BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 384| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 384 Author: Ma (D) Amended: 5/5/10 in Senate Vote: 21 SENATE REVENUE & TAXATION COMMITTEE : 3-0, 6/9/10 AYES: Wolk, Alquist, Padilla NO VOTE RECORDED: Walters, Ashburn SENATE APPROPRIATIONS COMMITTEE : 10-0, 6/28/10 AYES: Kehoe, Cox, Alquist, Corbett, Denham, Leno, Price, Walters, Wolk, Yee NO VOTE RECORDED: Wyland ASSEMBLY FLOOR : 62-8, 1/27/10 - See last page for vote SUBJECT : Property taxation: certified aircraft assessment SOURCE : California Assessors Association DIGEST : This bill extends the property tax assessment practices for commercial aircraft until the 2015-16 fiscal year. ANALYSIS : Existing property tax law requires the personal property of an air carrier be taxed at its fair market value, and the California Constitution requires property subject to ad valorem property taxation to be assessed in the county in which it is situated. Existing CONTINUED AB 384 Page 2 law, for the 2005-06 fiscal year to the 2010-11 fiscal year, inclusive, specifies a formula to determine the fair market value of certified aircraft of a commercial air carrier. Existing law further requires, until December 31, 2010, the Aircraft Advisory Subcommittee of the California Assessors' Association to designate, after soliciting input from commercial air carriers operating in the state, a lead county assessor's office for each commercial air carrier operating certificated aircraft in this state in an assessment year, and requires the lead county assessor to calculate the value of the air carrier's personal property and to transmit these calculations to other county assessors, but specifies that each county assessor is responsible for assessing and enrolling the taxable value of the property in his or her county, as provided. Existing law also requires, until December 31, 2010, the lead county assessor's office to lead a team to audit the books and records of a commercial air carrier and authorizes these air carriers to file a property statement solely with the lead county assessor's office, as provided. This bill: 1. Extends, until the 2015-16 fiscal year, the application of the current assessment methodology for determining the fair market value of certificated aircraft owned by commercial air carriers for property tax purposes. 2. Extends, until December 31, 2015, the application of the following provisions of law that otherwise are scheduled to sunset on December 31, 2010: A. Section 441 of the Revenue and Taxation Code (RTC) that requires a commercial air carrier to file one annual property statement with a designated "lead" county. B. RTC Section 1153.5 that establishes the procedure for selecting a lead county to calculate an airline's fleet value and a coordinated multi-county audit team to perform mandatory audits of commercial air carriers. CONTINUED AB 384 Page 3 3. Specifies that it is "rebuttably" presumed that the pre-allocated fair market value of certified aircraft is the amount determined under the provided formula and, thus, allows either the assessor or the taxpayer to challenge that amount before an assessment appeals board. The value of an individual aircraft assessed to the original owner of that aircraft shall not exceed its original cost from the manufacturer. The preallocated fair market value of an aircraft may be rebutted by evidence including, but not limited to, appraisals, invoices, and expert testimony. Prior legislation . Last year, the Legislature approved AB 311 (Ma), which extended the valuation methodology for certificated aircraft until the 2014-15 fiscal year. The Governor vetoed AB 311, stating: "This bill is intended to represent the continuation of an important tax assessment methodology that was agreed to by all the major airlines in 2005. The original methodology brought consistency and greater efficiency to the assessment of certificated aircraft. However, this bill makes changes that do not reflect consensus. Since the existing methodology does not end until December 31, 2010, I would encourage the author and stakeholders to reach that consensus and send me legislation to that effect." This bill is substantively similar to AB 311, with the main differences that AB 384 extends the assessment methodology one year longer (2015-16), than AB 311 (2014-15), replaces language specifying value with a rebuttable presumption, providing a cap on valuation equal to its original cost, and specifying that the taxpayer may rebut the presumption with appraisals, invoices, and expert testimony. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: Yes Senate Appropriations Committee staff notes that the estimated assessed value of certificated aircraft allocated to California in 2008 was approximately $8.2 billion, which resulted in approximately $94 million in property taxes. CONTINUED AB 384 Page 4 SUPPORT : (Verified 6/29/10) California Assessors Association (source) Alaska Airlines American Airlines United Airlines ARGUMENTS IN SUPPORT : According to the author, "AB 384 is needed to ensure that administrative efficiencies created by AB 964 continue for both the airlines and assessors. AB 964 created a fair and equitable statewide valuation of certificated aircrafts. The Centralized Fleet Calculation Program has allowed assessors to carry out their mandated responsibility to fairly assess taxable property in an efficient manner." The bill's sponsor, the California Assessors Association, argues that the existing Centralized Fleet Calculation Program, which was established by AB 964 (Horton), Chapter 699, Statutes of 2005, has been a success. The program "has allowed assessors to carry out their mandated responsibility to fairly assess all taxable property within their jurisdiction in an efficient manner" while streamlining the property tax process for commercial airlines. The sponsor also states that the "total annual cost savings statewide for assessors with centralized valuation and audit and the avoidance of assessment appeals is estimated at over $3.4 million." The proponents state that the existing Centralized Fleet Calculation Program provides an equitable and consistent formula in valuing aircraft and allows airlines to plan accordingly for the next five years. The proponents also emphasize the importance of the current practice of designating one lead county and allowing airlines to file only one property tax return with that county. ASSEMBLY FLOOR : AYES: Adams, Ammiano, Arambula, Beall, Bill Berryhill, Tom Berryhill, Blakeslee, Block, Blumenfield, Bradford, Brownley, Buchanan, Caballero, Charles Calderon, Chesbro, Conway, Coto, Davis, De La Torre, De Leon, DeVore, Eng, CONTINUED AB 384 Page 5 Evans, Feuer, Fong, Fuentes, Fuller, Furutani, Galgiani, Garrick, Gilmore, Hagman, Harkey, Hayashi, Hernandez, Hill, Huber, Huffman, Jeffries, Jones, Knight, Lieu, Bonnie Lowenthal, Ma, Mendoza, Miller, Nava, Nestande, Nielsen, John A. Perez, Portantino, Ruskin, Salas, Saldana, Skinner, Smyth, Solorio, Audra Strickland, Swanson, Torrico, Tran, Yamada NOES: Anderson, Emmerson, Fletcher, Gaines, Logue, Niello, Silva, Villines NO VOTE RECORDED: Carter, Cook, Hall, Monning, V. Manuel Perez, Torlakson, Torres, Bass DLW:mw 6/30/10 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED