Electric Distribution Systems

Distribution systems, not including substations, transmission or generation equipment may not be subject to property taxes if they are either:

• Located in a rural area and owned by a cooperative association that pays the REA Membership Tax (a tax of $10 per each 100 members, or fraction of)
• Primarily used for supplying electricity for farmers at retail

What qualifies as a rural area?

For purposes of the REA Membership Tax, a rural area is any area that is not included within the boundaries of any statutory city or home rule charter city.

Report exempt rural distribution system property in the Depreciable Excludable section of the Market Value Report:

Include:

• A schedule identifying the type of property included in the excludable amount you listed
• Asset detail identifying that the property included in the electric distribution system total

See the Utility and Pipeline Property Record Report Instructions for detailed information on reporting operating property to the department for apportionment.

Some electric cooperative associations pay $10 per 100 members annually (commonly referred to as the REA Membership Tax) instead of paying property taxes on their electric distribution system property outside of a city. The exemption does not include substations, transmission or generation equipment, or distribution system property located within a city.

For those cooperative associations, information provided on the Market Value Report and Property Record Report must both:

• Be aggregated to the unique taxing jurisdiction level
• Exclude information related to electric distribution system property outside of city limits (except substations). 

Unique taxing jurisdiction means the geographic area subject to the same set of local tax rates.