BILL ANALYSIS Ó
SB 1329
Page 1
Date of Hearing: August 3, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
SB 1329
(Hertzberg) - As Amended May 31, 2016
-----------------------------------------------------------------
|Policy |Revenue and Taxation |Vote:|9 - 0 |
|Committee: | | | |
| | | | |
| | | | |
-----------------------------------------------------------------
Urgency: No State Mandated Local Program: YesReimbursable:
No
SUMMARY:
This bill extends the Centralized Fleet Calculation Program for
statewide assessment of certificated aircraft for property tax
purposes for one year, until fiscal year (FY) 2017-18.
FISCAL EFFECT:
1)Unknown revenue impact relative to current law. Property tax
revenues for the additional year utilizing the lead assessor
methodology could be higher or lower than what would have
occurred absent this bill.
SB 1329
Page 2
2)Minor administrative and implementation costs to the Board of
Equalization (BOE).
COMMENTS:
1)Purpose. SB 1329 will maintain the status quo in terms of how
commercial aircraft are assessed for the purposes of property
taxation for an additional year. According to a recent letter
of support from Southwest Airlines, SB 1329 provides
additional time for negotiations between local county
assessors and the airline industry as the two parties continue
to negotiate possible changes to the commercial property tax
assessment process.
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
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
SB 1329
Page 3
Aircraft Advisory Subcommittee of the California Assessors'
Association. The lead county calculates the fleet fair market
value (FMV) 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)Appellate process. Earlier versions of this bill contained
language related to how a taxpayer (such as an airline) could
appeal a local assessor's valuation of commercial aircraft.
Under current law, any taxpayers seeking to appeal a local
assessment must contact the assessor to request
reconsideration. If this informal process fails to produce a
solution, then the taxpayer starts a formal appeals process
with the county's board of equalization. When a taxpayer
continues to disagree with a county's decision, the taxpayer
can file suit with the Superior Court, but the court can only
review the existing record to determine whether substantial
evidence supports the appeals board's decision. In these
cases, the court generally acts as the appellate court and
only grants review for "arbitrariness, abuse of discretion, or
failure to follow the standards prescribed by the
Legislature," as they see the county assessment appeals
process as performing the same fact-finding function as trial
courts.
Prior versions of this bill contained a provision that granted
airlines a right to a "trial de novo." This would have allowed
SB 1329
Page 4
courts to receive and consider new evidence in the case of an
appeal of the local assessment of commercial aircraft.
4)Related legislation. AB 2622 (Nazarian) of 2016 extends the
sunset date for the current lead county system for an
additional three years as well as modifies the "representative
period" that is used when calculating an aircraft's assessed
value. That bill is currently pending in the Senate Committee
on Governance and Finance.
Analysis Prepared by:Luke Reidenbach / APPR. / (916)
319-2081