BILL ANALYSIS                                                                                                                                                                                                    



                                                                    AB 1157


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          Date of Hearing:  May 13, 2015


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                                 Jimmy Gomez, Chair


          AB  
          1157 (Nazarian) - As Amended May 4, 2015


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          |Policy       |Revenue and Taxation           |Vote:|6 - 3        |
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          Urgency:  No  State Mandated Local Program:  YesReimbursable:   
          Yes


          SUMMARY:


          This bill extends, until FY 2016-17, the application of the  
          current assessment methodology for determining the fair market  
          value, for tax purposes, of certificated aircraft owned by  
          commercial air carriers, and extends, until December 31, 2016,  
          the procedures 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.  


          FISCAL EFFECT:









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          Unknown; absent a codified methodology, there can be no  
          assurance that the values determined by individual county  
          assessors would be the same, higher, or lower than they are  
          under the current methodology.  Aggregate property tax revenue  
          from commercial aircraft in 2014 was approximately $80 million.


          COMMENTS:


          1)Purpose.  This bill extends the sunset date by one year for  
            the state's centralized system of determining fair market  
            value for tax purposes of commercial aircraft.  According to  
            the author, the system allows commercial airlines operating in  
            multiple airport locations to file a single, consolidated tax  
            return with the designated lead county, streamlining  
            administration and ensuring aircraft continue to be valued  
            uniformly and taxed efficiently. 


          2)California's Airline Assessment Methodology.  Prior to 1999,  
            the state did not have a single or specific assessment  
            methodology for valuing certificated commercial aircraft.   
            Valuation was left to each county assessor, leading to  
            significant problems and conflicts over inconsistent  
            valuations, property tax apportionment, and administrative  
            cost and complexity.


            In 1998, a group of counties and airline industry  
            representatives agreed to dispose of outstanding litigation  
            and appeals over the valuation of certificated aircraft and  
            create a new assessment methodology.  That methodology was  
            further refined by county assessors and industry  
            representatives in 2005, resulting in the current method for  
            valuing aircraft.  In addition to specifying the component  
            metrics used to value fleets, the methodology prescribes  
            procedures for designating a lead county assessor's office for  








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            each commercial air carrier operating in California, allowing  
            an airline to file one property statement with the lead  
            county, and prescribing a centralized audit process.  The lead  
            county is designated by Aircraft Advisory Subcommittee of the  
            California Assessors' Association.  The lead county calculates  
            the fleet value of the airlines certificated aircraft and  
            transmits the valuation to other counties.  Those counties  
            then determine their allocated portions of the fleet value  
            based on physical presence.


          3)Is There A Better Way?  Opponents, led by several major  
            airlines, argue the current system remains costly and overly  
            burdensome.  They observe that California is one of only four  
            states that tax the property of commercial air carriers  
            locally, the others being Alaska, Indiana, and Massachusetts.   
            Opponents claim 45 tax appeals have been filed against county  
            assessors by airlines in the past 5 years, all of which have  
            been denied, and that the current methodology will only  
            maintain the current level of litigation and airline  
            discontent.  While opponents concede the current methodology  
            is more efficient than a county-by-county system, they assert  
            a single tax agency, the Board of Equalization, would be less  
            costly and even more efficient.





          Analysis Prepared by:Joel Tashjian / APPR. / (916)  
          319-2081
















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