AOPA questions application of California 'possessory interest tax' on Orange County hangar and tiedown renters

AOPA questions application of California 'possessory interest tax' on Orange County hangar and tiedown renters

The Aircraft Owners and Pilots Association is questioning the application of the so-called "possessory interest tax" that affects pilots who rent hangars and tiedown spaces from publicly owned airports in southern California's Orange County.

"We want to ensure that any tax on aircraft owners is being levied fairly," said Bill Dunn, AOPA vice president for regional affairs. "Orange County may be pushing the boundaries of the law by its application of this tax provision."

The California constitution allows the state and local governments to levy a tax on a private individual or company that has possession or exclusive use of government-owned tax-exempt property. The law was originally aimed at ranchers and farmers using public land.

After its brush with bankruptcy in 1994, Orange County again began taxing the use of publicly owned hangars and tiedown spaces. (Orange County had stopped collecting the tax in 1984 but later claimed that the California State Board of Equalization forced the county to resume its collection.)

In letters to the Orange County assessor and the Board of Equalization, AOPA asked for information to show that the tax was assessed fairly and the tax proceeds distributed properly.

AOPA questioned whether month-to-month renters should be subject to the tax at all because the tax only applies to those who have "durable" (long-term) use of the property.

"Since most hangar and tiedown agreements are for 30 days, an airport manager can terminate occupancy after a month," said Dunn. "There's nothing durable about that."

AOPA also questioned how the county determined the value of hangar and tiedown use, and therefore the tax level. Orange County's tax billings, Dunn wrote, "appear contrary to existing California requirements surrounding possessory interest tax valuations."

AOPA noted that the possessory interest tax is well established in California law, with at least one third of the proceeds dedicated to public schools.

"But the tax can also benefit airports," said Dunn, "because some communities are returning some of their possessory interest tax collections to the local airport."

The 355,000-member Aircraft Owners and Pilots Association is the world's largest civil aviation organization. More than one half of the nation's pilots are members, as are some 45,000 California pilots.

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April 21, 2000