BILL ANALYSIS Ó
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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