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AIRLINE REVENUES TO LAND STATEWIDE

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Revenues will continue to drop out of the skies into local tax coffers throughout Utah, the State Tax Commission ruled Tuesday.

In a far-reaching decision that will almost certainly be appealed, the four-member commission voted unanimously to reject a proposal to allocate airline property taxes to their county of origin.Had the commission accepted the proposal, Salt Lake County taxing entities could have kept up to $6 million in property taxes that now are being distributed to local governments and school districts statewide. That's because most airline traffic begins and ends at the Salt Lake International Airport.

Commissioner Roger O. Tew made the motion to maintain the existing allocation system and to spell it out in state law. He said the commission is obligated to apportion airline taxes the same way it apportions revenues from trucking lines and other "mobile assets."

According to Tew, the entities petitioning for the change - Salt Lake City and the city school district - offered no compelling arguments as to why airlines should be treated differently, and "that's at the heart of this issue."

Commission Chairman W. Val Oveson added the Tax Commission would in effect become an "appropriating body" if it were to change the long-standing practice. "I don't think we should undo it," he said.

However, Oveson said the commission would be receptive to legislative action on the issue. Also, he invited the Salt Lake petitioners to contest the decision in the rulemaking stage that will follow Tuesday's vote.

The action came during a brief Tax Commission rule meeting that followed weeks of study, a public hearing and a written comment period. It was the first rule meeting to be opened to the public under new procedures enacted earlier this year.

Deputy Salt Lake City Attorney Steven Allred said while he was disappointed by the commission's vote, he was neither surprised nor daunted by it. The city and the school district both plan administrative and legal appeals.

"There is a statutory basis for treating airlines differently," Allred said, pointing to the fact that unlike trucks, airplanes have no physical contact with many of the counties that get their taxes.

School district attorney Diane Banks agreed, saying there was "no basis" in law for the Tax Commission's decision. Property, including airlines, must be taxed where they are located, she said. "There needs to be a nexus to that, and airspace is not part of the ground."

Saying that federal law has already addressed the issue, the two attorneys predicted that the Tax Commission's rule will ultimately fail.

If it does, the fallout would be felt throughout the state, especially in the smaller school districts and local governments that depend on airline revenues for significant portions of their budgets.

Duchesne County, for example, reaps a $400,000 windfall from airlines that never land there. It and almost every other county and school district in the state opposed Salt Lake City's bid for a rule change. Commercial airlines also expressed concerns that their property taxes might go up if they were based on the higher Salt Lake levels.

Allred and Banks said the potential financial gains are not as important as the constitutional questions.

"It's an issue of economics and equity," Allred said.