BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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          |SENATE RULES COMMITTEE            |                   AB 384|
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                                 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  
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                                                                AB 384
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          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. 


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          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.


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           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,  

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                                                                AB 384
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            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

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