Public Utility Valuation and Franchise Tax Unit

Utility Valuation

Public utilities are, by definition, monopolies in the areas they serve.  As a result, the forces of competition which regulate prices in a free enterprise society are unable to operate.  The state of Maryland regulates utility rates, operations, and services, as a substitute for competition.

In Maryland, utilities are regulated as “public service companies.” Utility companies and railroads are assessed using the unit method of valuation because the interconnected real and personal property function together to provide service.  The unit method relies on the income approach and all other relevant factors such as the cost approach and the market approach when data is available.

Assessments are certified to local governments where they are converted into property tax bills by applying the appropriate tax rates set by local governments.

Public utility and railroad property includes all property used to operate the business.  It includes real property such as land and buildings.  It also includes personal property such as telephone or electric poles, towers, lines, cables, meters, transmission, distribution mains, and other equipment used to operate the utility. 
Maryland Code:
Public Utilities §1-101 (x) 
Tax Property §8-108 and §8-109 

Franchise Tax

​​​Franchise tax is typically calculated on a percentage of the revenues derived from sales of the utility company to customers in the service area or territory.

The franchise tax is applied to public service companies such as gas, electric, and telephone for the privilege of doing business in Maryland.  The Franchise is calculated in part as a percentage (2%) of the gross receipts derived from business in Maryland.  Electric and gas companies are also subject to the .00062 per kilowatt-hour charge for electricity delivered or .00402 per therm charge for gas delivered. 

“Public service company” is an entity engaged in telephone business in the State or engaged in the transmission, distribution, or delivery of electricity or gas in Maryland. 
MD Code: Tax-Gen​eral §8-401-417​.