California Seeks Permission to Tax Stored Aircraft

Wednesday, December 8, 2004
Airport fears drop in deals by tax move in California
The Riverside (CA) Press-Enterprise

A proposed change to the way the state taxes airplanes being stored in California is hurting efforts to revitalize San Bernardino International Airport and could affect other Southern California airports. The state Board of Equalization scheduled a hearing for Tuesday on a possible change to property tax rule 138, which provides a property tax exemption for aircraft being repaired, modified or serviced.

The rule was intended only for aircraft actually being worked on, according to Dick Fisher, assessor for Yolo County. But that has been interpreted over the years to include planes stored in the state that receive only an annual oil change, Fisher said in comments the California Assessors Association forwarded to the state.

The assessors want the law changed to specifically exclude aircraft that are being stored in the state. That has created a snag in a plan that could generate as much as $500,000 a year for the San Bernardino airport.

The airport has approved a lease with a company that wants to store large commercial aircraft at the airport, located at the former Norton Air Force Base, according to Don Rogers, interim executive director for the San Bernardino International Airport Authority.

The lease agreement was to take effect on Dec. 1, but has been postponed because of the uncertainty created by the proposed tax change.

That is not surprising, Rogers said, given that for a $10 million airplane, the property tax would be $100,000 a year.

“They simply would not come to California,” Rogers said. “The airlines could not have said it more succinctly: ‘If you pass this rule, we will leave California.’ “

The San Bernardino airport’s agreement with KCP Leasing Inc. would have yielded $300,000 to $500,000 a year, according to Rogers, who added that the higher figure would be equivalent to about a third of the airport authority’s budget. That change also could affect the financial viability of airports in Victorville and Mojave, he said.

“As one of my lessees says, airplanes are not buildings. They can move them,” Rogers said. “Any representation that they are going to collect that tax is an illusion.”

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