BILL ANALYSIS
AB 384
Page 1
Date of Hearing: January 21, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
AB 384 (Ma) - As Amended: January 4, 2010
Policy Committee: Revenue and
Taxation Vote: 8-0
Urgency: No State Mandated Local Program:
Yes Reimbursable: Yes
SUMMARY
This bill extends, from 2010-11 to 2015-16, the application of
the current standard assessment methodology for determining the
fair market value of certificated aircraft owned by commercial
air carriers for property tax purposes.
FISCAL EFFECT
1)The State Board of Equalization (BOE) estimates that this bill
will have no revenue impact since the existing valuation
methodology is a reasonable method for determining fair market
value of certificated aircraft and this bill simply extends
the application of this methodology.
2)Major administrative savings to both county assessors and
airlines due to continued use of a standard assessment
methodology.
COMMENTS
1)Rationale . This bill is sponsored by the California Assessors'
Association (CAA), which states that its purpose is to
continue operation of a successful centralized assessment
procedure, resulting in administrative efficiencies for both
the air carriers and the counties.
The bill is nearly identical to AB 311, which passed both
houses of the Legislature in 2009. The bill was vetoed by the
governor, however, who stated that, while the bill represented
AB 384
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a continuation of an important tax assessment methodology, its
provisions did not reflect a consensus among stakeholders.
2)Opposition. While most major airlines and the California
Assessors' Association supported AB 311, Southwest Airlines
opposed the measure on the grounds that the current
methodology's reliance on the Airliner Price Guide to
determine fleet values has led to unwarranted increases in
assessed values of its newer aircraft.
AB 384 attempts to address this concern by including
"rebuttable presumption" language, allowing a taxpayer to
appeal the valuation. Under the language, an assessment
appeals board could make an alternative assessment for the
aircraft when the facts presented in an appeal clearly
overcome the presumption of correctness of the standard
methodology. Despite this language, Southwest Airlines remains
opposed to the new measure.
3)Background . Certificated aircraft used in commercial aviation
are subject to California's property tax. As personal
property, the aircraft are not subject to the valuation
limitations of Proposition 13. Hence, they must be valued each
year.
Aircraft valuation was a contentious issue prior to 1998, as
no specific assessment methodology 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
certificated aircraft. The settlement agreement created a new
unified assessment methodology for valuing aircraft that was
subsequently codified into law. The calculations were refined
in 2005 by a working group of industry and county
representatives, to apply more consistent standards for
aircraft valuation.
The current valuation methodology has three key elements.
First is the selection of a lead county for the purpose of
valuing each carrier's fleet of aircraft. Second is the
determination by the lead county assessor of the total value
of the full fleet of each type of aircraft operated by the
carrier based on standard valuation methods, which may include
reliance on prices derived from the "Airliner Price Guide".
(This guide is an industry "blue book" of new and used
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aircraft and engine values, based on actual transactions).
Third is the transmission of total fleet value to assessors in
each county where the carrier operates, who then allocate a
portion of the total fleet value to their county based
percentage of the fleet's time spent in their county. The
latter calculation is based on a formula that takes into
account the percentage of the fleet's total landings occurring
in the county and information from the airlines flight
schedule.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081