As the 2022 lawmaking session closes this week in Kentucky’s state capitol, it does so without legislators moving forward on a proposal to remove property tax on privately used aircraft.
House bill 447 did not make it out of committee, but the Bluegrass State is far from the only place where efforts are brewing to ditch taxes on planes as supporters see such expenses as a deterrent to bringing more business into their borders.
The list of states taxing private aircraft as personal property is diverse geographically and politically when looking at a map compiled from NBAA tracking. In general, states without such property taxes are in the Northeast, Central Plains and the Rocky Mountains. States in the Southeast and Pacific West are more likely to levy such taxes, but exemptions vary from state to state.
Could Florida & New York move in different directions on aircraft sales tax?
Florida and New York are two of the largest states for private aviation. Both do not collect property taxes on private aircraft. However, there have been pushes this year in each respective state to move in opposite directions on aircraft sales taxes.
Companion bills in Florida, Senate Bill 786 and House Bill 6051, would have exempted all aircraft sales and leases in the Sunshine State from sales and use taxes. Both bills died in committee.
Supporters of the bills noted that Florida is losing private aircraft business to Georgia, Alabama and Virginia, where aircraft sales taxes are lower.
Michael S. Ayers, president and CEO of the Melbourne, Florida Regional Chamber, wrote in February that New York’s effort to drop aircraft sales tax in 2015 led to “significant growth and investment in new infrastructure, workforce and aviation maintenance and services.”
An effort to reverse New York’s relief on aircraft sales tax has yet to make it out of committee. Similar bills have failed in recent sessions.
Iowa & Alabama pass tax relief on aircraft parts
Seeking a competitive advantage over border rivals, some states are moving to provide exemptions on the cost of parts and labor. Alabama recently enacted such an extension on the sale of parts and components for some military aircraft, while Iowa passed tax breaks on parts and maintenance.
Lawmakers called it a lifeline for businesses at community airports in the heavily rural farmbelt state.
“It’s very expensive to certify aircraft for airworthiness,” Iowa state Rep. Charlie McConkey, a pilot from Council Bluffs, told Radio Iowa. “In order to do that, there’s a lot of downtime and a lot of maintenance that has to be done.”
U.S. states (in blue) that do not have a property tax on aircraft
Effort to end property tax on private aircraft in Kentucky fails
While 27 states do not collect property tax on aircraft, it does not appear that Kentucky will become the 28th right away.
The recently failed proposal would do away with a property tax of $0.015 upon each $100 of value of all aircraft not used in the business of transporting persons or property for compensation or hire.
Kentucky state Rep. Jonathan Dixon, (R) Corydon, Ky., the lead sponsor of the bill told GlobalAir.com that data from the AOPA and other resources show 5,000 to 7,000 land-based aircraft in neighboring states, while Kentucky is around the 2,000 mark.
“Why are we not attracting some of those aircraft?” he said.
Dixon believes each additional jet lured to the state can be worth hundreds of thousands of dollars of economic impact, as well as jobs and FBO usage.
“We have been working on this issue for many years, and this is the first time since 2006 that we actually have a great opportunity to remove this tax,” the Kentucky Aviation Association wrote in a statement in February. “If passed, this would give our airports the ability to compete for additional based aircraft. Kentucky is surrounded by states that do not have property taxes on aircraft based on their airports.”
However, the bill received negative populist reaction on Twitter. Dixon, who is a small business owner, acknowledged that tax breaks for private aviation can be easy targets for negative criticism.
“I don’t see it that way because I see the impacts it would have for our general aviation airports and our state,” he said, noting that there has been a lot of talk about tax reform in Kentucky. “At the end of the day, all general aviation airports are looking for ways to grow and improve their services. In economic development, they are the front door to those individuals who are investing in our community.”
Looking ahead to the next states to address aviation taxes
While Kentucky mulled over a bill this year on the property tax levied on aircraft, Scott O’Brien, senior director of Public Policy & Advocacy for the NBAA, says those issues can vary widely on the makeup of a state and its real estate value. Such taxes can be a municipal issue, varying from town to town or school district to school district.
Other types of taxes impacting the private aviation industry, such as a usage tax, can impact an operator for merely coming into a state for a month.
O’Brien expects Florida to revisit the issue of aircraft sales tax, saying advocates in favor of reducing it might take a “more creative” approach that could face more support for a lower rate rather than an all-out abolition of the tax. He also noted that other states in the southeast rely on a cap or a flat tax when it comes to selling a plane, regardless of the price tag.
Next year, the NBAA expects to work with parts manufacturers and MROs to push for exemptions on taxation of aircraft parts and maintenance.
“That’s a competitive thing, too,” O’Brien said. “A lot of states around Texas have that exemption.”
Recent Comments