July 18, 1980

Mr. Andrew Aberle 
Dewey County State's Attorney 
Timber Lake, South Dakota 57656

Official Opinion No. 80-44

Classification of REA Property for Taxation

Dear Mr. Aberle:

You have requested an official opinion from this office in regard to the following factual situation:

FACTS: 

Moreau-Grand Electric is a rural electric cooperative serving Corson, Dewey and Ziebach counties.  Moreau-Grand Electric, hereinafter referred to as cooperative, owns a parcel of land in Dewey County on which it has erected a tower for communication transmissions between its base station at Timber Lake, South Dakota, and its mobile units as well as to other stations.  The tower is affixed to the land. 

The cooperative also has various substations throughout the service area located on land which the cooperative owns.  These substations are likewise affixed to the parcels of land owned by the cooperative.

Based upon the above facts, you have asked the following questions:

QUESTIONS: 

1.  Is the (radio) tower considered real or personal property? 

2.  Are the substations considered real or personal property?

IN RE QUESTION NO. 1:

It is your contention that the radio tower is used for communication but not for distribution or transmission of electric energy, and that the substations,  while used in the distribution and transmission of electric energy, are not personal but rather real property because of the definition of same in SDCL 43-1-2 and 43-1-3.  You have also referred to an earlier opinion of this office found at 1959-60 A.G.R. 191.

The chapter in question, 10-36, which imposes a special tax on rural electric companies in lieu of ad valorem taxes, establishes a special definition for the personal property of such companies and states in 10-6-1: 

Personal property of persons, corporations, cooperatives and associations engaged in the distribution, transmission and/or generation of electric energy for consumption solely in rural areas within this state, . . . is hereby expressly classified for the purpose of taxation.

SDCL 10-36-2 defines what property is included in the term personal property and states: 

. . . shall include but shall not be limited to the following property used, or intended for use, by a company in connection with the distribution, transmission and/or generation of electric energy:  all poles, wires, lines, transformers, generating equipment, meters, machinery, fixtures and all attachments and appurtenances thereto.

All of this property is clearly property which is used, or intended for use, in connection with the actual distribution, transmission and/or generation of electric energy.  This is evidenced by the enumeration of certain types of  property:  poles, wires, lines, etc., which do the actual distributing of the energy produced or sold.

Clearly, radio telephone towers are not of the same character of property so far as the distribution of the electrical energy is concerned.  Granted, the company may, in the course of its operation, have occasion to use radio telephone communications, but the use of such radio communications does not in and of itself distribute or transmit electrical energy.  It is my opinion, therefore, that the radio tower should be considered as appurtenant to real estate and therefore real property.

IN RE QUESTION NO. 2:

In connection with the transmission towers and substations, I find no legal basis to reverse the 1959 opinion, which in turn upheld 1941-42 A.G.R. 465, although it reversed 1957-58 A.G.R. 233. The 1959 opinion has not been challenged nor has the Legislature seen fit to amend the definition knowing full well what interpretation was being placed upon the definition of personal property with respect to substations and transmission towers.  It is therefore my opinion that the substations and transmission towers should be considered personal property.

Respectfully submitted,

Mark V. Meierhenry
Attorney General