L.A. County Tightens Tax Rules on Out-of-state Aircraft

Aircraft owners whose aircraft are based outside of California but spend significant time in the Golden State may face new taxes in Los Angeles County. State law provides that an aircraft is subject to property tax if it establishes situs in California, and it further provides that the aircraft should be taxed in the county where it is “habitually situated.”

According to Joe Park, managing partner of business aviation tax firm BizjetCPA, neither the law nor the regulations provide any specific guidance regarding the determination of sufficient connectivity with California as to constitute situs.

“Each of the 58 California County Tax Assessors is essentially free to make their own separate determination of what is required for an aircraft to establish situs, or taxability, in California,” Park told AIN. “Historically, most counties in California have provided aircraft owners with informal guidance that excludes taxation if an aircraft spends less than 30 or sometimes 60 overnights in their county.”

“While this position could be legally challenged in court, it’s often the case that the property tax amount due is not enough to justify a formal challenge,” explained Park.

Recently, Los Angeles County took steps to significantly change how it defines situs and enforces property tax compliance, with the county now taking the arbitrary position that an aircraft that spends as few as 19 overnights annually (5% of its time) in the state has established situs and is therefore taxable. 

To identify those aircraft, the county claims to be using an “advanced aircraft discovery software” that has resulted in nearly 1,000 new assessments worth almost $40 million, with enforcement increasing significantly.

Aside from Los Angeles International Airport (KLAX), the county includes several busy business aviation gateways—Van Nuys (KVNY), Hollywood Burbank (KBUR), Long Beach (KLGB), and Hawthorne Municipal (KHHR)—as well as numerous other airfields.

“If an out-of-state aircraft owner receives a property tax bill, we recommend a review of the aircraft’s activity during the look-back period to see whether there is an argument that situs was not established (no tax is due) or whether apportionment to an alternate situs can be established to reduce the bill,” Park said. “We would like to see the California Board of Equalization step up and provide specific guidance to its county tax assessors as to what level of connectivity is actually required to establish situs.”

He believes that would provide for uniformity of the application of the law across California.