AB 1157: Property taxation: certificated aircraft assessment.
- Session Year: 2015-2016
- House: Assembly
- Latest Version Date: 2015-10-02
Existing property tax law requires the personal property of an air carrier to be taxed at its fair market value, and the California Constitution requires property subject to ad valorem property taxation to be assessed in the county in which it is situated. Existing law, for the 200506 fiscal year to the 201516 fiscal year, inclusive, specifies a formula to determine the fair market value of certificated aircraft of a commercial air carrier, and rebuttably presumes that the amount determined pursuant to this formula is the fair market value of the certificated aircraft. Existing law further requires, until December 31, 2015, the Aircraft Advisory Subcommittee of the California Assessors Association to designate, after soliciting input from commercial air carriers operating in the state, a lead county assessors office for each commercial air carrier operating certificated aircraft in this state in an assessment year, and requires the lead county assessor to calculate the value of the air carriers personal property and to transmit these calculations to other county assessors, but specifies that each county assessor is responsible for assessing and enrolling the taxable value of the property in his or her county, as provided. Existing law also requires, until December 31, 2015, the lead county assessors office to lead a team to audit the books and records of commercial air carriers and authorizes these air carriers to file a property statement solely with the lead county assessors office, as provided.
This bill would extend the 201516 fiscal year termination date to the 201617 fiscal year and the December 31, 2015, inoperative or repeal date to December 31, 2016, for the above-described provisions relating to the determination of the fair market value and taxation of certificated aircraft.
By extending the application of the aforementioned valuation process for certificated aircraft beyond the 201516 fiscal year, thereby imposing new duties upon a lead county assessors office, the bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to these statutory provisions.
Existing property tax law requires the personal property of an air carrier to be taxed at its fair market value, and the California Constitution requires property subject to ad valorem property taxation to be assessed in the county in which it is situated. Existing law, for the 200506 fiscal year to the 201516 fiscal year, inclusive, specifies a formula to determine the fair market value of certificated aircraft of a commercial air carrier, and rebuttably presumes that the amount determined pursuant to this formula is the fair market value of the certificated aircraft. Existing law further requires, until December 31, 2015, the Aircraft Advisory Subcommittee of the California Assessors Association to designate, after soliciting input from commercial air carriers operating in the state, a lead county assessors office for each commercial air carrier operating certificated aircraft in this state in an assessment year, and requires the lead county assessor to calculate the value of the air carriers personal property and to transmit these calculations to other county assessors, but specifies that each county assessor is responsible for assessing and enrolling the taxable value of the property in his or her county, as provided. Existing law also requires, until December 31, 2015, the lead county assessors office to lead a team to audit the books and records of commercial air carriers and authorizes these air carriers to file a property statement solely with the lead county assessors office, as provided.
This bill would extend the 201516 fiscal year termination date to the 201617 fiscal year and the December 31, 2015, inoperative or repeal date to December 31, 2016, for the above-described provisions relating to the determination of the fair market value and taxation of certificated aircraft.
By extending the application of the aforementioned valuation process for certificated aircraft beyond the 201516 fiscal year, thereby imposing new duties upon a lead county assessors office, the bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to these statutory provisions.
Existing property tax law requires the personal property of an air carrier to be taxed at its fair market value, and the California Constitution requires property subject to ad valorem property taxation to be assessed in the county in which it is situated. Existing law, for the 200506 fiscal year to the 201516 fiscal year, inclusive, specifies a formula to determine the fair market value of certificated aircraft of a commercial air carrier, and rebuttably presumes that the amount determined pursuant to this formula is the fair market value of the certificated aircraft. Existing law further requires, until December 31, 2015, the Aircraft Advisory Subcommittee of the California Assessors Association to designate, after soliciting input from commercial air carriers operating in the state, a lead county assessors office for each commercial air carrier operating certificated aircraft in this state in an assessment year, and requires the lead county assessor to calculate the value of the air carriers personal property and to transmit these calculations to other county assessors, but specifies that each county assessor is responsible for assessing and enrolling the taxable value of the property in his or her county, as provided. Existing law also requires, until December 31, 2015, the lead county assessors office to lead a team to audit the books and records of commercial air carriers and authorizes these air carriers to file a property statement solely with the lead county assessors office, as provided.
This bill would extend the 201516 fiscal year termination date to the 202122 201617 fiscal year and the December 31, 2015, inoperative or repeal date to December 31, 2021, 2016, for the above-described provisions relating to the determination of the fair market value and taxation of certificated aircraft.
By extending the application of the aforementioned valuation process for certificated aircraft beyond the 201516 fiscal year, thereby imposing new duties upon a lead county assessors office, the bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to these statutory provisions.
Existing property tax law requires the personal property of an air carrier to be taxed at its fair market value, and the California Constitution requires property subject to ad valorem property taxation to be assessed in the county in which it is situated. Existing law, for the 200506 fiscal year to the 201516 fiscal year, inclusive, specifies a formula to determine the fair market value of certificated aircraft of a commercial air carrier, and rebuttably presumes that the amount determined pursuant to this formula is the fair market value of the certificated aircraft. Existing law further requires, until December 31, 2015, the Aircraft Advisory Subcommittee of the California Assessors Association to designate, after soliciting input from commercial air carriers operating in the state, a lead county assessors office for each commercial air carrier operating certificated aircraft in this state in an assessment year, and requires the lead county assessor to calculate the value of the air carriers personal property and to transmit these calculations to other county assessors, but specifies that each county assessor is responsible for assessing and enrolling the taxable value of the property in his or her county, as provided. Existing law also requires, until December 31, 2015, the lead county assessors office to lead a team to audit the books and records of commercial air carriers and authorizes these air carriers to file a property statement solely with the lead county assessors office, as provided.
This bill would extend the 201516 fiscal year termination date to the 202122 fiscal year and the December 31, 2015, inoperative or repeal date to December 31, 2021, for the above-described provisions relating to the determination of the fair market value and taxation of certificated aircraft.
By extending the application of the aforementioned valuation process for certificated aircraft beyond the 201516 fiscal year, thereby imposing new duties upon a lead county assessors office, the bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to these statutory provisions.
(a)For the 200506 fiscal year to the 201617 fiscal year, inclusive, it shall be rebuttably presumed that the preallocated fair market value of each make, model, and series of mainline jets, production freighters, and regional aircraft that has attained situs within this state is the lesser of the sum total of the amounts determined under paragraph (1) or the sum total of the amounts determined under paragraph (2). The value of an individual aircraft assessed to the original owner of that aircraft shall not exceed its original cost from the manufacturer. The preallocated fair market value of an aircraft may be rebutted by evidence including, but not limited to, appraisals, invoices, and expert testimony.
(1)(A)The original cost for the aircraft, which shall be determined as follows and adjusted, as applicable, under subparagraphs (B), (C), and (D):
(i)For owned and leased aircraft, the taxpayers or lessors acquisition cost for that individual aircraft reported in accordance with generally accepted accounting principles, and to the extent not included in the acquisition cost, transportation costs and capitalized interest and the cost of improvements made before a transaction described in clause (ii). If the original cost for leased aircraft cannot be determined from information reasonably available to the taxpayer, original cost may be determined by reference to the average new prices column of the Airliner Price Guide for that model, series, and year of manufacture of aircraft. If information is not available in the average new prices column for that model, series, and year, the original cost may be determined using the best indicator of original cost plus all conversion costs and improvement costs incurred for that aircraft.
(ii)For sale/leaseback or assignment of purchase rights transaction aircraft, the average of the taxpayers cost established pursuant to clause (i) and the cost established in a sale/leaseback or assignment of purchase rights transaction for individual aircraft that transfers the benefits and burdens of ownership to the lessor for United States federal income tax purposes. In no event shall the original cost for sale/leaseback aircraft be less than the taxpayers acquisition cost.
(iii)In the event of a merger, bankruptcy, or change in accounting methods by the reporting airline, there shall be a rebuttable presumption that the cost of the individual aircraft and the acquisition date reported by the acquired company, if available, or the cost reported prior to the change in accounting method, are the original cost and the applicable acquisition date.
(B)(i)For mainline jets and production freighters, the original cost described in subparagraph (A), plus the cost of any improvements not otherwise included in the original cost, shall be adjusted from the date of the acquisition of the aircraft to the lien date using the monthly United States Department of Labor Producer Price Index for aircraft and a 20-year straight-line percent-good table starting from the delivery date of the aircraft to the current owner or, in the case of a sale/leaseback or assignment of purchase rights transaction, as described in this section, the current operator with a minimum combined factor of 25 percent.
(ii)For regional aircraft, the original cost described in subparagraph (A), plus the cost of any improvements not otherwise included in the original cost, shall be adjusted from the date of the acquisition of the aircraft to the lien date using the monthly United States Department of Labor Producer Price Index for aircraft and a 16-year straight-line percent-good table starting from the delivery date of the aircraft to the current owner or, in the case of a sale/leaseback or assignment of purchase rights transaction, as described in this section, the current operator with a minimum combined factor of 25 percent.
(iii)If original cost is determined by reference to the Airliner Price Guide average new prices column, the adjustments required by this paragraph shall be made by setting the acquisition date of the aircraft to be the date of the aircrafts manufacture.
(C)(i)For mainline jets and regional aircraft, the assessor shall analyze the adjusted original cost derived pursuant to subparagraph (B), for application of an economic obsolescence allowance which shall be determined as follows:
(I)For the applicable year, the assessor shall calculate the average annual net revenue per available seat mile, the net load factor, and the yield utilizing the Airline Quarterly Financial Review published by the United States Department of Transportation, and referring to the section descriptive of the passenger airline industry, entitled System Operations, System Pax. Majors for the calendar year ending December 31 immediately preceding the applicable assessment date.
(II)For a 10-year benchmark, the assessor shall calculate as of December 31 for each of the 10 calendar years preceding the applicable year, the average annual net revenue per available seat mile, the net load factor, and the yield utilizing the Airline Quarterly Financial Review published by the United States Department of Transportation, and referring to the section descriptive of the passenger airline industry, entitled System Operations, System Pax. Majors for the calendar year ending December 31 immediately preceding the applicable assessment date.
(ii)(I)The assessor shall compare each factor calculated under subclause (I) of clause (i) with the corresponding factor calculated under subclause (II) of clause (i) to derive the percentage that each of the factors calculated under subclause (I) of clause (i) deviated from the 10-year benchmark calculated under subclause (II) of clause (i). The assessor shall then calculate a weighted average of the indicated percentage adjustments, weighted as follows:
(aa)Net revenue per available seat mile shall be weighted 35 percent.
(ab)Net load factor shall be weighted 35 percent.
(ac)Yield shall be weighted 30 percent.
(II)The assessor shall reduce the adjusted original costs derived under subparagraph (B) by the percentage adjustment calculated in subclause (I), but only if the final economic obsolescence determined under that subclause exceeds 10 percent, otherwise no economic obsolescence allowance shall be provided.
(D)(i)For production freighters, the assessor shall analyze the adjusted original cost derived under subparagraph (B), for application of an economic obsolescence allowance, as follows:
(I)For the applicable year, the assessor shall calculate the industry average of net revenue per available ton mile and the ton load factor based upon the Airline Quarterly Financial Review published by the United States Department of Transportation, and referring to the section descriptive of the cargo airline industry, entitled System Operations, System Cargo Majors for the calendar year ending December 31 preceding the relevant assessment date.
(II)For a 10-year benchmark, the assessor shall calculate as of December 31 for each of the 10 calendar years preceding the applicable year, the net revenue per available ton mile and the ton load factor utilizing the Airline Quarterly Financial Review published by the United States Department of Transportation and referring to the section descriptive of the cargo airline industry, entitled System Operations, System Cargo Majors as of December 31 for each of the 10 calendar years preceding the calendar year utilized for the subject year, for the calendar year ending December 31 immediately preceding the applicable assessment date.
(ii)(I)The assessor shall compare each factor calculated under subclause (I) of clause (i) with the corresponding factor calculated under subclause (II) of clause (i) to derive the percentage that each of the factors calculated under subclause (I) of clause (i) deviated from the 10-year benchmark calculated under subclause (II) of clause (i). The assessor shall then calculate a weighted average of the indicated percentage adjustments so that the net revenue per available ton mile is weighted 50 percent and the ton load factor is weighted 50 percent.
(II)The assessor shall reduce the adjusted original costs derived under subparagraph (B) by the percentage adjustment calculated in subclause (I), but only if the final economic obsolescence determined under that subclause exceeds 10 percent, otherwise no economic obsolescence allowance shall be provided.
(2)(A)Except as otherwise provided in subparagraph (B), for each individual mainline jet, production freighter, or regional aircraft, the assessor shall identify the value referenced in the Used Price of Avg. Acft. Wholesale column of the Winter edition of the Airliner Price Guide by make, model, series, and year of manufacture, and deduct 10 percent from that value for a fleet discount.
(B)For each individual mainline jet, production freighter, or regional aircraft that is less than two years old and for which the Airliner Price Guide does not list used wholesale values, the original cost determined under paragraph (1) of subparagraph (A) shall be decreased by the lesser of 5 percent or one-half of the percentage decrease between original cost and 90 percent of the value listed in the Used Price of Avg. Acft. Wholesale column of the Winter edition of the Airliner Price Guide for a two-year-old aircraft of that same make, model, and series.
(b)For the 200506 fiscal year to the 201617 fiscal year, inclusive, it shall be rebuttably presumed that the preallocated fair market value for each make, model, and series of converted freighters that has attained situs within this state is the amount that is determined as follows:
(1)(A)The assessor shall begin his or her appraisal of a converted freighter as of the relevant lien date by identifying the aircrafts original cost as a passenger aircraft prior to conversion. The aircrafts original cost as a converted freighter shall be the lesser of:
(i)Its trended original cost as a passenger aircraft prior to conversion, less a downward adjustment of 10 percent to reflect tear-outs.
(ii)Its value described in the Winter edition of the Airliner Price Guide in the Used Price of Avg. Acft. Wholesale column in passenger configuration, less a downward adjustment of 10 percent to reflect tear-outs.
(B)The amount determined under subparagraph (A) shall be adjusted according to the following:
(i)If, on the relevant lien date, the frame of the aircraft is 15 years old or more, 50 percent of the cost to convert the aircraft to a freighter shall be added to the value determined under subparagraph (A).
(ii)If, on the relevant lien date, the frame of the aircraft is less than 15 years old, 75 percent of the cost to convert the aircraft to a freighter shall be added to the value determined under subparagraph (A).
(iii)In addition, all other improvements, including capitalized interest, to the aircraft that are not otherwise included in the aircrafts original and conversion costs shall be added at full value.
(2)The amount determined under paragraph (1) shall be adjusted from the date of the conversion of the aircraft to the lien date using the monthly United States Department of Labor Producer Price Index for aircraft and a 16-year straight-line percent-good table, however, the percent-good applied to the aircraft shall in no event be less than 15 percent.
(3)If the Airliner Price Guide Used Price of Avg. Acft. Wholesale is utilized under paragraph (1), only the improvements and adjusted conversion costs pertaining to the converted freighter shall be adjusted from the date of the conversion of the aircraft to the relevant lien date using the monthly United States Department of Labor Producer Price Index for aircraft and a 16-year straight-line percent-good table. In no event, however, shall the percent-good applied to the improvements and adjusted conversion costs be less than 15 percent.
(4)(A)Except as otherwise provided in subparagraph (B), the assessor shall reduce the adjusted original cost, plus improvements, and adjusted conversion costs, derived under paragraphs (1) to (3), inclusive, by the obsolescence percentage adjustment calculated for production freighters under subparagraph (D) of paragraph (1) of subdivision (a).
(B)If the Airliner Price Guide Used Price of Avg. Acft. Wholesale is utilized under paragraph (1), only the improvements and adjusted conversion costs pertaining to the converted freighter shall be reduced by the obsolescence percentage adjustment described in subparagraph (A).
(c)For purposes of this section, if the Airliner Price Guide ceases to be published or the format significantly changes, a guide or adjustment agreed to by commercial air carriers and the counties in which certificated aircraft have situs shall be substituted. If these parties do not agree on a guide or adjustment, the State Board of Equalization shall determine the guide or adjustment.
(d)The taxpayer shall, to the extent that information is reasonably available to the taxpayer, furnish the county assessor with an annual property statement that includes the aircraft original costs as defined in subparagraph (A) of paragraph (1) of subdivision (a). If an air carrier that has this information reasonably available to it fails to report original cost and improvements, as required by Sections 441 and 442, an assessor may in that case make an appropriate assessment pursuant to Section 501.
(e)For purposes of this section, all of the following apply:
(1)Converted freighter means a certificated aircraft, as defined in Section 1150, that, following its original manufacture, was used for passenger transportation, but was later converted to be used primarily for cargo transportation purposes.
(2)Mainline jet means a certificated aircraft, as defined in Section 1150, that is either of the following:
(A)Manufactured by Boeing, Airbus, or McDonnell Douglas.
(B)Capable of being configured with approximately 100 seats or more.
(3)Production Freighter means a certificated aircraft, as defined in Section 1150, that immediately following its manufacture is deployed primarily for cargo transportation purposes.
(4)Regional aircraft means a certificated aircraft, as defined in Section 1150, that is either of the following:
(A)Manufactured by ATR (Avions De Transport Regional), Beech, British Aerospace Jetstream, Canadair Regional Jet, Cessna, DeHaviland, Embraer, Fairchild, or Saab.
(B)Generally configured with fewer than 100 seats.
(5)Improvements means the cost of any modifications or capital additions that materially add to the value of or substantially prolong the useful life of the aircraft, or make it adaptable to a different use. Improvements include modification costs incurred during a heavy maintenance visit to the extent that they materially add to the value of or substantially prolong the useful life of the aircraft. Improvements do not include repair and maintenance costs incurred for the purpose of keeping the aircraft in an ordinarily efficient operating condition.
(6)Net revenue per available seat mile means operating revenue per available seat mile less cost per available seat mile as determined by the United States Department of Transportation.
(7)Net load factor means actual passenger load factor less break-even passenger load factor, as determined by the United States Department of Transportation.
(8)Net revenue per available ton mile means operating revenue per ton mile less cost per available ton mile as determined by the United States Department of Transportation.
(9)Yield means average revenue per revenue passenger mile as determined by the United States Department of Transportation.
(10)Ton Load Factor means that percentage of effective use of cargo capacity as determined by the United States Department of Transportation.
(f)The amendments made by the act adding this subdivision shall apply with respect to lien dates occurring on and after January 1, 2011.
SEC. 2.Section 441 of the Revenue and Taxation Code is amended to read:441.(a)Each person owning taxable personal property, other than a manufactured home subject to Part 13 (commencing with Section 5800), having an aggregate cost of one hundred thousand dollars ($100,000) or more for any assessment year shall file a signed property statement with the assessor. Every person owning personal property that does not require the filing of a property statement or real property shall, upon request of the assessor, file a signed property statement. Failure of the assessor to request or secure the property statement does not render any assessment invalid.
(b)The property statement shall be declared to be true under the penalty of perjury and filed annually with the assessor between the lien date and 5 p.m. on April 1. The penalty provided by Section 463 applies for property statements not filed by May 7. If May 7 falls on a Saturday, Sunday, or legal holiday, a property statement that is mailed and postmarked on the next business day shall be deemed to have been filed between the lien date and 5 p.m. on May 7. If, on the dates specified in this subdivision, the countys offices are closed for the entire day, that day is considered a legal holiday for purposes of this section.
(c)The property statement may be filed with the assessor through the United States mail, properly addressed with postage prepaid. For purposes of determining the date upon which the property statement is deemed filed with the assessor, the date of postmark as affixed by the United States Postal Service, or the date certified by a bona fide private courier service on the envelope containing the application, shall control. This subdivision shall be applicable to every taxing agency, including, but not limited to, a chartered city and county, or chartered city.
(d)(1)At any time, as required by the assessor for assessment purposes, every person shall make available for examination information or records regarding his or her property or any other personal property located on premises he or she owns or controls. In this connection details of property acquisition transactions, construction and development costs, rental income, and other data relevant to the determination of an estimate of value are to be considered as information essential to the proper discharge of the assessors duties.
(2)(A)This subdivision shall also apply to an owner-builder or an owner-developer of new construction that is sold to a third party, is constructed on behalf of a third party, or is constructed for the purpose of selling that property to a third party.
(B)The owner-builder or owner-developer of new construction described in subparagraph (A), shall, within 45 days of receipt of a written request by the assessor for information or records, provide the assessor with all information and records regarding that property. The information and records provided to the assessor shall include the total consideration provided either by the purchaser or on behalf of the purchaser that was paid or provided either, as part of or outside of the purchase agreement, including, but not limited to, consideration paid or provided for the purchase or acquisition of upgrades, additions, or for any other additional or supplemental work performed or arranged for by the owner-builder or owner-developer on behalf of the purchaser.
(e)In the case of a corporate owner of property, the property statement shall be signed either by an officer of the corporation or an employee or agent who has been designated in writing by the board of directors to sign the statements on behalf of the corporation.
(f)In the case of property owned by a bank or other financial institution and leased to an entity other than a bank or other financial institution, the property statement shall be submitted by the owner bank or other financial institution.
(g) The assessor may refuse to accept any property statement he or she determines to be in error.
(h)If a taxpayer fails to provide information to the assessor pursuant to subdivision (d) and introduces any requested materials or information at any assessment appeals board hearing, the assessor may request and shall be granted a continuance for a reasonable period of time. The continuance shall extend the two-year period specified in subdivision (c) of Section 1604 for a period of time equal to the period of the continuance.
(i)Notwithstanding any other provision of law, every person required to file a property statement pursuant to this section shall be permitted to amend that property statement until May 31 of the year in which the property statement is due, for errors and omissions not the result of willful intent to erroneously report. The penalty authorized by Section 463 does not apply to an amended statement received prior to May 31, provided the original statement is not subject to penalty pursuant to subdivision (b). The amended property statement shall otherwise conform to the requirements of a property statement as provided in this article.
(j)This subdivision shall apply to the oil, gas, and mineral extraction industry only. Any information that is necessary to file a true, correct, and complete statement shall be made available by the assessor, upon request, to the taxpayer by mail or at the office of the assessor by February 28. For each business day beyond February 28 that the information is unavailable, the filing deadline in subdivision (b) shall be extended in that county by one business day, for those statements affected by the delay. In no case shall the filing deadline be extended beyond June 1 or the first business day thereafter.
(k)The assessor may accept the filing of a property statement by the use of electronic media. In lieu of the signature required by subdivision (a) and the declaration under penalty of perjury required by subdivision (b), property statements filed using electronic media shall be authenticated pursuant to methods specified by the assessor and approved by the board. Electronic media includes, but is not limited to, computer modem, magnetic media, optical disk, and facsimile machine.
(l)(1)After receiving the notice required by Section 1162, the manager in control of a fleet of fractionally owned aircraft shall file with the lead county assessors office one signed property statement for all of its aircraft that have acquired situs in the state, as described in Section 1161.
(2)Flight data required to compute fractionally owned aircraft allocation under Section 1161 shall be segregated by airport.
(m)(1)After receiving the notice required by paragraph (5) of subdivision (b) of Section 1153.5, a commercial air carrier whose certificated aircraft is subject to Article 6 (commencing with Section 1150) of Chapter 5 shall file with the lead county assessors office designated under Section 1153.5 one signed property statement for its personal property at all airport locations and fixtures at all airport locations.
(2)Each commercial air carrier may file one schedule for all of its certificated aircraft that have acquired situs in this state under Section 1151.
(3)Flight data required to compute certificated aircraft allocation under Section 1152 and subdivision (g) of Section 202 of Title 18 of the California Code of Regulations shall be segregated by airport location.
(4)Beginning with the 2006 assessment year, a commercial air carrier may file a statement described in this subdivision electronically by means of the California Assessors Standard Data Record (SDR) network. If the SDR is not equipped to accept electronic filings for the 2006 assessment year, an air carrier may file a printed version of its property statement for that year with its lead county assessors office.
(5)This subdivision shall remain operative only until December 31, 2016.
SEC. 3.Section 1153.5 of the Revenue and Taxation Code is amended to read:1153.5.(a)The Aircraft Advisory Subcommittee of the California Assessors Association shall, after soliciting input from commercial air carriers operating in the state, do both of the following:
(1)On or before March 1, 2006, and on or before each March 1 thereafter, designate a lead county assessors office for each commercial air carrier operating certificated aircraft in this state in that assessment year.
(2)Every third year thereafter, redesignate a lead county assessors office for each of these air carriers, unless an air carrier and its existing lead county assessors office concur to waive this redesignation.
(b)The lead county assessors office described in subdivision (a) shall do all of the following:
(1)Calculate, pursuant to Section 401.17, an unallocated value of the certificated aircraft of each commercial air carrier to which he or she is designated.
(2)Electronically transmit to the assessor of each county in which the property described in paragraph (1) has situs for the assessment year the values determined by the lead county assessors office under paragraph (1).
(3)Receive the property statement, as described in subdivision (l) of Section 441, of each commercial air carrier to which he or she is designated.
(4)Lead the audit team described in subdivision (d) when that team is conducting an audit of a commercial air carrier to which he or she is designated.
(5)Notify, in writing, each commercial air carrier for which he or she has been designated of this designation on or before the first March 15 that follows that designation.
(c)(1)Notwithstanding subdivision (b), the county assessor of each county in which the personal property of a commercial air carrier has situs for an assessment year is solely responsible for assessing that property, applying the allocation formula set forth in Section 1152, and enrolling the value of the property in that county, but, in determining the unallocated fleet value for each make, model, and series of certificated aircraft of a commercial air carrier, the assessor may consult with the lead county assessors office designated for that commercial air carrier.
(2)The lead county assessors office is subject to Section 322 of Title 18 of the California Code of Regulations and Sections 408, 451, and 1606 to the same extent as the assessor described in paragraph (1).
(d)Notwithstanding Section 469, an audit of a commercial air carrier shall be conducted once every four years on a centralized basis by an audit team of auditor-appraisers from at least one, but not more than three, counties, as determined by the Aircraft Advisory Subcommittee of the California Assessors Association. An audit, so conducted, shall encompass all of the California Personal Property and fixtures of the air carrier and is deemed to be made on behalf of each county for which an audit would otherwise be required under Section 469.
(e)This section shall remain in effect only until December 31, 2016, and as of that date is repealed.
SEC. 4.If the Commission on State Mandates determines that this act contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code.
(a)For the 200506 fiscal year to the 201617 fiscal year, inclusive, it shall be rebuttably presumed that the preallocated fair market value of each make, model, and series of mainline jets, production freighters, and regional aircraft that has attained situs within this state is the lesser of the sum total of the amounts determined under paragraph (1) or the sum total of the amounts determined under paragraph (2). The value of an individual aircraft assessed to the original owner of that aircraft shall not exceed its original cost from the manufacturer. The preallocated fair market value of an aircraft may be rebutted by evidence including, but not limited to, appraisals, invoices, and expert testimony.
(1)(A)The original cost for the aircraft, which shall be determined as follows and adjusted, as applicable, under subparagraphs (B), (C), and (D):
(i)For owned and leased aircraft, the taxpayers or lessors acquisition cost for that individual aircraft reported in accordance with generally accepted accounting principles, and to the extent not included in the acquisition cost, transportation costs and capitalized interest and the cost of improvements made before a transaction described in clause (ii). If the original cost for leased aircraft cannot be determined from information reasonably available to the taxpayer, original cost may be determined by reference to the average new prices column of the Airliner Price Guide for that model, series, and year of manufacture of aircraft. If information is not available in the average new prices column for that model, series, and year, the original cost may be determined using the best indicator of original cost plus all conversion costs and improvement costs incurred for that aircraft.
(ii)For sale/leaseback or assignment of purchase rights transaction aircraft, the average of the taxpayers cost established pursuant to clause (i) and the cost established in a sale/leaseback or assignment of purchase rights transaction for individual aircraft that transfers the benefits and burdens of ownership to the lessor for United States federal income tax purposes. In no event shall the original cost for sale/leaseback aircraft be less than the taxpayers acquisition cost.
(iii)In the event of a merger, bankruptcy, or change in accounting methods by the reporting airline, there shall be a rebuttable presumption that the cost of the individual aircraft and the acquisition date reported by the acquired company, if available, or the cost reported prior to the change in accounting method, are the original cost and the applicable acquisition date.
(B)(i)For mainline jets and production freighters, the original cost described in subparagraph (A), plus the cost of any improvements not otherwise included in the original cost, shall be adjusted from the date of the acquisition of the aircraft to the lien date using the monthly United States Department of Labor Producer Price Index for aircraft and a 20-year straight-line percent-good table starting from the delivery date of the aircraft to the current owner or, in the case of a sale/leaseback or assignment of purchase rights transaction, as described in this section, the current operator with a minimum combined factor of 25 percent.
(ii)For regional aircraft, the original cost described in subparagraph (A), plus the cost of any improvements not otherwise included in the original cost, shall be adjusted from the date of the acquisition of the aircraft to the lien date using the monthly United States Department of Labor Producer Price Index for aircraft and a 16-year straight-line percent-good table starting from the delivery date of the aircraft to the current owner or, in the case of a sale/leaseback or assignment of purchase rights transaction, as described in this section, the current operator with a minimum combined factor of 25 percent.
(iii)If original cost is determined by reference to the Airliner Price Guide average new prices column, the adjustments required by this paragraph shall be made by setting the acquisition date of the aircraft to be the date of the aircrafts manufacture.
(C)(i)For mainline jets and regional aircraft, the assessor shall analyze the adjusted original cost derived pursuant to subparagraph (B), for application of an economic obsolescence allowance which shall be determined as follows:
(I)For the applicable year, the assessor shall calculate the average annual net revenue per available seat mile, the net load factor, and the yield utilizing the Airline Quarterly Financial Review published by the United States Department of Transportation, and referring to the section descriptive of the passenger airline industry, entitled System Operations, System Pax. Majors for the calendar year ending December 31 immediately preceding the applicable assessment date.
(II)For a 10-year benchmark, the assessor shall calculate as of December 31 for each of the 10 calendar years preceding the applicable year, the average annual net revenue per available seat mile, the net load factor, and the yield utilizing the Airline Quarterly Financial Review published by the United States Department of Transportation, and referring to the section descriptive of the passenger airline industry, entitled System Operations, System Pax. Majors for the calendar year ending December 31 immediately preceding the applicable assessment date.
(ii)(I)The assessor shall compare each factor calculated under subclause (I) of clause (i) with the corresponding factor calculated under subclause (II) of clause (i) to derive the percentage that each of the factors calculated under subclause (I) of clause (i) deviated from the 10-year benchmark calculated under subclause (II) of clause (i). The assessor shall then calculate a weighted average of the indicated percentage adjustments, weighted as follows:
(aa)Net revenue per available seat mile shall be weighted 35 percent.
(ab)Net load factor shall be weighted 35 percent.
(ac)Yield shall be weighted 30 percent.
(II)The assessor shall reduce the adjusted original costs derived under subparagraph (B) by the percentage adjustment calculated in subclause (I), but only if the final economic obsolescence determined under that subclause exceeds 10 percent, otherwise no economic obsolescence allowance shall be provided.
(D)(i)For production freighters, the assessor shall analyze the adjusted original cost derived under subparagraph (B), for application of an economic obsolescence allowance, as follows:
(I)For the applicable year, the assessor shall calculate the industry average of net revenue per available ton mile and the ton load factor based upon the Airline Quarterly Financial Review published by the United States Department of Transportation, and referring to the section descriptive of the cargo airline industry, entitled System Operations, System Cargo Majors for the calendar year ending December 31 preceding the relevant assessment date.
(II)For a 10-year benchmark, the assessor shall calculate as of December 31 for each of the 10 calendar years preceding the applicable year, the net revenue per available ton mile and the ton load factor utilizing the Airline Quarterly Financial Review published by the United States Department of Transportation and referring to the section descriptive of the cargo airline industry, entitled System Operations, System Cargo Majors as of December 31 for each of the 10 calendar years preceding the calendar year utilized for the subject year, for the calendar year ending December 31 immediately preceding the applicable assessment date.
(ii)(I)The assessor shall compare each factor calculated under subclause (I) of clause (i) with the corresponding factor calculated under subclause (II) of clause (i) to derive the percentage that each of the factors calculated under subclause (I) of clause (i) deviated from the 10-year benchmark calculated under subclause (II) of clause (i). The assessor shall then calculate a weighted average of the indicated percentage adjustments so that the net revenue per available ton mile is weighted 50 percent and the ton load factor is weighted 50 percent.
(II)The assessor shall reduce the adjusted original costs derived under subparagraph (B) by the percentage adjustment calculated in subclause (I), but only if the final economic obsolescence determined under that subclause exceeds 10 percent, otherwise no economic obsolescence allowance shall be provided.
(2)(A)Except as otherwise provided in subparagraph (B), for each individual mainline jet, production freighter, or regional aircraft, the assessor shall identify the value referenced in the Used Price of Avg. Acft. Wholesale column of the Winter edition of the Airliner Price Guide by make, model, series, and year of manufacture, and deduct 10 percent from that value for a fleet discount.
(B)For each individual mainline jet, production freighter, or regional aircraft that is less than two years old and for which the Airliner Price Guide does not list used wholesale values, the original cost determined under paragraph (1) of subparagraph (A) shall be decreased by the lesser of 5 percent or one-half of the percentage decrease between original cost and 90 percent of the value listed in the Used Price of Avg. Acft. Wholesale column of the Winter edition of the Airliner Price Guide for a two-year-old aircraft of that same make, model, and series.
(b)For the 200506 fiscal year to the 201617 fiscal year, inclusive, it shall be rebuttably presumed that the preallocated fair market value for each make, model, and series of converted freighters that has attained situs within this state is the amount that is determined as follows:
(1)(A)The assessor shall begin his or her appraisal of a converted freighter as of the relevant lien date by identifying the aircrafts original cost as a passenger aircraft prior to conversion. The aircrafts original cost as a converted freighter shall be the lesser of:
(i)Its trended original cost as a passenger aircraft prior to conversion, less a downward adjustment of 10 percent to reflect tear-outs.
(ii)Its value described in the Winter edition of the Airliner Price Guide in the Used Price of Avg. Acft. Wholesale column in passenger configuration, less a downward adjustment of 10 percent to reflect tear-outs.
(B)The amount determined under subparagraph (A) shall be adjusted according to the following:
(i)If, on the relevant lien date, the frame of the aircraft is 15 years old or more, 50 percent of the cost to convert the aircraft to a freighter shall be added to the value determined under subparagraph (A).
(ii)If, on the relevant lien date, the frame of the aircraft is less than 15 years old, 75 percent of the cost to convert the aircraft to a freighter shall be added to the value determined under subparagraph (A).
(iii)In addition, all other improvements, including capitalized interest, to the aircraft that are not otherwise included in the aircrafts original and conversion costs shall be added at full value.
(2)The amount determined under paragraph (1) shall be adjusted from the date of the conversion of the aircraft to the lien date using the monthly United States Department of Labor Producer Price Index for aircraft and a 16-year straight-line percent-good table, however, the percent-good applied to the aircraft shall in no event be less than 15 percent.
(3)If the Airliner Price Guide Used Price of Avg. Acft. Wholesale is utilized under paragraph (1), only the improvements and adjusted conversion costs pertaining to the converted freighter shall be adjusted from the date of the conversion of the aircraft to the relevant lien date using the monthly United States Department of Labor Producer Price Index for aircraft and a 16-year straight-line percent-good table. In no event, however, shall the percent-good applied to the improvements and adjusted conversion costs be less than 15 percent.
(4)(A)Except as otherwise provided in subparagraph (B), the assessor shall reduce the adjusted original cost, plus improvements, and adjusted conversion costs, derived under paragraphs (1) to (3), inclusive, by the obsolescence percentage adjustment calculated for production freighters under subparagraph (D) of paragraph (1) of subdivision (a).
(B)If the Airliner Price Guide Used Price of Avg. Acft. Wholesale is utilized under paragraph (1), only the improvements and adjusted conversion costs pertaining to the converted freighter shall be reduced by the obsolescence percentage adjustment described in subparagraph (A).
(c)For purposes of this section, if the Airliner Price Guide ceases to be published or the format significantly changes, a guide or adjustment agreed to by commercial air carriers and the counties in which certificated aircraft have situs shall be substituted. If these parties do not agree on a guide or adjustment, the State Board of Equalization shall determine the guide or adjustment.
(d)The taxpayer shall, to the extent that information is reasonably available to the taxpayer, furnish the county assessor with an annual property statement that includes the aircraft original costs as defined in subparagraph (A) of paragraph (1) of subdivision (a). If an air carrier that has this information reasonably available to it fails to report original cost and improvements, as required by Sections 441 and 442, an assessor may in that case make an appropriate assessment pursuant to Section 501.
(e)For purposes of this section, all of the following apply:
(1)Converted freighter means a certificated aircraft, as defined in Section 1150, that, following its original manufacture, was used for passenger transportation, but was later converted to be used primarily for cargo transportation purposes.
(2)Mainline jet means a certificated aircraft, as defined in Section 1150, that is either of the following:
(A)Manufactured by Boeing, Airbus, or McDonnell Douglas.
(B)Capable of being configured with approximately 100 seats or more.
(3)Production Freighter means a certificated aircraft, as defined in Section 1150, that immediately following its manufacture is deployed primarily for cargo transportation purposes.
(4)Regional aircraft means a certificated aircraft, as defined in Section 1150, that is either of the following:
(A)Manufactured by ATR (Avions De Transport Regional), Beech, British Aerospace Jetstream, Canadair Regional Jet, Cessna, DeHaviland, Embraer, Fairchild, or Saab.
(B)Generally configured with fewer than 100 seats.
(5)Improvements means the cost of any modifications or capital additions that materially add to the value of or substantially prolong the useful life of the aircraft, or make it adaptable to a different use. Improvements include modification costs incurred during a heavy maintenance visit to the extent that they materially add to the value of or substantially prolong the useful life of the aircraft. Improvements do not include repair and maintenance costs incurred for the purpose of keeping the aircraft in an ordinarily efficient operating condition.
(6)Net revenue per available seat mile means operating revenue per available seat mile less cost per available seat mile as determined by the United States Department of Transportation.
(7)Net load factor means actual passenger load factor less break-even passenger load factor, as determined by the United States Department of Transportation.
(8)Net revenue per available ton mile means operating revenue per ton mile less cost per available ton mile as determined by the United States Department of Transportation.
(9)Yield means average revenue per revenue passenger mile as determined by the United States Department of Transportation.
(10)Ton Load Factor means that percentage of effective use of cargo capacity as determined by the United States Department of Transportation.
(f)The amendments made by the act adding this subdivision shall apply with respect to lien dates occurring on and after January 1, 2011.
SEC. 2.Section 441 of the Revenue and Taxation Code is amended to read:441.(a)Each person owning taxable personal property, other than a manufactured home subject to Part 13 (commencing with Section 5800), having an aggregate cost of one hundred thousand dollars ($100,000) or more for any assessment year shall file a signed property statement with the assessor. Every person owning personal property that does not require the filing of a property statement or real property shall, upon request of the assessor, file a signed property statement. Failure of the assessor to request or secure the property statement does not render any assessment invalid.
(b)The property statement shall be declared to be true under the penalty of perjury and filed annually with the assessor between the lien date and 5 p.m. on April 1. The penalty provided by Section 463 applies for property statements not filed by May 7. If May 7 falls on a Saturday, Sunday, or legal holiday, a property statement that is mailed and postmarked on the next business day shall be deemed to have been filed between the lien date and 5 p.m. on May 7. If, on the dates specified in this subdivision, the countys offices are closed for the entire day, that day is considered a legal holiday for purposes of this section.
(c)The property statement may be filed with the assessor through the United States mail, properly addressed with postage prepaid. For purposes of determining the date upon which the property statement is deemed filed with the assessor, the date of postmark as affixed by the United States Postal Service, or the date certified by a bona fide private courier service on the envelope containing the application, shall control. This subdivision shall be applicable to every taxing agency, including, but not limited to, a chartered city and county, or chartered city.
(d)(1)At any time, as required by the assessor for assessment purposes, every person shall make available for examination information or records regarding his or her property or any other personal property located on premises he or she owns or controls. In this connection details of property acquisition transactions, construction and development costs, rental income, and other data relevant to the determination of an estimate of value are to be considered as information essential to the proper discharge of the assessors duties.
(2)(A)This subdivision shall also apply to an owner-builder or an owner-developer of new construction that is sold to a third party, is constructed on behalf of a third party, or is constructed for the purpose of selling that property to a third party.
(B)The owner-builder or owner-developer of new construction described in subparagraph (A), shall, within 45 days of receipt of a written request by the assessor for information or records, provide the assessor with all information and records regarding that property. The information and records provided to the assessor shall include the total consideration provided either by the purchaser or on behalf of the purchaser that was paid or provided either, as part of or outside of the purchase agreement, including, but not limited to, consideration paid or provided for the purchase or acquisition of upgrades, additions, or for any other additional or supplemental work performed or arranged for by the owner-builder or owner-developer on behalf of the purchaser.
(e)In the case of a corporate owner of property, the property statement shall be signed either by an officer of the corporation or an employee or agent who has been designated in writing by the board of directors to sign the statements on behalf of the corporation.
(f)In the case of property owned by a bank or other financial institution and leased to an entity other than a bank or other financial institution, the property statement shall be submitted by the owner bank or other financial institution.
(g) The assessor may refuse to accept any property statement he or she determines to be in error.
(h)If a taxpayer fails to provide information to the assessor pursuant to subdivision (d) and introduces any requested materials or information at any assessment appeals board hearing, the assessor may request and shall be granted a continuance for a reasonable period of time. The continuance shall extend the two-year period specified in subdivision (c) of Section 1604 for a period of time equal to the period of the continuance.
(i)Notwithstanding any other provision of law, every person required to file a property statement pursuant to this section shall be permitted to amend that property statement until May 31 of the year in which the property statement is due, for errors and omissions not the result of willful intent to erroneously report. The penalty authorized by Section 463 does not apply to an amended statement received prior to May 31, provided the original statement is not subject to penalty pursuant to subdivision (b). The amended property statement shall otherwise conform to the requirements of a property statement as provided in this article.
(j)This subdivision shall apply to the oil, gas, and mineral extraction industry only. Any information that is necessary to file a true, correct, and complete statement shall be made available by the assessor, upon request, to the taxpayer by mail or at the office of the assessor by February 28. For each business day beyond February 28 that the information is unavailable, the filing deadline in subdivision (b) shall be extended in that county by one business day, for those statements affected by the delay. In no case shall the filing deadline be extended beyond June 1 or the first business day thereafter.
(k)The assessor may accept the filing of a property statement by the use of electronic media. In lieu of the signature required by subdivision (a) and the declaration under penalty of perjury required by subdivision (b), property statements filed using electronic media shall be authenticated pursuant to methods specified by the assessor and approved by the board. Electronic media includes, but is not limited to, computer modem, magnetic media, optical disk, and facsimile machine.
(l)(1)After receiving the notice required by Section 1162, the manager in control of a fleet of fractionally owned aircraft shall file with the lead county assessors office one signed property statement for all of its aircraft that have acquired situs in the state, as described in Section 1161.
(2)Flight data required to compute fractionally owned aircraft allocation under Section 1161 shall be segregated by airport.
(m)(1)After receiving the notice required by paragraph (5) of subdivision (b) of Section 1153.5, a commercial air carrier whose certificated aircraft is subject to Article 6 (commencing with Section 1150) of Chapter 5 shall file with the lead county assessors office designated under Section 1153.5 one signed property statement for its personal property at all airport locations and fixtures at all airport locations.
(2)Each commercial air carrier may file one schedule for all of its certificated aircraft that have acquired situs in this state under Section 1151.
(3)Flight data required to compute certificated aircraft allocation under Section 1152 and subdivision (g) of Section 202 of Title 18 of the California Code of Regulations shall be segregated by airport location.
(4)Beginning with the 2006 assessment year, a commercial air carrier may file a statement described in this subdivision electronically by means of the California Assessors Standard Data Record (SDR) network. If the SDR is not equipped to accept electronic filings for the 2006 assessment year, an air carrier may file a printed version of its property statement for that year with its lead county assessors office.
(5)This subdivision shall remain operative only until December 31, 2016.
SEC. 3.Section 1153.5 of the Revenue and Taxation Code is amended to read:1153.5.(a)The Aircraft Advisory Subcommittee of the California Assessors Association shall, after soliciting input from commercial air carriers operating in the state, do both of the following:
(1)On or before March 1, 2006, and on or before each March 1 thereafter, designate a lead county assessors office for each commercial air carrier operating certificated aircraft in this state in that assessment year.
(2)Every third year thereafter, redesignate a lead county assessors office for each of these air carriers, unless an air carrier and its existing lead county assessors office concur to waive this redesignation.
(b)The lead county assessors office described in subdivision (a) shall do all of the following:
(1)Calculate, pursuant to Section 401.17, an unallocated value of the certificated aircraft of each commercial air carrier to which he or she is designated.
(2)Electronically transmit to the assessor of each county in which the property described in paragraph (1) has situs for the assessment year the values determined by the lead county assessors office under paragraph (1).
(3)Receive the property statement, as described in subdivision (l) of Section 441, of each commercial air carrier to which he or she is designated.
(4)Lead the audit team described in subdivision (d) when that team is conducting an audit of a commercial air carrier to which he or she is designated.
(5)Notify, in writing, each commercial air carrier for which he or she has been designated of this designation on or before the first March 15 that follows that designation.
(c)(1)Notwithstanding subdivision (b), the county assessor of each county in which the personal property of a commercial air carrier has situs for an assessment year is solely responsible for assessing that property, applying the allocation formula set forth in Section 1152, and enrolling the value of the property in that county, but, in determining the unallocated fleet value for each make, model, and series of certificated aircraft of a commercial air carrier, the assessor may consult with the lead county assessors office designated for that commercial air carrier.
(2)The lead county assessors office is subject to Section 322 of Title 18 of the California Code of Regulations and Sections 408, 451, and 1606 to the same extent as the assessor described in paragraph (1).
(d)Notwithstanding Section 469, an audit of a commercial air carrier shall be conducted once every four years on a centralized basis by an audit team of auditor-appraisers from at least one, but not more than three, counties, as determined by the Aircraft Advisory Subcommittee of the California Assessors Association. An audit, so conducted, shall encompass all of the California Personal Property and fixtures of the air carrier and is deemed to be made on behalf of each county for which an audit would otherwise be required under Section 469.
(e)This section shall remain in effect only until December 31, 2016, and as of that date is repealed.
SEC. 4.If the Commission on State Mandates determines that this act contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code.
(a)For the 200506 fiscal year to the 202122 201617 fiscal year, inclusive, it shall be rebuttably presumed that the preallocated fair market value of each make, model, and series of mainline jets, production freighters, and regional aircraft that has attained situs within this state is the lesser of the sum total of the amounts determined under paragraph (1) or the sum total of the amounts determined under paragraph (2). The value of an individual aircraft assessed to the original owner of that aircraft shall not exceed its original cost from the manufacturer. The preallocated fair market value of an aircraft may be rebutted by evidence including, but not limited to, appraisals, invoices, and expert testimony.
(1)(A)The original cost for the aircraft, which shall be determined as follows and adjusted, as applicable, under subparagraphs (B), (C), and (D):
(i)For owned and leased aircraft, the taxpayers or lessors acquisition cost for that individual aircraft reported in accordance with generally accepted accounting principles, and to the extent not included in the acquisition cost, transportation costs and capitalized interest and the cost of improvements made before a transaction described in clause (ii). If the original cost for leased aircraft cannot be determined from information reasonably available to the taxpayer, original cost may be determined by reference to the average new prices column of the Airliner Price Guide for that model, series, and year of manufacture of aircraft. If information is not available in the average new prices column for that model, series, and year, the original cost may be determined using the best indicator of original cost plus all conversion costs and improvement costs incurred for that aircraft.
(ii)For sale/leaseback or assignment of purchase rights transaction aircraft, the average of the taxpayers cost established pursuant to clause (i) and the cost established in a sale/leaseback or assignment of purchase rights transaction for individual aircraft that transfers the benefits and burdens of ownership to the lessor for United States federal income tax purposes. In no event shall the original cost for sale/leaseback aircraft be less than the taxpayers acquisition cost.
(iii)In the event of a merger, bankruptcy, or change in accounting methods by the reporting airline, there shall be a rebuttable presumption that the cost of the individual aircraft and the acquisition date reported by the acquired company, if available, or the cost reported prior to the change in accounting method, are the original cost and the applicable acquisition date.
(B)(i)For mainline jets and production freighters, the original cost described in subparagraph (A), plus the cost of any improvements not otherwise included in the original cost, shall be adjusted from the date of the acquisition of the aircraft to the lien date using the monthly United States Department of Labor Producer Price Index for aircraft and a 20-year straight-line percent-good table starting from the delivery date of the aircraft to the current owner or, in the case of a sale/leaseback or assignment of purchase rights transaction, as described in this section, the current operator with a minimum combined factor of 25 percent.
(ii)For regional aircraft, the original cost described in subparagraph (A), plus the cost of any improvements not otherwise included in the original cost, shall be adjusted from the date of the acquisition of the aircraft to the lien date using the monthly United States Department of Labor Producer Price Index for aircraft and a 16-year straight-line percent-good table starting from the delivery date of the aircraft to the current owner or, in the case of a sale/leaseback or assignment of purchase rights transaction, as described in this section, the current operator with a minimum combined factor of 25 percent.
(iii)If original cost is determined by reference to the Airliner Price Guide average new prices column, the adjustments required by this paragraph shall be made by setting the acquisition date of the aircraft to be the date of the aircrafts manufacture.
(C)(i)For mainline jets and regional aircraft, the assessor shall analyze the adjusted original cost derived pursuant to subparagraph (B), for application of an economic obsolescence allowance which shall be determined as follows:
(I)For the applicable year, the assessor shall calculate the average annual net revenue per available seat mile, the net load factor, and the yield utilizing the Airline Quarterly Financial Review published by the United States Department of Transportation, and referring to the section descriptive of the passenger airline industry, entitled System Operations, System Pax. Majors for the calendar year ending December 31 immediately preceding the applicable assessment date.
(II)For a 10-year benchmark, the assessor shall calculate as of December 31 for each of the 10 calendar years preceding the applicable year, the average annual net revenue per available seat mile, the net load factor, and the yield utilizing the Airline Quarterly Financial Review published by the United States Department of Transportation, and referring to the section descriptive of the passenger airline industry, entitled System Operations, System Pax. Majors for the calendar year ending December 31 immediately preceding the applicable assessment date.
(ii)(I)The assessor shall compare each factor calculated under subclause (I) of clause (i) with the corresponding factor calculated under subclause (II) of clause (i) to derive the percentage that each of the factors calculated under subclause (I) of clause (i) deviated from the 10-year benchmark calculated under subclause (II) of clause (i). The assessor shall then calculate a weighted average of the indicated percentage adjustments, weighted as follows:
(aa)Net revenue per available seat mile shall be weighted 35 percent.
(ab)Net load factor shall be weighted 35 percent.
(ac)Yield shall be weighted 30 percent.
(II)The assessor shall reduce the adjusted original costs derived under subparagraph (B) by the percentage adjustment calculated in subclause (I), but only if the final economic obsolescence determined under that subclause exceeds 10 percent, otherwise no economic obsolescence allowance shall be provided.
(D)(i)For production freighters, the assessor shall analyze the adjusted original cost derived under subparagraph (B), for application of an economic obsolescence allowance, as follows:
(I)For the applicable year, the assessor shall calculate the industry average of net revenue per available ton mile and the ton load factor based upon the Airline Quarterly Financial Review published by the United States Department of Transportation, and referring to the section descriptive of the cargo airline industry, entitled System Operations, System Cargo Majors for the calendar year ending December 31 preceding the relevant assessment date.
(II)For a 10-year benchmark, the assessor shall calculate as of December 31 for each of the 10 calendar years preceding the applicable year, the net revenue per available ton mile and the ton load factor utilizing the Airline Quarterly Financial Review published by the United States Department of Transportation and referring to the section descriptive of the cargo airline industry, entitled System Operations, System Cargo Majors as of December 31 for each of the 10 calendar years preceding the calendar year utilized for the subject year, for the calendar year ending December 31 immediately preceding the applicable assessment date.
(ii)(I)The assessor shall compare each factor calculated under subclause (I) of clause (i) with the corresponding factor calculated under subclause (II) of clause (i) to derive the percentage that each of the factors calculated under subclause (I) of clause (i) deviated from the 10-year benchmark calculated under subclause (II) of clause (i). The assessor shall then calculate a weighted average of the indicated percentage adjustments so that the net revenue per available ton mile is weighted 50 percent and the ton load factor is weighted 50 percent.
(II)The assessor shall reduce the adjusted original costs derived under subparagraph (B) by the percentage adjustment calculated in subclause (I), but only if the final economic obsolescence determined under that subclause exceeds 10 percent, otherwise no economic obsolescence allowance shall be provided.
(2)(A)Except as otherwise provided in subparagraph (B), for each individual mainline jet, production freighter, or regional aircraft, the assessor shall identify the value referenced in the Used Price of Avg. Acft. Wholesale column of the Winter edition of the Airliner Price Guide by make, model, series, and year of manufacture, and deduct 10 percent from that value for a fleet discount.
(B)For each individual mainline jet, production freighter, or regional aircraft that is less than two years old and for which the Airliner Price Guide does not list used wholesale values, the original cost determined under paragraph (1) of subparagraph (A) shall be decreased by the lesser of 5 percent or one-half of the percentage decrease between original cost and 90 percent of the value listed in the Used Price of Avg. Acft. Wholesale column of the Winter edition of the Airliner Price Guide for a two-year-old aircraft of that same make, model, and series.
(b)For the 200506 fiscal year to the 202122 201617 fiscal year, inclusive, it shall be rebuttably presumed that the preallocated fair market value for each make, model, and series of converted freighters that has attained situs within this state is the amount that is determined as follows:
(1)(A)The assessor shall begin his or her appraisal of a converted freighter as of the relevant lien date by identifying the aircrafts original cost as a passenger aircraft prior to conversion. The aircrafts original cost as a converted freighter shall be the lesser of:
(i)Its trended original cost as a passenger aircraft prior to conversion, less a downward adjustment of 10 percent to reflect tear-outs.
(ii)Its value described in the Winter edition of the Airliner Price Guide in the Used Price of Avg. Acft. Wholesale column in passenger configuration, less a downward adjustment of 10 percent to reflect tear-outs.
(B)The amount determined under subparagraph (A) shall be adjusted according to the following:
(i)If, on the relevant lien date, the frame of the aircraft is 15 years old or more, 50 percent of the cost to convert the aircraft to a freighter shall be added to the value determined under subparagraph (A).
(ii)If, on the relevant lien date, the frame of the aircraft is less than 15 years old, 75 percent of the cost to convert the aircraft to a freighter shall be added to the value determined under subparagraph (A).
(iii)In addition, all other improvements, including capitalized interest, to the aircraft that are not otherwise included in the aircrafts original and conversion costs shall be added at full value.
(2)The amount determined under paragraph (1) shall be adjusted from the date of the conversion of the aircraft to the lien date using the monthly United States Department of Labor Producer Price Index for aircraft and a 16-year straight-line percent-good table, however, the percent-good applied to the aircraft shall in no event be less than 15 percent.
(3)If the Airliner Price Guide Used Price of Avg. Acft. Wholesale is utilized under paragraph (1), only the improvements and adjusted conversion costs pertaining to the converted freighter shall be adjusted from the date of the conversion of the aircraft to the relevant lien date using the monthly United States Department of Labor Producer Price Index for aircraft and a 16-year straight-line percent-good table. In no event, however, shall the percent-good applied to the improvements and adjusted conversion costs be less than 15 percent.
(4)(A)Except as otherwise provided in subparagraph (B), the assessor shall reduce the adjusted original cost, plus improvements, and adjusted conversion costs, derived under paragraphs (1) to (3), inclusive, by the obsolescence percentage adjustment calculated for production freighters under subparagraph (D) of paragraph (1) of subdivision (a).
(B)If the Airliner Price Guide Used Price of Avg. Acft. Wholesale is utilized under paragraph (1), only the improvements and adjusted conversion costs pertaining to the converted freighter shall be reduced by the obsolescence percentage adjustment described in subparagraph (A).
(c)For purposes of this section, if the Airliner Price Guide ceases to be published or the format significantly changes, a guide or adjustment agreed to by commercial air carriers and the counties in which certificated aircraft have situs shall be substituted. If these parties do not agree on a guide or adjustment, the State Board of Equalization shall determine the guide or adjustment.
(d)The taxpayer shall, to the extent that information is reasonably available to the taxpayer, furnish the county assessor with an annual property statement that includes the aircraft original costs as defined in subparagraph (A) of paragraph (1) of subdivision (a). If an air carrier that has this information reasonably available to it fails to report original cost and improvements, as required by Sections 441 and 442, an assessor may in that case make an appropriate assessment pursuant to Section 501.
(e)For purposes of this section, all of the following apply:
(1)Converted freighter means a certificated aircraft, as defined in Section 1150, that, following its original manufacture, was used for passenger transportation, but was later converted to be used primarily for cargo transportation purposes.
(2)Mainline jet means a certificated aircraft, as defined in Section 1150, that is either of the following:
(A)Manufactured by Boeing, Airbus, or McDonnell Douglas.
(B)Capable of being configured with approximately 100 seats or more.
(3)Production Freighter means a certificated aircraft, as defined in Section 1150, that immediately following its manufacture is deployed primarily for cargo transportation purposes.
(4)Regional aircraft means a certificated aircraft, as defined in Section 1150, that is either of the following:
(A)Manufactured by ATR (Avions De Transport Regional), Beech, British Aerospace Jetstream, Canadair Regional Jet, Cessna, DeHaviland, Embraer, Fairchild, or Saab.
(B)Generally configured with fewer than 100 seats.
(5)Improvements means the cost of any modifications or capital additions that materially add to the value of or substantially prolong the useful life of the aircraft, or make it adaptable to a different use. Improvements include modification costs incurred during a heavy maintenance visit to the extent that they materially add to the value of or substantially prolong the useful life of the aircraft. Improvements do not include repair and maintenance costs incurred for the purpose of keeping the aircraft in an ordinarily efficient operating condition.
(6)Net revenue per available seat mile means operating revenue per available seat mile less cost per available seat mile as determined by the United States Department of Transportation.
(7)Net load factor means actual passenger load factor less break-even passenger load factor, as determined by the United States Department of Transportation.
(8)Net revenue per available ton mile means operating revenue per ton mile less cost per available ton mile as determined by the United States Department of Transportation.
(9)Yield means average revenue per revenue passenger mile as determined by the United States Department of Transportation.
(10)Ton Load Factor means that percentage of effective use of cargo capacity as determined by the United States Department of Transportation.
(f)The amendments made by the act adding this subdivision shall apply with respect to lien dates occurring on and after January 1, 2011.
SEC. 2.Section 441 of the Revenue and Taxation Code is amended to read:441.(a)Each person owning taxable personal property, other than a manufactured home subject to Part 13 (commencing with Section 5800), having an aggregate cost of one hundred thousand dollars ($100,000) or more for any assessment year shall file a signed property statement with the assessor. Every person owning personal property that does not require the filing of a property statement or real property shall, upon request of the assessor, file a signed property statement. Failure of the assessor to request or secure the property statement does not render any assessment invalid.
(b)The property statement shall be declared to be true under the penalty of perjury and filed annually with the assessor between the lien date and 5 p.m. on April 1. The penalty provided by Section 463 applies for property statements not filed by May 7. If May 7 falls on a Saturday, Sunday, or legal holiday, a property statement that is mailed and postmarked on the next business day shall be deemed to have been filed between the lien date and 5 p.m. on May 7. If, on the dates specified in this subdivision, the countys offices are closed for the entire day, that day is considered a legal holiday for purposes of this section.
(c)The property statement may be filed with the assessor through the United States mail, properly addressed with postage prepaid. For purposes of determining the date upon which the property statement is deemed filed with the assessor, the date of postmark as affixed by the United States Postal Service, or the date certified by a bona fide private courier service on the envelope containing the application, shall control. This subdivision shall be applicable to every taxing agency, including, but not limited to, a chartered city and county, or chartered city.
(d)(1)At any time, as required by the assessor for assessment purposes, every person shall make available for examination information or records regarding his or her property or any other personal property located on premises he or she owns or controls. In this connection details of property acquisition transactions, construction and development costs, rental income, and other data relevant to the determination of an estimate of value are to be considered as information essential to the proper discharge of the assessors duties.
(2)(A)This subdivision shall also apply to an owner-builder or an owner-developer of new construction that is sold to a third party, is constructed on behalf of a third party, or is constructed for the purpose of selling that property to a third party.
(B)The owner-builder or owner-developer of new construction described in subparagraph (A), shall, within 45 days of receipt of a written request by the assessor for information or records, provide the assessor with all information and records regarding that property. The information and records provided to the assessor shall include the total consideration provided either by the purchaser or on behalf of the purchaser that was paid or provided either, as part of or outside of the purchase agreement, including, but not limited to, consideration paid or provided for the purchase or acquisition of upgrades, additions, or for any other additional or supplemental work performed or arranged for by the owner-builder or owner-developer on behalf of the purchaser.
(e)In the case of a corporate owner of property, the property statement shall be signed either by an officer of the corporation or an employee or agent who has been designated in writing by the board of directors to sign the statements on behalf of the corporation.
(f)In the case of property owned by a bank or other financial institution and leased to an entity other than a bank or other financial institution, the property statement shall be submitted by the owner bank or other financial institution.
(g) The assessor may refuse to accept any property statement he or she determines to be in error.
(h)If a taxpayer fails to provide information to the assessor pursuant to subdivision (d) and introduces any requested materials or information at any assessment appeals board hearing, the assessor may request and shall be granted a continuance for a reasonable period of time. The continuance shall extend the two-year period specified in subdivision (c) of Section 1604 for a period of time equal to the period of the continuance.
(i)Notwithstanding any other provision of law, every person required to file a property statement pursuant to this section shall be permitted to amend that property statement until May 31 of the year in which the property statement is due, for errors and omissions not the result of willful intent to erroneously report. The penalty authorized by Section 463 does not apply to an amended statement received prior to May 31, provided the original statement is not subject to penalty pursuant to subdivision (b). The amended property statement shall otherwise conform to the requirements of a property statement as provided in this article.
(j)This subdivision shall apply to the oil, gas, and mineral extraction industry only. Any information that is necessary to file a true, correct, and complete statement shall be made available by the assessor, upon request, to the taxpayer by mail or at the office of the assessor by February 28. For each business day beyond February 28 that the information is unavailable, the filing deadline in subdivision (b) shall be extended in that county by one business day, for those statements affected by the delay. In no case shall the filing deadline be extended beyond June 1 or the first business day thereafter.
(k)The assessor may accept the filing of a property statement by the use of electronic media. In lieu of the signature required by subdivision (a) and the declaration under penalty of perjury required by subdivision (b), property statements filed using electronic media shall be authenticated pursuant to methods specified by the assessor and approved by the board. Electronic media includes, but is not limited to, computer modem, magnetic media, optical disk, and facsimile machine.
(l)(1)After receiving the notice required by Section 1162, the manager in control of a fleet of fractionally owned aircraft shall file with the lead county assessors office one signed property statement for all of its aircraft that have acquired situs in the state, as described in Section 1161.
(2)Flight data required to compute fractionally owned aircraft allocation under Section 1161 shall be segregated by airport.
(m)(1)After receiving the notice required by paragraph (5) of subdivision (b) of Section 1153.5, a commercial air carrier whose certificated aircraft is subject to Article 6 (commencing with Section 1150) of Chapter 5 shall file with the lead county assessors office designated under Section 1153.5 one signed property statement for its personal property at all airport locations and fixtures at all airport locations.
(2)Each commercial air carrier may file one schedule for all of its certificated aircraft that have acquired situs in this state under Section 1151.
(3)Flight data required to compute certificated aircraft allocation under Section 1152 and subdivision (g) of Section 202 of Title 18 of the California Code of Regulations shall be segregated by airport location.
(4)Beginning with the 2006 assessment year, a commercial air carrier may file a statement described in this subdivision electronically by means of the California Assessors Standard Data Record (SDR) network. If the SDR is not equipped to accept electronic filings for the 2006 assessment year, an air carrier may file a printed version of its property statement for that year with its lead county assessors office.
(5)This subdivision shall remain operative only until December 31, 2021. 2016.
SEC. 3.Section 1153.5 of the Revenue and Taxation Code is amended to read:1153.5.(a)The Aircraft Advisory Subcommittee of the California Assessors Association shall, after soliciting input from commercial air carriers operating in the state, do both of the following:
(1)On or before March 1, 2006, and on or before each March 1 thereafter, designate a lead county assessors office for each commercial air carrier operating certificated aircraft in this state in that assessment year.
(2)Every third year thereafter, redesignate a lead county assessors office for each of these air carriers, unless an air carrier and its existing lead county assessors office concur to waive this redesignation.
(b)The lead county assessors office described in subdivision (a) shall do all of the following:
(1)Calculate, pursuant to Section 401.17, an unallocated value of the certificated aircraft of each commercial air carrier to which he or she is designated.
(2)Electronically transmit to the assessor of each county in which the property described in paragraph (1) has situs for the assessment year the values determined by the lead county assessors office under paragraph (1).
(3)Receive the property statement, as described in subdivision (l) of Section 441, of each commercial air carrier to which he or she is designated.
(4)Lead the audit team described in subdivision (d) when that team is conducting an audit of a commercial air carrier to which he or she is designated.
(5)Notify, in writing, each commercial air carrier for which he or she has been designated of this designation on or before the first March 15 that follows that designation.
(c)(1)Notwithstanding subdivision (b), the county assessor of each county in which the personal property of a commercial air carrier has situs for an assessment year is solely responsible for assessing that property, applying the allocation formula set forth in Section 1152, and enrolling the value of the property in that county, but, in determining the unallocated fleet value for each make, model, and series of certificated aircraft of a commercial air carrier, the assessor may consult with the lead county assessors office designated for that commercial air carrier.
(2)The lead county assessors office is subject to Section 322 of Title 18 of the California Code of Regulations and Sections 408, 451, and 1606 to the same extent as the assessor described in paragraph (1).
(d)Notwithstanding Section 469, an audit of a commercial air carrier shall be conducted once every four years on a centralized basis by an audit team of auditor-appraisers from at least one, but not more than three, counties, as determined by the Aircraft Advisory Subcommittee of the California Assessors Association. An audit, so conducted, shall encompass all of the California Personal Property and fixtures of the air carrier and is deemed to be made on behalf of each county for which an audit would otherwise be required under Section 469.
(e)This section shall remain in effect only until December 31, 2021, 2016, and as of that date is repealed.
SEC. 4.If the Commission on State Mandates determines that this act contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code.
(a)For the 200506 fiscal year to the 201516 202122 fiscal year, inclusive, it shall be rebuttably presumed that the preallocated fair market value of each make, model, and series of mainline jets, production freighters, and regional aircraft that has attained situs within this state is the lesser of the sum total of the amounts determined under paragraph (1) or the sum total of the amounts determined under paragraph (2). The value of an individual aircraft assessed to the original owner of that aircraft shall not exceed its original cost from the manufacturer. The preallocated fair market value of an aircraft may be rebutted by evidence including, but not limited to, appraisals, invoices, and expert testimony.
(1)(A)The original cost for the aircraft, which shall be determined as follows and adjusted, as applicable, under subparagraphs (B), (C), and (D):
(i)For owned and leased aircraft, the taxpayers or lessors acquisition cost for that individual aircraft reported in accordance with generally accepted accounting principles, and to the extent not included in the acquisition cost, transportation costs and capitalized interest and the cost of improvements made before a transaction described in clause (ii). If the original cost for leased aircraft cannot be determined from information reasonably available to the taxpayer, original cost may be determined by reference to the average new prices column of the Airliner Price Guide for that model, series, and year of manufacture of aircraft. If information is not available in the average new prices column for that model, series, and year, the original cost may be determined using the best indicator of original cost plus all conversion costs and improvement costs incurred for that aircraft.
(ii)For sale/leaseback or assignment of purchase rights transaction aircraft, the average of the taxpayers cost established pursuant to clause (i) and the cost established in a sale/leaseback or assignment of purchase rights transaction for individual aircraft that transfers the benefits and burdens of ownership to the lessor for United States federal income tax purposes. In no event shall the original cost for sale/leaseback aircraft be less than the taxpayers acquisition cost.
(iii)In the event of a merger, bankruptcy, or change in accounting methods by the reporting airline, there shall be a rebuttable presumption that the cost of the individual aircraft and the acquisition date reported by the acquired company, if available, or the cost reported prior to the change in accounting method, are the original cost and the applicable acquisition date.
(B)(i)For mainline jets and production freighters, the original cost described in subparagraph (A), plus the cost of any improvements not otherwise included in the original cost, shall be adjusted from the date of the acquisition of the aircraft to the lien date using the monthly United States Department of Labor Producer Price Index for aircraft and a 20-year straight-line percent-good table starting from the delivery date of the aircraft to the current owner or, in the case of a sale/leaseback or assignment of purchase rights transaction, as described in this section, the current operator with a minimum combined factor of 25 percent.
(ii)For regional aircraft, the original cost described in subparagraph (A), plus the cost of any improvements not otherwise included in the original cost, shall be adjusted from the date of the acquisition of the aircraft to the lien date using the monthly United States Department of Labor Producer Price Index for aircraft and a 16-year straight-line percent-good table starting from the delivery date of the aircraft to the current owner or, in the case of a sale/leaseback or assignment of purchase rights transaction, as described in this section, the current operator with a minimum combined factor of 25 percent.
(iii)If original cost is determined by reference to the Airliner Price Guide average new prices column, the adjustments required by this paragraph shall be made by setting the acquisition date of the aircraft to be the date of the aircrafts manufacture.
(C)(i)For mainline jets and regional aircraft, the assessor shall analyze the adjusted original cost derived pursuant to subparagraph (B), for application of an economic obsolescence allowance which shall be determined as follows:
(I)For the applicable year, the assessor shall calculate the average annual net revenue per available seat mile, the net load factor, and the yield utilizing the Airline Quarterly Financial Review published by the United States Department of Transportation, and referring to the section descriptive of the passenger airline industry, entitled System Operations, System Pax. Majors for the calendar year ending December 31 immediately preceding the applicable assessment date.
(II)For a 10-year benchmark, the assessor shall calculate as of December 31 for each of the 10 calendar years preceding the applicable year, the average annual net revenue per available seat mile, the net load factor, and the yield utilizing the Airline Quarterly Financial Review published by the United States Department of Transportation, and referring to the section descriptive of the passenger airline industry, entitled System Operations, System Pax. Majors for the calendar year ending December 31 immediately preceding the applicable assessment date.
(ii)(I)The assessor shall compare each factor calculated under subclause (I) of clause (i) with the corresponding factor calculated under subclause (II) of clause (i) to derive the percentage that each of the factors calculated under subclause (I) of clause (i) deviated from the 10-year benchmark calculated under subclause (II) of clause (i). The assessor shall then calculate a weighted average of the indicated percentage adjustments, weighted as follows:
(aa)Net revenue per available seat mile shall be weighted 35 percent.
(ab)Net load factor shall be weighted 35 percent.
(ac)Yield shall be weighted 30 percent.
(II)The assessor shall reduce the adjusted original costs derived under subparagraph (B) by the percentage adjustment calculated in subclause (I), but only if the final economic obsolescence determined under that subclause exceeds 10 percent, otherwise no economic obsolescence allowance shall be provided.
(D)(i)For production freighters, the assessor shall analyze the adjusted original cost derived under subparagraph (B), for application of an economic obsolescence allowance, as follows:
(I)For the applicable year, the assessor shall calculate the industry average of net revenue per available ton mile and the ton load factor based upon the Airline Quarterly Financial Review published by the United States Department of Transportation, and referring to the section descriptive of the cargo airline industry, entitled System Operations, System Cargo Majors for the calendar year ending December 31 preceding the relevant assessment date.
(II)For a 10-year benchmark, the assessor shall calculate as of December 31 for each of the 10 calendar years preceding the applicable year, the net revenue per available ton mile and the ton load factor utilizing the Airline Quarterly Financial Review published by the United States Department of Transportation and referring to the section descriptive of the cargo airline industry, entitled System Operations, System Cargo Majors as of December 31 for each of the 10 calendar years preceding the calendar year utilized for the subject year, for the calendar year ending December 31 immediately preceding the applicable assessment date.
(ii)(I)The assessor shall compare each factor calculated under subclause (I) of clause (i) with the corresponding factor calculated under subclause (II) of clause (i) to derive the percentage that each of the factors calculated under subclause (I) of clause (i) deviated from the 10-year benchmark calculated under subclause (II) of clause (i). The assessor shall then calculate a weighted average of the indicated percentage adjustments so that the net revenue per available ton mile is weighted 50 percent and the ton load factor is weighted 50 percent.
(II)The assessor shall reduce the adjusted original costs derived under subparagraph (B) by the percentage adjustment calculated in subclause (I), but only if the final economic obsolescence determined under that subclause exceeds 10 percent, otherwise no economic obsolescence allowance shall be provided.
(2)(A)Except as otherwise provided in subparagraph (B), for each individual mainline jet, production freighter, or regional aircraft, the assessor shall identify the value referenced in the Used Price of Avg. Acft. Wholesale column of the Winter edition of the Airliner Price Guide by make, model, series, and year of manufacture, and deduct 10 percent from that value for a fleet discount.
(B)For each individual mainline jet, production freighter, or regional aircraft that is less than two years old and for which the Airliner Price Guide does not list used wholesale values, the original cost determined under paragraph (1) of subparagraph (A) shall be decreased by the lesser of 5 percent or one-half of the percentage decrease between original cost and 90 percent of the value listed in the Used Price of Avg. Acft. Wholesale column of the Winter edition of the Airliner Price Guide for a two-year-old aircraft of that same make, model, and series.
(b)For the 200506 fiscal year to the 201516 202122 fiscal year, inclusive, it shall be rebuttably presumed that the preallocated fair market value for each make, model, and series of converted freighters that has attained situs within this state is the amount that is determined as follows:
(1)(A)The assessor shall begin his or her appraisal of a converted freighter as of the relevant lien date by identifying the aircrafts original cost as a passenger aircraft prior to conversion. The aircrafts original cost as a converted freighter shall be the lesser of:
(i)Its trended original cost as a passenger aircraft prior to conversion, less a downward adjustment of 10 percent to reflect tear-outs.
(ii)Its value described in the Winter edition of the Airliner Price Guide in the Used Price of Avg. Acft. Wholesale column in passenger configuration, less a downward adjustment of 10 percent to reflect tear-outs.
(B)The amount determined under subparagraph (A) shall be adjusted according to the following:
(i)If, on the relevant lien date, the frame of the aircraft is 15 years old or more, 50 percent of the cost to convert the aircraft to a freighter shall be added to the value determined under subparagraph (A).
(ii)If, on the relevant lien date, the frame of the aircraft is less than 15 years old, 75 percent of the cost to convert the aircraft to a freighter shall be added to the value determined under subparagraph (A).
(iii)In addition, all other improvements, including capitalized interest, to the aircraft that are not otherwise included in the aircrafts original and conversion costs shall be added at full value.
(2)The amount determined under paragraph (1) shall be adjusted from the date of the conversion of the aircraft to the lien date using the monthly United States Department of Labor Producer Price Index for aircraft and a 16-year straight-line percent-good table, however, the percent-good applied to the aircraft shall in no event be less than 15 percent.
(3)If the Airliner Price Guide Used Price of Avg. Acft. Wholesale is utilized under paragraph (1), only the improvements and adjusted conversion costs pertaining to the converted freighter shall be adjusted from the date of the conversion of the aircraft to the relevant lien date using the monthly United States Department of Labor Producer Price Index for aircraft and a 16-year straight-line percent-good table. In no event, however, shall the percent-good applied to the improvements and adjusted conversion costs be less than 15 percent.
(4)(A)Except as otherwise provided in subparagraph (B), the assessor shall reduce the adjusted original cost, plus improvements, and adjusted conversion costs, derived under paragraphs (1) to (3), inclusive, by the obsolescence percentage adjustment calculated for production freighters under subparagraph (D) of paragraph (1) of subdivision (a).
(B)If the Airliner Price Guide Used Price of Avg. Acft. Wholesale is utilized under paragraph (1), only the improvements and adjusted conversion costs pertaining to the converted freighter shall be reduced by the obsolescence percentage adjustment described in subparagraph (A).
(c)For purposes of this section, if the Airliner Price Guide ceases to be published or the format significantly changes, a guide or adjustment agreed to by commercial air carriers and the counties in which certificated aircraft have situs shall be substituted. If these parties do not agree on a guide or adjustment, the State Board of Equalization shall determine the guide or adjustment.
(d)The taxpayer shall, to the extent that information is reasonably available to the taxpayer, furnish the county assessor with an annual property statement that includes the aircraft original costs as defined in subparagraph (A) of paragraph (1) of subdivision (a). If an air carrier that has this information reasonably available to it fails to report original cost and improvements, as required by Sections 441 and 442, an assessor may in that case make an appropriate assessment pursuant to Section 501.
(e)For purposes of this section, all of the following apply:
(1)Converted freighter means a certificated aircraft, as defined in Section 1150, that, following its original manufacture, was used for passenger transportation, but was later converted to be used primarily for cargo transportation purposes.
(2)Mainline jet means a certificated aircraft, as defined in Section 1150, that is either of the following:
(A)Manufactured by Boeing, Airbus, or McDonnell Douglas.
(B)Capable of being configured with approximately 100 seats or more.
(3)Production Freighter means a certificated aircraft, as defined in Section 1150, that immediately following its manufacture is deployed primarily for cargo transportation purposes.
(4)Regional aircraft means a certificated aircraft, as defined in Section 1150, that is either of the following:
(A)Manufactured by ATR (Avions De Transport Regional), Beech, British Aerospace Jetstream, Canadair Regional Jet, Cessna, DeHaviland, Embraer, Fairchild, or Saab.
(B)Generally configured with fewer than 100 seats.
(5)Improvements means the cost of any modifications or capital additions that materially add to the value of or substantially prolong the useful life of the aircraft, or make it adaptable to a different use. Improvements include modification costs incurred during a heavy maintenance visit to the extent that they materially add to the value of or substantially prolong the useful life of the aircraft. Improvements do not include repair and maintenance costs incurred for the purpose of keeping the aircraft in an ordinarily efficient operating condition.
(6)Net revenue per available seat mile means operating revenue per available seat mile less cost per available seat mile as determined by the United States Department of Transportation.
(7)Net load factor means actual passenger load factor less break-even passenger load factor, as determined by the United States Department of Transportation.
(8)Net revenue per available ton mile means operating revenue per ton mile less cost per available ton mile as determined by the United States Department of Transportation.
(9)Yield means average revenue per revenue passenger mile as determined by the United States Department of Transportation.
(10)Ton Load Factor means that percentage of effective use of cargo capacity as determined by the United States Department of Transportation.
(f)The amendments made by the act adding this subdivision shall apply with respect to lien dates occurring on and after January 1, 2011.
SEC. 2.Section 441 of the Revenue and Taxation Code is amended to read:441.(a)Each person owning taxable personal property, other than a manufactured home subject to Part 13 (commencing with Section 5800), having an aggregate cost of one hundred thousand dollars ($100,000) or more for any assessment year shall file a signed property statement with the assessor. Every person owning personal property that does not require the filing of a property statement or real property shall, upon request of the assessor, file a signed property statement. Failure of the assessor to request or secure the property statement does not render any assessment invalid.
(b)The property statement shall be declared to be true under the penalty of perjury and filed annually with the assessor between the lien date and 5 p.m. on April 1. The penalty provided by Section 463 applies for property statements not filed by May 7. If May 7 falls on a Saturday, Sunday, or legal holiday, a property statement that is mailed and postmarked on the next business day shall be deemed to have been filed between the lien date and 5 p.m. on May 7. If, on the dates specified in this subdivision, the countys offices are closed for the entire day, that day is considered a legal holiday for purposes of this section.
(c)The property statement may be filed with the assessor through the United States mail, properly addressed with postage prepaid. For purposes of determining the date upon which the property statement is deemed filed with the assessor, the date of postmark as affixed by the United States Postal Service, or the date certified by a bona fide private courier service on the envelope containing the application, shall control. This subdivision shall be applicable to every taxing agency, including, but not limited to, a chartered city and county, or chartered city.
(d)(1)At any time, as required by the assessor for assessment purposes, every person shall make available for examination information or records regarding his or her property or any other personal property located on premises he or she owns or controls. In this connection details of property acquisition transactions, construction and development costs, rental income, and other data relevant to the determination of an estimate of value are to be considered as information essential to the proper discharge of the assessors duties.
(2)(A)This subdivision shall also apply to an owner-builder or an owner-developer of new construction that is sold to a third party, is constructed on behalf of a third party, or is constructed for the purpose of selling that property to a third party.
(B)The owner-builder or owner-developer of new construction described in subparagraph (A), shall, within 45 days of receipt of a written request by the assessor for information or records, provide the assessor with all information and records regarding that property. The information and records provided to the assessor shall include the total consideration provided either by the purchaser or on behalf of the purchaser that was paid or provided either, as part of or outside of the purchase agreement, including, but not limited to, consideration paid or provided for the purchase or acquisition of upgrades, additions, or for any other additional or supplemental work performed or arranged for by the owner-builder or owner-developer on behalf of the purchaser.
(e)In the case of a corporate owner of property, the property statement shall be signed either by an officer of the corporation or an employee or agent who has been designated in writing by the board of directors to sign the statements on behalf of the corporation.
(f)In the case of property owned by a bank or other financial institution and leased to an entity other than a bank or other financial institution, the property statement shall be submitted by the owner bank or other financial institution.
(g) The assessor may refuse to accept any property statement he or she determines to be in error.
(h)If a taxpayer fails to provide information to the assessor pursuant to subdivision (d) and introduces any requested materials or information at any assessment appeals board hearing, the assessor may request and shall be granted a continuance for a reasonable period of time. The continuance shall extend the two-year period specified in subdivision (c) of Section 1604 for a period of time equal to the period of the continuance.
(i)Notwithstanding any other provision of law, every person required to file a property statement pursuant to this section shall be permitted to amend that property statement until May 31 of the year in which the property statement is due, for errors and omissions not the result of willful intent to erroneously report. The penalty authorized by Section 463 does not apply to an amended statement received prior to May 31, provided the original statement is not subject to penalty pursuant to subdivision (b). The amended property statement shall otherwise conform to the requirements of a property statement as provided in this article.
(j)This subdivision shall apply to the oil, gas, and mineral extraction industry only. Any information that is necessary to file a true, correct, and complete statement shall be made available by the assessor, upon request, to the taxpayer by mail or at the office of the assessor by February 28. For each business day beyond February 28 that the information is unavailable, the filing deadline in subdivision (b) shall be extended in that county by one business day, for those statements affected by the delay. In no case shall the filing deadline be extended beyond June 1 or the first business day thereafter.
(k)The assessor may accept the filing of a property statement by the use of electronic media. In lieu of the signature required by subdivision (a) and the declaration under penalty of perjury required by subdivision (b), property statements filed using electronic media shall be authenticated pursuant to methods specified by the assessor and approved by the board. Electronic media includes, but is not limited to, computer modem, magnetic media, optical disk, and facsimile machine.
(l)(1)After receiving the notice required by Section 1162, the manager in control of a fleet of fractionally owned aircraft shall file with the lead county assessors office one signed property statement for all of its aircraft that have acquired situs in the state, as described in Section 1161.
(2)Flight data required to compute fractionally owned aircraft allocation under Section 1161 shall be segregated by airport.
(m)(1)After receiving the notice required by paragraph (5) of subdivision (b) of Section 1153.5, a commercial air carrier whose certificated aircraft is subject to Article 6 (commencing with Section 1150) of Chapter 5 shall file with the lead county assessors office designated under Section 1153.5 one signed property statement for its personal property at all airport locations and fixtures at all airport locations.
(2)Each commercial air carrier may file one schedule for all of its certificated aircraft that have acquired situs in this state under Section 1151.
(3)Flight data required to compute certificated aircraft allocation under Section 1152 and subdivision (g) of Section 202 of Title 18 of the California Code of Regulations shall be segregated by airport location.
(4)Beginning with the 2006 assessment year, a commercial air carrier may file a statement described in this subdivision electronically by means of the California Assessors Standard Data Record (SDR) network. If the SDR is not equipped to accept electronic filings for the 2006 assessment year, an air carrier may file a printed version of its property statement for that year with its lead county assessors office.
(5)This subdivision shall remain in effect operative only until December 31, 2015, and as of that date is repealed 2021.
SEC. 3.Section 1153.5 of the Revenue and Taxation Code is amended to read:1153.5.(a)The Aircraft Advisory Subcommittee of the California Assessors Association shall, after soliciting input from commercial air carriers operating in the state, do both of the following:
(1)On or before March 1, 2006, and on or before each March 1 thereafter, designate a lead county assessors office for each commercial air carrier operating certificated aircraft in this state in that assessment year.
(2)Every third year thereafter, redesignate a lead county assessors office for each of these air carriers, unless an air carrier and its existing lead county assessors office concur to waive this redesignation.
(b)The lead county assessors office described in subdivision (a) shall do all of the following:
(1)Calculate, pursuant to Section 401.17, an unallocated value of the certificated aircraft of each commercial air carrier to which he or she is designated.
(2)Electronically transmit to the assessor of each county in which the property described in paragraph (1) has situs for the assessment year the values determined by the lead county assessors office under paragraph (1).
(3)Receive the property statement, as described in subdivision (l) of Section 441, of each commercial air carrier to which he or she is designated.
(4)Lead the audit team described in subdivision (d) when that team is conducting an audit of a commercial air carrier to which he or she is designated.
(5)Notify, in writing, each commercial air carrier for which he or she has been designated of this designation on or before the first March 15 that follows that designation.
(c)(1)Notwithstanding subdivision (b), the county assessor of each county in which the personal property of a commercial air carrier has situs for an assessment year is solely responsible for assessing that property, applying the allocation formula set forth in Section 1152, and enrolling the value of the property in that county, but, in determining the unallocated fleet value for each make, model, and series of certificated aircraft of a commercial air carrier, the assessor may consult with the lead county assessors office designated for that commercial air carrier.
(2)The lead county assessors office is subject to Section 322 of Title 18 of the California Code of Regulations and Sections 408, 451, and 1606 to the same extent as the assessor described in paragraph (1).
(d)Notwithstanding Section 469, an audit of a commercial air carrier shall be conducted once every four years on a centralized basis by an audit team of auditor-appraisers from at least one, but not more than three, counties, as determined by the Aircraft Advisory Subcommittee of the California Assessors Association. An audit, so conducted, shall encompass all of the California Personal Property and fixtures of the air carrier and is deemed to be made on behalf of each county for which an audit would otherwise be required under Section 469.
(e)This section shall remain in effect only until December 31, 2015, 2021, and as of that date is repealed.
SEC. 4.If the Commission on State Mandates determines that this act contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code.
|
Date
|
Status
|
|---|---|
| Jun 4, 2015 | Referred to Com. on GOV. & F. |
| Oct 2, 2015 | Chaptered by Secretary of State - Chapter 440, Statutes of 2015. |
| Oct 2, 2015 | Approved by the Governor. |
| Sep 18, 2015 | Enrolled and presented to the Governor at 4 p.m. |
| Sep 10, 2015 | Read third time. Passed. Ordered to the Assembly. (Ayes 39. Noes 0. Page 2690.). |
| Sep 10, 2015 | Read third time. Passed. Ordered to the Assembly. |
| Sep 10, 2015 | In Assembly. Ordered to Engrossing and Enrolling. |
| Aug 31, 2015 | Read second time. Ordered to third reading. |
| Aug 27, 2015 | From committee: Do pass. (Ayes 7. Noes 0.) (August 27). |
| Aug 17, 2015 | In committee: Referred to APPR. suspense file. |
| Jul 15, 2015 | From committee: Do pass and re-refer to Com. on APPR. (Ayes 6. Noes 0.) (July 15). Re-referred to Com. on APPR. |
| Jul 1, 2015 | In committee: Set, first hearing. Hearing canceled at the request of author. |
| Feb 27, 2015 | Introduced. To print. |
| May 22, 2015 | Read third time. Passed. Ordered to the Senate. (Ayes 49. Noes 25. Page 1548.) |
| May 22, 2015 | Read third time. Passed. Ordered to the Senate. |
| May 22, 2015 | In Senate. Read first time. To Com. on RLS. for assignment. |
| May 14, 2015 | Read second time. Ordered to third reading. |
| May 13, 2015 | From committee: Do pass. (Ayes 12. Noes 5.) (May 13). |
| May 5, 2015 | Re-referred to Com. on APPR. |
| May 4, 2015 | Read second time and amended. |
| Apr 30, 2015 | From committee: Amend, and do pass as amended and re-refer to Com. on APPR. (Ayes 6. Noes 3.) (April 27). |
| Mar 23, 2015 | Referred to Com. on REV. & TAX. |
| Mar 2, 2015 | Read first time. |
| Mar 1, 2015 | From printer. May be heard in committee March 31. |
|
Date
|
Description
|
Location
|
Votes
|
|
|---|---|---|---|---|
| Sep 10, 2015 | Assembly 3rd Reading AB1157 Nazarian By Hill | Senate Floor |
Passed |
|
| Aug 27, 2015 | Do pass | Senate Standing Committee on Appropriations |
Passed |
|
| Aug 17, 2015 | Placed on suspense file | Senate Standing Committee on Appropriations |
Passed |
|
| Jul 15, 2015 | Do pass, but first be re-referred to the Committee on [Appropriations] | Senate Standing Committee on Governance and Finance |
Passed |
|
| May 22, 2015 | AB 1157 NAZARIAN Assembly Third Reading | Assembly Floor |
Passed |
|
| May 13, 2015 | Do pass. | Assembly Standing Committee on Appropriations |
Passed |
|
| Apr 27, 2015 | Do pass as amended and be re-referred to the Committee on [Appropriations] | Assembly Standing Committee on Revenue and Taxation |
Passed |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
|
Organization
|
Position
|
Date
|
|---|---|---|
| Airlines for America | ** Against | May 13, 2015 |
| Alaska Airlines | ** Against | May 13, 2015 |
| California Assessors' Association | * Indeterminate | May 13, 2015 |
| California Special Districts Association | ** Support | Sep 10, 2015 |
| California State Association Of Counties | ** Support | Sep 10, 2015 |
| California Tax Reform Association | ** Support | Sep 10, 2015 |
| City Of San Mateo | * Indeterminate | May 13, 2015 |
| Glendale City Employees Association | ** Support | May 13, 2015 |
| Humboldt County Board of Supervisors | ** Support | Sep 10, 2015 |
| League Of California Cities | ** Support | Sep 10, 2015 |
| Los Angeles County Assessor Jeffrey Prang | ** Support | Sep 10, 2015 |
| Organization Of Smud Employees | ** Support | Sep 10, 2015 |
| Page L | ** Support | May 13, 2015 |
| REV. & TAX. | ** Against | May 13, 2015 |
| Sacramento County Board of Supervisors | ** Support | Sep 10, 2015 |
| San Bernardino Employees Association | ** Support | Sep 10, 2015 |
| San Bernardino Public Employees Association | ** Support | May 13, 2015 |
| San Diego County Court Employees Association | ** Support | Sep 10, 2015 |
| San Luis Obispo County Employees Association | ** Support | Sep 10, 2015 |
| San Mateo County Board of Supervisors | ** Support | Sep 10, 2015 |
| Southwest Airlines Co. | ** Against | May 13, 2015 |
| United Airlines | ** Support | Sep 10, 2015 |
AB 1157
Page 6
|
Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 |
THIRD READING
Bill No: AB 1157
Amended: 5/4/15 in Assembly
SENATE GOVERNANCE & FIN. COMMITTEE: 6-0, 7/15/15
AYES: Hertzberg, Nguyen, Beall, Lara, Moorlach, Pavley
NO VOTE RECORDED: Hernandez
SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/27/15
AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen
ASSEMBLY FLOOR: 49-25, 5/22/15 - See last page for vote
SUBJECT: Property taxation: certificated aircraft assessment
DIGEST: This bill extends for one year the lead assessor methodology to value certificated aircraft.
Existing law:
Provides that all property is taxable unless explicitly exempted by the Constitution or federal law.
Limits the maximum amount of any ad valorem tax on real property at 1% of full cash value, and precludes reassessment unless the property is newly constructed or changes ownership; however, assessors value personal property, such as certificated aircraft, each year.
Allows assessors to value certificated aircraft with “situs” in California on a fleet basis, defined as all aircraft owned by the taxpayer by make and model.
Designates a lead assessor for each airline, and sets forth a methodology to calculate aircraft value, and apportion it to counties where the aircraft has situs (AB 964, Horton, Chapter 699, Statutes of 2006).
Allows airlines to file a single consolidated statement with a single assessor designated by the Aircraft Advisory Subcommittee of the California Assessors’ Association.
Establishes categories for mainline jets, regional aircraft, production freighters, and converted freighters, and sets forth a valuation methodology for each.
For mainline jets, states as a rebuttable presumption the aircraft value as the lesser of a historical cost basis, or 10% off (for a fleet adjustment) the wholesale price listed in the Airline Price Guide. However, in no case may this value exceed the aircraft’s original cost (AB 384, Ma, Chapter 228, Statutes of 2010).
Apportions value among counties based on a weighted average of the fleet’s ground and flight time (75%), and arrivals and departures (25%) measured only during the “representative period,” currently designated by the Board of Equalization (BOE) as the second full in week in January.
Allows assessors to reduce value to account for economic obsolescence, measured by the current year’s average net revenue per seat mile, net load factor, and yield compared to the previous 10 years.
Sunsets after the 2015-16 fiscal year, after which certificated aircraft will revert to local assessment.
This bill extends the current methodology for valuing certificated aircraft until the 2016-17 fiscal year.
Background
Until 1998, state law did not prescribe a specific method for assessors to determine the value of aircraft, resulting in years of disagreements and litigation between assessors and airlines. In 1998, the Legislature detailed a valuation methodology for certificated aircraft which was presumed to equal the fair market value of the aircraft for those years, enacting three bills to codify a settlement agreement between several counties and airline industry representatives. In 2003, the agreement expired, and assessors again locally valued aircraft without specific guidance from the Revenue and Taxation Code.
In 2006, assessors and the airlines again agreed on a new valuation methodology, which sunset in the 2010-11 fiscal year. Under the agreement, a “lead assessor” values each airline’s fleet. Instead of filing property statements with each county, airlines may instead file a single consolidated statement with a single assessor designated by the Aircraft Advisory Subcommittee of the California Assessors’ Association. AB 964 also directed the lead assessor to audit the airline every four years.
After Governor Schwarzenegger vetoed the first bill that extended the sunset (AB 311, Ma, 2009), he signed a similar bill the next year, which extended the lead assessor model and the valuation methodology until the 2015-16 fiscal year, but differed from AB 311 by:
Replacing language specifying value with a rebuttable presumption,
Allowing the taxpayer to rebut the presumption with appraisals, invoices, and expert testimony, and
Capping an aircraft’s value at its original cost.
Assessment of personal property, especially certificated aircraft, is inherently difficult. Not only are planes valuable, which leads to a larger range of disagreement, but the economic condition of the airline industry can change rapidly due to terrorist attacks, economic recessions, and mergers, all of which have occurred in recent years. The Legislature initially codified an assessment methodology after years of litigation resulted in settlement agreements. AB 964’s methods of assessment were supposed to establish a very detailed methodology based on either an easily knowable cost basis or a well-known price index. However, that bill also created a safety valve that would reduce values due to obsolescence whenever a weighted average of three metrics fell 10% below its average for the past 10 years. Some airlines appealed assessors’ valuations over different issues, including arguing that assessors erred by using an incorrect period to calculate the 10-year average, incorrect comparison information, and applied the incorrect base year. Assessors disagreed, and assessment appeals boards subsequently upheld the assessor’s valuations. However, airlines subsequently filed suit in several counties to challenge that determination, and to preserve legal standing.
Under current law, taxpayers can only appeal local assessment appeals board decisions to superior court if they believe assessment are illegal; issues of pure valuation must be resolved administratively. Additionally, even if taxpayers win art one county assessment appeals board, its decisions aren’t binding on other counties. However, the Constitution allows the Legislature to authorize counties to create multi-county assessment appeals boards.
Related Legislation
SB 661 (Hill, 2015) would have transferred assessment from assessors to BOE in response to concerns from airlines regarding the taxpayer compliance burden resulting from the lead assessor model. However, the Senate Committee on Appropriations held the bill on its suspense file.
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes
According to the Senate Appropriations Committee, the precise revenue impact of this bill relative to current law is unknown. Property tax revenues for the additional year utilizing the lead assessor methodology could higher or lower than what would have occurred absent this bill.
California Assessors Association
California Special Districts Association
California State Association of Counties
California Tax Reform Association
Glendale City Employees’ Association
Humboldt County Board of Supervisors
League of California Cities
Los Angeles County Assessor Jeffrey Prang
Organization of SMUD Employees
Sacramento County Board of Supervisors
San Bernardino Employees Association
San Diego County Court Employees Association
San Luis Obispo County Employees Association
San Mateo County Board of Supervisors
Service Employees International Union
United Airlines
OPPOSITION: (Verified 8/28/15)
None received
ARGUMENTS IN SUPPORT: According to the author, “The provisions outlined in current law relating to the centralized assessment of aircraft will sunset December 31, 2015. Unless extended, airlines would be required to file separate property statements and submit duplicative aircraft fleet information in every county in which they operated. In addition each county will be required to audit each carrier, if the air carrier’s assessment qualifies as a mandatory audit in that county. Absent a uniform codified methodology, each county would have to calculate the total aircraft fleet value. Airlines would inevitable face uncertainty and delays on the valuation of their aircraft. A centralized process simplifies the valuation and taxation of certified aircraft, ensures statewide consistency in the base value of an aircraft fleet and promotes administrative efficiency for both carriers and counties. In extending the sunset date for the assessment of certified aircraft, AB 1157 continues to eliminate the need for multiple tax returns reporting the same information, and allows assessors to carry out their mandated responsibility to fairly assess all taxable property, within their jurisdiction, in an efficient manner. It is imperative that counties continue to assess aircraft in an administratively efficient manner as these assessments translate into approximately $30 million in local revenue.”
ASSEMBLY FLOOR: 49-25, 5/22/15
AYES: Achadjian, Bloom, Bonilla, Bonta, Brown, Burke, Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd, Eggman, Frazier, Cristina Garcia, Gipson, Gomez, Gonzalez, Gordon, Gray, Roger Hernández, Holden, Irwin, Jones-Sawyer, Levine, Lopez, Low, McCarty, Medina, Mullin, Nazarian, Obernolte, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting, Williams, Wood, Atkins
NOES: Travis Allen, Baker, Bigelow, Brough, Chang, Chávez, Dahle, Beth Gaines, Gallagher, Gatto, Grove, Hadley, Harper, Jones, Kim, Lackey, Linder, Maienschein, Mathis, Mayes, Melendez, Patterson, Steinorth, Wagner, Wilk
NO VOTE RECORDED: Alejo, Eduardo Garcia, O'Donnell, Olsen, Waldron, Weber
Prepared by: Colin Grinnell / GOV. & F. / (916) 651-4119
8/30/15 19:27:42
**** END ****
AB 1157 (Nazarian) Page 3 of 3
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 1157 (Nazarian) - Property taxation: certificated aircraft assessment.
|
|
Version: May 4, 2015 |
Policy Vote: GOV. & F. 6 - 0 |
Urgency: No |
Mandate: Yes |
Hearing Date: August 17, 2015 |
Consultant: Robert Ingenito |
This bill may meet the criteria for referral to the Suspense File.
Bill Summary:
SB 1157 would extend the lead assessor methodology to value certificated aircraft for one additional year, through fiscal year 2016-17.
Fiscal Impact:
The precise revenue impact of this bill relative to current law is unknown. Property tax revenues for the additional year utilizing the lead assessor methodology could higher or lower than what would have occurred absent the bill. Approximately 50 percent of property tax revenues statewide accrue to schools, which generally offsets state General Fund obligations pursuant to Proposition 98. Consequently, any change in the school share of property tax revenues that is attributable to the bill’s impact on assessed values would, in turn, impact General Fund expenditures.
BOE’s costs to implement the bill would be minor and absorbable.
Background:
Current law (1) provides that all property is taxable unless explicitly exempted either by the Constitution or federal law, (2) limits the maximum amount of any ad valorem tax on real property at 1 percent of full cash value, and (3) precludes reassessment unless the property is newly constructed or changes ownership. In contrast, assessors value personal property each year.
In 1850, the Legislature first directed county assessors to tax property; however, assessors in different counties often applied different tax rates and methodologies. Inconsistencies were especially acute between counties dominated by mining and agriculture. In 1879, the Board of Equalization (BOE) was created to equalize rates and assessment practices among counties. In 1910, voters amended the Constitution to direct BOE to value property that crossed county lines, including that owned by railways, companies selling gas and electricity, or telephone companies.
Generally, assessors value business personal property such as aircraft by multiplying the taxpayer’s cost of acquiring it by an inflation adjustment to estimate the cost to replace the property at current market prices. This “reproduction cost new” is then multiplied by a depreciation factor to provide an estimate of the depreciated reproduction cost of the property, which becomes the taxable value of the property for the fiscal year.
Assessors may only value certificated aircraft with “situs” in California on a fleet basis. Once assessors calculate value, they must apportion it among counties based on a weighted average of (1) the fleet’s ground and flight time (75 percent) and (2) arrivals and departures (25 percent) measured only during the “representative period,” currently designated by BOE as the second full in week in January. This apportioned fleet value is then multiplied by the appropriate rate for the tax rate area in that county.
Until 1998, state law did not prescribe a specific method for assessors to determine the value of aircraft, resulting in years of disagreements and litigation between assessors and airlines. In 1998, the Legislature detailed a valuation methodology for certificated aircraft which was presumed to equal the fair market value of the aircraft for those years, enacting three bills to codify a settlement agreement between several counties and airline industry representatives. In 2003, the agreement expired, and assessors again locally valued aircraft.
In 2006, assessors and the airlines again agreed on a new valuation methodology (AB 964, Horton), and directed a “lead assessor” to value each airline’s fleet; this new methodology had a sunset in 2010-11. Instead of filing property statements with each county, airlines instead file a single consolidated statement with a single assessor designated by the Aircraft Advisory Subcommittee of the California Assessors’ Association. The measure established categories for various types of aircraft, and set forth a valuation methodology for each. The bill also directed the lead assessor to audit the airline every four years
AB 964 also directed assessors to analyze the cost to determine whether an economic obsolescence allowance should apply. To determine economic obsolescence for mainline jets and regional aircraft, the assessor calculates three factors for both the previous calendar year and the past ten years: average net revenue per seat mile, net load factor, and yield. The assessor then compares each factor’s previous calendar year value with its value for the past ten years to determine the amount of difference. The assessor then applies a weighted average of the indicated percentage adjustments: net revenue per available seat mile (35 percent), net load (35 percent), and yield (30 percent). The assessor must reduce the original cost by the percentage, but only if the final economic obsolescence exceeds 10 percent.
The methodology set forth in AB 964 was extended until 2015-16 (AB 384, Ma). With AB 384’s sunset approaching, certificated aircraft will revert to local assessment without a lead assessor on January 1, 2016, requiring each assessor where a plane lands to independently value aircraft.
Proposed Law:
This bill would extend, until 2016-17, the application of the current assessment methodology for determining the fair market value, for tax purposes, of certificated aircraft owned by commercial air carriers, and would extend, until December 31, 2016, the procedures 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.
Related Legislation:
SB 661 (Hill) would transfer assessment of airline personal property from local assessors to the Board of Equalization (BOE). The bill was held under submission on this Committee’s Suspense File.
Staff Comments:
This bill would maintain the status quo for one additional year. The revenue realized under the existing valuation methodology would likely differ from that derived from the methodology used prior to 1998, when valuation was left to each individual assessor. However, the magnitude and direction of the difference are unknown.
-- END --
AB 1157 (Nazarian) 5/4/15 Page 4 of 4
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
Bill No: |
AB 1157 |
Hearing Date: |
7/15/15 |
Author: |
Nazarian |
Tax Levy: |
No |
Version: |
5/4/15 |
Fiscal: |
Yes |
Consultant: |
Grinnell |
||
Property taxation: certificated aircraft assessment
Extends for one year the lead assessor methodology to value certificated aircraft.
Background and Existing Law
Section 1 of Article XIII of the California Constitution provides that all property is taxable unless explicitly exempted by the Constitution or federal law. While the Constitution limits the maximum amount of any ad valorem tax on real property at 1% of full cash value, and precludes reassessment unless the property is newly constructed or changes ownership, assessors value personal property each year.
Generally, assessors value business personal property, such as aircraft, by multiplying the taxpayer’s cost of acquiring it by a price index that measures inflation to estimate its “reproduction cost new,” an approximation of the cost to replace the property at current market prices. This “reproduction cost new” is then multiplied by a “percent good factor” (a depreciation factor) to provide an estimate of the depreciated reproduction cost of the property, which becomes the taxable value of the property for the fiscal year.
Assessors may only value certificated aircraft with “situs” in California on a fleet basis, defined as all aircraft owned by the taxpayer by make and model. For example, assessors must value an airlines’ entire A380 fleet if only one enters the state, but doesn’t include any of its 747’s if none of them do, regardless of the total number or value of A380s or 747s an airline owns. Once assessors calculate value, they must apportion it among counties based on a weighted average of the fleet’s ground and flight time (75%) and arrivals and departures (25%) measured only during the “representative period,” currently designated by BOE as the second full in week in January. This apportioned fleet value is then multiplied by the appropriate rate for the tax rate area in that county.
Until 1998, state law did not prescribe a specific method for assessors to determine the value of aircraft, resulting in years of disagreements and litigation between assessors and airlines. In 1998, the Legislature detailed a valuation methodology for certificated aircraft which was presumed to equal the fair market value of the aircraft for those years, enacting three bills to codify a settlement agreement between several counties and airline industry representatives (AB 1807, Takasugi; AB 2318, Knox; and SB 30, Kopp). In 2003, the agreement expired, and assessors again locally valued aircraft without specific guidance from the Revenue and Taxation Code.
In 2006, assessors and the airlines again agreed on a new valuation methodology. Under the agreement, a “lead assessor” values each airline’s fleet (AB 964, Horton). Instead of filing property statements with each county, airlines file a single consolidated statement with a single assessor designated by the Aircraft Advisory Subcommittee of the California Assessors’ Association. The measure established categories for mainline jets, regional aircraft, production freighters, and converted freighters, and set forth a valuation methodology for each. The bill also directed the lead assessor to audit the airline every four years. The new methodology provided that the aircraft value was the lesser of:
A historical cost basis, including transportation and improvement costs, as well as capitalized interest, with specific provisions for leased aircraft, aircraft in a sale/leaseback or assignment of purchase rights, or aircraft acquired in bankruptcy, with specified adjustments, or
10% off (for a fleet adjustment) on the wholesale prices listed in the “Airliner Pricing Guide.” If the APG ceases to exist, the Board of Equalization (BOE) must determine the guide or adjustment.
AB 964 also directed assessors to analyze the cost to see if an economic obsolescence allowance should apply. To determine economic obsolescence for mainline jets and regional aircraft, the assessor calculates three factors for both the previous calendar year and the past ten years: average net revenue per seat mile, net load factor, and yield. The assessor then compares each factor’s previous calendar year value with its value for the past ten years to determine the amount of difference. The assessor then applies a weighted average of the indicated percentage adjustments: net revenue per available seat mile (35%), net load (35%), and yield (30%). The assessor must reduce the original cost by the percentage, but only if the final economic obsolescence exceeds 10%. AB 964 applied a different economic obsolescence formula similar to the above for freighters, except it uses net revenue per available ton mile (50%) and ton load (50%) factors instead. The measure sunset after the 2010-11 fiscal year.
After Governor Schwarzenegger vetoed the first bill that extended the sunset (AB 311, Ma, 2009), he signed a similar bill the next year (AB 384, Ma, 2010). AB 384 extended the lead assessor model and the valuation methodology until the 2015-16 fiscal year, but differed from AB 311 by:
Replacing language specifying value with a rebuttable presumption,
Allowing the taxpayer to rebut the presumption with appraisals, invoices, and expert testimony, and
Capping an aircraft’s value at its original cost.
With AB 384’s sunset approaching, certificated aircraft will revert to local assessment without a lead assessor on January 1, 2016, requiring each assessor where a plane lands to independently value aircraft. Assessors want to extend the current lead assessor methodology for one year.
Proposed Law
Assembly Bill 1157 extends the current lead assessor model for assessing certificated aircraft by one year to apply through the 2016-17 fiscal year, eventually expiring on the January 1, 2017 lien date.
State Revenue Impact
The Board of Equalization (BOE) states that AB 1157’s revenue impact is unknown.
Comments
1. Purpose of the bill. According to the author, “The provisions outlined in current law relating to the centralized assessment of aircraft will sunset December 31, 2015. Unless extended, airlines would be required to file separate property statements and submit duplicative aircraft fleet information in every county in which they operated. In addition each county will be required to audit each carrier, if the air carrier’s assessment qualifies as a mandatory audit in that county. Absent a uniform codified methodology, each county would have to calculate the total aircraft fleet value. Airlines would inevitable face uncertainty and delays on the valuation of their aircraft. A centralized process simplifies the valuation and taxation of certified aircraft, ensures statewide consistency in the base value of an aircraft fleet and promotes administrative efficiency for both carriers and counties. In extending the sunset date for the assessment of certified aircraft, AB 1157 continues to eliminate the need for multiple tax returns reporting the same information, and allows assessors to carry out their mandated responsibility to fairly assess all taxable property, within their jurisdiction, in an efficient manner. It is imperative that counties continue to assess aircraft in an administratively efficient manner as these assessments translate into approximately $30 million in local revenue.”
2. How to assess? Assessment of personal property, especially certificated aircraft, is inherently difficult. Not only are planes valuable, which leads to a larger range of disagreement, but the economic condition of the airline industry can change rapidly due to terrorist attacks, economic recessions, and mergers, all of which have occurred in recent years. The Legislature initially codified an assessment methodology after years of litigation resulted in settlement agreements. AB 964’s methods of assessment were supposed to establish a very detailed methodology based on either an easily knowable cost basis or a well-known price index. However, that bill also created a kind of safety valve that would reduce values due to obsolescence whenever a weighted average of three metrics fell 10% below its average for the past ten years. Some airlines appealed assessors’ valuations over different issues, including arguing that assessors erred by using an incorrect period to calculate the ten year average, incorrect comparison information, and applied the incorrect base year. Assessors disagreed, and assessment appeals boards subsequently upheld the assessor’s valuations. However, airlines subsequently filed suit in several counties to challenge that determination, and to preserve legal standing.
3. Appeals. Under current law, taxpayers can only appeal local assessment appeals board decisions to superior court if they believe assessment are illegal; issues of pure valuation must be resolved administratively. Additionally, even if taxpayers win art one county assessment appeals board, its decisions aren’t binding on other counties. However, the Constitution allows the Legislature to authorize counties to create multi-county assessment appeals boards.
4. Embedded. Another point of contention between assessors and airlines is whether to value embedded software. Assessors may value storage media and basic operational programs, defined as those fundamental and necessary to a computer functioning; however, “computer programs” are expressly exempt (the statute, crafted in 1972, refers to “punched cards, tapes, discs, or drums”). In 1996, BOE implemented Property Tax Rule 152, which interprets statute to include only the ROM-based kernel software contained in a computer, and allowed operating system software to be exempt from the property tax. However, the grand bargain represented in AB 964 and AB 384 was to maintain local assessment of certificated aircraft, but not to include embedded software in valuation. AB 1157 extends this agreement to appoint a lead assessor, but remain silent on embedded software.
5. Related legislation. Earlier this year, the Committee approved SB 661 (Hill), which would have transferred assessment from assessors to BOE in response to concerns from airlines regarding the taxpayer compliance burden resulting from the lead assessor model. However, the Committee on Appropriations held the measure on its suspense file.
Assembly Actions
Assembly
Floor 49-25
Assembly Appropriations 12-5
Assembly
Revenue and Taxation 6-0
Support and Opposition
(7/9/15)
Support: Los Angeles County Assessor Jeffrey Prang, California Assessors’ Association, California State Association of Counties, California Special Districts Association, California Tax Reform Association, Glendale City Employees’ Association, Humboldt County Board of Supervisors, League of California Cities, Sacramento County Board of Supervisors, San Mateo County Board of Supervisors, Service Employees International Union.
Opposition: None received.
-- END --
AB 1157
Page 5
ASSEMBLY THIRD READING
AB 1157
(Nazarian)
As Amended May 4, 2015
Majority vote
Committee |
Votes |
Ayes |
Noes |
Revenue & Taxation |
6-3 |
Ting, Dababneh, Gipson, Roger Hernández, Mullin, Quirk |
Brough, Patterson, Wagner |
Appropriations |
12-5 |
Gomez, Bloom, Bonta, Calderon, Daly, Eggman, Eduardo Garcia, Holden, Quirk, Rendon, Weber, Wood |
Bigelow, Chang, Gallagher, Jones, Wagner |
SUMMARY: Extends the Centralized Fleet Calculation Program for statewide assessment of certificated aircraft for property tax purposes until Fiscal Year (FY) 2016 to 2017.
Specifically, this bill:
Extends, until FY 2016 to 2017, the application of the current assessment methodology for determining the fair market value (FMV) of certificated aircraft owned by commercial air carriers for property tax purposes and the rebuttable presumption that the pre-allocated FMV of certified aircraft, as calculated, is correct.
Extends, until December 31, 2016, the application of the following provisions of law that otherwise are scheduled to sunset on December 31, 2015:
Revenue and Taxation Code (RT&C) Section 441(l) that requires a commercial air carrier to file one annual property statement with a designated "lead" county, as provided; and,
RT&C Section 1153.5 that establishes 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.
Imposes a state-mandated local program and provides that, if the State Mandates Commission determines that this bill contains costs mandated by the state, reimbursement for those costs will be made as required by the statute.
EXISTING LAW:
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 (California Constitution Article XIII, Section 2). 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."
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. Certificated aircraft is subject to property taxation when in revenue service in California. Typically, certificated aircraft are commercial aircraft operated by air carriers for passenger and freight service, while general aircraft are typically privately owned aircraft. General 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. Only an allocated portion of the entire fleet's value ultimately taxed to reflect actual presence in California's counties. 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 during the year.
Prescribes a centralized assessment methodology for valuing certificated aircraft for FYs 2005 to 2006 through 2015 to 2016. This methodology 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 FMV 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. The preallocated value is the lesser of:
A historical cost less depreciation basis with no individual aircraft value exceeding the original price paid; or,
The value referenced in the winter edition of the "Airline Price Guide," a commercially-prepared value guide for aircraft, less 10%.
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. An allocation ratio is the sum of two factors:
A ground and flight time factor, which accounts for 75% of the ratio; and,
An arrivals-and-departures factor, which accounts for 25% of the ratio. [Property Tax Rule 202 (c)].
The sum of these factors yields the allocation ration, which is applied to the full cash value of a fleet of a particular type of aircraft operated by an air carrier. The sum of the assessed allocated values for each make and model used by an air carrier results in the total assessed value of the aircraft for that air carrier for a particular county.
Specifies that, with respect to lien dates occurring on and after January 1, 2011, the value of an individual aircraft assessed to the original owner may not exceed its original cost and that the pre-allocated FMV of an aircraft may be rebutted by certain evidence, including appraisals, invoices, and expert testimony.
Requires the "lead" county to transmit the property statement related to an airport location to the situs county, and provides that each county is responsible for valuing personal property and fixtures at its particular airport locations.
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).
Allows an audit team comprised of staff from one to three counties, as determined by the Aircraft Advisory Subcommittee of the California Assessors' Association, to perform a mandatory audit of a commercial air carrier once every four years on a centralized basis. 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. (R&TC Section 1153.5).
Provides that the existing valuation methodology for certificated aircraft applies for FYs 2005 to 2006 through 2015 to 2016, and is repealed as of December 31, 2015.
FISCAL EFFECT: According to the Assembly Appropriations Committee, unknown; absent a codified methodology, there can be no assurance that the values determined by individual county assessors would be the same, higher, or lower than they are under the current methodology. Aggregate property tax revenue from commercial aircraft in 2014 was approximately $80 million.
COMMENTS:
Author's Statement. The author has provided the following statement in support of this bill:
AB 1157 extends for five years the sunset date for the centralized determination of the fair market value and taxation of certificated aircraft. By extending the sunset date, this bill ensures aircraft continues to be valued uniformly and taxed efficiently throughout the state.
In extending the sunset date for the assessment of certified aircraft, AB 1157 continues to eliminate the need for multiple tax returns reporting the same information, and allows assessors to carry out their mandated responsibility to fairly assess all taxable property, within their jurisdiction, in an efficient manner.
It is imperative that counties continue to assess aircraft in an administratively efficient manner as these assessments translate into approximately $30 million in local revenue.
Background. Prior to 1999, no specific assessment methodology procedure for valuing certificated aircraft or 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 to 1999 to FY 2002 to 2003 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].
The 2005 Settlement Agreement. 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. For instance, with respect to calculating the historical cost basis of the aircraft, each variable component is specified and taken into account: a) acquisition cost, b) price index, c) percent good factor, and d) economic obsolescence. With respect to Aircraft Performance Group, a "blue book" value guide for aircraft, the use of values referenced in that guide is delineated, recognizing that airlines generally receive a fleet discount that is not reflected in prices listed in the guide. The 2005 revisions to the valuation methodology of certificated aircraft were codified by AB 964 (Horton), Chapter 699, Statutes of 2005. However, AB 964 specified that the revised formula for determining the FMV of certificated aircraft of a commercial air carrier applied only for FYs 2005 to 2006 through 2010to 2011. AB 964 also included repeal dates for the provisions prescribing the procedures for designating a lead county assessor's office for each commercial air carrier operating certificated aircraft in California, allowing a commercial air carrier to file one property statement with the lead county, and permitting an audit of those carriers on a centralized basis.
In 2010, a bill was introduced to extend the valuation methodology and centralized assessment provisions temporarily to the FY 2015-16. [AB 384 (Ma), Chapter 228, Statutes of 2010.] AB 384 also revised the valuation provisions to create a rebuttable presumption of correctness for the FMV of certificated aircraft determined under the assessment methodology. AB 384 specified that the FMV may be rebutted by evidence including appraisals, invoices, and expert testimony. Finally, AB 384 provided that the value of an individual aircraft assessed to the original owner may not exceed its original cost from the manufacturer.
Centralized Assessment System. Under existing law, which this bill proposes to extend, a "lead" county is designated by the Aircraft Advisory Subcommittee of the California Assessors' Association for each commercial air carrier operating certificated aircraft in California. The "lead" county is required to calculate an unallocated fleet value of the carrier's certificated aircraft for each make, model, and series, as provided. Once the fleet value is calculated, it is transmitted to other counties, which in turn will determine their allocated portions of the fleet value based on the flight data for each county. The allocation process limits each county's assessment to reflect the aircraft's physical presence in that county.
Existing law also allows commercial air carriers operating in multiple California airports to file a single consolidated property statement with a "lead" county. In turn, the "lead" county must transmit return information related to non-aircraft personal property and fixtures to other counties where the air carrier operates. The audit procedures are also centralized: an audit team directed by the "lead" county will audit the air carrier once every four years on a centralized basis.
Certainty and Predictability of the Existing Assessment Methodology. 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.1 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. 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. 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.
The Rebuttable Presumption of Value. The assessment of certificated aircraft is a difficult and complex task. As such, the potential for litigation and assessment appeals is significant. It is presumed by both the assessor and taxpayer that the existing methodology will result in a fair and reasonable assessment. However, since appraisal is not an exact science, there may be instances where one of the parties believes, and has clear evidence, that the assessment resulting from the prescribed methodology is wrong. In these instances, the issue is usually settled by an assessment appeals board. Consistent with the existing law, this bill would allow taxpayers and assessors to appeal a value established by following a legally prescribed methodology. The practical result of "rebuttably presumed" language is that it clearly recognizes that an assessment appeals board has the discretion to set a FMV where the facts presented clearly overcome the presumption of correctness in any given methodology. According to the author, the best solution is for the Legislature to extend the existing valuation methodology to arrive at a FMV for certificated aircraft, including the rebuttable presumption of correctness of the value. If the existing centralized assessment provisions are not extended, then the burden of proof regarding the correctness of the assessment will shift to the air carrier challenging the assessed value.
Related Legislation. SB 661 (Hill) of the current legislative session, would transfer assessment jurisdiction for commercial air carrier personal property, including certificated aircraft, to the Board of Equalization. SB 661 is currently pending in the Senate Appropriations Committee.
Analysis Prepared by: Oksana Jaffe / REV. & TAX. / (916) 319-2098 FN: 0000433
1 Recently, several air carriers have commenced legal action challenging the calculations of economic obsolescence under R&TC Sections 401.17(a)(1)(C) and (D). This bill, however, does not propose to modify the economic obsolescence provisions.
AB 1157
Page 2
Date of Hearing: May 13, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB 1157
(Nazarian) – As Amended May 4, 2015
Policy Committee: |
Revenue and Taxation |
Vote: |
6 - 3 |
Urgency: No State Mandated Local Program: Yes Reimbursable: Yes
SUMMARY:
This bill extends, until FY 2016-17, the application of the current assessment methodology for determining the fair market value, for tax purposes, of certificated aircraft owned by commercial air carriers, and extends, until December 31, 2016, the procedures 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.
FISCAL EFFECT:
Unknown; absent a codified methodology, there can be no assurance that the values determined by individual county assessors would be the same, higher, or lower than they are under the current methodology. Aggregate property tax revenue from commercial aircraft in 2014 was approximately $80 million.
COMMENTS:
1) Purpose. This bill extends the sunset date by one year for the state's centralized system of determining fair market value for tax purposes of commercial aircraft. According to the author, the system allows commercial airlines operating in multiple airport locations to file a single, consolidated tax return with the designated lead county, streamlining administration and ensuring aircraft continue to be valued uniformly and taxed efficiently.
2) California's Airline Assessment Methodology. 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 Aircraft Advisory Subcommittee of the California Assessors' Association. The lead county calculates the fleet value 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.
3) Is There A Better Way? Opponents, led by several major airlines, argue the current system remains costly and overly burdensome. They observe that California is one of only four states that tax the property of commercial air carriers locally, the others being Alaska, Indiana, and Massachusetts. Opponents claim 45 tax appeals have been filed against county assessors by airlines in the past 5 years, all of which have been denied, and that the current methodology will only maintain the current level of litigation and airline discontent. While opponents concede the current methodology is more efficient than a county-by-county system, they assert a single tax agency, the Board of Equalization, would be less costly and even more efficient.
Analysis Prepared by: Joel Tashjian / APPR. / (916) 319-2081
AB 1157
Page 6
Date of Hearing: April 27, 2015
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Philip Ting, Chair
AB 1157
(Nazarian) – As Introduced February 27, 2015
Majority vote. Fiscal committee.
SUBJECT: Property taxation: certificated aircraft assessment
SUMMARY: Extends the Centralized Fleet Calculation Program for statewide assessment of certificated aircraft for property tax purposes until fiscal year (FY) 2021-22.
Specifically, this bill:
Extends, until FY 2015-16, the application of the current assessment methodology for determining the fair market value (FMV) of certificated aircraft owned by commercial air carriers for property tax purposes and the rebuttable presumption that the pre-allocated FMV of certified aircraft, as calculated, is correct.
Extends, until December 31, 2021, the application of the following provisions of law that otherwise are scheduled to sunset on December 31, 2015:
Revenue and Taxation Code (RT&C) Section 441(l) that requires a commercial air carrier to file one annual property statement with a designated "lead" county, as provided; and,
RT&C Section 1153.5 that establishes 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.
Imposes a state-mandated local program and provides that, if the Commission on State Mandates determines that this bill contains costs mandated by the state, reimbursement for those costs will be made as required by the statute.
EXISTING LAW:
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."
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. Certificated aircraft is subject to property taxation when in revenue service in California. Typically, certificated aircraft are commercial aircraft operated by air carriers for passenger and freight service, while general aircraft are typically privately owned aircraft. General 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. Only an allocated portion of the entire fleet's value ultimately taxed to reflect actual presence in California's counties. 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 during the year.
Prescribes a centralized assessment methodology for valuing certificated aircraft for FYs 2005-06 through 2015-16. This methodology 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. The preallocated value is the lesser of:
A historical cost less depreciation basis with no individual aircraft value exceeding the original price paid; or,
The value referenced in the Winter edition of the "Airline Price Guide," a commercially-prepared value guide for aircraft, less 10%.
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. An allocation ratio is the sum of
two factors:
A ground and flight time factor, which accounts for 75% of the ratio; and,
An arrivals-and-departures factor, which accounts for 25% of the ratio. [Property Tax Rule 202 (c)].
The sum of these factors yields the allocation ration, which is
applied to the full cash value of a fleet of a particular type of
aircraft operated by an air carrier. The sum of the assessed
allocated values for each make and model used by an air carrier
results in the total assessed value of the aircraft for that air
carrier for a particular county.
Specifies that, with respect to lien dates occurring on and after January 1, 2011, the value of an individual aircraft assessed to the original owner may not exceed its original cost and that the pre-allocated fair market value of an aircraft may be rebutted by certain evidence, including appraisals, invoices, and expert testimony.
Requires the 'lead' county to transmit the property statement related to an airport location to the situs county, and provides that each county is responsible for valuing personal property and fixtures at its particular airport locations.
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).
Allows an audit team comprised of staff from one to three counties, as determined by the Aircraft Advisory Subcommittee of the California Assessors' Association, to perform a mandatory audit of a commercial air carrier once every four years on a centralized basis. 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. (R&TC Section 1153.5).
Provides that the existing valuation methodology for certificated aircraft applies for FYs 2005-06 through 2015-16, and is repealed as of December 31, 2015.
FISCAL EFFECT: Unknown.
COMMENTS:
Author's Statement. The author has provided the following statement in support of this bill:
"AB 1157 extends for five years the sunset date for the centralized determination of the fair market value and taxation of certificated aircraft. By extending the sunset date, this bill ensures aircraft continues to be valued uniformly and taxed efficiently throughout the state.
"In extending the sunset date for the assessment of certified aircraft, AB 1157 continues to eliminate the need for multiple tax returns reporting the same information, and allows assessors to carry out their mandated responsibility to fairly assess all taxable property, within their jurisdiction, in an efficient manner.
"It is imperative that counties continue to assess aircraft in an administratively efficient manner as these assessments translate into approximately $30 million in local revenue."
Arguments in Support. The proponents state that current law "permits county assessors and commercial air carriers to use a streamlined administrative procedure" and allows "commercial air carriers operating in multiple airport locations in California to file a single consolidated property statement (tax return) with a designated 'lead' county." The proponents argue that a codified methodology "helps reduce conflict." Finally, the proponents assert that by extending the provisions for five more years, "AB 1157 would provide a period of stability and allow periodic methodology re-evaluation and adjustment" and would ensure "continued uniform certificated aircraft assessments for each carrier statewide."
Arguments in Opposition. The opponents observe that of the "30 states that tax property of commercial air carriers only four states – Alaska, Indiana, Massachusetts and California – assess locally." The opponents also assert that existing framework for assessing commercial airlines for property tax purposes is a "dated and inefficient process, which is costly and cumbersome to the airlines and the assessors" and "an extraordinary an unnecessary burden on the airline industry." The opponents note that within the past five years, 45 appeals have been filed by the airlines and 45 appeals have been denied by county assessors, who review and determine the outcome of those appeals." The existing approach "has led to litigation rather than achieving resolution at the county level." Finally, the opponents argue that while "the process was improved over the process in place prior to 2005, the efficiencies achieved with filing in one location in California, and working with one entity logically provide greater cost savings for the counties as well as taxpayers."
Background. Prior to 1999, no specific assessment methodology procedure for valuing certificated aircraft or 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].
The 2005 Settlement Agreement. 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. For instance, with respect to calculating the historical cost basis of the aircraft, each variable component is specified and taken into account: (a) acquisition cost, (b) price index, (c) percent good factor, and (d) economic obsolescence. With respect to APG, a "blue book" value guide for aircraft, the use of values referenced in that guide is delineated, recognizing that airlines generally receive a fleet discount that is not reflected in prices listed in the guide. The 2005 revisions to the valuation methodology of certificated aircraft were codified by AB 964 (Horton), Chapter 699, Statutes of 2005. However, AB 964 specified that the revised formula for determining the fair market value of certificated aircraft of a commercial air carrier applied only for FYs 2005-06 through 2010-11. AB 964 also included repeal dates for the provisions prescribing the procedures for designating a lead county assessor's office for each commercial air carrier operating certificated aircraft in California, allowing a commercial air carrier to file one property statement with the lead county, and permitting an audit of those carriers on a centralized basis.
In 2010, a bill was introduced to extend the valuation methodology and centralized assessment provisions temporarily to the FY 2015-16. [AB 384 (Ma), Chapter 228, Statutes of 2010.] AB 384 also revised the valuation provisions to create a rebuttable presumption of correctness for the FMV of certificated aircraft determined under the assessment methodology. AB 384 specified that the FMV may be rebutted by evidence including appraisals, invoices, and expert testimony. Finally, AB 384 provided that the value of an individual aircraft assessed to the original owner may not exceed its original cost from the manufacturer.
Centralized Assessment System. Under existing law, which this bill proposes to extend, a "lead" county is designated by the Aircraft Advisory Subcommittee of the California Assessors' Association for each commercial air carrier operating certificated aircraft in California. The "lead" county is required to calculate an unallocated fleet value of the carrier's certificated aircraft for each make, model, and series, as provided. Once the fleet value is calculated, it is transmitted to other counties, which in turn will determine their allocated portions of the fleet value based on the flight data for each county. The allocation process limits each county's assessment to reflect the aircraft's physical presence in that county.
Existing law also allows commercial air carriers operating in multiple California airports to file a single consolidated property statement with a "lead" county. In turn, the "lead" county must transmit return information related to non-aircraft personal property and fixtures to other counties where the air carrier operates. The audit procedures are also centralized: an audit team directed by the "lead" county will audit the air carrier once every four years on a centralized basis.
Certainty and Predictability of the Existing Assessment Methodology. 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.1 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. 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. 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.
The Rebuttable Presumption of Value. The assessment of certificated aircraft is a difficult and complex task. As such, the potential for litigation and assessment appeals is significant. It is presumed by both the assessor and taxpayer that the existing methodology will result in a fair and reasonable assessment. However, since appraisal is not an exact science, there may be instances where one of the parties believes, and has clear evidence, that the assessment resulting from the prescribed methodology is wrong. In these instances, the issue is usually settled by an assessment appeals board. Consistent with the existing law, this bill would allow taxpayers and assessors to appeal a value established by following a legally prescribed methodology. The practical result of "rebuttably presumed" language is that it clearly recognizes that an assessment appeals board has the discretion to set a fair market value where the facts presented clearly overcome the presumption of correctness in any given methodology. According to the author, the best solution is for the Legislature to extend the existing valuation methodology to arrive at a fair market value for certificated aircraft, including the rebuttable presumption of correctness of the value. If the existing centralized assessment provisions are not extended, then the burden of proof regarding the correctness of the assessment will shift to the air carrier challenging the assessed value.
Related Legislation. SB 661 (Hill) would transfer assessment jurisdiction for commercial air carrier personal property, including certificated aircraft, to the BOE. SB 661 is pending hearing by the Senate Appropriations Committee.
REGISTERED SUPPORT / OPPOSITION:
Support
Glendale City Employees Association
Organization of SMUD Employees
San Bernardino Public Employees Association
San Diego County Court Employees Association
San Luis Obispo County Employees Association
Service Employees International Union (SEIU)
Opposition
Airlines for America
Alaska Airlines
Southwest Airlines
United Airlines
Analysis Prepared by: Oksana Jaffe / REV. & TAX. / (916) 319-2098
1 Recently, several air carriers have commenced legal action challenging the calculations of economic obsolescence under R&TC Sections 401.17(a)(1)(C) and (D). This bill, however, does not propose to modify the economic obsolescence provisions.
Discussed in Hearing
3MIN
Senate Floor
23SEC
Senate Standing Committee on Appropriations
1MIN
Assembly Floor
2MIN
Assembly Standing Committee on Appropriations
Bill Author
Bill Co-Author(s):