BILL ANALYSIS
AB 311
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 311 (Ma)
As Amended September 2, 2009
Majority vote
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|ASSEMBLY: |60-4 |(May 28, 2009) |SENATE: |36-3 |(September 4, |
| | | | | |2009) |
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Original Committee Reference: REV. & TAX.
SUMMARY : Extends the Centralized Fleet Calculation Program for
statewide assessment of certificated aircraft for property tax
purposes until fiscal year (FY) 2014-15.
The Senate amendments :
1)Make a clarifying technical change to Revenue and Taxation Code
(R&TC) Section 1153.5.
2)Add double-jointing language to avoid chaptering out problems with
AB 852 (Fong), pending in the Senate.
EXISTING LAW :
1)Provides that all property is taxable unless explicitly exempted
by the California Constitution or federal law. Limits ad valorem
taxes on real property to 1% of the full cash value of that
property as set forth in the California Constitution. Requires
that real and personal property be taxed at the same rate (Section
2 of Article XIII of the California Constitution). However,
personal property, which generally is defined as property other
than real property, is subject to property tax of 1% of the
assessed value of the taxable personal property. Thus, the
property tax applicable to personal property is calculated based
on the market value of that property, rather than its "full cash
value."
2)Requires each county to impose an ad valorem property tax rate of
1% of the assessed value of the taxable property located in that
county, including any taxable certificated aircraft within the
county. Typically, certificated aircraft are commercial aircraft
operated by air carriers for passenger and freight service, while
general aircraft are typically privately owned aircraft. General
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aircraft are assessed on an aircraft-by-aircraft basis and an
assessment is made only in a single county where the aircraft is
habitually situated. Certificated aircraft are valued for
purposes of property taxation under a "fleet" concept, which means
that the basis of the assessed value is not the value of any
single aircraft owned by an air carrier, but the value of all
aircraft of each particular fleet type that is flown into
California. Types are grouped by make and model. Because
certificated aircraft are movable, they are often located in more
than one county during an assessment year, and assessments are
made for each county in which the aircraft in the fleet land to
reflect actual presence in California.
3)Prescribes a centralized assessment methodology for valuing
certificated aircraft for FYs 2005-06 through 2010-11. Also,
until January 1, 2011, allows a commercial air carrier to file a
single, consolidated property statement with a designated "lead"
county for all certificated aircraft that has acquired a tax situs
in California. The centralized assessment methodology is based on
a formula to be used by the "lead" county in determining the
preallocated fair market value of each make, model, and series of
mainline jets, production freighters, converted freighters, and
regional aircraft with a tax situs within California for property
tax purposes. Once the "lead" county calculates the preallocated
value of the aircraft, the information is transmitted to all other
counties within which the airline has acquired a tax nexus. Each
individual county then determines its allocated portion of the
fleet based on the flight data for that particular county. R&TC
Section 1152 provides 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 county.
4)Requires assessors to audit once every four years the personal
property holdings of any property owner with an assessed value of
more than $400,000 (RT&C Section 469). Until December 31, 2010,
allows an audit team comprised of staff from one to three counties
to perform a mandatory audit of a commercial air carrier. The
work performed by the audit team is deemed to have been made on
behalf of each county for which a mandatory audit would otherwise
be required under RT&C Section 469.
5)Defines the term "certificated aircraft" as "aircraft operated by
an air carrier or foreign air carrier engaged in air
transportation, as defined in subdivisions (3), (5), (10), and
(19) of Section 101 of Title of the "Federal Aviation Act of 1958"
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(P.L. 85-726; 72 Stat. 731), while there is in force a certificate
or permit issued by the Civil Aeronautics Board of the United
States, or its successor, or a certificate or permit issued by the
California Public Utilities Commission, or its successor,
authorizing such air carrier to engage in such transportation."
(RT&C Section 1150).
AS PASSED BY THE ASSEMBLY , this bill:
1)Extended, until FY 2014-15, the application of the current
assessment methodology for determining the fair market value of
certificated aircraft owned by commercial air carriers for
property tax purposes.
2)Extended, until December 31, 2014, the application of the
following provisions of law that otherwise were scheduled to
sunset on December 31, 2010:
a) RT&C Section 441 that required a commercial air carrier to
file one annual property statement with a designated "lead"
county; and,
b) RT&C Section 1153.5 that established 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)Imposed a state-mandated local program and provided that, if the
Commission on State Mandates determined that this bill contained
costs mandated by the state, reimbursement for those costs would
be made as required by the statute.
FISCAL EFFECT : The State Board of Equalization (BOE) estimates that
this bill will have no revenue impact.
COMMENTS : According to the author, "AB 311 is needed to ensure that
administrative efficiencies created by AB 964 continue for both the
airlines and assessors. AB 964 created a fair and equitable
statewide valuation of certificated aircrafts. The Centralized
Fleet Calculation Program has allowed assessors to carry out their
mandated responsibility to fairly assess taxable property in an
efficient manner."
The sponsor of this bill, California Assessors' Association, argues
that the existing Centralized Fleet Calculation Program, which was
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established by AB 964 (Horton), Chapter 699, Statutes of 2005, has
been a success. The program "has allowed assessors to carry out
their mandated responsibility to fairly assess all taxable property
within their jurisdiction in an efficient manner" while streamlining
the property tax process for commercial airlines. The sponsor also
states that the "total annual cost savings statewide for assessors
with centralized valuation and audit and the avoidance of assessment
appeals is estimated as over $3.4 million." The proponents state
that the existing Centralized Fleet Calculation Program provides an
equitable and consistent formula in valuing aircraft and allows
airlines to plan accordingly for the next five years.
Additionally, the proponents emphasize the importance of the current
practice of designating one lead county and allowing airlines to
file only one property tax return with that county.
The opponents argue that the "unanticipated revision of the Airline
Pricing Guide (APG) in combination with the formula attached to the
application of the APG contained in current statute has resulted in
precipitous and unexpected rises in tax liability for Southwest
Airlines." The opponents suggest either an increase to 20% in the
percent discount from the APG of 10% or an extension of the sunset
to no more than three years to precipitate evaluation and discussion
of the methodology. The opponents state that the existing
assessment methodology was not intended to be a permanent solution
to airline valuation issues and the sunset provisions are necessary
to motivate a periodic review of that methodology.
Prior to 1999, no specific assessment methodology procedure for
valuing certificated aircraft or for valuing the carrier's
possessory interest in the publicly owned airport existed in
California. In 1998, a group of counties and airline industry
representatives entered into a written settlement agreement to
dispose of outstanding litigation and appeals over the valuation of
possessory interest assessments in airports and the valuation of
certificated aircraft. The settlement agreement created a new
assessment methodology for valuing aircraft that applied to FY
1998-99 to FY 2002-03 and was codified in a three-piece legislative
package [AB 1807 (Takasugi), Chapter 86, Statutes of 1998, AB 2318
(Knox), Chapter 85, Statutes of 1998, and SB 30 (Kopp), Chapter 87,
Statutes of 1998]. In 2005, the representatives of the airline
industry and a county assessors working group, jointly, refined that
valuation methodology, recognizing the need to distinguish between
different types of aircraft and to detail the specific calculation
of the variable components that were previously lacking.
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Committee staff notes that, prior to 1998, the valuation of aircraft
had been contentious and challenging for both county assessors and
commercial air carriers but the codified valuation methodology has
reduced those conflicts. The existing centralized assessment of
certificated aircraft provides certainty and predictability for both
assessors and airlines. Further, the current procedure of
designating a lead county assessor's office to calculate the
preallocated fleet value ensures that airlines report the same
information to every county, resulting in a uniform statewide
assessment. As BOE staff points out in its analysis of this bill,
"Absent a codified methodology, there is no guarantee that the
values determined by each individual county assessor would be the
same," since property appraisal is subjective and opinions of value
differ. Finally, the centralized assessment of aircraft greatly
reduces administrative costs for both parties. As reported by the
author, if the existing centralized valuation methodology and the
centralized audit program are not extended, 236 additional fleet
calculations and 390 additional statewide mandatory audits would be
required, resulting in an annual cost of approximately $1.3 million,
and $1.8 million, respectively.
Analysis Prepared by : Oksana Jaffe / REV. & TAX. / (916) 319-2098
FN: 0002905