Most states, but not all assess a property tax on the value of general aircraft that have established “situs” or are habitually situated within their taxing jurisdiction.  Situs is the place where property is situated for tax purposes.    Generally, but not under all circumstances, the residence or domiciliary of the aircraft owner establishes the situs of the aircraft.  Generally the assessment is made to the owner of record as of the lien date (the “assessee”) regardless of whether or not the aircraft is subsequently sold.

Recently some states have become more aggressive in the determination of situs.  As personal property, aircraft are mobile and by their nature frequently have no single fixed location.  General aviation aircraft used in Part 91 operations usually establish situs at the home-base airport or hangar location where the aircraft is habitually returned at the conclusion of a trip.  However, for aircraft used in Part 135 operations, determination of situs may be significantly more complicated.  In 2007 Washington State undertook to impose property tax on charter operators that were based in neighboring states and which only occasionally landed in Washington.  Of course such actions are being contested in the courts on constitutional grounds and only time will tell whether such determinations of situs will be upheld.  In another version of expanding situs, Maine has recently undertaken to apply a use tax to aircraft that are situated in the state for more than twenty days per year.  Not to be outdone, in 2007 California passed a law designed to assess property tax on the aircraft of the four major fractional ownership programs.  Under this truly unique scheme, the tax is assessed on the program manager, not the fractional aircraft owner.   Each state has its own rules for the classification of aircraft and the determination of situs. As states continue to experience revenue pressure in their budget process, the boundaries of taxable situs will be expanded in new and increasingly creative ways.

Once the assessee, situs, and description of the property has been determined, the next major issue is to determine the taxable value.  Most states that impose a property tax do so based on some derivative of fair market value, but some states begin the valuation with the aircraft’s costs.  Those states that base their assessment on fair market value generally prescribe an appraisal process based on a recognized industry standard or valuation guide.  Determination of the proper assessed value of the aircraft may lead to disagreement between the taxing authority and the taxpayer; however, state law generally provides for an appeals process should the taxpayer strongly disagree.

An aircraft can be exempt from property tax by reason of its ownership, use, and/or type.  For example, aircraft held by a dealer as inventory is exempt by type.  Aircraft owned by State or Federal governments or the agencies thereof are exempt from property tax by ownership.