Cheers to the Holidays⁠—and Property Taxes

December 20, 2018 | Insights

By Katherine Staton & Jim Struble

The holiday season is in full swing which means Christmas cookies, New Year’s resolutions, and property taxes. Wait. What?

Yes, if you or your clients are aircraft owners in Texas, you should already be thinking about 2019 property taxes. Here is why: Property taxes are assessed by the local taxing jurisdictions on all income producing personal property located within that jurisdiction on January 1 of each year. An Aircraft Rendition and Application for Allocation both must be filed by their corresponding deadline.

Aircraft Rendition

Appraisal Districts start with a presumption that an aircraft owned by an entity is income producing personal property. Aircraft which are not held or used in the production of income are not subject to property taxes. A declaration of non-income producing aircraft must be filed to declare that an aircraft is non-income producing and exempt from property tax. This declaration only needs to be filed once, unless there is a change in the aircraft registration number. However, each county has varying processes for verifying that the aircraft is in fact non-income producing. Failure to file a declaration may result in a presumption that your aircraft is used in the production of income and is subject to property taxes.

Rendition statements for aircraft used to produce income must be delivered every year to the chief appraiser after January 1, 2019 and not later than April 1, 2019 or April 15, 2019, depending on your appraisal district[1].

Application for Allocation

An Application for Allocation of Value is used to claim an allocation of value that fairly represents the use of taxable tangible personal property in Texas. Most aircraft owners can reduce the taxable value of their aircraft by showing they are entitled to an interstate allocation (business or commercial) so the taxpayer is not taxed for use outside of Texas.

Whether the business aircraft formula or the commercial aircraft formula is used will have a drastic effect on the aircraft personal property tax. Very often applying the commercial allocation formula will result in a net tax that is only 3 percent to 5 percent of the tax due using the business aircraft allocation.

The deadline to file an Application for Allocation of Value is March 31, 2019.

Remember, if the appraisal district ultimately assigns an aircraft value or allocation with which you disagree, there is always an option to protest.

*Some appraisal districts use their own forms in addition to the Texas Comptroller forms.

Happy Holidays and be on the lookout for more helpful tips from Jackson Walker’s Aviation group in 2019.

[1] The deadline for an aircraft located in an appraisal district in which one or more taxing units exempts freeport property under Tax Code Section 11.251 (a business personal property tax exemption on inventory that leaves Texas within 175 days) is April 1, 2019; for all other appraisal districts the deadline is April 15, 2019. Check with your local taxing units to see if they exempt freeport property.

Meet Katherine

Litigation partner Katherine A. Staton serves large and small aviation and corporate clients and companies in Texas and nationally. She is a CPA and represented plaintiffs before joining Jackson Walker. She is also a private pilot, owned an aircraft, and she completed an aircraft engine course to better understand her clients’ operations and case issues. This diverse background gives Katherine an advantage in understanding complex litigation issues, assisting clients with buying and selling aircraft, and helping clients with strategic decisions and challenging legal issues.

Meet Jim

James D. Struble’s primary area of practice is aviation, in which he has experience in trying both jury and non-jury matters as lead counsel for major airlines. Jim represents corporate and fractional ownership aircraft owners and operators in all aspects of aviation transactional matters including purchase, management, charter, and lease agreements. He also handles regulatory and enforcement matters, including dangerous goods/hazardous materials and drug and alcohol testing matters, for both air carriers and pilots and has successfully tried cases before NTSB Administrative Law Judges.

The opinions expressed are those of the authors and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for informational purposes only and does not constitute legal advice.