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