Did You Know Airlines Pay Local Property Taxes on Planes? In California It’s the Subject of a Fight.

GringoLoco sends me to this Los Angeles Times article on the political fight over how the value of aircraft are assessed for California property tax purposes.

That’s right… airlines (including cargo operators) pay about $80 million per year in business property taxes. This is based on the value of the aircraft and the amount of time the planes are in the state, and the taxes are paid to 11 different counties.

County tax assessors value the aircraft, and estimate the time each aircraft spends in their county.

…one “lead county” [is designated] to appraise the fleets of each firm. The lead county crunches the numbers for its assigned carriers — Los Angeles County handles American Airlines and FedEx, for example — and distributes its findings to the other counties, which calculate the time each plane spends within their borders and send out the bills.

The airline industry wants one state agency to become responsible for determining the value of aircraft. Opponents argue that would make it easier for the industry to lobby for lower valuations. The State legislator sponsoring legislation to centralizing assessments swears this really isn’t a tax cut, because he’s a California Democrat after all.

Of course, the current system leads to complexity and also to some airlines assigned to some lead counties where they’re likely to be more heavily taxed.

Los Angeles doesn’t believe that the profitability of the airline industry can affect aircraft values, for instance, even though industry profitability affects the demand for aircraft and thus the price an airline might pay for or sell planes at on the open market.

The county’s assessment appeals board pointed out that aircrafts’ market value, on which the assessments are based, don’t change when airlines’ profits shrink, and rejected both claims. The independent appeals board said each claim would lead to “an absurd consequence.”

Somewhat arcane stuff, perhaps, but I pass this along because — though it makes perfect sense — it had never actually occurred to me that airlines were paying business property tax on aircraft (as opposed to, say, stationary equipment at an airport) in each jurisdiction in which they do business that has such a tax.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. Profitable airlines decrease the value of planes if anything. When airlines are flush with cash and in a super low rate EETC market they can afford to get brand new, more fuel efficient planes instead of perfectly good used aircraft.

  2. Do they tax foreign aircraft also? How does this encourage new routes to CA. cities?

  3. Those who play professional sports are often taxed when on the road, plus the teams management pay a hotel tax for all those rooms they booked.

    Now some local businesses have went to court and usually get a lower book value on land and equipment. The local liberal newspaper, an automaker that no longer in the area and a casino that received tax incentives.

    If you are not aware, Boeing plans to close down an old Mac plant, located in SoCal. http://www.bizjournals.com/seattle/news/2015/05/06/washington-to-be-sole-west-coast-aircraft-assembly.html

  4. Nice stock photo … not! This is a form for the german equivalent of the IRS, not really relevant here, is it?

  5. Of course California would have something stupid like this… There’s a law and a tax for everything there!

  6. Most states charge tax on both real and personal property. Real estate taxes are based on the assessed value of the property. Personal property taxes are based on the utilization of the personal property where it is located. In other words, if you use it in that state to generate a profit, they tax you. Surprise surprise, you made money they want some of it.

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