Valuing Aircraft For Property Tax Purposes
The California Constitution provides that all property is subject to taxation (property taxes). In addition to real property such as land, structures and vineyards, the county assessor is responsible for the valuation of four main categories of personal property: boats, aircraft, equipment used in a trade or business and manufactured homes not on a permanent foundation. For the 2001-2002 tax year, Napa County assessed 235 aircraft with a total value of $39,591,737. The annual valuation of aircraft as of January 1 is governed by specific laws and regulations which require close attention by both the appraisal staff in the assessor's office and the aircraft owner.
Pursuant to California Revenue and Taxation Code Section 5364 the State Board of Equalization in Sacramento has approved the Aircraft Bluebook Price Digest, a commercial valuation guide, which the Assessor must use to assess individual aircraft. The guide is published each Fall and gives a base average value (BAV) for most aircraft in general aviation use by model and year built. The State Board has also mandated that each County Assessor reduce the BAV by a ten per cent reduction to insure that a conservative valuation is used as a starting point.
The reduced BAV is then adjusted for a number of factors. The first factor is the amount of time on the airframe (usually the total hours the aircraft has flown since built). The Digest publishers have researched the average airframe hours for the fleet of each model by year built. If the subject aircraft being assessed in Napa County has more airframe hours than the fleet average, a downward value adjustment is given; if fewer hours, an upward adjustment. The second factor is the number of hours on the engine(s) since major overhaul (SMOH). Each aircraft engine must be overhauled after a certain number of hours based on manufacturer's recommendations and Federal Aviation Administration (FAA) regulations. The Digest gives the estimated cost of the overhaul, say $15,000, and the number of hours between overhauls, say 1,500 hours. Dividing $15,000 by 1,500 gives a cost of $10 per hour. If an engine is less than halfway to overhaul, say 600 out of 1,500 hours, there is an upward adjustment calculated by 750 hours - 600 hours = 150 hours x $10/hr = $1,500 increase. If the engine has 1,200 hours on it, the downward adjustment would be 1,200-750=450 hours times $10/hr= $4,500 reduction.
The BAV is based on a number of items that are considered standard for that aircraft for that year. These items include avionics, such as radios, glide slope, autopilots, electric trim, accessories such as larger fuel tanks and condition issues such as damage history, original logbooks and airworthiness directives. The condition of the paint and the interior of the cabin also impact value. Each aircraft owner needs to update the Aircraft Owner Report that they file with this office annually to make sure that we have the most current information on the items covered by the BAV so that we can arrive at a correct value.
Finally, California assessment practices require that sales tax be included with the value because sales tax and other charges such as delivery have to be paid to put an aircraft (or any item of business equipment) into service in California. Because the values for each model and year in the guide are used by jurisdictions across the country, the values do not include sales tax. Aircraft start out with a fresh BAV each year because of market fluctuations unlike a desk or a computer which has an original acquisition cost that includes sales tax and is then factored each year to arrive at the January 1 value. Thus the sales tax must be added to the adjusted BAV each year to arrive at a full cash value under California law.
Should you have any questions about aircraft assessment issues, please contact Napa County Assessor John Tuteur at (707) 253-4459 or by e-mail at firstname.lastname@example.org.