Clarifying “Accumulated Depreciation”: Rhode Island Supreme Court Mandates Uniform Financial-Accounting Depreciation for Telecommunications Tangible Personal Property Tax

Introduction

On 3 July 2025, the Rhode Island Supreme Court delivered its opinion in Verizon New England Inc. v. Savage, No. 2023-221-M.P. The decision settles a long-running dispute between Verizon and the Rhode Island Division of Taxation over how to calculate “accumulated depreciation” under G.L. 1956 § 44-13-13, which governs the taxation of tangible personal property (TPP) owned by telegraph, cable, and telecommunications corporations.

At stake was more than $24 million in refund claims and, more importantly, the methodology by which every telecommunications carrier operating in Rhode Island must value its equipment going forward. The Court affirmed the District Court’s judgment in favour of the Tax Administrator, declaring that “accumulated depreciation” refers solely to financial-accounting depreciation (book depreciation) and therefore excludes additional deductions for functional or economic obsolescence advocated by Verizon.

Summary of the Judgment

Issue: Whether “accumulated depreciation” in § 44-13-13 includes reductions for functional and economic obsolescence, or is limited to book (financial-accounting) depreciation.
Holding: The term is unambiguous and denotes the amount recorded on a company’s balance sheet; consequently, only financial-accounting depreciation applies.
Outcome: District Court judgment and agency refund denials upheld; Verizon’s requested refunds were properly denied.
Key Rationale: Ordinary dictionary meaning of “accumulated depreciation,” consistent four-decade administrative practice, and the Legislature’s acquiescence confirm a uniform, book-value approach.

Analysis

Precedents Cited and Their Influence

Gott v. Norberg, 417 A.2d 1352 (R.I. 1980) – Recognised Title 44 as a “comprehensive scheme of taxation” requiring consistent construction. The Court invoked Gott to stress uniformity and discourage disparate valuation outcomes that Verizon’s method could create.
Olamuyiwa v. Zebra Atlantek, Inc., 45 A.3d 527 (R.I. 2012) and Planned Environments Mgmt. Corp. v. Robert, 966 A.2d 117 (R.I. 2009) – Both illustrate the practice of using dictionary definitions when statutory terms are undefined. They supplied the framework for turning to Black’s Law Dictionary for “accumulated depreciation.”
Trice v. City of Cranston, 297 A.2d 649 (R.I. 1972) – A “longstanding, practical and plausible” agency interpretation unchallenged by the Legislature merits judicial acceptance. This principle underpinned the Court’s reliance on four decades of agency practice.
Administrative review cases (Beagan v. DLT, Iselin, etc.) – Cited for standards of certiorari review and statutory interpretation, reaffirming de novo review of legal questions.

Legal Reasoning

The Court’s reasoning followed a familiar statutory-interpretation path:

Textual Analysis. § 44-13-13 defines “net book value” as “original cost less accumulated depreciation,” capping depreciation at 75 % of original cost, but does not define “accumulated depreciation.”
Dictionary Definition. Black’s defines the disputed term as “the total depreciation currently recorded on an asset,” reflecting balance-sheet treatment. The Court emphasised that book depreciation addresses ordinary physical deterioration and passage of time, not external market factors.
Administrative Practice. For 40 years the Tax Administrator has required financial-accounting depreciation. Legislative inaction in the face of that practice is taken as implicit approval (Trice).
Uniformity and Predictability. The Court criticised Verizon’s approach as “subjective” and likely to produce inconsistent assessments for identical assets, contravening the uniform-taxation policy highlighted in Gott.
Deference Alternative. The Court added that even if ambiguity existed, the agency’s interpretation would deserve deference under administrative law principles (Skidmore-style, not explicitly Chevron, since Rhode Island follows its own precedent).

Impact of the Decision

Immediate Financial Consequences. Verizon’s $24 million refund claims are definitively barred; other carriers contemplating similar claims will likely abandon them.
Administrative Clarity. Tax professionals now have a bright-line rule: use GAAP book depreciation, capped at 75 % of original cost, when preparing Rhode Island TPP filings for telecommunications property.
Litigation Deterrence. By foreclosing the inclusion of obsolescence, the Court reduces scope for valuation disputes that often hinge on complex appraisal testimony.
Legislative Signal. If the General Assembly wishes to allow obsolescence adjustments, statutory amendments will be required. Until then, administrative consistency is cemented.
Broader Appraisal Practice. The opinion may influence other jurisdictions with similar statutory language, especially in New England, by providing a persuasive interpretation favouring administrable book values over market-based appraisals.

Complex Concepts Simplified

Accumulated Depreciation: The total amount of depreciation expense recorded on an asset since it was placed in service. Think of it as the “used-up” portion of the asset, tracked annually on the company’s books.
Financial-Accounting (Book) Depreciation: Method prescribed by generally accepted accounting principles (GAAP) to allocate an asset’s cost over its useful life. It typically reflects physical wear and tear and passage of time, not market forces.
Functional Obsolescence: Loss in property value resulting from design or technological deficiencies that make an asset less useful than newer alternatives, even if still physically intact.
Economic Obsolescence: Loss in value caused by external economic factors (e.g., market saturation, regulatory changes) independent of the asset’s physical condition.
Net Book Value: Original cost minus accumulated depreciation; essentially what the books say the asset is worth at a point in time.
Certiorari Review: When the Supreme Court uses a discretionary writ to review lower-court decisions for legal error without re-weighing evidence.

Conclusion

Verizon v. Savage solidifies a pivotal rule in Rhode Island tax law: the valuation of telecommunications tangible personal property hinges exclusively on financial-accounting depreciation. By rooting its holding in ordinary meaning, long-standing administrative practice, and the policy of tax uniformity, the Court closed the door on subjective obsolescence deductions under § 44-13-13. The decision brings certainty to taxpayers, municipalities, and the Division of Taxation alike, while offering a blueprint for other courts confronting similar statutory language. Unless and until the General Assembly rewrites the statute, Rhode Island assessors and telecommunications companies must align their filings with the bright-line book-value approach confirmed by the Court.