legal/legal15/sessions/5
Assessing high-tech equipment and the software inside: What's assessable and what's not?
California law requires the valuation and taxation of “operational” software essential to the operation of machinery and equipment, and excludes “application” software that is not essential but intended to enhance the performance of the equipment. Corporate taxpayers are required to annually report to assessors the acquisition cost of machinery and equipment as if it contained only “basic operational” programs, and to provide documentation to support the reported costs. As a result there is a growing, multi-billion dollar dispute before local assessment appeals boards and courts over whether software “embedded” in high-tech equipment might actually include “application” software and therefore excluded from valuation. Taxpayers and assessors are faced with the challenge of determining the cost and value of equipment that is not commonly sold in the manner prescribed by law. With the exponential growth in the variety of sophisticated machinery and equipment requiring specially-designed software, how California manages this issue will have implications for the nation. The panel will be comprised of the assessor from Silicon Valley, and the nation’s leading embedded software academician. They will provide an overview from an assessor’s perspective, in addition to an in-depth discussion on how engineers and technologists separate essential operational software from non-essential application software.