April 14, 2010 Update

 KEY VICTORY AGAINST AIRCRAFT EXCISE TAX INCREASE!!

Senate Bill 6143 was approved by House conference committee report on Sunday, April 11th - and in turn, by the Senate on Monday, April 12th. All mention of aircraft excise tax is removed from the passed legislation, which now awaits the governor's signature.

Barring any histrionics by Governor Gregoire, this will mean that we have successfully won the battle to prevent the damaging effects of any changes to the current aircraft excise tax that was in and out (and in and out) of this legislation.

The urgency in fighting this tax increase was the impetus for reinvigorating the Washington Aviation Coalition. After a State Senate Finance Committee meeting this past February 13, fifty or so aviation proponents, who had travelled to Olympia on a rainy Saturday, commandeered an empty Senate offices meeting room for review. Recognizing the strength of "One voice, One message", the seeds were sown to bring back the Washington Aviation Coalition. At the WPA State Annual Meeting in Puyallup, the newly reformed coalition elected Ryan Zulauf as chair and set about the business of mobilizing the member constituencies of the various organizations represented. Word went out to the members urging the message be sent to Washington legislators, loud and clear.

In the end, legislators listen best to the voters who put them in office.

Congratulations to WPA members, in the chapter and across the state, and to Coalition members, for a successful campaign in communicating the message against this misguided legislation.

Thank you for demonstrating one of the values and benefits of WPA membership - Advocacy for Washington Aviation, by Washington Aviators!

Footnote: Remember, this was a supplemental tax bill, meaning this was to cover the $2.6 billion shortfall for the current budget. Next legislative session, our lawmakers will work on the regular 2 year budget cycle and will be facing a $5.7 billion shortfall. This fight is likely to return in January 2011.

The State of Washing has a new bill it raise money for the state.  It has lots of ideas, but one that concerns us as pilots and aircraft owners is section X (ten) that wants to plane an annual excise tax on our  aircraft based on their depreciated value.  Below is a document that will help you understand and act on the bill.

House Bill 3176 would impose a .005% (1/2 percent) excise tax

Latest News: Hearing scheduled for Saturday, Feb. 13, 9:00 am.   Attend if at all possible!

 An Analysis of House Bill 3176 and it’s tax increases

 A letter from John Townsley  (Legislative Director, WPA, state level)

 The proposed revision to the Registration Fee schedule

 Sample letters to State legislators   

Hopefully from these letters, and from all the information in this document, you can find your own words to express yourself to State Legislators    DO THIS WITHOUT DELAY!

 The Washington state House of Representatives has introduced House Bill 3176 that will impose a .5% (1/2 percent) excise tax on all aircraft in the state of Washington.

The bill also states that if you elect to register your aircraft in another state and that state does not have an excise tax or is less than this new WA excise tax you will be required to pay the difference. This addition to the state of Washington tax law is in Sec. 1002 (page 69) of this bill and it reads:

Sec. 1002. RCW 82.48.020 and 2000 c 229 s 4 are each amended to read as follows:

1.       An annual excise tax is imposed for the privilege of using any aircraft in the state. The amount of the tax is five-tenths of one percent of the taxable value of the aircraft, as determined under section 1003 of this act.

2.       The tax imposed under this section must be collected annually or under a staggered collection schedule as required by the secretary by rule.

3.       Persons who are required to register aircraft under chapter 47.68 RCW and who register aircraft in another state or foreign country and avoid the aircraft excise tax imposed under this section are liable for the unpaid excise tax. A violation of this subsection is a gross misdemeanor.

4.       The department of revenue may, under chapter 82.32 RCW, assess and collect the unpaid excise tax imposed under this section, including the penalties and interest provided in chapter 82.32 RCW.

5.       Except as provided under subsection (3) of this section, a violation of this chapter is a misdemeanor punishable as provided in chapter 9A.20 RCW.

You can read the bill yourself at: http://apps.leg.wa.gov/documents/billdocs/2009-10/Pdf/Bills/House%20Bills/3176.pdf

As proposed in the bill, this new excise tax will replace of the current annual registration fee. So if you own a single-engine fixed wing airplane worth $100,000 your current annual registration fee is $65.00. Under the proposal in the bill that annual fee (excise tax) would jump to $500.00.
For comparison purposes in the state of Washington - non-commercial boats pay an annual excise tax of .005%, but only if the boat is over 16' in length ; and if you own a car you only pay an excise tax of .003% at the time you purchase the car, but not annually. (Information from the Washington State Department of Revenue web site)

WPA is urging you to take immediate action.

Contact your state legislators to protest this new and unwarranted excise/property tax on your aircraft.

To find your Washington State House of Representatives and/or your Washington State Senator: http://apps.leg.wa.gov/DistrictFinder/Default.aspx

Write or call your elected official to let them know how this would affect you!

The time to act is NOW...

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LATEST NEWS!!!!

A hearing has been set for House Bill 3176.

WPA urges members to attend if at all able. Let’s pack the hearing room and make our voices heard!

Finance - Saturday, 2/13/2010 9:00 a.m.
House Full Committee
House Hearing: Room A
John L. O'Brien Building
Olympia, WA

Public Hearing:

• SB 6130 - Relating to fiscal matters. (If measure is referred to committee.)

• ESB 6843 - Preserving essential public services by temporarily suspending the two-thirds vote requirement for tax increases. (If measure is referred to committee.)

• HB 3176 - Increasing state revenues to preserve funding for education, public safety, health care, and safety net services for elderly, disabled, and vulnerable people by preventing abusive tax avoidance transactions, narrowing or eliminating certain tax preferences, and providing equitable tax treatment.

We need to “pack the house” if we want to see this bill stopped or modified.  The recommendation is that we dress business casual, and arrive 30 minutes early for sign in etc..(sign in is necessary only if you wish to speak) and be prepared to share how this bill would have a negative impact on your aviation.


Where is the John L. O’Brien Building?   http://www.ga.wa.gov/images/campus-map.pdf

Even if you are NOT an aircraft owner, you should come. This bill, as written, could have a devastating effect on Aviation in Washington!

Owners - If you are at all able, make the trip! Otherwise, you’ll think back on it next time you’re paying taxes on your aircraft.


 

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Analysis of HB 3176

Part X

Airplane Excise Tax

Section 1004

From Dan Cryer, Airport Manager for Vista Field

The table below illustrates the increases in airplane excise taxes as compared to the current registration fee.

1.                  The cost of some newer single-engine fixed wing aircraft such as the Cessna 182 and Cirrus R22 can approach $500,000; the cost of some newer multi-engine fixed wing aircraft (non-turboprop) can exceed $1 million.

The percentage increase in excise tax ranges from 150 percent for the low end of single-engine aircraft to 120,000 percent for high end turbojet multi-engine aircraft.

Examples of recent aircraft classified for sale ads (Controller.com)

Single-engine Fixed Wing

            1980 Cessna 182 $92,500

            1968 Beechcraft V35 $98,500

Multi-engine Fixed Wing

            1971 Cessna 421 $185,000

            1982 Beechcraft 58P $389,000

Turboprop Multi-engine Fixed Wing

            1990 Beechcraft King Air 300 $1,595,000

            2007 Beechcraft King Air 350 $4,950,000

Turbojet Multi-engine Fixed Wing

            Beechcraft 400A $2,295,000

            Cessna Citation X $13,995,000

            Boeing BBJ $49,750,000

Helicopter

            Bell 412 $3,508,800

Other Categories

            No relevant information available

The fair market value of aircraft can vary dramatically depending on condition, total airframe hours, engine hours, type and age of avionics, and damage history.  The cost of a piston engine overhaul can exceed $25,000 and an upgraded avionics suite can exceed $100,000.  All aircraft have time limited components that must be replaced at the pre-determined number of hours.

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From: John Townsley  (Legislative Director, WPA, state level)

Sent: Friday, February 12, 2010 8:23 AM
Subject: RE: Hearing on Saturday

Bruce:

 Great.  We need to pack the hearing room.

 Do you know if anyone is planning to testify from WASAR?

 John Dobson, WPA President, will testify for WPA.  WPA is working with several alphabet players to address this bill.  John will take the high road in his comments.  He will discuss the needs of the system, the importance of services and activity at airports to keep airports viable, and he will affirm that we need to have a solid aviation system for the benefit of all Washingtonians.  John will propose updating the existing schedule of excise taxes, and then (rather than sending all tax receipts to the General Fund) depositing all excise taxes to the Aeronautics Account for reinvestment in airports and the State aviation system.

 We believe it is very! unlikely that we can completely stop an increase in the excise tax.  The last time the excise tax was increased was in 2003.  We may, however, take the high ground and successfully deflect the tax increase to where it would benefit aviation.  We may also be able to soften the tax increase.  We do not want to see a percentage based tax since it would automatically index, regardless of the economic situation of aviation.

 It is very important that we differentiate aviation from boats.  I keep hearing legislators say “well, boats pay ½%, so you (rich airplane owner) should too…”  Below is a letter I sent to the EAA government affairs staff that might be helpful.

 John

 --------------------------------------------------------------------------------

 Randy:

 Thanks for your attention to this important legislation.

I do not have information readily available about the relative value of boats and aircraft in 1949.  I don’t believe that relative values of boats and aircraft in 1949 is relevant to the situation aviation in Washington faces today.

A comparison of taxes applied to boats and to aircraft is like comparing the proverbial “apples and strawberries”.  Just as apples grow on trees, aircraft operate in the air.  Apples require long term investment to bear fruit.  So do airports and the aircraft based upon them.  Boats operate from marinas.  They are restricted to well defined waterways, lakes, and the sea.  Aircraft of all sizes and capabilities are essential to Washington’s economy. 

Aircraft are used for search and rescue, disaster relief, medical evacuations, surveys, movement of goods and cargo, movement of people, and for personal transportation in ways similar to automobiles.  If a boat fails to return to its berth are sent to search for it, not another boat.  When a child or elderly person wanders away from a rural community, we use aircraft in the search.  In many instances these services are provided at no cost, or perhaps just for the cost of fuel.  Just last fall volunteers donated hundreds of flight hours during the eight day search for a missing Taylor Craft from Harvey Field.

Aircraft and aircraft owners provide significant services to citizens of Washington at no charge.  For example, nearly 2200 young people were introduced to aviation around the State through the EAA “Young Eagles” program in 2009.   Hopefully some of these youngsters will realize that they too can fly, and will grow up fill in behind one of the many military, air ambulance, and airline pilots who will retire in the next few years.  Another selfless organization is Angel Flight.  Nearly 300 Washington pilots and aircraft owners flew hundreds of Angel Flight “missions” in 2009, serving residents of our State.  Angel flight transports medically stable patients from their homes to where they receive needed care – for FREE! 

The 2006 State and Regional Disaster Airlift Operations Plan developed by the Washington Department of Transportation, Aviation Division would utilize privately owned aircraft to augment Government resources should a large disaster occur.  Tasks such as for transporting persons and cargos to hard hit areas, reconnaissance, surveillance, and disaster relief may be performed by private individuals in privately owned aircraft.  The ½% excise tax on aircraft cannot but diminish the pool of available private aircraft to assist with emergency response to very large disasters.  Recall that a significant amount of aid to the disaster victims in Haiti is provided by private individuals flying privately owned aircraft.  The huge tax increase proposed in HB 3174 will discourage individuals from owning aircraft, or from basing their aircraft in Washington.

A few years ago the Legislature and Governor established very liberal tax benefits for Boeing Corporation and related commercial aircraft enterprises.  Clearly there was recognition that the manufacture and use of large transport category aircraft brought significant social and economic benefit to the State.  While the legislature was very diligent in protecting Boeing Corporation, it has shown less interest in the health and vitality of small businesses and individual users of the aviation system.  Small airports such as Kelso, Goldendale, and Tonasket serve rural communities located at some distance from major urban centers.  Volunteers, many of whom are aircraft owners, donate many hours to maintain or improve the airports – for the public good.  Are public roads and highways improved and maintained by volunteer donations?  Marinas?  Ferrys?  No.  Small airport Fixed Base Operators and providers of air taxi services  have not received the same favored tax treatment.  The proposed ½% excise tax will, instead of improving their balance sheet as was done with Boeing, significantly increase their fixed costs.  Who will train the next generation of pilots when even more small flight schools close because they cannot recapture the additional cost of owning and operating their fleet?  Moody Aviation based at Spokane Felts Field estimates the excise tax will raise their costs of operation by nearly $100,000 per year.  Is it the Legislatures intent to eliminate privately held flight schools?

In July of 2009 the Governor and Legislature received the report by the Longterm Air Transportation Study council (LATS).   The LATS report reviewed existing capacity, trends, and challenges to the Washington air transportation system.  Among the findings of LATS was that a significant backlog of urgently needed aerodrome maintenance, safety improvements, and other infrastructure work exists on public use airports within Washington State. LATS also found that between 2005 when the study began, and 2009 when it was completed that three public use airports closed.  Why is this relevant to the discussion of relative worth and taxation methods for boats vs aircraft?  Because airports, particularly those that serve smaller communities receive substantial support from fees and rents paid by aircraft owners and tenants.  It is also relevant because one of the major recommendations of LATS was to increase investment in the aviation transportation system.  Investments are needed both to assure adequate capacity for the future and to prevent further erosion of capacity caused by deterioration and closure.   The proposed several hundred to several thousand percent increase in aircraft excise taxes will diminish critically needed investments in the Washington State aviation system.  HB 3176 would direct all excise tax receipts to the general fund.  Currently 10% of excise taxes are deposited to the aeronautics account.

In summary, the comparison of aircraft to boats is a red herring, if you will excuse the pun.  Aircraft subject to the proposed excise tax provide Washington’s citizens with many benefits.  Direct benefits include eliciting substantial numbers of volunteer hours maintaining essential public services.  Indirect benefits accrue from the jobs and businesses supported by the nearly 7,000 aircraft registered with WSDOT/Aviation.  These businesses create wealth that is tapped by local communities to support their municipal or Port District owned airport.  While the General Fund may  receive some additional revenue from the ½% excise tax, the true increase in State revenue will be something less.  Fewer flying hours means a reduction in maintenance and fuel sales.  This will reduce state sales taxes by an unknown, but substantial amount.  It will also reduce sales tax revenues received by local governments, causing impacts at the local level.  Fewer flying hours also means less income for airport dependent businesses.  This means a reduction in B&O revenue.  Some FBOs have already let employees go because their business has diminished.  Further reductions in business are likely should the excise tax increase be enacted as proposed. As airport businesses decline, so will local airports.  As our airports decline, our capacity to respond to disasters, conduct SAR, and to create wealth through off airport business enterprises will decline.  Boats are not airplanes.  Marinas are not airports.  Marinas are not a portal to the world.  Every airport is potentially a direct connection to every other airport.  Airplanes look for boats in trouble.  Boats never return the favor.

The legislature views aviation as just another cash cow.  Of the 36 to 38 million dollars in State taxes levied on the aviation industry in the last biennium, only about 14-15% was reinvested in the system.  Contrast this to the highway system where all fuel taxes and registration fees are reinvested for the benefit of our citizens.  There is a real danger that the cash cow many Washington residents depend upon for essential services, the cash cow we rely upon in times of trouble, will be drained of vitality and become just an anemic carcass.  

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The proposed revision to the Registration Fee schedule…

Submitted February 13, 2010

Example letters to State legislators…

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This letter was sent by a Dave Van Horn, member of Paine Chapter, to his State Senator and Representatives:

I ask you to oppose HB 3176 provisions to vastly increase the excise tax on aircraft.  In the midst of the worst recession in a generation, to single out an already suffering industry for a huge tax increase is unwarranted and unwise.

The recent earthquake in Haiti was a vivid reminder how an airport can be a crucial lifeline after a disaster.  Keeping in mind our region's own history of flooding and earthquakes, it is a reminder we should heed.  But those airports will only be there when they are most needed if they are kept alive day to day by the activities of privately owned aircraft.  The huge tax increase proposed in HB 3176 would devastate the ranks of those privately owned aircraft and the airports that depend on them. 

The unreasonable tax increase of HB 3176 would devastate the activities of private aircraft owners and the vital infrastructure of airports that depend on them.  I urge you to vote against HB 3176.

Thank you for your time,

David Van Horn

Member, Paine Chapter

Washington Pilots Association

 A letter from Richard Jones, member of Paine Chapter…

 Subject: House Bill 3176

PART X - 6 Airplane Excise Tax

I find that the proposed changes to:

RCW 82.48.010 and 1995 c 318 s 4 as proposed by House Bill 3176 are very unsatisfactory for many reasons.  I will cover what I see as the significant issues in this note. 

1.      The change from a flat fee to a percent of the value of the aircraft is fraught with many problems that the State Government is not capable of addressing.  If first requires that the State know what the most recent sale price of the aircraft was.  It is unlikely that the State even has easy assess to this information because unlike motor vehicles aircraft titles are Federal.  Then there is the problem of establishing a depreciation schedule.  Unlike motor vehicles the average age of aircraft in the fleet is somewhere around 35-40 years with large numbers of them being over 60 years old.  The variation in value between like models and year of manufacture can be extremely large based on equipment installed and overall condition of the aircraft.  The administrative overhead cost of establishing the valuation for all aircraft in the State of Washington would be very large.  This will negate the very purpose of the bill which is to generate more revenue. 

2.      This approach hardly fair in any way as I will demonstrate:
My neighbor purchases a new aircraft for $70,000 and pays an excise tax of $350 per year.
I purchased my aircraft in 1984 for $12,500.  It’s value in recent times (before the recession) was about $80,000.  House Bill 3176 would have me paying 0.5% of $12,500 less a depreciation schedule yet to be determined.  Let us say the depreciation schedule is a very small 3% per year.  Now I will be paying 0.5% of about $5,700 (about $28) compared to my neighbor’s $500 for an aircraft of lesser value.  This is hardly what I would call fair even if it does work to my advantage. 

3.      Raising the annual excise tax on aircraft from $65 to as much as $350 in a single year implies to me that our State Government has lost it’s ability to manage our collective expenditures. 

Summary:

If the State of Washington is inclined to be so irresponsible as to raise taxes in such hard times it would be more appropriate to raise the current flat excise tax of $65 per aircraft to something somewhat higher.  This would at least increase revenue without adding a large overhead in Washington State work force that the State can clearly not afford. 

Please understand that I am not in favor of such an increase in excise tax. 

I am only providing the above guidance and advice because I fully recognize how fiscally irresponsible the State of Washington has been and will likely continue to be over the next few years.

 A letter from Stephanie Allen, member of Paine Chapter…

 WA taxes make this a General Aviation unfriendly state

Washington charges sales tax on aviation gas. These taxes go to the general fund. Here is a statistical report from AirNav as of 2/12/2010.  As shown WA has the highest fuel prices in the West Coast and nearby areas.

USA Avg Price $4.60 Western Pacific Avg Price $4.74

State                Avg price             min. price

WA                   $4.84                    $4.10

OR                     $4.44                    $3.85

ID                       $4.51                    $3.75

CA                      $4.74                    $3.90

NV                      $4.73                    $3.80

MT                      $4.31                    $3.99

UT                       $4.56                    $3.85

We have the highest sales/use tax and aircraft owners moving into the state must pay use tax on current blue book values regardless of how long they have owned the aircraft. An example of the use tax issue for new residents: original purchase price of aircraft #1 was $10,000, current blue book price is $36,000, aircraft #2 original purchase price $12,500, current blue book value $56,000. Automobile owners pay no use tax on moving into the state if the automobile was purchased 90 days prior to the move. RV and Boat owners pay on moving into the state. RVs and boats depreciate unlike a well maintained older aircraft.

Doing the math: Aircraft #1 and #2 originally purchased, in 91 and 85 respectively, by a resident using the current tax rate of 9.5%, even though at time of purchase the rate was quite lower, would pay .095 x $22,500 = $2,138 (or in the past the rate was 8% or less, 8% = $1,800). If moving into the state, in order to register and pay the registration fee of $65 per aircraft they also have to pay, if stored at Paine Field, .095 x $92,000 = $8,740. This is a really big price to pay to move here. Now add an annual .5% fee in place of the $50 excise tax (the other $15 is a filing fee). You have .005 x 92,000 = $460 + $30 for the two aircraft = $490 in place of $130. So move in costs would be $8740 +$490 = $9,200. Would you move here? Answer, only if we had to and we may have to give up the aircraft.

Now, some individual stats: When I bought aircraft #1 in 1991, I had a job and earned $37,000. In 1993 I earned $40,000 and then retired early due to job loss at the end of 1993. With no pension, only a 401K plan and no jobs in my field, my budget was $2,000 a month to cover all expenses. I managed to increase my budget with additional part time jobs that paid $7 per hour and then one that paid $10 per hour. To make my budget, I sold my house and purchased a less expensive condominium. What is my point? We aircraft owners are not all wealthy, we are average, we work hard and we love to fly. In my case the airplane was close to being out of my budget and gone when I met the love of my life (he had airplane #2) and he had and still has a job. I am blessed.

Sincerely, Average Women Pilot

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