BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
311 (Ma)
Hearing Date: 07/23/2009 Amended: 05/04/2009
Consultant: Mark McKenzie Policy Vote: Rev&Tax 8-0
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BILL SUMMARY: AB 311 would extend the current administrative
procedures and methodology for the valuation of commercial
aircraft for property tax assessment purposes through the
2014-15 fiscal year.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
Property tax revenue unknown revenue impact General/
--------see staff comments---------
Local
Tax administration savings Likely significant savings to
assessors and Local
(avoidance of appeals) airlines by continuing standard
assessment
methodology and centralized
administration
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STAFF COMMENTS:
Absent this bill, staff presumes that the assessment of
certificated aircraft would be performed by individual county
assessors as of January 1, 2011. Staff notes that the statewide
assessed value of aircraft under the existing valuation
methodology may be different from values assigned by county
assessors if the current methodology sunsets. The Board of
Equalization (BOE) estimates that there is no revenue impact
from this bill, as the existing valuation methodology, which
this bill would extend, is a reasonable method to determine fair
market value of certificated aircraft. Extending the current
methodology would also prevent an increase in costs related to
property tax administration; absent a statewide valuation
methodology, there would likely be a significant increase in
appeals and litigation as a result of disagreements between
county assessors and airlines.
Generally, the valuation of business personal property is based
on the acquisition cost of the property, which is adjusted for
inflation and depreciation to produce the taxable fair market
value. Certificated aircraft are valued for purposes of
property taxation under a "fleet" concept, whereby the types of
aircraft of an air carrier that have been used in California are
valued as a fleet and then only a portion of the value of the
carrier's entire fleet is ultimately taxed to reflect actual
presence in the state. Existing law provides for an allocation
formula to determine the frequency and the amount of time that
an air carrier's aircraft makes contact and maintains situs
within a particular county. Current law also requires
commercial air carriers to file "property statements" for each
county in which they own or use personal property, detailing
property holdings, acquisition costs, and flight and ground
data. These statements are used by county assessors as the
basis for determining property tax assessments.
Page 2
AB 311 (Ma)
Prior to 1998, the assessment of certificated aircraft was
performed in each individual county in which an airline had a
presence. The lack of a statewide methodology resulted in
frequent disagreements about valuation, and in 1998 a group of
counties and airline representatives agreed to a settlement to
dispose of outstanding litigation and appeals, resulting in a
codified methodology for valuation of aircraft for a six-year
period. AB 964 (J.Horton), Chapter 699 of 2005, the result of a
subsequent working group of county and airline representatives,
revised and updated methodology for determining the value of
certificated aircraft for property tax purposes through the
2010-11 fiscal year. This methodology essentially builds upon
the statutory formulas and procedures used prior to 2006, but it
includes distinctions between the different types of passenger
and freighter aircraft and details a more comprehensive
historical cost basis that includes economic obsolescence.
Specifically, AB 964 bases value on the lesser of historical
cost basis, as specified, or prices listed in the "Airliner
Price Guide," a commercially-prepared value guide for aircraft,
and adjusted as specified. AB 964 also established a procedure
for centralized assessment of commercial aircraft by allowing
air carriers to file a single, consolidated property statement
with a designated "lead county" instead of filing duplicative
information to all counties in which an airline has a presence.
The duties of the lead county include accepting property
statements from airlines, determining fleet value, transmitting
values to other counties where the airline has a presence, and
leading a mandatory audit process. The current methodology is
scheduled to sunset on December 31, 2010.
AB 311 would extend the statewide valuation methodology
established by AB 964 through the 2014-15 fiscal year, and
sunset the provisions on December 31, 2014.
This bill would provide certainty and predictability in the
valuation of aircraft for both assessors and airlines. Absent a
codified methodology, there is no way to predict whether the
assessed values of aircraft determined by each individual county
assessor would be the same, higher, or lower than they would be
without this bill. The existing procedures also ensure uniform
statewide assessment by centralizing reporting and valuation
with a "lead county," which eliminates duplicative reporting and
limits discrepancies in valuation, resulting in fewer appeals.
Staff notes that the estimated assessed value of certificated
aircraft allocated to California in 2008 was approximately $8.2
billion, which resulted in about $94 million in property taxes.
Staff recommends the following technical amendment on page 14,
lines 3-4:
(c) (e) This subdivision section shall remain in effect
only until December
31, 2014, and as of that date is repealed.