BILL ANALYSIS Ó
AB 2622
Page 1
Date of Hearing: May 18, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
AB
2622 (Nazarian) - As Amended April 26, 2016
-----------------------------------------------------------------
|Policy |Revenue and Taxation |Vote:|5 - 0 |
|Committee: | | | |
| | | | |
| | | | |
-----------------------------------------------------------------
Urgency: No State Mandated Local Program: YesReimbursable:
Yes
SUMMARY:
This bill extends the Centralized Fleet Calculation Program
(Program) for statewide assessment of certificated aircraft for
property tax purposes until fiscal year (FY) 2019-20, and makes
assorted technical changes to the administration of the Program.
Specifically, this bill:
1)Extends, until FY 2019-20, the application of the current
assessment methodology for the fair market value (FMV) of
certificated aircraft owned by commercial air carriers for
property tax purposes and the rebuttable presumption that the
AB 2622
Page 2
pre-allocated FMV of certificated aircraft, as calculated, is
correct.
2)Extends, until December 31, 2019, the application of the
following provisions of law that otherwise are scheduled to
sunset on December 31, 2016:
a) A commercial air carrier must file one annual property
statement with a designated "lead" county, as provided;
and,
b) 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.
3)States that it is the intent of the Legislature to determine
the most appropriate method of calculating the assessed value
of certified aircraft over a 365-day period.
4)Requires, on or before March 1, 2017, the Aircraft Advisory
Subcommittee of the California Assessors' Association to do
the following:
a) Designate two contacts in each lead county assessor's
office for each commercial air carrier to address reporting
and data issues; and,
b) Establish best practices for the effective
administration of the lead county system, audit process,
and methods to evaluate converted freighters.
AB 2622
Page 3
5)Requires the lead county assessor's office to transmit the
property statement received from a commercial air carrier to
the assessor of each county in which the carrier's personal
property is located or has acquired situs.
6)Requires a county assessor that receives a property statement
from the lead county to first direct questions to the lead
county assessor's office, and only question the commercial air
carrier if the lead county assessor's office is unable to
provide the answer.
FISCAL EFFECT:
Unknown fiscal effect. 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.
COMMENTS:
1)Purpose. According to the author, by extending the sunset date
for the assessment of certified aircraft, AB 2622 continues to
allow assessors to carry out their mandated responsibility to
fairly assess all taxable property, within their jurisdiction,
in an efficient manner.
2)Background. 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
AB 2622
Page 4
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 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.
Unless the existing methodology for valuing aircraft is
extended, both the assessors and airlines will have to deal
with multiple tax returns reporting the same information,
multiple audits and multiple county assessment appeals.
Furthermore, assessors would be able to use any valid method
to determine FMV, such as, for example, cost, income,
comparable sales, and published market value guides.
3)Representative period. A key variable in the calculation of
commercial aircraft property tax is the "representative
period." This is the time period that is used to estimate the
frequency and amount of time that an air carrier's aircraft
makes contact and maintains situs within a county. The purpose
of the representative period is to obtain air carrier
operational data that can reasonably be expected to reflect
the average activity of the carrier for the ensuring tax year.
AB 2622
Page 5
Under current law, the representative period is determined by
the BOE on or before January 1 of each year, upon consultation
with the assessors of counties where air carriers' aircraft
make regular physical contact. January 1 is also the lien
date by which the assessor establishes the assessed value and
owner of property for tax purposes.
Over the last 20 years, the representative period selected has
most often been the first or second week of January following
the lien date. In 2013, at the request of the California
Assessors Association, the BOE commenced an interested parties
process on this issue. The key stakeholders argued the
following:
a) The airline industry contended that the representative
period should be as close to the lien date as possible to
ensure that information reported by airlines will most
accurately reflect the activity of assessed aircraft.
b) Assessors contended that many other states use the
preceding 12 months prior to the lien date as a
representative period. Moreover, a full year representative
period better reflects the true value of the aircraft.
1)Committee Amendments. When the concept of the representative
period was established in 1968, technological limitations
provided that utilizing an entire year's past flight activity
would be too burdensome. However, the FAA now provides
records of all flight data on its public Web site that may be
used to derive a more accurate representative period, and
thus, more accurate assessment of aircraft. However, questions
about this data set, such as how it could be used by assessors
and the industry and how FAA can guarantee its availability
AB 2622
Page 6
into the future, remain unanswered. As these issues get worked
out between stakeholders, the Committee recommends that this
bill be amended to require BOE to choose a representative
period that incorporates a week, or group of weeks in January,
as is currently common practice, in addition to a week, or
group of weeks, in July.
Analysis Prepared by:Luke Reidenbach / APPR. / (916)
319-2081