Utah Property Tax Update Archive

Updated June 2018

Tax Commission Holds that Debt Rate Must Match Capital Structure

The concluding step in deriving a weighted average cost of capital cost is to determine the proper capital structure.  In Appeal No. 15-958 (May 2018), the Tax Commission stated that the capital structure is related to a company’s credit rating and held that “[c]ombining a debt rate from “A” rated companies with a capital structure from mostly “B” rated guidelines companies . . . [was] a mismatch.”  The Commission corrected this error by utilizing an “A” credit rating and a capital structure of “A” rated debt.  Thus, it is important to understand the relationship between a company’s debt rating and its capital structure when determining a weighted average cost of capital.

David J. Crapo, John T. Deeds
Crapo Deeds PLLC
American Property Tax Counsel (APTC)

Updated July 2017

Utah Legislature Declines Cost Approach & Contract Rents for Special Purpose Properties

During Utah’s 2017 General Legislative Session, Senate Bill 43 was drafted to value special purposes properties using a replacement cost approach and relying on contract rents. Specifically, the bill stated that in assessing such properties, the assessor was to “consider, as a primary factor, the cost of constructing improvements that are equivalent to the improvements currently on the property” and also “shall consider the terms of the agreement that provides for the rental or lease of the special purpose property.” This would have essentially asked for a “value in use” and a “leased fee” valuation rather than the constitutionally mandated “value in exchange” and “fee simple” standard of valuation. Industry offered its opposition to this bill and the bill ultimately did not pass.

John T. Deeds
Holland & Hart LLP
American Property Tax Counsel (APTC)

UPDATED DECEMBER 2016

Lease-Up Costs Not Allowed

In a recent ruling, the Utah State Tax Commission (the “Commission”) did not allow a reduction to an income approach for lease-up costs because “the subject property was fully occupied as of the lien date [and it] should be valued as such, rather than as if it was an unoccupied property.”  Commission Appeal Nos. 15-319 (decided June 13, 2016).  However, the Commission implied that if the property was vacant on the lien date, then it would be appropriate to consider such costs.  The Commission’s rationale appears to focus on the facts as they exist on the lien date.  Additionally, the Commission stated that allowing lease-up costs for a fully occupied property would be giving too much consideration to what a buyer might be willing to pay for the property over the price for which a seller would be willing to sell the property.

John T. Deeds
Holland & Hart LLP
American Property Tax Counsel (APTC)

Updated September 2016

Tax Commission Confirms Fair Market Value Means Value Based on Fee Simple Ownership

In two recent decisions, the Utah State Tax Commission (the “Commission”) has addressed whether Utah’s fair market value standard should be based on fee simple value or lease fee value and has affirmed its previous rulings that it should be based on fee simple value.  Utah State Tax Commission Appeal Nos. 15-1071 (decided May 13, 2106) & 15-319 (decided June 13, 2016).  In one case the taxpayer was arguing for a lower value based on a long term lease of the subject property, and in the other case the taxpayer was arguing that a comparable sale should be disregarded because it was a leased fee sale based on a long term lease which was above market lease rates and resulted in a sale above fair market value.  The Commission was consistent in both instances stating that “the fair market value standard means the property is to be valued based on fee simple ownership.” 

John T. Deeds
Holland & Hart LLP
American Property Tax Counsel (APTC)

Updated June 2016

Utah Refuses to Follow 9th Circuit on Tribal Exemption Issue

Recently the 9th Circuit Court of Appeals held that land held in trust by the United States government for the use of a tribe exempts not only the land, but also “exempts permanent improvements on that land from state and local taxation.” Chehalis v. Thurston County Board of Equalization, 724 F.3d 1153, 1179 (9th Cir. 2013) Id. at 1157. Additionally, the court explained that the improvements were exempt “without regard to the ownership of the improvements. ” Id. at 1159. Thus, even though the improvements in that matter were only owned 51% by an Indian tribe and 49% by a private entity, 100% of the improvements were exempt from property tax.

The Utah State Tax Commission declined to follow Chehalis in a recent decision, reasoning that Utah is within the 10th Circuit and thus not bound by the 9th Circuit decision. The Commission stated that “Chehalis does not support the position that the tribal exemption should be applied to permanent improvements on trust lands regardless of ownership” and that doing so would be a departure from how the Division historically has assessed other properties on trust lands. Appeal No. 14-45 et al. Thus, until a higher court rules otherwise, the percentage of ownership will be applicable in determining the amount of exemption improvements on trust lands will receive.  

John T. Deeds
Holland & Hart LLP
American Property Tax Counsel (APTC)

Updated December 2015

CAUTION: Review Assessed Values Even if Property is Currently Benefiting from Greenbelt Assessment

Utah law allows for a reduction in property taxes if the property is actively used for agricultural purposes. This is known as greenbelt assessment. Instead of such property being taxed at its fair market value, it is taxed based on “the value that the land has for agricultural use” which is significantly lower than the property’s fair market value. Thus, when property qualifies for greenbelt assessment, the taxing jurisdiction provides two assessed values, one at the agricultural use value and the other at fair market value. Additionally, Utah law requires appeals relating to the assessed value of property to typically be filed by September 15. When property is no longer used for agricultural purposes and no longer qualifies for greenbelt assessment, a five year rollback tax applies. This means that the taxing jurisdiction looks back five years and imposes property tax based upon the property being valued at its fair market value rather than the reduced agricultural use value. Consequently, if a taxpayer ignores the fair market value assessment when it is issued (which often occurs because it qualifies for greenbelt assessment) it is barred from challenging that assessment for the five year rollback when the property falls out of greenbelt status. This is exactly what happened in a recent decision from the Utah State Tax Commission. See Appeal No. 14-461. Therefore, even though your property may currently be in greenbelt status, be sure to review the fair market value assessment each year and file an appeal if the value is excessive to preserve your rights in the event the property is removed from greenbelt status.

John T. Deeds
Holland & Hart LLP
American Property Tax Counsel (APTC)

Updated September 2015

Valuation Increases as a Result of Treating Operating Leases as Debt

The State of Utah has begun to treat operating leases as debt when considering the capital structure of a company for purposes of utilizing the income approach to value. This has the effect of placing a greater percentage on the cost of debt and thus a lower percentage on the cost of equity, resulting in a lower weighted average cost of capital (“WACC”). All things being equal, a lower WACC result in a higher valuation. While this appears to be a minimal adjustment, it can create dramatic swings in value for certain taxpayers. This issue is yet to be resolved in Utah, but it is finding its way into multiple disputes. Thus, review assessments carefully for this treatment of operating leases and be cognizant of the potential valuation increase created thereby.

John T. Deeds
Holland & Hart
American Property Tax Counsel (APTC)

Updated March 2015

Commission Allows Use Of Unitary Approach to Challenge the Accuracy of Percent Good Tables

The Utah State Tax Commission recently issued a decision upholding the taxpayer’s argument that personal property can be valued via a unitary approach. In Utah, personal property is assessed by applying a percent good factor as published in administrative rule R884-24P-33 (“Rule 33”) to the acquisition price of such property. The taxpayer disagreed with the assessed value of its personal property resulting from the application of Rule 33’s percent good tables. In challenging the assessment, the taxpayer submitted expert appraisals for all years using unitary approaches to demonstrate error in the assessments. The Taxpayer’s expert utilized income, sales comparison, and RCNLD cost approaches to demonstrate that the percent good tables did not account for functional and external obsolescence. The County argued that the use of such unitary approaches to value were violative of Utah law. Agreeing with the taxpayer, the Commission held that Utah law does not prohibit the use of unitary appraisal approaches to challenge the accuracy of the percent good tables, and that a taxpayer “should be allowed an opportunity to demonstrate that a valuation method other than the one set forth in Rule 33 would yield a more accurate estimate of the fair market value of its personal property.”

John T. Deeds
Holland & Hart LLP
American Property Tax Counsel (APTC)

Updated June 2014

Utah Legislature Moves to Ensure Qualified Tax Commissioners

During the 2014 legislative session, the Utah legislature passed SJR 7 and SB 19, which are meant to ensure that Utah's Tax Commissioners are qualified for the job. The State of Utah has a Tax Commission which is comprised of four members and is charged to "administer and supervise the State's tax laws," including deciding tax disputes. Utah Const. art. XIII, § 6. Historically, no more than two of the four members could belong to the same political party. The legislature passed SJR 7 requesting an amendment to Utah's Constitution to remove that requirement and focus more on qualifications rather than political affiliation. In order for this constitutional amendment to take effect, a majority of those voting in this year's general election must approve the amendment. Coordinated with SJR 7 is SB 19 which lists certain qualifications that a member of the commission must have, including "expertise in the theory and practice of ad valorem taxation." Additionally, before appointments to the Commission are made, the Governor is to obtain recommendations of qualified individuals from practitioners in the industry. Such modifications to Utah's Constitution and statutory code are intended to ensure that Utah's tax commissioners have the requisite knowledge and expertise to "administer and supervise the State's tax laws."

John T. Deeds 
Holland & Hart
American Property Tax Counsel (APTC)

Updated September 2013

Protect Your Appeal Rights on Personal Property Taxes

Utah imposes property tax on the tangible personal property of businesses. This personal property tax is self-reported and self-assessed. Businesses are required to annually submit a signed personal property statement to each county in which they own property. Utah Code Ann. § 59-2-306. The businesses are required to identify the acquisition prices and vintages for their personal property in these statements and then multiply the prices by a provided percent good factor to determine the estimated fair market value for each property. The business then multiplies the resulting value by the county's tax rate to determine the tax due and sends a check for the taxes in with the signed statement. Unfortunately, application of the percent good tables provided by the state does not always equate to fair market value of the property. If the business believes that the application of the percent good tables does not accurately estimate that fair market value of its property, the business should either (1) file an appeal challenging the valuation on the same day it files the personal property statement, or (2) reduce the reported value on the statement to what it believes is the correct fair market value and then properly identify the requested reduction and include supporting information. Failure to take one of these actions on the statement filing date will typically preclude the taxpayer's rights to challenge the assessment.

David J. Crapo
Crapo Smith PLLC
American Property Tax Counsel

Updated June 2013

Valuation of Operating Leased Property and Intangible Property

Union Pacific Railroad Company recently won a key victory regarding property tax valuations in Utah's Second Judicial District Court. Two of the main issues decided by this case were (1) the proper method of valuing and accounting for operating leased property in unitary assessments, and (2) the proper valuation and removal of intangible properties. The Court agreed with Union Pacific that the proper way to capture the value of operating leased property is to treat the property as if owned. Thus, the appraiser should disallow the rent expense, allow a depreciation expense, recalculate the appropriate income tax obligations, and make an appropriate allowance for capital expenditures to maintain the property. This was in direct contrast to the counties' and Commission's approach which attempted to account for the value of operating leased property by calculating the present value of future lease payments and adding onto that a terminal value. The Court also agreed with Union Pacific that the value of its custom computer software should be removed from the unit, and held it was appropriate to value such software via the replacement cost model and remove that value from the unit value established via the income approach. These two holdings represent significant precedent in Utah and a very favorable result for Utah taxpayers.

David J. Crapo
Crapo Smith PLLC
American Property Tax Counsel

Updated March 2013

Personal Property Tax Exemption Increased to Ease Burden on Small Business

The Utah Legislature recently closed its annual general legislative session. Among the property tax bills passed were H.B. 67, Property Taxation Revisions, and its companion bill S.B. 35, Property Taxation of Business Personal Property. These bills were meant to ease the onerous personal property tax filing requirements placed upon small businesses. Utah imposes a business personal property tax wherein a business must list every item of personal property it owns and then pay a tax thereon. H.B. 67 and S.B. 35, among other things, increased the personal property tax exemption from $3,500 to $10,000. Therefore, small businesses which own personal property with an aggregate value of $10,000 or less no longer need to file a business personal property tax return, known as a "signed statement." This bill goes into effect on January 1, 2014 and it is anticipated that it will affect approximately 26,000 Utah small businesses.

John T. Deeds
Crapo Smith PLLC
American Property Tax Counsel (APTC)

Updated December 2012

WSATA Appraisal Handbook and NCUVS Standards Rejected

Many western state assessors promote the standards espoused by the Western States Association of Tax Administrators' ("WSATA") Appraisal Handbook and the National Conference of Unit Valuation States ("NCUVS"). However, challenges have arisen regarding the appropriateness of these standards because they often conflict with generally accepted appraisal principles. Such a challenge was recently made in Montana wherein the Montana District Court held that portions of the WSATA Handbook and NCUVS standards were inconsistent with statute. See Gold Creek Cellular of Montana Limited Partnership d/b/a Verizon Wireless; and AT&T Mobility, LLC. v. State of Montana Dept. of Revenue, No. DDV-2011-154 (dated Aug. 10, 2012 and released Oct. 10, 2012).
The Montana Department of Revenue (the "DOR") attempted to narrow the definition of intangible property, limit the definition of goodwill to only accounting goodwill, and adopt standards and definitions from the WSATA Handbook and NCUVS standards by amending its administrative rules. Verizon Wireless and AT&T Mobility filed complaints against the DOR seeking to have the administrative rules declared invalid because they conflicted with statute. The court agreed with Verizon Wireless and AT&T Mobility and held that the amended administrative rules placed additional requirements that were contradictory to the statute exempting intangible property from taxation, that the amendments were out of harmony with statute, and rejected the DOR's use of the WSATA Handbook and NCUVS standards to the extent they were contrary to Montana's intangible property exemption statute. Id. at 7, 11.

Updated September 2012

Don't Miss Your Deadline for Appealing Personal Property Taxes

Personal property taxes in Utah are generally self-assessed by the taxpayer pursuant to percent good tables published by the Utah State Tax Commission. See Utah Code Ann. § 59-2-306; Utah Admin. Code R884-24P-33. However, the Utah State Tax Commission is authorized to perform audits of personal property taxes. See Utah Code Ann. § 59-2-705. Such audits often result in the reclassification of property which has the effect of increasing the value of property. These audits are then given to the individual counties, who then send deficiency tax notices to the taxpayer. The Utah Code states that a taxpayer has 60 days to appeal such a deficiency tax notice. Utah Code Ann. § 59-2-1005(1)(a)(ii). However, the counties throughout Utah are not uniform in allowing taxpayers 60 days to file appeals; some counties only allow 30 days. Therefore, in order to be safe and avoid an unnecessary fight over whether an appeal is timely, it is advised to file an appeal of personal property taxes resulting from a tax notice within 30 days after receiving the tax notice.

Updated June 2012

Utah District Court Affirms The Unreliability Of The Stock And Debt Approach As An Indicator Of Value

There is a continuing disagreement between taxing jurisdictions and taxpayers regarding whether the stock and debt approach is a reliable indicator of value for taxable properties owned by centrally assessed businesses. Utah has a regulation stating that "the stock and debt method typically capture[s] the value of intangible property at higher levels than other methods" and that relatively less weight should be given to this method in the reconciliation process. Utah Admin. Code R884-24P-62(4)(b)(ii). However, in a property tax dispute regarding the value of PacifiCorp, Inc.'s property ("PacifiCorp") for the tax year 2006, the counties in Utah attempted to use the stock and debt approach and the sale of PacifiCorp to MidAmerican Energy Holdings Company ("MECHC"), which occurred on March 21, 2006, as evidence of the value of PacifiCorp's taxable property for the tax year 2006.

The District Court rejected the counties' appraiser's estimation of value based on the stock and debt approach and held that the stock and debt indicator used by the appraiser was unreliable. Findings of Fact, Conclusions of Law and Final Decision at ¶ 7, Beaver County v. Property Tax Div. of the Utah State Tax Comm'n, No. 080905451, (3rd Dist. Ct. Utah, Feb. 15, 2012). This is a significant holding reiterating the unreliability of the stock and debt approach to accurately measure the value of the taxable tangible property.

Updated March 2012

The Utah Supreme Court Holds That Exclusive Possession Really Means Exclusive Possession

Utah imposes a privilege tax on a property user for "the privilege of beneficially using or possessing property in connection with a for-profit business, when the owner of that property is exempt from taxation." Alliant Techsystems, Inc., v. Salt Lake Board of Equalization, 2012 UT 4 at ¶ 1 (citing Utah Code § 59-4-101(1)(a)). However, on January 20, 2012, the Utah Supreme Court held that Utah's privilege tax could not be imposed upon a user of exempt property unless the lessee had "exclusive possession" of the property. Id. The Court explained that "exclusive possession" means "exclusive possession as against all parties, . . . including the [exempt] landowner. Id. at ¶ 24. As a result of the Court's holding, an entity using property, whose owner is exempt from taxation, is only subject to Utah's privilege tax if that entity has the right to exclude the property owner from occupying the property, is able to make broad use of the property, and has power over a definite space for a definite time. Id. at ¶ 33.

David J. Crapo
Crapo Smith PLLC
American Property Tax Counsel (APTC)

Updated December 2011

The Utah Supreme Court Expounds on Double Taxation

The Utah Supreme Court expounded on what constitutes double taxation by clearly establishing three elements a taxpayer must prove to show that property has been subjected to double taxation: "(1) the tax must fall on the same property, (2) the burden of the tax must fall on the same person, and (3) other similarly situated property must be taxed only once." Summit Water Distribution Co. v. Utah State Tax Comm'n, 2011 UT 43, ¶ 23, 259 P.3d 1055.
In Summit Water Distribution Co. the court held that the value of a water company's property was not taxed twice when a tax was imposed upon the distribution facilities themselves, as well as the increased value of property serviced by the water company, which values had increased due to the water company providing water to such property. The court stated that the distribution facilities are different from the real property the distribution facilities serve, and the burden of the taxes are imposed upon different persons, the water company and the owners of the real property. Because all three elements were not met, no double taxation occurred.

Johnny Deeds
Crapo Smith PLLC
American Property Tax Counsel (APTC)

Updated September 2011

Goodwill is Declared an Intangible and Not Taxable

The Utah Supreme Court recently issued a landmark decision in T-Mobile USA, Inc., v. Utah State Tax Commission holding that goodwill constitutes intangible property and that the value of goodwill is not subject to property tax. 2011 UT 28, ¶33, 254 P.3d 752. T-Mobile appealed the assessed value of its property, arguing that the assessment improperly included the value of intangible property because the assessment included the value of goodwill. The Court agreed, and stated that goodwill is consistent with the generally accepted definition of intangible property and thus is not taxable. Id. at ¶32. According to the Utah Constitution, the legislature can choose to tax intangibles as property or the income from intangible property. Id. at ¶29. Because Utah taxes the income from intangibles, it is prohibited from taxing the intangible property itself. Id. at ¶35. Therefore, goodwill is exempt from property taxation in Utah.

Updated March 2011

Lis Pendens May Lower the Fair Market Value of Property for Property Tax Purposes

Property owners with a lis pendens filed on their property which affects the property’s highest and best use, may want to consider appealing the assessed value of that property.  In recent years, the Utah State Tax Commission (the “Commission”) has dealt with whether a lis pendens placed on property affects its fair market value.  In Appeal No. 07-0348 the Commission held that a lis pendens did not affect the subject property’s value; however, the Commission stated the result might be different if the lis pendens affected the highest and best use of the property.  Recently, the Commission provided such an example, and stated, “it appears appropriate to consider the effect on value that [a] . . . lawsuit and lis pendens may have on . . . property . . .”  Utah State Tax Comm’n,  Appeal No. 10-0059 (Initial Hearing Order Aug. 19, 2010). 
In Appeal No. 10-0059 the taxpayer owned a 35.22 acre parcel of land in Davis County.  The highest and best of the parcel was for it to be developed into residential lots.  However, a lawsuit was brought seeking a right-of-way over the property and a resulting lis pendens was placed on the property.  The Commission stated that a buyer aware of the pending litigation might reasonably anticipate development could be delayed and therefore might pay less for the property.  As a result, the Commission reduced the property’s assessed value.  Therefore, if a lis pendens placed on property affects its highest and best use and the assessment does not reflect that possible negative impact, it is likely that the property has been over-assessed.

David J. Crapo
Crapo Smith PLLC
American Property Tax Counsel (APTC)

Updated December 2009

Operating Property Leased by the Taxpayer is to be Included in Property Tax Assessments

Non-capitalized leased assets ("operating leased" assets) can pose a concern for appraisers. The cost of these assets does not show up on the taxpayer's balance sheet, but the lease payments will be shown as a deduction on the income statement. These lease payments reflect the income going to the lessor of the operating leased assets. If the appraiser is preparing an income indicator of value these lease payments are effectively removing a portion of the value of the operating leased assets from the income indicator. If one is in a state that requires the valuation of the fee interest in the property, an adjustment may need to be made to the income approach to add the lessor's interest in the leased property back into the assessment. The Utah State Tax Commission recently affirmed a method for adding a value for operating leased property into a yield capitalization income approach. The Commission explained that it would be appropriate to estimate the value of the operating leased property by capitalizing the resultant amount of the lease payments made for the property less depreciation associated with lease property. This capitalized amount for the leased property would then be added to the yield capitalization income amount derived for the taxpayer owned operating property.

Updated June 2009

Privilege Taxes May Be Assessed at the Same Amount for a Leasehold Interest as It Would be for a Fee Simple Interest

On June 12, 2009 the Utah Supreme Court issued its decision in the ABCO Enterprises case upholding the assessment of "a privilege tax on a leasehold interest at the same amount that a fee simple interest would be assessed." When otherwise tax-exempt property is use to conduct a for-profit business a privilege tax may be assessed in the "same amount as the property taxes that would have been owed by an owner of nonexempt property." The Court determined that "it is not unreasonable to impose the pro rata share of raising governmental revenue upon a lessee of exempt property," and ruled that an assessment on the leasehold interest did not violate the uniform operation of laws provision of article I, section 24 of the Utah Constitution or the Equal Protection Clause of the Fourteenth amendment to the United States Constitution.

Updated December 2008

Rulemaking Request to Centrally Assess Cable Companies

Utah law provides that all property which "operates as a unit across county lines" is subject to central assessment by the Utah State Tax Commission. Utah Code Ann. § 59-2-201(1)(a). On June 27, 2008, Qwest Corporation submitted a rulemaking request to the Commission wherein it requested that the Commission amend its central assessment rule to explicitly included cable companies that provide two-way telecommunications services within its umbrella of central assessment. Qwest argued that the current operation of certain cable companies in Utah clearly satisfies this statutory requirement for central assessment. Comcast and other cable have opposed the rule claiming that they should be viewed as local operating units because of the franchise agreements they are required to enter into to with cities and counties in order to provide services. The Commission should issue a decision by the end of September as to whether they are willing to entertain rulemaking procedures on this issue.

Updated September 2008

Utah State Tax Commission equates "value in use" with "fair market value"

The Utah State Tax Commission recently conducted an Initial Hearing involving the valuation of a mid-size retail box leased by a well-known national retailer. Property taxes in Utah are supposed to be assessed on the fee simple estate. The taxpayer's appraiser testified there was little demand for a building of that size with its particular built-to-suit characteristics, and the low demand would drive the purchase price down significantly in a transaction between a willing buyer and a willing seller. The County argued a buyer would pay a higher price because the property was subject to a long-term lease with a strong tenant. The Commission chose to consider the effects the lease had on value, and adopted the County's higher valuation. We believe this decision improperly taxes value in use and constitutes a potentially harmful precedent for other taxpayers. We understand this matter will be appealed to a Formal Hearing.

Updated March 2008

How to Properly Handle DIT in the Income Approach - When Valuing Rate-Regulated Utilities

On February 28, 2008, the Utah State Tax Commission issued its decision in the PacifiCorp case and clarified that deferred federal income tax expenses ("DIT") should not be added into the cash flow to capitalize in the yield capitalization model "without making an offsetting adjustment for replacement capital expenditures." The Commission found that "when a mature cost regulated utility is expected to make . . . constant replacement capital expenditures into the future, the resulting DIT expense will be offset by the payment of taxes previously deferred and the net cash flow to [the utility] of DIT will be $0." The Commission also concluded that "any net present value benefits associated with DIT would be passed through to the rate payers." Inasmuch as these present value benefits would not accrue to the benefit of a would-be buyer, any present value benefits associated with DIT should not be "included in the cash flow to be capitalized under the yield capitalization approach" to value.

Updated December 2007

Deduction of Amortization Expenses in the Income Approach to Value

The Utah State Tax Commission issued a decision in November 2007 clarifying how amortization expenses should be accounted for in deriving the cash flow to capitalize in a yield capitalization income model. The Commission stated that if the amortization expense is associated with assets that will be replaced, the amortization should be added to the cash flow, but the addition should be offset by any equivalent replacement capital expenditure. The Commission also ruled that if the amortization expense is associated with an intangible that is not expected to be replaced, i.e. customer lists, an appropriate amount of amortization expense should be added to the cash flow without and offsetting capital expenditure deduction. Typically, the amortization expense associated with an intangible like customer lists declines quite rapidly. Thus, the Commission indicated that the appropriate amount of amortization expense to be added to the cash flow should be the current year's amortization expense adjusted downward to "reflect the declining pattern" of the amortization expense.