AB 2622: Property taxation: certificated aircraft assessment.
- Session Year: 2015-2016
- House: Assembly
- Latest Version Date: 2016-08-19
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 201617 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.
This bill would extend the 201617 fiscal year termination date to the 201920 fiscal year for the above-described provisions relating to the determination of the fair market value and taxation of certificated aircraft.
Existing law, until December 31, 2016, requires 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, until December 31, 2016, also requires the lead county assessors office to lead a team to audit the books and records of commercial air carriers and requires a commercial air carrier that receives a notice of the designation of a lead county assessors office to file one signed property statement with the lead county assessors office for its personal property at all airport locations and fixtures at all airport locations. Existing law requires the lead county assessors office to receive the property statement of each commercial air carrier to which he or she is assigned.
This bill would extend the December 31, 2016, inoperative or repeal date to December 31, 2019, for the above-described provisions. The bill, on or before March 1, 2017, would additionally require the Aircraft Advisory Subcommittee of the California Assessors Association to designate contacts in each lead county assessors office for each commercial air carrier to address specified issues and to establish best practices for the effective administration of the lead county system and audit process. The bill would require the lead county assessors office to transmit the property statement to the assessor of each county in which the personal property of the commercial air carrier is located or has acquired situs, including certificated aircraft. The bill would require a county assessor that receives a property statement from the lead county assessors office to direct questions about the contents of the property statement first to the lead county assessors office and then, if the lead county assessors office is unable to provide an answer, to the commercial air carrier that filed the property statement.
Existing property tax law requires the State Board of Equalization, after consultation with county tax assessors, to designate for each assessment year the representative period to be used by the assessors in assessing the aircraft of the carrier.
This bill would require the representative period to consist equally of a week or group of weeks in January and a week or group of weeks in July.
By extending the application of the aforementioned valuation process for certificated aircraft beyond the 201617 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 201617 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.
This bill would extend the 201617 fiscal year termination date to the 201920 fiscal year for the above-described provisions relating to the determination of the fair market value and taxation of certificated aircraft.
Existing law, until December 31, 2016, requires 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, until December 31, 2016, also requires the lead county assessors office to lead a team to audit the books and records of commercial air carriers and requires a commercial air carrier that receives a notice of the designation of a lead county assessors office to file one signed property statement with the lead county assessors office for its personal property at all airport locations and fixtures at all airport locations. Existing law requires the lead county assessors office to receive the property statement of each commercial air carrier to which he or she is assigned.
This bill would extend the December 31, 2016, inoperative or repeal date to December 31, 2019, for the above-described provisions. The bill, on or before March 1, 2017, would additionally require the Aircraft Advisory Subcommittee of the California Assessors Association to designate contacts in each lead county assessors office for each commercial air carrier to address specified issues, issues and to establish best practices for the effective administration of the lead county system, audit process, and methods to evaluate converted freighters. system and audit process. The bill would require the lead county assessors office to transmit the property statement to the assessor of each county in which the personal property of the commercial air carrier is located or has acquired situs, including certificated aircraft. The bill would require a county assessor that receives a property statement from the lead county assessors office to direct questions about the contents of the property statement first to the lead county assessors office and then, if the lead county assessors office is unable to provide an answer, to the commercial air carrier that filed the property statement.
Existing property tax law requires the State Board of Equalization, after consultation with county tax assessors, to designate for each assessment year the representative period to be used by the assessors in assessing the aircraft of the carrier.
This bill would require the representative period to consist equally of a week or group of weeks in January and a week or group of weeks in July.
By extending the application of the aforementioned valuation process for certificated aircraft beyond the 201617 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 201617 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.
This bill would extend the 201617 fiscal year termination date to the 201920 fiscal year for the above-described provisions relating to the determination of the fair market value and taxation of certificated aircraft.
Existing law, until December 31, 2016, requires 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, until December 31, 2016, also requires the lead county assessors office to lead a team to audit the books and records of commercial air carriers and requires a commercial air carrier that receives a notice of the designation of a lead county assessors office to file one signed property statement with the lead county assessors office for its personal property at all airport locations and fixtures at all airport locations. Existing law requires the lead county assessors office to receive the property statement of each commercial air carrier to which he or she is assigned.
This bill would extend the December 31, 2016, inoperative or repeal date to December 31, 2019, for the above-described provisions. The bill, on or before March 1, 2017, would additionally require the Aircraft Advisory Subcommittee of the California Assessors Association to designate contacts in each lead county assessors office for each commercial air carrier to address specified issues, and to establish best practices for the effective administration of the lead county system, audit process, and methods to evaluate converted freighters. The bill would require the lead county assessors office to transmit the property statement to the assessor of each county in which the personal property of the commercial air carrier is located or has acquired situs, including certificated aircraft. The bill would require a county assessor that receives a property statement from the lead county assessors office to direct questions about the contents of the property statement first to the lead county assessors office and then, if the lead county assessors office is unable to provide an answer, to the commercial air carrier that filed the property statement.
Existing property tax law requires the State Board of Equalization, after consultation with county tax assessors, to designate for each assessment year the representative period to be used by the assessors in assessing the aircraft of the carrier.
This bill would state the intent of the Legislature to determine the most appropriate method of calculating the assessed value of certificated aircraft over a 365-day period.
This bill would require the representative period to consist equally of a week or group of weeks in January and a week or group of weeks in July.
By extending the application of the aforementioned valuation process for certificated aircraft beyond the 201617 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 201617 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.
This bill would extend the 201617 fiscal year termination date to the 201920 fiscal year for the above-described provisions relating to the determination of the fair market value and taxation of certificated aircraft.
Existing law, until December 31, 2016, requires 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, until December 31, 2016, also requires the lead county assessors office to lead a team to audit the books and records of commercial air carriers and requires a commercial air carrier that receives a notice of the designation of a lead county assessors office to file one signed property statement with the lead county assessors office for its personal property at all airport locations and fixtures at all airport locations. Existing law requires the lead county assessors office to receive the property statement of each commercial air carrier to which he or she is assigned.
This bill would extend the December 31, 2016, inoperative or repeal date to December 31, 2019, for the above-described provisions. The bill, on or before March 1, 2017, would additionally require the Aircraft Advisory Subcommittee of the California Assessors Association to designate contacts in each lead county assessors office for each commercial air carrier to address specified issues, and to establish best practices for the effective administration of the lead county system, audit process, and methods to evaluate converted freighters. The bill would require the lead county assessors office to transmit the property statement to the assessor of each county in which the personal property of the commercial air carrier is located or has acquired situs, including certificated aircraft. The bill would require a county assessor that receives a property statement from the lead county assessors office to direct questions about the contents of the property statement first to the lead county assessors office and then, if the lead county assessors office is unable to provide an answer, to the commercial air carrier that filed the property statement.
Existing property tax law requires the State Board of Equalization, after consultation with county tax assessors, to designate for each assessment year the representative period to be used by the assessors in assessing the aircraft of the carrier.
This bill would eliminate that requirement and would, instead, require the representative period of an air carriers ground and flight time and the arrival and departure activity to be derived from the air carriers flight operations recorded by the Federal Aviation Administration during the 12-month period of the prior calendar year for each assessment year.
This bill would state the intent of the Legislature to determine the most appropriate method of calculating the assessed value of certificated aircraft over a 365-day period.
By extending the application of the aforementioned valuation process for certificated aircraft beyond the 201617 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 201617 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.
This bill would extend the 201617 fiscal year termination date to the 201920 fiscal year for the above-described provisions relating to the determination of the fair market value and taxation of certificated aircraft.
Existing law, until December 31, 2016, requires 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, until December 31, 2016, also requires the lead county assessors office to lead a team to audit the books and records of commercial air carriers and requires a commercial air carrier that receives a notice of the designation of a lead county assessors office to file one signed property statement with the lead county assessors office for its personal property at all airport locations and fixtures at all airport locations. Existing law requires the lead county assessors office to receive the property statement of each commercial air carrier to which he or she is assigned.
This bill would extend the December 31, 2016, inoperative or repeal date to December 31, 2019, for the above-described provisions. The bill, on or before March 1, 2017, would additionally require the Aircraft Advisory Subcommittee of the California Assessors Association to designate contacts in each lead county assessors office for each commercial air carrier to address specified issues, and to establish best practices for the effective administration of the lead county system, audit process, and methods to evaluate converted freighters. The bill would require the lead county assessors office to transmit the property statement to the assessor of each county in which the personal property of the commercial air carrier is located or has acquired situs, including certificated aircraft. The bill would require a county assessor that receives a property statement from the lead county assessors office to direct questions about the contents of the property statement first to the lead county assessors office and then, if the lead county assessors office is unable to provide an answer, to the commercial air carrier that filed the property statement.
Existing property tax law requires the State Board of Equalization, after consultation with county tax assessors, to designate for each assessment year the representative period to be used by the assessors in assessing the aircraft of the carrier.
This bill would eliminate that requirement and would, instead, require the representative period of an air carriers ground and flight time and the arrival and departure activity to be derived from the air carriers flight operations recorded by the Federal Aviation Administration during the 12-month period of the prior calendar year for each assessment year.
By extending the application of the aforementioned valuation process for certificated aircraft beyond the 201617 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 201617 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.
This bill would extend the 201617 fiscal year termination date to the 201920 fiscal year for the above-described provisions relating to the determination of the fair market value and taxation of certificated aircraft.
Existing law, until December 31, 2016, requires 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, until December 31, 2016, also requires the lead county assessors office to lead a team to audit the books and records of commercial air carriers and requires a commercial air carrier that receives a notice of the designation of a lead county assessors office to file one signed property statement with the lead county assessors office for its personal property at all airport locations and fixtures at all airport locations. Existing law requires the lead county assessors office to receive the property statement of each commercial air carrier to which he or she is assigned.
This bill would extend the December 31, 2016, inoperative or repeal date to December 31, 2019, for the above-described provisions. The bill, on or before March 1, 2017, would additionally require the Aircraft Advisory Subcommittee of the California Assessors Association to designate contacts in each lead county assessors office for each commercial air carrier to address specified issues, and to establish best practices for the effective administration of the lead county system, audit process, and methods to evaluate converted freighters. The bill would require the lead county assessors office to transmit the property statement to the assessor of each county in which the personal property of the commercial air carrier is located or has acquired situs, including certificated aircraft. The bill would require a county assessor that receives a property statement from the lead county assessors office to direct questions about the contents of the property statement first to the lead county assessors office and then, if the lead county assessors office is unable to provide an answer, to the commercial air carrier that filed the property statement.
By extending the application of the aforementioned valuation process for certificated aircraft beyond the 201617 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 201617 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, 2016, 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, 2016, 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 state the intent of the Legislature to enact legislation amending the provisions regarding the assessment of certificated aircraft described above.
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 201617 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, 2016, 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, 2016, 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 state the intent of the Legislature to enact legislation amending the provisions regarding the assessment of certificated aircraft described above.
(a)For the 200506 fiscal year to the 201920 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:
(ia)Net revenue per available seat mile shall be weighted 35 percent.
(ib)Net load factor shall be weighted 35 percent.
(ic)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 201920 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, 2019.
SEC. 3.Section 1153 of the Revenue and Taxation Code is amended to read:1153.(a)After consulting with the assessors of the counties in which aircraft of an air carrier normally make physical contact, the board shall designate for each assessment year the representative period to be used by the assessors in assessing the aircraft of the carrier.
(b)The representative period shall consist equally of both of the following:
(1)A week or group of weeks in January.
(2)A week or group of weeks in July.
SEC. 4.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 all 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.
(3)On or before March 1, 2017, do both of the following:
(A)Designate two contacts in each lead county assessors office for each of these carriers that will be available to address reporting issues and issues with the California Assessors Standard Data Record network.
(B)Establish best practices for the effective administration of the lead county system and audit process.
(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)(A)Receive the property statement, as described in subdivision (m) of Section 441, of each commercial air carrier to which he or she is designated. The lead county assessors office shall transmit the property statement to the assessor of each county in which the personal property of the commercial air carrier is located or has acquired situs, including the property described in paragraph (1).
(B)A county assessor that receives a property statement pursuant to this section shall direct questions about the contents of the property statement first to the lead county assessors office and then, if the lead county assessors office is unable to provide an answer, to the commercial air carrier that filed the property statement.
(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, 2019, and as of that date is repealed.
SEC. 5.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 201920 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:
(ia)Net revenue per available seat mile shall be weighted 35 percent.
(ib)Net load factor shall be weighted 35 percent.
(ic)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 201920 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, 2019.
SEC. 3.Section 1153 of the Revenue and Taxation Code is amended to read:1153.(a)After consulting with the assessors of the counties in which aircraft of an air carrier normally make physical contact, the board shall designate for each assessment year the representative period to be used by the assessors in assessing the aircraft of the carrier.
(b)The representative period shall consist equally of both of the following:
(1)A week or group of weeks in January.
(2)A week or group of weeks in July.
SEC. 4.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 all 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.
(3)On or before March 1, 2017, do both of the following:
(A)Designate two contacts in each lead county assessors office for each of these carriers that will be available to address reporting issues and issues with the California Assessors Standard Data Record network.
(B)Establish best practices for the effective administration of the lead county system, audit process, and methods to evaluate converted freighters. system and audit process.
(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)(A)Receive the property statement, as described in subdivision (m) of Section 441, of each commercial air carrier to which he or she is designated. The lead county assessors office shall transmit the property statement to the assessor of each county in which the personal property of the commercial air carrier is located or has acquired situs, including the property described in paragraph (1).
(B)A county assessor that receives a property statement pursuant to this section shall direct questions about the contents of the property statement first to the lead county assessors office and then, if the lead county assessors office is unable to provide an answer, to the commercial air carrier that filed the property statement.
(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, 2019, and as of that date is repealed.
SEC. 5.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 201920 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:
(ia)Net revenue per available seat mile shall be weighted 35 percent.
(ib)Net load factor shall be weighted 35 percent.
(ic)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 201920 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, 2019.
SEC. 3.Section 1153 of the Revenue and Taxation Code is amended to read:1153.(a)After consulting with the assessors of the counties in which aircraft of an air carrier normally make physical contact, the board shall designate for each assessment year the representative period to be used by the assessors in assessing the aircraft of the carrier.
(b)It is the intent of the Legislature to determine the most appropriate method of calculating the assessed value of certificated aircraft over a 365-day period.
(b)The representative period shall consist equally of both of the following:
(1)A week or group of weeks in January.
(2)A week or group of weeks in July.
SEC. 4.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 all 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.
(3)On or before March 1, 2017, do both of the following:
(A)Designate two contacts in each lead county assessors office for each of these carriers that will be available to address reporting issues and issues with the California Assessors Standard Data Record network.
(B)Establish best practices for the effective administration of the lead county system, audit process, and methods to evaluate converted freighters.
(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)(A)Receive the property statement, as described in subdivision (m) of Section 441, of each commercial air carrier to which he or she is designated. The lead county assessors office shall transmit the property statement to the assessor of each county in which the personal property of the commercial air carrier is located or has acquired situs, including the property described in paragraph (1).
(B)A county assessor that receives a property statement pursuant to this section shall direct questions about the contents of the property statement first to the lead county assessors office and then, if the lead county assessors office is unable to provide an answer, to the commercial air carrier that filed the property statement.
(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, 2019, and as of that date is repealed.
SEC. 5.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 201920 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:
(ia)Net revenue per available seat mile shall be weighted 35 percent.
(ib)Net load factor shall be weighted 35 percent.
(ic)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 201920 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, 2019.
SEC. 3.Section 1153 of the Revenue and Taxation Code is repealed.SEC. 4.Section 1153 is added to the Revenue and Taxation Code, to read:1153.The representative period of an air carriers ground and flight time and the arrival and departure activity shall be derived from the air carriers flight operations recorded by the Federal Aviation Administration during the 12-month period of the prior calendar year for each assessment year.
SEC. 3.Section 1153 of the Revenue and Taxation Code is amended to read:1153.(a)After consulting with the assessors of the counties in which aircraft of an air carrier normally make physical contact, the board shall designate for each assessment year the representative period to be used by the assessors in assessing the aircraft of the carrier.
(b)It is the intent of the Legislature to determine the most appropriate method of calculating the assessed value of certificated aircraft over a 365-day period.
SEC. 5.SEC. 4.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 all 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.
(3)On or before March 1, 2017, do both of the following:
(A)Designate two contacts in each lead county assessors office for each of these carriers that will be available to address reporting issues and issues with the California Assessors Standard Data Record network.
(B)Establish best practices for the effective administration of the lead county system, audit process, and methods to evaluate converted freighters.
(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)(A)Receive the property statement, as described in subdivision (m) of Section 441, of each commercial air carrier to which he or she is designated. The lead county assessors office shall transmit the property statement to the assessor of each county in which the personal property of the commercial air carrier is located or has acquired situs, including the property described in paragraph (1).
(B)A county assessor that receives a property statement pursuant to this section shall direct questions about the contents of the property statement first to the lead county assessors office and then, if the lead county assessors office is unable to provide an answer, to the commercial air carrier that filed the property statement.
(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, 2019, and as of that date is repealed.
SEC. 6.SEC. 5.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 201920 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:
(ia)Net revenue per available seat mile shall be weighted 35 percent.
(ib)Net load factor shall be weighted 35 percent.
(ic)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 201920 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, 2019.
SEC. 3.Section 1153 of the Revenue and Taxation Code is repealed.1153.After consulting with the assessors of the counties in which aircraft of an air carrier normally make physical contact, the board shall designate for each assessment year the representative period to be used by the assessors in assessing the aircraft of the carrier.
SEC. 4.Section 1153 is added to the Revenue and Taxation Code, to read:1153.The representative period of an air carriers ground and flight time and the arrival and departure activity shall be derived from the air carriers flight operations recorded by the Federal Aviation Administration during the 12-month period of the prior calendar year for each assessment year.
SEC. 3.SEC. 5.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 all 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.
(3)On or before March 1, 2017, do both of the following:
(A)Designate two contacts in each lead county assessors office for each of these carriers that will be available to address reporting issues and issues with the California Assessors Standard Data Record network.
(B)Establish best practices for the effective administration of the lead county system, audit process, and methods to evaluate converted freighters.
(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)(A)Receive the property statement, as described in subdivision (m) of Section 441, of each commercial air carrier to which he or she is designated. The lead county assessors office shall transmit the property statement to the assessor of each county in which the personal property of the commercial air carrier is located or has acquired situs, including the property described in paragraph (1).
(B)A county assessor that receives a property statement pursuant to this section shall direct questions about the contents of the property statement first to the lead county assessors office and then, if the lead county assessors office is unable to provide an answer, to the commercial air carrier that filed the property statement.
(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, 2019, and as of that date is repealed.
SEC. 4.SEC. 6.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 201920 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)
(ia)Net revenue per available seat mile shall be weighted 35 percent.
(ab)
(ib)Net load factor shall be weighted 35 percent.
(ac)
(ic)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 201920 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. 2019.
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 all 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.
(3)On or before March 1, 2017, do both of the following:
(A)Designate two contacts in each lead county assessors office for each of these carriers that will be available to address reporting issues and issues with the California Assessors Standard Data Record network.
(B)Establish best practices for the effective administration of the lead county system, audit process, and methods to evaluate converted freighters.
(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)(A)Receive the property statement, as described in subdivision (l) (m) of Section 441, of each commercial air carrier to which he or she is designated. The lead county assessors office shall transmit the property statement to the assessor of each county in which the personal property of the commercial air carrier is located or has acquired situs, including the property described in paragraph (1).
(B)A county assessor that receives a property statement pursuant to this section shall direct questions about the contents of the property statement first to the lead county assessors office and then, if the lead county assessors office is unable to provide an answer, to the commercial air carrier that filed the property statement.
(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, 2019, 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.
SECTION 1.It is the intent of the Legislature to enact legislation to amend Sections 401.17, 441, and 1153.5 of the Revenue and Taxation Code, pertaining to the assessment of certificated aircraft for property taxation.
It is the intent of the Legislature to enact legislation to amend Sections 401.17, 441, and 1153.5 of the Revenue and Taxation Code, pertaining to the assessment of certificated aircraft for property taxation.
|
Date
|
Status
|
|---|---|
| Jun 1, 2016 | Read third time. Passed. Ordered to the Senate. |
| Aug 23, 2016 | Ordered to inactive file at the request of Senator Hertzberg. |
| Aug 22, 2016 | Read second time. Ordered to third reading. |
| Aug 19, 2016 | Read third time and amended. Ordered to second reading. |
| Aug 15, 2016 | Read second time. Ordered to third reading. |
| Aug 11, 2016 | From committee: Do pass. (Ayes 7. Noes 0.) (August 11). |
| Aug 8, 2016 | Referred to APPR. suspense file. |
| Aug 2, 2016 | Read second time and amended. Re-referred to Com. on APPR. |
| Aug 1, 2016 | From committee: Amend, and do pass as amended and re-refer to Com. on APPR. (Ayes 7. Noes 0.) (June 29). |
| Jun 13, 2016 | In committee: Set, first hearing. Hearing canceled at the request of author. |
| Jun 9, 2016 | Referred to Com. on GOV. & F. |
| Jun 2, 2016 | In Senate. Read first time. To Com. on RLS. for assignment. |
| Jun 1, 2016 | Read third time. Passed. Ordered to the Senate. (Ayes 50. Noes 28.) |
| Jun 1, 2016 | Read third time. Passed. Ordered to the Senate. (Ayes 50. Noes 28. Page 5080.) |
| Feb 19, 2016 | Introduced. To print. |
| May 23, 2016 | Read second time. Ordered to third reading. |
| May 19, 2016 | Read second time and amended. Ordered returned to second reading. |
| May 18, 2016 | From committee: Amend, and do pass as amended. (Ayes 14. Noes 6.) (May 18). |
| Apr 27, 2016 | Re-referred to Com. on APPR. |
| Apr 26, 2016 | Read second time and amended. |
| Apr 25, 2016 | From committee: Amend, and do pass as amended and re-refer to Com. on APPR. (Ayes 5. Noes 0.) (April 18). |
| Apr 13, 2016 | Re-referred to Com. on REV. & TAX. |
| Apr 12, 2016 | From committee chair, with author's amendments: Amend, and re-refer to Com. on REV. & TAX. Read second time and amended. |
| Mar 28, 2016 | Re-referred to Com. on REV. & TAX. |
| Mar 18, 2016 | From committee chair, with author's amendments: Amend, and re-refer to Com. on REV. & TAX. Read second time and amended. |
| Mar 17, 2016 | Referred to Com. on REV. & TAX. |
| Feb 22, 2016 | Read first time. |
| Feb 21, 2016 | From printer. May be heard in committee March 22. |
|
Date
|
Description
|
Location
|
Votes
|
|
|---|---|---|---|---|
| Aug 11, 2016 | Do pass | Senate Standing Committee on Appropriations |
Passed |
|
| Aug 8, 2016 | Placed on suspense file | Senate Standing Committee on Appropriations |
Passed |
|
| Jun 29, 2016 | Do pass as amended, but first amend, and re-refer to the Committee on [Appropriations] | Senate Standing Committee on Governance and Finance |
Passed |
|
| Jun 1, 2016 | AB 2622 NAZARIAN Assembly Third Reading | Assembly Floor |
Passed |
|
| May 18, 2016 | Do pass as amended. | Assembly Standing Committee on Appropriations |
Passed |
|
| Apr 18, 2016 | 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 18, 2016 |
| Assessor of Los Angeles County, Jeffrey Prang | ** Support | May 18, 2016 |
| Assessor of Santa Clara County, Larry Stone | ** Support | May 18, 2016 |
| California Assessors' Association | * Support | Jun 29, 2016 |
| California Special District Association | * Support | Jun 29, 2016 |
| California State Association Of Counties | * Support | Jun 29, 2016 |
| Delta Air Lines Inc. | * Support | Jun 29, 2016 |
Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 | AB 2622 |
THIRD READING
Bill No: AB 2622
Amended: 8/19/16 in Senate
SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 6/29/16
AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach, Pavley
SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/11/16
AYES: Lara, Bates, Beall, Hill, McGuire, Mendoza, Nielsen
ASSEMBLY FLOOR: 50-28, 6/1/16 - See last page for vote
SUBJECT: Property taxation: certificated aircraft assessment
DIGEST: This bill extends the lead county assessor methodology for valuing certificated aircraft, and enacts other changes to improve the administration of the lead assessor system.
Senate Floor Amendments of 8/19/16 delete the bill’s change to the representative period for allocating the value of 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.
- 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.
- Creates a lead assessor methodology for valuing certificated aircraft, and sets forth a methodology to calculate aircraft value (AB 964, Horton, Chapter 699, Statutes of 2006). The methodology:
- Requires owners of certificated aircraft to file one signed property statement for the taxpayer’s personal property with a single assessor, which the owner can file using the Standard Data Record (SDR) network.
- Allows owners to file one schedule for its certificated aircraft.
- Limits audits of certificated aircraft to one, led performed by a multi-county team.
- Establishes categories for mainline jets, regional aircraft, production freighters, and converted freighters, and sets forth a valuation methodology for each.
- 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, and owners of certificated aircraft may rebut the presumption using appraisals, invoices, and expert testimony (AB 384, Ma, Chapter 228, Statutes of 2010).
- Provides for an economic obsolescence adjustment, where assessors analyze the change in three variables to determine whether larger economic forces are diminishing the aircraft’s value.
- Requires the California Assessors’ Association to designate a lead assessor for each airline to calculate the unallocated value of the fleet, transmit that value to non-lead counties, receive the consolidated property statement, and lead the audit team.
- Sunsets after the 2016-17 fiscal year, after which certificated aircraft will revert to local assessment.
This bill:
- Extends the current provisions of the lead assessor methodology to value certificated aircraft for three years, through the 2019-2020 fiscal year.
- Requires the Aircraft Advisory Subcommittee of the California Assessors’ Association to designate two contacts in each lead assessor’s office for each carrier to address reporting issues and issues with the SDR network.
- Requires the lead assessor to transmit the consolidated property statement to each assessor in which the personal property of the commercial air carrier has acquired situs, but directs each non-lead assessor receiving the statement to first send questions about its contents to the lead assessor. If the lead assessor cannot provide an answer, the non-lead assessor may then question the carrier.
- Makes a technical change.
- States that reimbursement for any state mandated costs must be made pursuant to existing statute.
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 the lead assessor designated by the Aircraft Advisory Subcommittee of the California Assessors’ Association. AB 964 (Horton, Chapter 699, Statutes of 2005) 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.
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 three years utilizing the lead assessor methodology (as proposed to be modified) could be 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 this bill will be minor and absorbable.
Alameda County Board of Supervisors
California Assessors’ Association
California Special Districts Association
California State Association of Counties
Delta Air Lines
Los Angeles County Assessor Jeffrey Prang
Los Angeles County Board of Supervisors
Placer County Assessor Kristen Spears
San Luis Obispo County Assessor Tom Bordanaro
San Mateo County Assessor Mark Church
Stanislaus County Assessor Don H. Gaekle
OPPOSITION: (Verified 8/12/16)
None received
ARGUMENTS IN SUPPORT: According to the author, “The provisions outlined in current law relating to the centralized assessment of aircraft will sunset on December 31, 2016. Without centralization, 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. Absent a uniform codified methodology, each county would have to calculate the total aircraft fleet value, and values would likely vary from county to county. Airlines would inevitably face uncertainty and delays on the valuation of their aircraft. By extending the sunset date for the assessment of certified aircraft, AB 2622 continues to allow assessors to carry out their mandated responsibility to fairly assess all taxable property, within their jurisdiction, in an efficient manner. Further, AB 2622 makes several administrative changes that streamline and reduce workload for the airline industry. These changes ensure that the non-lead counties contact lead counties first with questions on filings, before contacting commercial air carriers. Additionally, AB 2622 requires assessors, in collaboration with the airline industry, to establish best practices for the effective administration of the lead county system. This bill also requires them to designate two points of contacts that will be able to address reporting/filing issues. To better assess and reflect the carrier actual tax nexus, AB 2622 also changes the representative period methodology by requiring it to be based equally on the carrier’s flight activity in the week or groups of weeks in January and July. It is imperative that counties continue to assess aircraft in an administratively efficient manner as these assessments translate into approximately $80 million in local revenue.”
ASSEMBLY FLOOR: 50-28, 6/1/16
AYES: Achadjian, Alejo, Arambula, Atkins, Bloom, Bonilla, Bonta, Brown, Burke, Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Dodd, Eggman, Frazier, Cristina Garcia, Eduardo Garcia, Gipson, Gomez, Gonzalez, Gordon, Roger Hernández, Holden, Irwin, Jones-Sawyer, Levine, Lopez, Low, McCarty, Medina, Mullin, Nazarian, O'Donnell, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting, Weber, Williams, Wood, Rendon
NOES: Travis Allen, Baker, Bigelow, Brough, Chang, Chávez, Dahle, Beth Gaines, Gallagher, Gatto, Gray, Grove, Harper, Jones, Kim, Lackey, Linder, Maienschein, Mathis, Mayes, Melendez, Obernolte, Olsen, Patterson, Steinorth, Wagner, Waldron, Wilk
NO VOTE RECORDED: Daly, Hadley
Prepared by: Colin Grinnell / GOV. & F. / (916) 651-4119
8/22/16 22:42:36
**** END ****
Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 | AB |
THIRD READING
Bill No: AB 2622
:
SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 6/29/16
AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach, Pavley
SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/11/16
AYES: Lara, Bates, Beall, Hill, McGuire, Mendoza, Nielsen
ASSEMBLY FLOOR: 50-28, 6/1/16 - See last page for vote
DIGEST: This bill extends the lead county assessor methodology for valuing certificated aircraft, and enacts other changes to improve the administration of the lead assessor system.
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.
- 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.
- Creates a lead assessor methodology for valuing certificated aircraft, and sets forth a methodology to calculate aircraft value (AB 964, Horton, Chapter 699, Statutes of 2006). The methodology:
- Requires owners of certificated aircraft to file one signed property statement for the taxpayer’s personal property with a single assessor, which the owner can file using the Standard Data Record (SDR) network.
- Allows owners to file one schedule for its certificated aircraft.
- Limits audits of certificated aircraft to one, led performed by a multi-county team.
- Establishes categories for mainline jets, regional aircraft, production freighters, and converted freighters, and sets forth a valuation methodology for each.
- 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, and owners of certificated aircraft may rebut the presumption using appraisals, invoices, and expert testimony (AB 384, Ma, Chapter 228, Statutes of 2010).
- Provides for an economic obsolescence adjustment, where assessors analyze the change in three variables to determine whether larger economic forces are diminishing the aircraft’s value.
- Requires the California Assessors’ Association to designate a lead assessor for each airline to calculate the unallocated value of the fleet, transmit that value to non-lead counties, receive the consolidated property statement, and lead the audit team.
- Sunsets after the 2016-17 fiscal year, after which certificated aircraft will revert to local assessment.
This bill:
- Extends the current provisions of the lead assessor methodology to value certificated aircraft for three years, through the 2019-2020 fiscal year.
- Requires that the representative period designated by BOE to consist equally of a week or group of weeks in January, and a week or group of weeks in July.
- Requires the Aircraft Advisory Subcommittee of the California Assessors’ Association to designate two contacts in each lead assessor’s office for each carrier to address reporting issues and issues with the SDR network.
- Requires the lead assessor to transmit the consolidated property statement to each assessor in which the personal property of the commercial air carrier has acquired situs, but directs each non-lead assessor receiving the statement to first send questions about its contents to the lead assessor. If the lead assessor cannot provide an answer, the non-lead assessor may then question the carrier.
- Makes a technical change.
- States that reimbursement for any state mandated costs must be made pursuant to existing statute.
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 the lead assessor designated by the Aircraft Advisory Subcommittee of the California Assessors’ Association. AB 964 (Horton, Chapter 699, Statutes of 2005) 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.
FISCAL EFFECT: Appropriation: Fiscal Com.: Local:
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 three years utilizing the lead assessor methodology (as proposed to be modified) could be 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 this bill will be minor and absorbable.
Alameda County Board of Supervisors
California Assessors’ Association
California Special Districts Association
California State Association of Counties
Delta Air Lines
Los Angeles County Assessor Jeffrey Prang
Los Angeles County Board of Supervisors
Placer County Assessor Kristen Spears
San Luis Obispo County Assessor Tom Bordanaro
San Mateo County Assessor Mark Church
Stanislaus County Assessor Don H. Gaekle
OPPOSITION: (Verified 8/12/16)
None received
ARGUMENTS IN SUPPORT: According to the author, “The provisions outlined in current law relating to the centralized assessment of aircraft will sunset on December 31, 2016. Without centralization, 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. Absent a uniform codified methodology, each county would have to calculate the total aircraft fleet value, and values would likely vary from county to county. Airlines would inevitably face uncertainty and delays on the valuation of their aircraft. By extending the sunset date for the assessment of certified aircraft, AB 2622 continues to allow assessors to carry out their mandated responsibility to fairly assess all taxable property, within their jurisdiction, in an efficient manner. Further, AB 2622 makes several administrative changes that streamline and reduce workload for the airline industry. These changes ensure that the non-lead counties contact lead counties first with questions on filings, before contacting commercial air carriers. Additionally, AB 2622 requires assessors, in collaboration with the airline industry, to establish best practices for the effective administration of the lead county system. This bill also requires them to designate two points of contacts that will be able to address reporting/filing issues. To better assess and reflect the carrier actual tax nexus, AB 2622 also changes the representative period methodology by requiring it to be based equally on the carrier’s flight activity in the week or groups of weeks in January and July. It is imperative that counties continue to assess aircraft in an administratively efficient manner as these assessments translate into approximately $80 million in local revenue.”
ASSEMBLY FLOOR: 50-28, 6/1/16
AYES: Achadjian, Alejo, Arambula, Atkins, Bloom, Bonilla, Bonta, Brown, Burke, Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Dodd, Eggman, Frazier, Cristina Garcia, Eduardo Garcia, Gipson, Gomez, Gonzalez, Gordon, Roger Hernández, Holden, Irwin, Jones-Sawyer, Levine, Lopez, Low, McCarty, Medina, Mullin, Nazarian, O'Donnell, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting, Weber, Williams, Wood, Rendon
NOES: Travis Allen, Baker, Bigelow, Brough, Chang, Chávez, Dahle, Beth Gaines, Gallagher, Gatto, Gray, Grove, Harper, Jones, Kim, Lackey, Linder, Maienschein, Mathis, Mayes, Melendez, Obernolte, Olsen, Patterson, Steinorth, Wagner, Waldron, Wilk
NO VOTE RECORDED: Daly, Hadley
8/15/16 20:22:26
**** END ****
SENATE COMMITTEE ON
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 2622 (Nazarian) - Property taxation: certificated aircraft assessment
Version: | Policy Vote: |
Urgency: | Mandate: |
Hearing Date: | Consultant: |
This bill meets the criteria for referral to the Suspense File.
Bill Summary:
AB 2622 would extend the lead county assessor methodology for valuing certificated aircraft, with specified changes related to administration.
Fiscal Impact:
- The precise revenue impact of this bill relative to current law is unknown. Property tax revenues for the additional three years utilizing the lead assessor methodology (as proposed to be modified) could be 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:
All property, real and personal, is subject to property tax, unless a specific constitutional or statutory exemption applies. The Constitution limits the maximum amount of any ad valorem tax on real property at 1 percent of full cash value, and precludes reassessment unless the property is newly constructed or changes ownership; in contrast, county assessors value personal property, such as certificated aircraft, annually. The Legislature first directed county assessors in 1850 to tax property; however, assessors in different counties often applied different tax rates and methods of assessment. The inconsistencies were especially acute between counties dominated by mining and agriculture. As a response, the California Constitution of 1879 created BOE to equalize property tax rates and assessment practices among counties. In 1910, voters amended the Constitution to direct BOE to tax certain property that crossed county lines, including that owned by railways, firms selling gas and electricity, or telephone companies. The taxes were exclusively levied for state purposes on a gross receipts taxation basis. In 1933, the constitution was amended again and the 'in lieu" gross receipts taxation on public utilities was substituted with the ad valorem assessment by BOE that was allocated to the local jurisdictions according to situs.
Valuing Certificated Aircraft. 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 “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.
Certificated aircraft used by air carriers is subject to property tax when in revenue service in the State. Assessors may only value certificated aircraft (defined as aircraft operated by a domestic or foreign air carrier engaged in passenger or fleet service) with “situs” in California on a fleet basis. This means that the assessed value basis is not the value of any single aircraft owned by an air carrier, but rather the value of all aircraft of each type that is flown into the State. Aircraft regularly fly in and out of California and the various California counties with major airports; typically no single or particular aircraft remains located in the State on a permanent basis. Under the "fleet" concept, aircraft types that have gained situs in California by their entry into revenue service in this state are valued as a fleet, while only an allocated portion of the entire fleet's value is ultimately taxed to reflect actual presence in California’s counties. For example, assessors must value an airlines’ entire A380 fleet if only one enters the State, but doesn’t value any of its 747’s if none of them do so, regardless of the total number or value of A380s or 747s the airline owns. 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 one full week in January, with the selected week varying. This apportioned fleet value is then multiplied by the appropriate rate for the tax rate area in that county.
Prior to January 1, 1999, California law did not specify an assessment methodology for valuing certificated aircraft, or for valuing the carrier's taxable possessory interest in the publicly owned airport in which the aircraft operated. In 1997-98, a group of counties and air carrier industry representatives met to resolve property tax issues associated with air carrier-owned and -used property. The end result was a written settlement agreement to dispose of outstanding litigation and appeals over the valuation of airport possessory interest assessments and certificated aircraft. The Legislature codified the settlement agreement in a three-piece package:
- Aircraft Valuation Methodology and Monetary Settlement. AB 1807 (Takasugi, Chapter 86, Statutes of 1998) outlined the valuation procedures for certificated aircraft until 2003 and provided $50 million in tax credits against future tax liabilities, as well as extensive uncodified legislative findings and declarations.
- Airport Possessory Interests. AB 2318 (Knox, Chapter 85, Statutes of 1998) specified the assessment methodology for valuing the air carrier’s taxable possessory interest in publicly-owned airports.
- Tax Credits. SB 30 (Kopp, Chapter 87, Statutes of 1998) added general purpose provisions to allow counties and taxpayers to enter into written settlement agreements granting taxpayers tax credits.
In 2003, the agreement expired, and assessors again locally valued aircraft without specific guidance from state law. In 2006, assessors and the airlines again agreed on a new valuation methodology (AB 964, Horton, Chapter 699, Statutes of 2005), and directed a “lead assessor” to value each airline’s fleet. Instead of filing property statements with each county, airlines filed a single consolidated statement with a single assessor designated by the Aircraft Advisory Subcommittee of the California Assessors’ Association, which rotates generally every three years. AB 964 established categories for various types of aircraft (passenger aircraft and freighter aircraft), 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 percent off (for a fleet adjustment) on the wholesale prices listed in the “Airliner Pricing Guide,” If the APG ceases to exist, BOE determines the guide or adjustment.
AB 964 also included an adjustment factor to account for economic obsolescence, where assessors analyze the change in three variables to determine whether larger economic forces are diminishing the aircraft’s value. 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. Next, the assessor 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.
In 2009, AB 311 (Ma), as introduced, would have made the valuation methodology and centralized provisions permanent and, as amended, would have extended the effective date. However, Governor Schwarzenegger vetoed the bill because one airline disagreed with extending the valuation methodology, and the timing of AB 964’s sunset allowed another year for all the parties to reach consensus. The Governor signed a similar bill the following year (AB 384, Ma, 2010). AB 384 extended the lead assessor model and the valuation methodology until 2015-16, but differed from AB 311 by (1) replacing language specifying value with a rebuttable presumption (previously, the methodology-produced value was deemed to be the aircraft’s fair market value), (2) allowing the taxpayer to rebut the presumption with appraisals, invoices, and expert testimony, and (3) allowing aircraft to be valued lower than the APG guide value by capping an aircraft’s value at its original cost. The maximum value cap provision was added to appease the airline that opposed AB 311 in the prior year. In calculating total fleet values, this provision requires the county to substitute the original price paid when it is lower than wholesale price less 10 percent for any individual aircraft in the fleet. This reduces the total fleet value for any airline able to purchase new planes at deeper discounts.
In 2015, the Legislature enacted AB 1157 (Nazarian), which extended the sunset date of the lead county methodology by one year, through 2016-17. Thus, under current law absent legislation, beginning in 2017-18 each county would once again value certificated aircraft based on its fair market value without statutory guidance.
Proposed Law: This bill would
extend the lead assessor methodology for valuing certificated aircraft for three years, including the valuation method, the consolidated property statement, and single audit by the multicounty team headed by the lead assessor. The measure also would make other changes to the process of valuing certificated aircraft for property tax purposes, including the following:
- Specifying the representative period, or the period in which an airline fleet’s ground and flight time and arrivals and departures are measured to apportion fleet value between counties, as equally consisting of a week or weeks in both January and July.
- Requiring the Aircraft Advisory Subcommittee of the California Assessors Association to designate two contacts in each lead assessor’s office for each of these carriers that will be available to address reporting issues and the California Assessor’s Standard Data Record network, and establishing best practices for the effective administration of the lead county system and audit processes.
- Requiring the lead county assessor’s office to transmit the property statement to the assessor of each county in which the personal property of the commercial air carrier is located or has acquired situs.
- Providing that a county assessor that receives a property statement must first direct questions about the contents of the property statement to the lead county assessor’s office, and if the lead county assessor’s office is unable to provide an answer, may only then direct questions to the commercial air carrier that filed the property statement.
Related Legislation:
SB 1329 (Hertzberg), as amended April 26, 2016, proposed to extend the commercial air carrier provisions, but for five years rather than three years as this bill proposes. This version of SB 1329 would have (1) added a new section of law extending the valuation provisions (as opposed to extending the preexisting law as this bill proposes), (2) eliminated the 10 percent reduction provided when wholesale APG values are used, and (3) allowed trial de novo for commercial air carriers in a refund lawsuit. However, the bill was amended on May 31st to do nothing else but extend the current lead-county system for one additional year. The May 31st version of the bill is currently pending hearing in the Assembly Appropriations Committee
Staff Comments:
This bill would maintain the status quo, as modified, for one additional year. The resulting revenue 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.
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SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
Bill No: | AB 2622 | Hearing Date: | 6/29/16 |
Author: | Nazarian | Tax Levy: | No |
Version: | 5/19/16 | Fiscal: | Yes |
Consultant: | Grinnell | ||
Property taxation: certificated aircraft assessment
Extends the lead county assessor methodology for valuing certificated aircraft; enacts changes to improve the administration.
Background
Section One of Article XIII of the California Constitution provides that all property is taxable and shall be assessed at the same percentage of fair market value, 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 like certificated aircraft each year. The Constitution requires that property be assessed in the county, city, or district in which it is situated. While the Legislature first directed county assessors to tax property in 1849, assessors in different counties often applied different tax rates and methods of assessment. To remedy the lack of uniformity, the California Constitution of 1879 created the Board of Equalization (BOE) to equalize rates and assessment practices among counties. In 1910, voters amended the Constitution to direct BOE to value property owned by railways, companies selling gas and electricity, or telephone companies, as these companies own property that crosses county lines. The Constitution additionally allows the Legislature to authorize BOE assessment of property owned or used as “public utilities.”
Assessors may only value certificated aircraft with situs in California on a fleet basis, defined as aircraft operated by a domestic or foreign air carrier engaged in passenger or freight service 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 a specific model the taxpayer 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 to determine tax due. Certificated aircraft doesn’t include personal planes.
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 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 can instead file a single consolidated statement with one lead assessor designated by the Aircraft Advisory Subcommittee of the California Assessors’ Association, which usually rotates every three years. The bill also limited audits to one performed by a multi-county audit team. Currently, assessors from ten counties (Alameda, Fresno, Los Angeles, Orange, Riverside, Sacramento, San Bernardino, San Diego, San Mateo, and Santa Clara) assess the aircraft of each airline, and lead the appropriate audit teams.
To establish value, AB 964 established categories for mainline jets, regional aircraft, production freighters, and converted freighters, and detailed a valuation methodology for each. The new methodology provided that the aircraft value was the lesser of:
- A historical cost basis, or
- 10% off (for a fleet adjustment) 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 included a safety valve to account for economic obsolescence, where assessors analyze the change in three variables to determine whether larger economic forces are diminishing the aircraft’s value. 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 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 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.
Last year, the Legislature enacted AB 1157 (Nazarian), which extended the sunset by one year to the 2016-17 fiscal year. However, the lead assessor methodology will sunset for the 2017-18 fiscal year unless the Legislature extends it, in which case assessors will again value certificated aircraft based on fair market value without specific guidance from state law. Additionally, assessors have identified several potential improvements to the current system to improve administration.
Proposed Law
Assembly Bill 2622 extends the lead assessor methodology for valuing certificated aircraft for three years, including the valuation method, the consolidated property statement, and single audit by the multicounty team headed by the lead assessor. The measure also makes other changes to the process of valuing certificated aircraft for property tax purposes, including:
- Specifying the representative period, or the period in which an airline fleet’s ground and flight time and arrivals and departures are measured to apportion fleet value between counties, as equally consisting of a week or weeks in both January and July,
- Requiring the Aircraft Advisory Subcommittee of the California Assessors Association to designate two contacts in each lead assessor’s office for each of these carriers that will be available to address reporting issues and the California Assessor’s Standard Data Record network, and establishing best practices for the effective administration of the lead county system, audit process, and methods to evaluate converted freighters.
- Requiring the lead county assessor’s office to transmit the property statement to the assessor of each county in which the personal property of the commercial air carrier is located or has acquired situs, and
- Providing that a county assessor that receives a property statement must first direct questions about the contents of the property statement to the lead county assessor’s office, and if the lead county assessor’s office is unable to provide an answer, may only then direct questions to the commercial air carrier that filed the property statement.
State Revenue Impact
According to BOE, the revenue impact of extending the sunset date on provisions in current law instead of allowing them expire 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 on December 31, 2016. Without centralization, 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. Absent a uniform codified methodology, each county would have to calculate the total aircraft fleet value, and values would likely vary from county to county. Airlines would inevitably face uncertainty and delays on the valuation of their aircraft. By extending the sunset date for the assessment of certified aircraft, AB 2622 continues to allow assessors to carry out their mandated responsibility to fairly assess all taxable property, within their jurisdiction, in an efficient manner. Further, AB 2622 makes several administrative changes that streamline and reduce workload for the airline industry. These changes ensure that the non-lead counties contact lead counties first with questions on filings, before contacting commercial air carriers. Additionally, AB 2622 requires assessors, in collaboration with the airline industry, to establish best practices for the effective administration of the lead county system. This bill also requires them to designate two points of contacts that will be able to address reporting/filing issues. To better assess and reflect the carrier actual tax nexus, AB 2622 also changes the representative period methodology by requiring it to be based equally on the carrier’s flight activity in the week or groups of weeks in January and July. It is imperative that counties continue to assess aircraft in an administratively efficient manner as these assessments translate into approximately $80 million in local revenue.
2. Valuation. 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, among others, 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 eliminate or reduce disagreements because they rely on either a knowable cost basis or a well-known price index, with a safety valve that would reduce values due to economic obsolescence. However, disagreements continue: some airlines appealed some lead assessors’ valuations, arguing that assessors didn’t apply the economic obsolescence formula correctly. 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, with no court yet rendering a decision. Additionally, some assessors argue that the current methodology undervalues aircraft, and propose instead to eliminate the 10% discount from the Airline Price Guide, or change the representative period from the currently designated one week period in January to a year-round measure that more accurately captures airlines’ presence in this state. Notwithstanding this ongoing dispute, AB 2622 proposes to extend the current methodology for three years while seeking to make the existing lead assessor model easier to administer. The Committee may wish to consider whether the current methodology accurately values certificated aircraft, and if so, for how many years should the Legislature extend it.
3. Location, location. In addition to placing the appellate authority for locally-assessed property taxes with county boards of supervisors sitting as the county board of equalization (Article XIII, Section 16), the Constitution also requires that property be assessed in the jurisdiction in which it’s situated (Article XIII, Section 14). Under the lead assessor model for certificated aircraft, one assessor values one airline’s fleet, then transmits this value to assessors in other counties where the aircraft has situs. The non-lead county assessor is still solely responsible for enrolling the value for that county, and is not required to use this value, but almost always do. In discussing the current lead assessor model, Legislative Counsel Opinion #1523620 from 2015 confirms that the official appraisal of a property’s value must be performed by the city, county, or district where the property has situs.
4. Of horses and water. While the law also requires airlines to file “one signed property statement for personal property at all airport locations and fixtures at all airport locations,” all carriers have not chosen to do so. With respect to flight activity data, some airlines segregate flight activity information by airport location and file all the information with the lead county, while others report flight activity directly to each county. With respect to nonaircraft personal property and fixtures, many airlines continue to file with each county. Additionally, airlines can file their returns electronically via the California Assessor’s Standard Data Record network. Because some airlines experienced e-filing difficulties, this bill requires that airlines be provided the names of persons to contact for assistance.
5. Being converted. AB 2622 directs the Aircraft Advisory Subcommittee of the California Assessors Association to establish methods to evaluate converted freighters. However, with state law setting forth a specific assessment process and valuation methodology, the bill’s direction may not have much effect. Instead, the measure could strike sections of law detailing the valuation of converted freighters, and instead direct assessors to value them based on the same formula as production freighters.
6. Related legislation. Last year, the Committee approved SB 661 (Hill), which required BOE to assess airline personal property, including certificated aircraft, but the measure was subsequently held on the Senate Appropriations Committee’s suspense file. The Legislature subsequently enacted AB 1157 (Nazarian), which extended the current valuation methodology until the 2016-17 fiscal year. Last autumn, Assemblymember Nazarian convened several meetings to discuss this issue; however, disagreements between assessors and airlines continue. This year, Senator Hertzberg introduced SB 1329, which extends the lead assessor methodology for valuing certificated aircraft like AB 2622, while also allowing trial de novo for suits for refunds of locally-assessed property taxes on certificated aircraft. The Committee approved the measure, but it was subsequently amended to remove its trial de novo provisions, and was recently approved unanimously by the Assembly Revenue and Taxation Committee.
Assembly Actions
Assembly Revenue and Taxation 5-0
Assembly Appropriations 14-6
Assembly Floor 50-28
Support and Opposition
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Support: Delta Air Lines, San Luis Obispo County Assessor Tom Bordanaro, San Mateo County Assessor Mark Church, Stanislaus County Assesor Don H. Gaekle, Los Angeles County Assessor Jeffrey Prang, Placer County Assessor Kristen Spears, California Assessors Association, California Special Districts Association, California State Association of Counties, Los Angeles County Board of Supervisors.
Opposition: None received.
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ASSEMBLY THIRD READING
ATR Bill Id:AB 2622
Author:(Nazarian)
As Amended Ver:May 19, 2016
Majority vote
Committee | Votes | Ayes | Noes |
Revenue & Taxation | 5-0 | Ridley-Thomas, Dababneh, Mullin, O'Donnell, Quirk | |
Appropriations | 14-6 | Gonzalez, Bloom, Bonilla, Bonta, Calderon, Daly, Eggman, Eduardo Garcia, Roger Hernández, Holden, Quirk, Santiago, Weber, Wood | Bigelow, Patterson, Gallagher, Jones, Obernolte, Wagner |
SUMMARY: Extends the Centralized Fleet Calculation Program for statewide assessment of certificated aircraft for property tax purposes until fiscal year (FY) 2019-20. Specifically, this bill:
- Extends, until FY 2019-20, 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 certificated aircraft, as calculated, is correct.
- Extends, until December 31, 2019, the application of the following provisions of law that otherwise are scheduled to sunset on December 31, 2016:
- Revenue and Taxation Code (R&TC) Section 441(l) that requires a commercial air carrier to file one annual property statement with a designated "lead" county, as provided; and,
- R&TC 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.
- Specifies that the "representative period," as specified, for each assessment year of an air carrier's ground and flight time and arrival and departure activity shall consist equally of a week or group of weeks in January and a week or group of weeks in July.
- Requires, on or before March 1, 2017, the Aircraft Advisory Subcommittee of the California Assessors' Association to do the following:
- Designate two contacts in each lead county assessor's office for each commercial air carrier to address reporting and data issues; and,
- Establish best practices for the effective administration of the lead county system, audit process, and methods to evaluate converted freighters.
- Requires the lead county assessor's office to transmit the property statement received from a commercial air carrier to the assessor of each county in which the carrier's personal property is located or has acquired situs.
- Requires a county assessor that receives a property statement from the lead county to first direct questions to the lead county assessor's office, and only question the commercial air carrier if the lead county assessor's office is unable to provide the answer.
- 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 (California Constitution Article XIII Section 2 of Article XIII of the California Constitution). 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. The property tax applicable to personal property, however, 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 2016-17, and is repealed as of December 31, 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 pre-allocated 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 pre-allocated 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 pre-allocated 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 during a representative period. 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 ratio, 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.
- Requires the Board of Equalization (BOE), upon consultation with assessors, to designate for each assessment year the representative period of an air carrier's ground and flight time and arrival and departure activity used in the allocation formula.
- 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. - 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.
FISCAL EFFECT: According to the Assembly Appropriations Committee, unknown fiscal effect. 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.
COMMENTS:
- 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 Aircraft Performance Group (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, AB 384 (Ma), Chapter 228, Statutes of 2010, extended the valuation methodology and centralized assessment provisions temporarily to the FY 2015-16. 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.
AB 1157 (Nazarian), Chapter 440, Statutes of 2015, extended the current assessment methodology for certificated aircraft for one more year through FY 2016-17. This bill extends the assessment methodology through FY 2019-20, streamlines some administrative procedures between aircraft carriers and county assessors, and updates how the representative period used by county assessors in assessing the aircraft of the carrier is determined.
- 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 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. 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.
- A More Representative "Representative Period": Once the "lead" county has calculated the pre-allocated value of the aircraft, the information is transmitted to local counties to determine their allocated portion of the fleet based on the flight data for the particular county. This allocation formula is determined by the frequency and amount of time that an air carrier's aircraft makes contact and maintains situs within a county during a "representative period." The purpose of the representative period is to obtain air carrier operational data that can reasonably be expected to reflect the average activity of the carrier for the ensuing tax year.
Under current law, the representative period is determined by the BOE on or before January 1 of each year, upon consultation with the assessors of counties where air carriers' aircraft make regular physical contact. January 1 is also the lien date by which the assessor establishes the assessed value and owner of property for tax purposes.
Over the last 20 years, the representative period selected has most often been the first or second week of January following the lien date. In 2013, at the request of the California Assessors Association, the BOE commenced an interested parties process on this issue. The key stakeholders argued the following:
- The airline industry contended that the representative period should be as close to the lien date as possible to ensure that information reported by airlines will most accurately reflect the activity of assessed aircraft.
- Assessors contended that many other states use the preceding 12 months prior to the lien date as a representative period. Moreover, a full year representative period better reflects the true value of the aircraft.
When the concept of the representative period was established in 1968, technological limitations provided that utilizing an entire year's past flight activity would be too burdensome. The Federal Aviation Administration (FAA) now provides records of all flight data on its public Web site that may be used to derive a more accurate representative period, and thus, more accurate assessment of aircraft. However, questions about this data set, such as how it could be used by assessors and the industry and how FAA can guarantee its availability into the future, remain unanswered. As an alternative, this bill requires the BOE to choose a representative period that incorporates a week (or group of weeks) in July, in addition to a week (or group of weeks) in January, as is currently common practice.
Analysis Prepared by: Oksana Jaffe, Irene Ho / REV. & TAX. / (916) 319-2098 FN: 0003049
In 2013, several air carriers have commenced legal action challenging the calculations of economic obsolescence under R&TC Sections 401.17(a)(1)(C) and (D). The lawsuits have been consolidated into one case pending in Orange County Superior Court. This bill, however, does not propose to modify the economic obsolescence provisions. ↑
Date of Hearing: May 18, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
ABPCA Bill Id:AB 2622
Author:(Nazarian) – As Amended Ver:April 26, 2016
Policy Committee: | Revenue and Taxation | Vote: | 5 - 0 |
Urgency: No State Mandated Local Program: Yes Reimbursable: Yes
SUMMARY:
This bill extends the Centralized Fleet Calculation Program (Program) for statewide assessment of certificated aircraft for property tax purposes until fiscal year (FY) 2019-20, and makes assorted technical changes to the administration of the Program. Specifically, this bill:
- Extends, until FY 2019-20, the application of the current assessment methodology for 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 certificated aircraft, as calculated, is correct.
- Extends, until December 31, 2019, the application of the following provisions of law that otherwise are scheduled to sunset on December 31, 2016:
- A commercial air carrier must file one annual property statement with a designated "lead" county, as provided; and,
- 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.
- States that it is the intent of the Legislature to determine the most appropriate method of calculating the assessed value of certified aircraft over a 365-day period.
- Requires, on or before March 1, 2017, the Aircraft Advisory Subcommittee of the California Assessors' Association to do the following:
- Designate two contacts in each lead county assessor's office for each commercial air carrier to address reporting and data issues; and,
- Establish best practices for the effective administration of the lead county system, audit process, and methods to evaluate converted freighters.
- Requires the lead county assessor's office to transmit the property statement received from a commercial air carrier to the assessor of each county in which the carrier's personal property is located or has acquired situs.
- Requires a county assessor that receives a property statement from the lead county to first direct questions to the lead county assessor's office, and only question the commercial air carrier if the lead county assessor's office is unable to provide the answer.
FISCAL EFFECT:
Unknown fiscal effect. 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.
COMMENTS:
- Purpose. According to the author, by extending the sunset date for the assessment of certified aircraft, AB 2622 continues to allow assessors to carry out their mandated responsibility to fairly assess all taxable property, within their jurisdiction, in an efficient manner.
- Background. Prior to 1999, the state did not have a single or specific assessment methodology for valuing certificated commercial aircraft. Valuation was left to each county assessor, leading to significant problems and conflicts over inconsistent valuations, property tax apportionment, and administrative cost and complexity. In 1998, a group of counties and airline industry representatives agreed to dispose of outstanding litigation and appeals over the valuation of certificated aircraft and create a new assessment methodology. That methodology was further refined by county assessors and industry representatives in 2005, resulting in the current method for valuing aircraft.
In addition to specifying the component metrics used to value fleets, the methodology prescribes procedures for designating a lead county assessor's office for each commercial air carrier operating in California, allowing an airline to file one property statement with the lead county, and prescribing a centralized audit process. The lead county is designated by 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.
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.
- Representative period. A key variable in the calculation of commercial aircraft property tax is the “representative period.” This is the time period that is used to estimate the frequency and amount of time that an air carrier’s aircraft makes contact and maintains situs within a county. The purpose of the representative period is to obtain air carrier operational data that can reasonably be expected to reflect the average activity of the carrier for the ensuring tax year.
Under current law, the representative period is determined by the BOE on or before January 1 of each year, upon consultation with the assessors of counties where air carriers' aircraft make regular physical contact. January 1 is also the lien date by which the assessor establishes the assessed value and owner of property for tax purposes.
Over the last 20 years, the representative period selected has most often been the first or second week of January following the lien date. In 2013, at the request of the California Assessors Association, the BOE commenced an interested parties process on this issue. The key stakeholders argued the following:
- The airline industry contended that the representative period should be as close to the lien date as possible to ensure that information reported by airlines will most accurately reflect the activity of assessed aircraft.
- Assessors contended that many other states use the preceding 12 months prior to the lien date as a representative period. Moreover, a full year representative period better reflects the true value of the aircraft.
- Committee Amendments. When the concept of the representative period was established in 1968, technological limitations provided that utilizing an entire year's past flight activity would be too burdensome. However, the FAA now provides records of all flight data on its public Web site that may be used to derive a more accurate representative period, and thus, more accurate assessment of aircraft. However, questions about this data set, such as how it could be used by assessors and the industry and how FAA can guarantee its availability into the future, remain unanswered. As these issues get worked out between stakeholders, the Committee recommends that this bill be amended to require BOE to choose a representative period that incorporates a week, or group of weeks in January, as is currently common practice, in addition to a week, or group of weeks, in July.
Analysis Prepared by: Luke Reidenbach / APPR. / (916) 319-2081
Date of Hearing: April 18, 2016
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Sebastian Ridley-Thomas, Chair
ABPCA Bill Id:AB 2622 (
Author:Nazarian) – As Amended Ver:April 12, 2016
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) 2019-20. Specifically, this bill:
- Extends, until FY 2019-20, 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 certificated aircraft, as calculated, is correct.
- Extends, until December 31, 2019, the application of the following provisions of law that otherwise are scheduled to sunset on December 31, 2016:
- Revenue and Taxation Code (R&TC) Section 441(l) that requires a commercial air carrier to file one annual property statement with a designated "lead" county, as provided; and,
- R&TC 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.
- Specifies that the representative period for each assessment year of an air carrier's ground and flight time and arrival and departure activity is determined by the air carrier's flight operations recorded by the Federal Aviation Administration (FAA) during the prior calendar year.
- Requires, on or before March 1, 2017, the Aircraft Advisory Subcommittee of the California Assessors' Association to do the following:
- Designate two contacts in each lead county assessor's office for each commercial air carrier to address reporting and data issues; and,
- Establish best practices for the effective administration of the lead county system, audit process, and methods to evaluate converted freighters.
- Requires the lead county assessor's office to transmit the property statement received from a commercial air carrier to the assessor of each county in which the carrier's personal property is located or has acquired situs.
- Requires a county assessor that receives a property statement from the lead county to first direct questions to the lead county assessor's office, and only question the commercial air carrier if the lead county assessor's office is unable to provide the answer.
- 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). 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. The property tax applicable to personal property, however, 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 2016-17, and is repealed as of December 31, 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 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%.
- A historical cost less depreciation basis with no individual aircraft value exceeding the original price paid; or,
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 during a representative period. 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)].
- A ground and flight time factor, which accounts for 75% of the ratio; and,
The sum of these factors yields the allocation ratio, 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.
- Requires the BOE, upon consultation with assessors, to designate for each assessment year the representative period of an air carrier's ground and flight time and arrival and departure activity used in the allocation formula.
- 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).
FISCAL EFFECT: Unknown
COMMENTS:
- Author's Statement: The author has provided the following statement in support of this bill:
By extending the sunset date for the assessment of certified aircraft, AB 2622 continues to allow assessors to carry out their mandated responsibility to fairly assess all taxable property, within their jurisdiction, in an efficient manner. Additionally, to better assess and reflect the carrier actual tax nexus, AB 2622 changes the representative period methodology by requiring it to be based on the carrier’s entire year’s flight activity. Further, AB 2622 makes several administrative changes that streamline and reduce workload for the airline industry. Overall, it is imperative that counties continue to assess aircraft in an administratively efficient manner as these assessments translate into approximately $80 million in local revenue.
- Arguments in Support: Proponents of this bill state that it contains improvements "developed during extensive stakeholder meetings [to] make changes to ease the administrative burden on taxpayers while clarifying the lead county assessment system." Additionally, assessors do not feel the current representative period "accurately represents the true [flight] activity throughout the year…. The FAA has the most accurate and complete information covering aircraft activity. Since this information is available electronically, it can be integrated into assessors' appraisal processes. This change will result in more equitable assessments."
- Arguments in Opposition: Opponents of this bill state that "California remains an outlier in its approach to property tax assessment of commercial aircraft, as commercial airlines must file in every county within which we fly, despite the fact the law provides for a specific, formula-driven assessments made on the exact same fleet of aircraft." Opponents maintain that this bill does not provide consensus and "significantly increases the burden to provide information to local assessors, and potentially increases our property tax assessment."
- 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, AB 384 (Ma), Chapter 228, Statutes of 2010, extended the valuation methodology and centralized assessment provisions temporarily to the FY 2015-16. 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. 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.
- Working Together Towards Best Practices: AB 1157 (Nazarian), Chapter 440, Statutes of 2015, extended the current assessment methodology for certificated aircraft for one more year in hopes that the airline industry and county assessors could reach consensus on how the methodology could be reformed during the interim. The author's office hosted a series of meetings with the airline industry, county assessors, and Assembly and Senate staff. Although a long-term solution was not identified, this bill contains the following provisions agreed upon by the airline industry and county assessors:
- Extension of the sunset date for the centralized assessment methodology;
- Identification of key persons in the assessor's office for airlines to contact if they are having e-filing issues or need other help;
- Direction to the lead county to share the airlines' property statements with local assessors, and to local assessors to pose any questions to the lead county first, prior to contacting the airline; and,
- Establishment of best practices for the effective administration of the lead county system, audit process, and methods to evaluate converted freighters.
- A More Representative "Representative Period": This bill also contains a provision that was not agreed upon by the airline industry and county assessors, related to how the representative period used in the centralized assessment methodology is determined. Once the "lead" county has calculated the preallocated value of the aircraft, the information is transmitted to local counties to determine their allocated portion of the fleet based on the flight data for the particular county. The allocation formula is determined by the frequency and amount of time that an air carrier's aircraft makes contact and maintains situs within a county during a representative period, and is the sum of a ground and flight time factor and an arrivals-and-departures factor.
Under current law, the representative period is determined by the BOE on or before January 1 of each year, upon consultation with the assessors of counties where air carriers' aircraft make regular physical contact. January 1 is also the lien date by which the assessor establishes the assessed value and owner of property for tax purposes. Over the last 20 years, the representative period selected has most often been the first or second week of January following the lien date. In 2013, at the request of the California Assessors Association, the BOE commenced an interested parties process on this issue. The airline industry put forth that the representative period should be as close to the lien date as possible to ensure that information reported by airlines will most accurately reflect the activity of assessed aircraft. Assessors put forth that many other states use the preceding 12 months prior to the lien date as a representative period; prior to the lien date's shift to January 1 from March 1 in 1997, the representative period had either included the lien date or took place prior to the lien date – the representative period only shifted to after the lien date to avoid capturing higher than average flight activity from the Christmas and New Year travel season. The BOE concluded that there was no compelling reason to change the representative period since its historical practice has been to select one week in January.
The purpose of the representative period is to obtain air carrier operational data that can reasonably be expected to reflect the average activity of the carrier for the ensuring tax year. When the concept of the representative period was established in 1968, technological limitations provided that utilizing an entire year's past flight activity would be too burdensome. However, the FAA now provides records of all flight data on its public Web site that may be used to derive a more accurate representative period, and thus, more accurate assessment of aircraft. Since technological advances allow a "lead county" to more easily retrieve data from the FAA for local counties to use in determining aircraft activity, this bill proposes that the representative period be derived from FAA data during the calendar year prior to assessment.
- Related Legislation: SB 1329 (Hertzberg) would extend the sunset date for the centralized assessment methodology for an unspecified number of years, and allows for a trial de novo for commercial air carriers in a refund lawsuit. SB 1329 is pending hearing by the Senate Committee on Appropriations.
AB 1157 (Nazarian), Chapter 440, Statutes of 2015, extended the sunset date for the centralized assessment methodology from FY 2015-16 to FY 2016-17.
SB 661 (Hill) would have transferred assessment jurisdiction for commercial air carrier personal property, including certificated aircraft, to the BOE. SB 661 was held by the Senate Appropriations Committee and subsequently amended for a different purpose.
REGISTERED SUPPORT / OPPOSITION:
Support
Assessor of Los Angeles County, Jeffrey Prang
Assessor of Santa Clara County, Larry Stone
California Assessors' Association
Opposition
Airlines for America
Alaska Airlines
American Airlines
California Taxpayers Association
Delta Airlines
George Runner, Member, Board of Equalization
Southwest Airlines
United Airlines
Analysis Prepared by: Irene Ho / REV. & TAX. / (916) 319-2098, Oksana Jaffe / REV. & TAX. / (916) 319-2098
In 2013, several air carriers have commenced legal action challenging the calculations of economic obsolescence under R&TC Sections 401.17(a)(1)(C) and (D). The lawsuits have been consolidated into one case pending in Orange County Superior Court. This bill, however, does not propose to modify the economic obsolescence provisions. ↑
Discussed in Hearing
9MIN
Senate Standing Committee on Governance and Finance
1MIN
Assembly Floor
2MIN
Assembly Standing Committee on Appropriations
Bill Author
Bill Co-Author(s):
