Amended in Senate April 13, 2015

Senate Bill No. 661

Introduced by Senator Hill

February 27, 2015

An act to amend Sections 755 and 756 of, to amend, repeal, and add Sections begin insert 401.17, end insert 1152, 1153, and 1155 of, begin delete and end delete to add Sections 100.51, 721.51, begin delete and 828.1 end delete begin insert 828.1, and 1157 end insert to, begin insert and to amend and repeal Section 1153.5 of, end insert the Revenue and Taxation Code, relating to taxation.

LEGISLATIVE COUNSEL’S DIGEST

SB 661, as amended, Hill. Property taxation: state assessment: commercial air carrier personal property.

Existing property tax law requires the personal property of an air carrier to 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 law, through the 2015-16 fiscal year, specifies a formula to determine the fair market value of certificated aircraft of a commercial air carrier, and rebuttably presumes that the amount determined pursuant to this formula is the fair market value of the certificated aircraft.

The California Constitution requires the State Board of Equalization to assess specified properties owned by specified entities. Existing property tax law provides for the valuation of properties of a state assessee that owns property in more than one county. Existing law also provides, pursuant to specified formulas, for the application in each county of specified tax rates to the allocated assessed value of a state assessee’s property, and for the allocation among jurisdictions in that county of the resulting revenues.

This bill would, from the lien date for the begin delete 2016-17 end delete begin insert 2017-18 end insert fiscal year and each fiscal year thereafter, require the board to assess personal property that is owned by a commercial air carrier, as defined, in a manner consistent with currently specified procedures that determine the extent that the certificated aircraft is physically present in each county within the state. begin insert The bill would require the board to determine the fair market value of certificated aircraft according to the formula described above. end insert This bill would require the board to notify county assessors, as specified, if a commercial air carrier’s taxable personal property includes fixtures that are to be locally assessed as real property. This bill would require that the revenues derived from the assessment of this property be allocated in the same percentage shares as revenues derived from locally assessed property among the jurisdictions in which the property is located. This bill would also make conforming changes to related provisions. begin insert The bill would also require the board to conduct an audit of a commercial air carrier every four years, as specified. end insert

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 100.51 is added to the Revenue and
Taxation Code, to read:

100.51.  

Notwithstanding any other law, for the begin delete 2016-17 end delete
begin insert 2017-18 end insert fiscal year and each fiscal year thereafter, all of the
following apply:

(a) The property tax assessed value of taxable personal property
that is owned by a commercial air carrier, as defined in Section
721.51, and that is assessed by the board, shall be allocated entirely
to that tax rate area in the county in which the property is located.

(b) The tax rate applied to the assessed value allocated pursuant
to subdivision (a) shall be the rate calculated pursuant to Section
93.

(c) The revenues derived from the application of the tax rate to
the assessed value allocated to a tax rate area pursuant to
subdivision (a) shall be allocated among the jurisdictions in that
tax rate area, in those same percentage shares that property tax
revenues derived from locally assessed property are allocated to
those jurisdictions in that tax rate area, subject to any allocation
and payment of funds as provided in subdivision (b) of Section
33670 of the Health and Safety Code, and subject to any
modifications or adjustments made pursuant to Sections 99 and
99.2.

begin insert

begin insert SEC. 2. end insert   

end insert

begin insert Section 401.17 of the end insert begin insert Revenue and Taxation Code end insert begin insert is
amended to read: end insert

401.17.  

(a) For the 2005-06 fiscal year to the begin delete 2015-16 end delete
begin insert 2016-17 end insert fiscal year, inclusive, it shall be rebuttably presumed that
the preallocated fair market value of each make, model, and series
of mainline jets, production freighters, and regional aircraft that
has attained situs within this state is the lesser of the sum total of
the amounts determined under paragraph (1) or the sum total of
the amounts determined under paragraph (2). 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.

(1) (A) The original cost for the aircraft, which shall be
determined as follows and adjusted, as applicable, under
subparagraphs (B), (C), and (D):

(i) For owned and leased aircraft, the taxpayer’s or lessor’s
acquisition cost for that individual aircraft reported in accordance
with generally accepted accounting principles, and to the extent
not included in the acquisition cost, transportation costs and
capitalized interest and the cost of improvements made before a
transaction described in clause (ii). If the original cost for leased
aircraft cannot be determined from information reasonably
available to the taxpayer, original cost may be determined by
reference to the “average new prices” column of the Airliner Price
Guide for that model, series, and year of manufacture of aircraft.
If information is not available in the “average new prices” column
for that model, series, and year, the original cost may be determined
using the best indicator of original cost plus all conversion costs
and improvement costs incurred for that aircraft.

(ii) For sale/leaseback or assignment of purchase rights
transaction aircraft, the average of the taxpayer’s cost established
pursuant to clause (i) and the cost established in a sale/leaseback
or assignment of purchase rights transaction for individual aircraft
that transfers the benefits and burdens of ownership to the lessor
for United States federal income tax purposes. In no event shall
the original cost for sale/leaseback aircraft be less than the
taxpayer’s acquisition cost.

(iii) In the event of a merger, bankruptcy, or change in
accounting methods by the reporting airline, there shall be a
rebuttable presumption that the cost of the individual aircraft and
the acquisition date reported by the acquired company, if available,
or the cost reported prior to the change in accounting method, are
the original cost and the applicable acquisition date.

(B) (i) For mainline jets and production freighters, the original
cost described in subparagraph (A), plus the cost of any
improvements not otherwise included in the original cost, shall be
adjusted from the date of the acquisition of the aircraft to the lien
date using the monthly United States Department of Labor
Producer Price Index for aircraft and a 20-year straight-line
percent-good table starting from the delivery date of the aircraft
to the current owner or, in the case of a sale/leaseback or
assignment of purchase rights transaction, as described in this
section, the current operator with a minimum combined factor of
25 percent.

(ii) For regional aircraft, the original cost described in
subparagraph (A), plus the cost of any improvements not otherwise
included in the original cost, shall be adjusted from the date of the
acquisition of the aircraft to the lien date using the monthly United
States Department of Labor Producer Price Index for aircraft and
a 16-year straight-line percent-good table starting from the delivery
date of the aircraft to the current owner or, in the case of a
sale/leaseback or assignment of purchase rights transaction, as
described in this section, the current operator with a minimum
combined factor of 25 percent.

(iii) If original cost is determined by reference to the Airliner
Price Guide “average new prices” column, the adjustments required
by this paragraph shall be made by setting the acquisition date of
the aircraft to be the date of the aircraft’s manufacture.

(C) (i) For mainline jets and regional aircraft, the assessor shall
analyze the adjusted original cost derived pursuant to subparagraph
(B), for application of an economic obsolescence allowance which
shall be determined as follows:

(I) For the applicable year, the assessor shall calculate the
average annual net revenue per available seat mile, the net load
factor, and the yield utilizing the Airline Quarterly Financial
Review published by the United States Department of
Transportation, and referring to the section descriptive of the
passenger airline industry, entitled “System Operations, System
Pax. Majors” for the calendar year ending December 31
immediately preceding the applicable assessment date.

(II) For a 10-year benchmark, the assessor shall calculate as of
December 31 for each of the 10 calendar years preceding the
applicable year, the average annual net revenue per available seat
mile, the net load factor, and the yield utilizing the Airline
Quarterly Financial Review published by the United States
Department of Transportation, and referring to the section
descriptive of the passenger airline industry, entitled “System
Operations, System Pax. Majors” for the calendar year ending
December 31 immediately preceding the applicable assessment
date.

(ii) (I) The assessor shall compare each factor calculated under
subclause (I) of clause (i) with the corresponding factor calculated
under subclause (II) of clause (i) to derive the percentage that each
of the factors calculated under subclause (I) of clause (i) deviated
from the 10-year benchmark calculated under subclause (II) of
clause (i). The assessor shall then calculate a weighted average of
the indicated percentage adjustments, weighted as follows:

(aa) Net revenue per available seat mile shall be weighted 35
percent.

(ab) Net load factor shall be weighted 35 percent.

(ac) Yield shall be weighted 30 percent.

(II) The assessor shall reduce the adjusted original costs derived
under subparagraph (B) by the percentage adjustment calculated
in subclause (I), but only if the final economic obsolescence
determined under that subclause exceeds 10 percent, otherwise no
economic obsolescence allowance shall be provided.

(D) (i) For production freighters, the assessor shall analyze the
adjusted original cost derived under subparagraph (B), for
application of an economic obsolescence allowance, as follows:

(I) For the applicable year, the assessor shall calculate the
industry average of net revenue per available ton mile and the ton
load factor based upon the Airline Quarterly Financial Review
published by the United States Department of Transportation, and
referring to the section descriptive of the cargo airline industry,
entitled “System Operations, System Cargo Majors” for the
calendar year ending December 31 preceding the relevant
assessment date.

(II) For a 10-year benchmark, the assessor shall calculate as of
December 31 for each of the 10 calendar years preceding the
applicable year, the net revenue per available ton mile and the ton
load factor utilizing the Airline Quarterly Financial Review
published by the United States Department of Transportation and
referring to the section descriptive of the cargo airline industry,
entitled “System Operations, System Cargo Majors” as of
December 31 for each of the 10 calendar years preceding the
calendar year utilized for the subject year, for the calendar year
ending December 31 immediately preceding the applicable
assessment date.

(ii) (I) The assessor shall compare each factor calculated under
subclause (I) of clause (i) with the corresponding factor calculated
under subclause (II) of clause (i) to derive the percentage that each
of the factors calculated under subclause (I) of clause (i) deviated
from the 10-year benchmark calculated under subclause (II) of
clause (i). The assessor shall then calculate a weighted average of
the indicated percentage adjustments so that the net revenue per
available ton mile is weighted 50 percent and the ton load factor
is weighted 50 percent.

(II) The assessor shall reduce the adjusted original costs derived
under subparagraph (B) by the percentage adjustment calculated
in subclause (I), but only if the final economic obsolescence
determined under that subclause exceeds 10 percent, otherwise no
economic obsolescence allowance shall be provided.

(2) (A) Except as otherwise provided in subparagraph (B), for
each individual mainline jet, production freighter, or regional
aircraft, the assessor shall identify the value referenced in the “Used
Price of Avg. Acft. Wholesale” column of the Winter edition of
the Airliner Price Guide by make, model, series, and year of
manufacture, and deduct 10 percent from that value for a fleet
discount.

(B) For each individual mainline jet, production freighter, or
regional aircraft that is less than two years old and for which the
Airliner Price Guide does not list used wholesale values, the
original cost determined under paragraph (1) of subparagraph (A)
shall be decreased by the lesser of 5 percent or one-half of the
percentage decrease between original cost and 90 percent of the
value listed in the “Used Price of Avg. Acft. Wholesale” column
of the Winter edition of the Airliner Price Guide for a two-year-old
aircraft of that same make, model, and series.

(b) For the 2005-06 fiscal year to the begin delete 2015-16 end delete begin insert 2016-17 end insert fiscal
year, inclusive, it shall be rebuttably presumed that the preallocated
fair market value for each make, model, and series of converted
freighters that has attained situs within this state is the amount that
is determined as follows:

(1) (A) The assessor shall begin his or her appraisal of a
converted freighter as of the relevant lien date by identifying the
aircraft’s original cost as a passenger aircraft prior to conversion.
The aircraft’s original cost as a converted freighter shall be the
lesser of:

(i) Its trended original cost as a passenger aircraft prior to
conversion, less a downward adjustment of 10 percent to reflect
tear-outs.

(ii) Its value described in the Winter edition of the Airliner Price
Guide in the “Used Price of Avg. Acft. Wholesale” column in
passenger configuration, less a downward adjustment of 10 percent
to reflect tear-outs.

(B) The amount determined under subparagraph (A) shall be
adjusted according to the following:

(i) If, on the relevant lien date, the frame of the aircraft is 15
years old or more, 50 percent of the cost to convert the aircraft to
a freighter shall be added to the value determined under
subparagraph (A).

(ii) If, on the relevant lien date, the frame of the aircraft is less
than 15 years old, 75 percent of the cost to convert the aircraft to
a freighter shall be added to the value determined under
subparagraph (A).

(iii) In addition, all other improvements, including capitalized
interest, to the aircraft that are not otherwise included in the
aircraft’s original and conversion costs shall be added at full value.

(2) The amount determined under paragraph (1) shall be adjusted
from the date of the conversion of the aircraft to the lien date using
the monthly United States Department of Labor Producer Price
Index for aircraft and a 16-year straight-line percent-good table,
however, the percent-good applied to the aircraft shall in no event
be less than 15 percent.

(3) If the Airliner Price Guide “Used Price of Avg. Acft.
Wholesale” is utilized under paragraph (1), only the improvements
and adjusted conversion costs pertaining to the converted freighter
shall be adjusted from the date of the conversion of the aircraft to
the relevant lien date using the monthly United States Department
of Labor Producer Price Index for aircraft and a 16-year
straight-line percent-good table. In no event, however, shall the
percent-good applied to the improvements and adjusted conversion
costs be less than 15 percent.

(4) (A) Except as otherwise provided in subparagraph (B), the
assessor shall reduce the adjusted original cost, plus improvements,
and adjusted conversion costs, derived under paragraphs (1) to (3),
inclusive, by the obsolescence percentage adjustment calculated
for production freighters under subparagraph (D) of paragraph (1)
of subdivision (a).

(B) If the Airliner Price Guide “Used Price of Avg. Acft.
Wholesale” is utilized under paragraph (1), only the improvements
and adjusted conversion costs pertaining to the converted freighter
shall be reduced by the obsolescence percentage adjustment
described in subparagraph (A).

(c) For purposes of this section, if the Airliner Price Guide
ceases to be published or the format significantly changes, a guide
or adjustment agreed to by commercial air carriers and the counties
in which certificated aircraft have situs shall be substituted. If these
parties do not agree on a guide or adjustment, the State Board of
Equalization shall determine the guide or adjustment.

(d) The taxpayer shall, to the extent that information is
reasonably available to the taxpayer, furnish the county assessor
with an annual property statement that includes the aircraft original
costs as defined in subparagraph (A) of paragraph (1) of
subdivision (a). If an air carrier that has this information reasonably
available to it fails to report original cost and improvements, as
required by Sections 441 and 442, an assessor may in that case
make an appropriate assessment pursuant to Section 501.

(e) For purposes of this section, all of the following apply:

(1) “Converted freighter” means a certificated aircraft, as defined
in Section 1150, that, following its original manufacture, was used
for passenger transportation, but was later converted to be used
primarily for cargo transportation purposes.

(2) “Mainline jet” means a certificated aircraft, as defined in
Section 1150, that is either of the following:

(A) Manufactured by Boeing, Airbus, or McDonnell Douglas.

(B) Capable of being configured with approximately 100 seats
or more.

(3) “Production Freighter” means a certificated aircraft, as
defined in Section 1150, that immediately following its
manufacture is deployed primarily for cargo transportation
purposes.

(4) “Regional aircraft” means a certificated aircraft, as defined
in Section 1150, that is either of the following:

(A) Manufactured by ATR (Avions De Transport Regional),
Beech, British Aerospace Jetstream, Canadair Regional Jet, Cessna,
DeHaviland, Embraer, Fairchild, or Saab.

(B) Generally configured with fewer than 100 seats.

(5) “Improvements” means the cost of any modifications or
capital additions that materially add to the value of or substantially
prolong the useful life of the aircraft, or make it adaptable to a
different use. “Improvements” include modification costs incurred
during a heavy maintenance visit to the extent that they materially
add to the value of or substantially prolong the useful life of the
aircraft. “Improvements” do not include repair and maintenance
costs incurred for the purpose of keeping the aircraft in an
ordinarily efficient operating condition.

(6) “Net revenue per available seat mile” means operating
revenue per available seat mile less cost per available seat mile as
determined by the United States Department of Transportation.

(7) “Net load factor” means actual passenger load factor less
break-even passenger load factor, as determined by the United
States Department of Transportation.

(8) “Net revenue per available ton mile” means operating
revenue per ton mile less cost per available ton mile as determined
by the United States Department of Transportation.

(9) “Yield” means average revenue per revenue passenger mile
as determined by the United States Department of Transportation.

(10) “Ton Load Factor” means that percentage of effective use
of cargo capacity as determined by the United States Department
of Transportation.

(f) The amendments made by the act adding this subdivision
shall apply with respect to lien dates occurring on and after January
1, 2011.

begin insert

(g) This section shall remain in effect only until July 1, 2017,
and as of that date is repealed.

end insert

begin insert

begin insert SEC. 3. end insert   

end insert

begin insert Section 401.17 is added to the end insert begin insert Revenue and Taxation
Code end insert begin insert , to read: end insert

begin insert

begin insert 401.17. end insert   

(a) For the 2017-18 fiscal year and each fiscal year
thereafter, it shall be rebuttably presumed that the preallocated
fair market value of each make, model, and series of mainline jets,
production freighters, and regional aircraft that has attained situs
within this state is the lesser of the sum total of the amounts
determined under paragraph (1) or the sum total of the amounts
determined under paragraph (2). 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.

(1) (A)   The original cost for the aircraft, which shall be
determined as follows and adjusted, as applicable, under
subparagraphs (B), (C), and (D):

(i) For owned and leased aircraft, the taxpayer’s or lessor’s
acquisition cost for that individual aircraft reported in accordance
with generally accepted accounting principles, and to the extent
not included in the acquisition cost, transportation costs and
capitalized interest and the cost of improvements made before a
transaction described in clause (ii). If the original cost for leased
aircraft cannot be determined from information reasonably
available to the taxpayer, original cost may be determined by
reference to the “average new prices” column of the Airliner Price
Guide for that model, series, and year of manufacture of aircraft.
If information is not available in the “average new prices” column
for that model, series, and year, the original cost may be
determined using the best indicator of original cost plus all
conversion costs and improvement costs incurred for that aircraft.

(ii) For sale/leaseback or assignment of purchase rights
transaction aircraft, the average of the taxpayer’s cost established
pursuant to clause (i) and the cost established in a sale/leaseback
or assignment of purchase rights transaction for individual aircraft
that transfers the benefits and burdens of ownership to the lessor
for United States federal income tax purposes. In no event shall
the original cost for sale/leaseback aircraft be less than the
taxpayer’s acquisition cost.

(iii) In the event of a merger, bankruptcy, or change in
accounting methods by the reporting airline, there shall be a
rebuttable presumption that the cost of the individual aircraft and
the acquisition date reported by the acquired company, if available,
or the cost reported prior to the change in accounting method, are
the original cost and the applicable acquisition date.

(B) (i) For mainline jets and production freighters, the original
cost described in subparagraph (A), plus the cost of any
improvements not otherwise included in the original cost, shall be
adjusted from the date of the acquisition of the aircraft to the lien
date using the monthly United States Department of Labor
Producer Price Index for aircraft and a 20-year straight-line
percent-good table starting from the delivery date of the aircraft
to the current owner or, in the case of a sale/leaseback or
assignment of purchase rights transaction, as described in this
section, the current operator with a minimum combined factor of
25 percent.

(ii) For regional aircraft, the original cost described in
subparagraph (A), plus the cost of any improvements not otherwise
included in the original cost, shall be adjusted from the date of
the acquisition of the aircraft to the lien date using the monthly
United States Department of Labor Producer Price Index for
aircraft and a 16-year straight-line percent-good table starting
from the delivery date of the aircraft to the current owner or, in
the case of a sale/leaseback or assignment of purchase rights
transaction, as described in this section, the current operator with
a minimum combined factor of 25 percent.

(iii) If original cost is determined by reference to the Airliner
Price Guide “average new prices” column, the adjustments
required by this paragraph shall be made by setting the acquisition
date of the aircraft to be the date of the aircraft’s manufacture.

(C) (i)   For mainline jets and regional aircraft, the board shall
analyze the adjusted original cost derived pursuant to
subparagraph (B), for application of an economic obsolescence
allowance which shall be determined as follows:

(I) For the applicable year, the board shall calculate the average
annual net revenue per available seat mile, the net load factor,
and the yield utilizing the Airline Quarterly Financial Review
published by the United States Department of Transportation, and
referring to the section descriptive of the passenger airline
industry, entitled “System Operations, System Pax. Majors” for
the calendar year ending December 31 immediately preceding the
applicable assessment date.

(II) For a 10-year benchmark, the board shall calculate as of
December 31 for each of the 10 calendar years preceding the
applicable year, the average annual net revenue per available seat
mile, the net load factor, and the yield utilizing the Airline
Quarterly Financial Review published by the United States
Department of Transportation, and referring to the section
descriptive of the passenger airline industry, entitled “System
Operations, System Pax. Majors” for the calendar year ending
December 31 immediately preceding the applicable assessment
date.

(ii) (I)   The board shall compare each factor calculated under
subclause (I) of clause (i) with the corresponding factor calculated
under subclause (II) of clause (i) to derive the percentage that
each of the factors calculated under subclause (I) of clause (i)
deviated from the 10-year benchmark calculated under subclause
(II) of clause (i). The board shall then calculate a weighted average
of the indicated percentage adjustments, weighted as follows:

(ia) Net revenue per available seat mile shall be weighted 35
percent.

(ib) Net load factor shall be weighted 35 percent.

(ic) Yield shall be weighted 30 percent.

(II) The board shall reduce the adjusted original costs derived
under subparagraph (B) by the percentage adjustment calculated
in subclause (I), but only if the final economic obsolescence
determined under that subclause exceeds 10 percent, otherwise
no economic obsolescence allowance shall be provided.

(D) (i)   For production freighters, the board shall analyze the
adjusted original cost derived under subparagraph (B), for
application of an economic obsolescence allowance, as follows:

(I) For the applicable year, the board shall calculate the
industry average of net revenue per available ton mile and the ton
load factor based upon the Airline Quarterly Financial Review
published by the United States Department of Transportation, and
referring to the section descriptive of the cargo airline industry,
entitled “System Operations, System Cargo Majors” for the
calendar year ending December 31 preceding the relevant
assessment date.

(II) For a 10-year benchmark, the board shall calculate as of
December 31 for each of the 10 calendar years preceding the
applicable year, the net revenue per available ton mile and the
ton load factor utilizing the Airline Quarterly Financial Review
published by the United States Department of Transportation and
referring to the section descriptive of the cargo airline industry,
entitled “System Operations, System Cargo Majors” as of
December 31 for each of the 10 calendar years preceding the
calendar year utilized for the subject year, for the calendar year
ending December 31 immediately preceding the applicable
assessment date.

(ii) (I)   The board shall compare each factor calculated under
subclause (I) of clause (i) with the corresponding factor calculated
under subclause (II) of clause (i) to derive the percentage that
each of the factors calculated under subclause (I) of clause (i)
deviated from the 10-year benchmark calculated under subclause
(II) of clause (i). The board shall then calculate a weighted average
of the indicated percentage adjustments so that the net revenue
per available ton mile is weighted 50 percent and the ton load
factor is weighted 50 percent.

(II) The board shall reduce the adjusted original costs derived
under subparagraph (B) by the percentage adjustment calculated
in subclause (I), but only if the final economic obsolescence
determined under that subclause exceeds 10 percent, otherwise
no economic obsolescence allowance shall be provided.

(2) (A)   Except as otherwise provided in subparagraph (B), for
each individual mainline jet, production freighter, or regional
aircraft, the board shall identify the value referenced in the “Used
Price of Avg. Acft. Wholesale” column of the Winter edition of the
Airliner Price Guide by make, model, series, and year of
manufacture, and deduct 10 percent from that value for a fleet
discount.

(B) For each individual mainline jet, production freighter, or
regional aircraft that is less than two years old and for which the
Airliner Price Guide does not list used wholesale values, the
original cost determined under paragraph (1) of subparagraph
(A) shall be decreased by the lesser of 5 percent or one-half of the
percentage decrease between original cost and 90 percent of the
value listed in the “Used Price of Avg. Acft. Wholesale” column
of the Winter edition of the Airliner Price Guide for a two-year-old
aircraft of that same make, model, and series.

(b) For the 2017-18 fiscal year and each fiscal year thereafter
it shall be rebuttably presumed that the preallocated fair market
value for each make, model, and series of converted freighters that
has attained situs within this state is the amount that is determined
as follows:

(1) (A) The board shall begin its appraisal of a converted
freighter as of the relevant lien date by identifying the aircraft’s
original cost as a passenger aircraft prior to conversion. The
aircraft’s original cost as a converted freighter shall be the lesser
of:

(i) Its trended original cost as a passenger aircraft prior to
conversion, less a downward adjustment of 10 percent to reflect
tear-outs.

(ii) Its value described in the Winter edition of the Airliner Price
Guide in the “Used Price of Avg. Acft. Wholesale” column in
passenger configuration, less a downward adjustment of 10 percent
to reflect tear-outs.

(B) The amount determined under subparagraph (A) shall be
adjusted according to the following:

(i) If, on the relevant lien date, the frame of the aircraft is 15
years old or more, 50 percent of the cost to convert the aircraft to
a freighter shall be added to the value determined under
subparagraph (A).

(ii) If, on the relevant lien date, the frame of the aircraft is less
than 15 years old, 75 percent of the cost to convert the aircraft to
a freighter shall be added to the value determined under
subparagraph (A).

(iii) In addition, all other improvements, including capitalized
interest, to the aircraft that are not otherwise included in the
aircraft’s original and conversion costs shall be added at full
value.

(2) The amount determined under paragraph (1) shall be
adjusted from the date of the conversion of the aircraft to the lien
date using the monthly United States Department of Labor
Producer Price Index for aircraft and a 16-year straight-line
percent-good table, however, the percent-good applied to the
aircraft shall in no event be less than 15 percent.

(3) If the Airliner Price Guide “Used Price of Avg. Acft.
Wholesale” is utilized under paragraph (1), only the improvements
and adjusted conversion costs pertaining to the converted freighter
shall be adjusted from the date of the conversion of the aircraft to
the relevant lien date using the monthly United States Department
of Labor Producer Price Index for aircraft and a 16-year
straight-line percent-good table. In no event, however, shall the
percent-good applied to the improvements and adjusted conversion
costs be less than 15 percent.

(4) (A)   Except as otherwise provided in subparagraph (B), the
board shall reduce the adjusted original cost, plus improvements,
and adjusted conversion costs, derived under paragraphs (1) to
(3), inclusive, by the obsolescence percentage adjustment
calculated for production freighters under subparagraph (D) of
paragraph (1) of subdivision (a).

(B) If the Airliner Price Guide “Used Price of Avg. Acft.
Wholesale” is utilized under paragraph (1), only the improvements
and adjusted conversion costs pertaining to the converted freighter
shall be reduced by the obsolescence percentage adjustment
described in subparagraph (A).

(c) For purposes of this section, if the Airliner Price Guide
ceases to be published or the format significantly changes, a guide
or adjustment agreed to by commercial air carriers and the
counties in which certificated aircraft have situs shall be
substituted. If these parties do not agree on a guide or adjustment,
the State Board of Equalization shall determine the guide or
adjustment.

(d) The taxpayer shall, to the extent that information is
reasonably available to the taxpayer, furnish the board with an
annual property statement that includes the aircraft original costs
as defined in subparagraph (A) of paragraph (1) of subdivision
(a). If an air carrier that has this information reasonably available
to it fails to report original cost and improvements, as required
by Sections 441 and 442, the board may in that case make an
appropriate assessment pursuant to Section 501.

(e) For purposes of this section, all of the following apply:

(1) “Converted freighter” means a certificated aircraft, as
defined in Section 1150, that, following its original manufacture,
was used for passenger transportation, but was later converted to
be used primarily for cargo transportation purposes.

(2) “Mainline jet” means a certificated aircraft, as defined in
Section 1150, that is either of the following:

(A) Manufactured by Boeing, Airbus, or McDonnell Douglas.

(B) Capable of being configured with approximately 100 seats
or more.

(3) “Production Freighter” means a certificated aircraft, as
defined in Section 1150, that immediately following its manufacture
is deployed primarily for cargo transportation purposes.

(4) “Regional aircraft” means a certificated aircraft, as defined
in Section 1150, that is either of the following:

(A) Manufactured by ATR (Avions De Transport Regional),
Beech, British Aerospace Jetstream, Canadair Regional Jet,
Cessna, DeHaviland, Embraer, Fairchild, or Saab.

(B) Generally configured with fewer than 100 seats.

(5) “Improvements” means the cost of any modifications or
capital additions that materially add to the value of or substantially
prolong the useful life of the aircraft, or make it adaptable to a
different use. “Improvements” include modification costs incurred
during a heavy maintenance visit to the extent that they materially
add to the value of or substantially prolong the useful life of the
aircraft. “Improvements” do not include repair and maintenance
costs incurred for the purpose of keeping the aircraft in an
ordinarily efficient operating condition.

(6) “Net revenue per available seat mile” means operating
revenue per available seat mile less cost per available seat mile
as determined by the United States Department of Transportation.

(7) “Net load factor” means actual passenger load factor less
break-even passenger load factor, as determined by the United
States Department of Transportation.

(8) “Net revenue per available ton mile” means operating
revenue per ton mile less cost per available ton mile as determined
by the United States Department of Transportation.

(9) “Yield” means average revenue per revenue passenger mile
as determined by the United States Department of Transportation.

(10) “Ton Load Factor” means that percentage of effective use
of cargo capacity as determined by the United States Department
of Transportation.

(f) This section shall become operative on July 1, 2017.

end insert

begin delete SEC. 2. end delete
begin insert SEC. 4. end insert   

Section 721.51 is added to the Revenue and Taxation
Code, to read:

721.51.  

(a) Notwithstanding any other law, commencing with
the lien date for the begin delete 2016-17 end delete begin insert 2017-18 end insert fiscal year and for each
fiscal year thereafter, the board shall annually assess all personal
property that is owned, claimed, possessed, used, controlled, or
managed by a commercial air carrier as defined in subdivision (b).

(b) (1) For purposes of this section, “commercial air carrier”
means an air carrier or foreign air carrier engaged in air
transportation as defined in Section 1150.

(2) Certificated aircraft owned or used by a commercial air
carrier shall be assessed in a manner consistent with the procedures
set forth in Article 6 (commencing with Section 1150) of Chapter
5 that determines the extent that the certificated aircraft is
physically present in each county within this state.

(c) The board may audit a commercial air carrier as otherwise
provided by law.

begin delete SEC. 3. end delete
begin insert SEC. 5. end insert   

Section 755 of the Revenue and Taxation Code is
amended to read:

755.  

(a) On or before July 15, the board shall transmit to each
county auditor an estimate of the total unitary value and operating
nonunitary value of state-assessed property in the county and of
nonunitary state-assessed property in each revenue district in the
county. An estimate need not be made for a revenue district that
did not levy a tax or assessment during the preceding year unless
the board receives on or before January 1 preceding the fiscal year
for which the levy is to be made a notice in writing of the proposed
levy. The estimate shall be regarded as establishing the total
assessed value of state-assessed property in the county and each
revenue district in the county for the purpose of determining tax
rates, subject only to those changes as may be transmitted on or
prior to July 31. All information furnished pursuant to this section
is at all times during office hours open to inspection by any
interested person or entity.

(b) Notwithstanding subdivision (a), in making the estimate
referred to in subdivision (a), the value of property described in
paragraph (1) of subdivision (a) of Section 100.1 and the
nonunitary value of the property of regulated railway companies,
property subject to subdivisions (i), (j), (k), and (l) of Section 100,
property subject to Section 100.9, and property subject to Section
100.51 shall be allocated by revenue district.

(c) The amendments made to this section by the act that added
this subdivision apply for the 2007-08 fiscal year and for each
fiscal year thereafter.

begin delete SEC. 4. end delete
begin insert SEC. 6. end insert   

Section 756 of the Revenue and Taxation Code is
amended to read:

756.  

(a) On or before July 31, the board shall transmit to each
county auditor a roll showing the unitary and operating nonunitary
assessments made by the board in the county and the nonoperating
nonunitary assessments made by the board in each city and revenue
district in the county; provided, however, that the roll need not
show the assessments made by the board in a revenue district which
did not levy a tax or assessment during the preceding year. The
roll is at all times, during office hours, open to the inspection of
any person representing any taxing agency or revenue district, or
any district described in Section 2131. If the roll does not show
the assessments in a revenue district as herein provided and a notice
of a proposed levy is furnished to the board in writing, on or before
January 1 preceding the fiscal year for which the levy is to be
made, the board shall furnish an estimate of the total assessed value
of nonoperating nonunitary state-assessed property in the district
and shall transmit thereafter to the county auditor a statement of
roll change showing the nonoperating nonunitary assessments
made by the board in the district.

(b) Notwithstanding subdivision (a), in making the roll referred
to in subdivision (a), the value of property described in paragraph
(1) of subdivision (a) of Section 100.11 and the nonunitary value
of the property of regulated railway companies, property subject
to subdivisions (i), (j), (k), and (l) of Section 100, property subject
to Section 100.9, and property subject to Section 100.51 shall be
enrolled by revenue district.

(c) The amendments made to this section by the act that added
this subdivision apply for the 2007-08 fiscal year and for each
fiscal year thereafter.

begin delete SEC. 5. end delete
begin insert SEC. 7. end insert   

Section 828.1 is added to the Revenue and Taxation
Code, to read:

828.1.  

(a) All of the following apply to a property statement
submitted by a commercial air carrier:

(1) Personal property located in this state, other than certificated
aircraft, shall be reported by reference to the tax rate area in order
to allocate assessed value by tax rate area as required by Section
100.51.

(2) Information related to certificated aircraft that normally
make physical contact in counties shall be reported in the form
prescribed by the board.

(b) If a commercial air carrier’s property statement includes
fixtures that are to be locally assessed as fixtures, the board shall
provide information regarding the fixtures to the county assessor
for the county in which the fixtures are located.

begin delete SEC. 6. end delete
begin insert SEC. 8. end insert   

Section 1152 of the Revenue and Taxation Code is
amended to read:

1152.  

The allocation formula to be used by each assessor is as
follows:

(a) The time in state factor is the proportionate amount of time,
both in the air and on the ground, that certificated aircraft have
spent within the state during a representative period as compared
to the total time in the representative period. For purposes of this
subdivision, all time, both in the air and on the ground, that
certificated aircraft have spent within the state prior to the aircraft’s
first entry into the revenue service of the air carrier in control of
the aircraft on the current lien date shall be excluded from the time
in state factor. This factor shall be multiplied by 75 percent.

(b) The arrivals and departures factor is the proportionate
number of arrivals in and departures from airports within the state
of certificated aircraft during a representative period as compared
to the total number of arrivals in and departures from airports
during the representative period. This factor shall be multiplied
by 25 percent.

(c) For the 1983-84 fiscal year and fiscal years thereafter, in
computing the time-in-state factor, on each occasion during the
representative period that a certificated aircraft has spent 720 or
more consecutive hours on the ground, all ground time in excess
of 168 hours shall be excluded from the time in state attributable
to that aircraft.

(d) The time-in-state factor shall be added to the arrivals and
departures factor.

(e) The figure produced by application of subdivision (d) equals
the allocation to be applied to full cash value to determine the
value to which the assessment ratio shall be applied.

(f) This section shall remain in effect only until begin delete January 1, 2016, end delete
begin insert July 1, 2017, end insert and as of that date is repealed.

begin delete SEC. 7. end delete
begin insert SEC. 9. end insert   

Section 1152 is added to the Revenue and Taxation
Code, to read:

1152.  

The allocation formula to be used by the board is as
follows:

(a) The time in state factor is the proportionate amount of time,
both in the air and on the ground, that certificated aircraft have
spent within the state during a representative period as compared
to the total time in the representative period. For purposes of this
subdivision, all time, both in the air and on the ground, that
certificated aircraft have spent within the state prior to the aircraft’s
first entry into the revenue service of the air carrier in control of
the aircraft on the current lien date shall be excluded from the time
in state factor. This factor shall be multiplied by 75 percent.

(b) The arrivals and departures factor is the proportionate
number of arrivals in and departures from airports within the state
of certificated aircraft during a representative period as compared
to the total number of arrivals in and departures from airports
during the representative period. This factor shall be multiplied
by 25 percent.

(c) For the begin delete 2016-17 end delete begin insert 2017-18 end insert fiscal year and each fiscal year
thereafter, in computing the time-in-state factor, on each occasion
during the representative period that a certificated aircraft has spent
720 or more consecutive hours on the ground, all ground time in
excess of 168 hours shall be excluded from the time in state
attributable to that aircraft.

(d) The time-in-state factor shall be added to the arrivals and
departures factor.

(e) The figure produced by application of subdivision (d) equals
the allocation to be applied to full cash value to determine the
value to which the assessment ratio shall be applied.

(f) This section shall become operative on begin delete January 1, 2016. end delete begin insert July
1, 2017. end insert

begin delete SEC. 8. end delete
begin insert SEC. 10. end insert   

Section 1153 of the Revenue and Taxation Code is
amended to read:

1153.  

(a) After consulting with the assessors of the counties
in which aircraft of an air carrier normally make physical contact,
the board shall designate for each assessment year the
representative period to be used by the assessors in assessing the
aircraft of the carrier.

(b) This section shall remain in effect only until begin delete January 1, 2016, end delete
begin insert July 1, 2017, end insert and as of that date is repealed.

begin delete SEC. 9. end delete
begin insert SEC. 11. end insert   

Section 1153 is added to the Revenue and Taxation
Code, to read:

1153.  

(a) Notwithstanding any other law, for the begin delete 2016-17 end delete
begin insert 2017-18 end insert fiscal year and for each fiscal year thereafter, the
representative period to be used by the board in assessing the
certificated aircraft of a commercial air carrier shall be the second
full week of January annually.

(b) This section shall become operative on begin delete January 1, 2016. end delete
begin insert July 1, 2017. end insert

begin insert

begin insert SEC. 12. end insert   

end insert

begin insert Section 1153.5 of the end insert begin insert Revenue and Taxation Code end insert begin insert is
amended to read: end insert

1153.5.  

(a) The Aircraft Advisory Subcommittee of the
California Assessors’ Association shall, after soliciting input from
commercial air carriers operating in the state, do both of the
following:

(1) On or before March 1, 2006, and on or before each March
1 thereafter, designate a lead county assessor’s office for each
commercial air carrier operating certificated aircraft in this state
in that assessment year.

(2) Every third year thereafter, redesignate a lead county
assessor’s office for each of these air carriers, unless an air carrier
and its existing lead county assessor’s office concur to waive this
redesignation.

(b) The lead county assessor’s office described in subdivision
(a) shall do all of the following:

(1) Calculate, pursuant to Section 401.17, an unallocated value
of the certificated aircraft of each commercial air carrier to which
he or she is designated.

(2) Electronically transmit to the assessor of each county in
which the property described in paragraph (1) has situs for the
assessment year the values determined by the lead county
assessor’s office under paragraph (1).

(3) Receive the property statement, as described in subdivision
(l) of Section 441, of each commercial air carrier to which he or
she is designated.

(4) Lead the audit team described in subdivision (d) when that
team is conducting an audit of a commercial air carrier to which
he or she is designated.

(5) Notify, in writing, each commercial air carrier for which he
or she has been designated of this designation on or before the first
March 15 that follows that designation.

(c) (1) Notwithstanding subdivision (b), the county assessor of
each county in which the personal property of a commercial air
carrier has situs for an assessment year is solely responsible for
assessing that property, applying the allocation formula set forth
in Section 1152, and enrolling the value of the property in that
county, but, in determining the unallocated fleet value for each
make, model, and series of certificated aircraft of a commercial
air carrier, the assessor may consult with the lead county assessor’s
office designated for that commercial air carrier.

(2) The lead county assessor’s office is subject to Section 322
of Title 18 of the California Code of Regulations and Sections
408, 451, and 1606 to the same extent as the assessor described in
paragraph (1).

(d) Notwithstanding Section 469, an audit of a commercial air
carrier shall be conducted once every four years on a centralized
basis by an audit team of auditor-appraisers from at least one, but
not more than three, counties, as determined by the Aircraft
Advisory Subcommittee of the California Assessors’ Association.
An audit, so conducted, shall encompass all of the California
Personal Property and fixtures of the air carrier and is deemed to
be made on behalf of each county for which an audit would
otherwise be required under Section 469.

(e) This section shall remain in effect only until begin delete December 31,
2015, end delete begin insert July 1, 2017, end insert and as of that date is repealed.

begin delete SEC. 10. end delete
begin insert SEC. 13. end insert   

Section 1155 of the Revenue and Taxation Code is
amended to read:

1155.  

For purposes of Section 404, certificated aircraft shall
be deemed to be situated only in those taxing agencies in which
the aircraft normally make physical contact with sufficient
regularity to entitle such agencies to tax the aircraft under the laws
and Constitution of the United States. Flight time within the state
shall be allocated as follows:

(a) If the aircraft takes off in one taxing agency which is entitled
to tax (within the meaning of the preceding sentence) and lands
in another agency which is entitled to tax, the flight time between
such taxing agencies shall be allocated one-half to each such
agency.

(b) If the aircraft arrives from out of state or leaves the state,
the flight time from or to the state boundary shall be allocated to
the taxing agency entitled to tax in which the aircraft first lands
or last takes off, as the case may be.

(c) This section shall remain in effect only until begin delete January 1, 2016, end delete
begin insert July 1, 2017, end insert and as of that date is repealed.

begin delete SEC. 11. end delete
begin insert SEC. 14. end insert   

Section 1155 is added to the Revenue and Taxation
Code, to read:

1155.  

(a) For purposes of Section 100.51, certificated aircraft
shall be deemed to be situated only in those tax rate areas in which
the aircraft normally make physical contact with sufficient
regularity to entitle that tax rate area to the assessed value of the
aircraft under the laws and Constitution of the United States. Flight
time within the state shall be allocated as follows:

(1) If the aircraft takes off in one tax rate area that is entitled to
the assessed value of the aircraft and lands in another tax rate area
that is entitled to the assessed value of the aircraft, the flight time
between the two tax rate areas shall be allocated one-half to each
of the two tax rate areas.

(2) If the aircraft arrives from out of state or leaves the state,
the flight time from or to the state boundary shall be allocated to
the tax rate area entitled to the assessed value of the aircraft in
which the aircraft first lands or last takes off, as the case may be.

(b) This section shall become operative on begin delete January 1, 2016. end delete
begin insert July 1, 2017. end insert

begin insert

begin insert SEC. 15. end insert   

end insert

begin insert Section 1157 is added to the end insert begin insert Revenue and Taxation
Code end insert begin insert , to read: end insert

begin insert

begin insert 1157. end insert   

(a) Notwithstanding Section 469, the board shall conduct
an audit of a commercial air carrier that has a full value of four
hundred thousand dollars ($400,000) or more of assessable
California personal property once every four years. An audit, so
conducted, shall encompass all of the California personal property
of the air carrier and is deemed to be made on behalf of each
county for which an audit would otherwise be required under
Section 469.

(b) This section shall become operative on July 1, 2017.

end insert