Victory was sweet two years ago when FABA helped draft and enact the use tax exemption for out-of-state aircraft for flight training, repairs, and temporary use in Florida. But we’ll be taking two victory laps this time as a result of the Legislature’s action on the tax exemptions for the intangible tax for FBOs and on labor and parts for small aircraft repair and maintenance.
With one stroke of his pen, Governor Scott has erased the intangible tax liability for Fixed Based Operators (FBOs) in Florida. The Governor signed HB 7087 on March 28, 2012, retroactively eliminating the intangible tax liability that the Florida Department of Revenue (FDOR) was in the process of collecting from FBOs in Florida. A court decision from the Fourth District Court of Appeal in March of 2011 had given the FDOR a green light to pursue collecting intangible taxes from FBOs, going back as far as 1994 for the delinquent taxes.
HB 7087 includes a clarification inserted into the law that governmental leaseholds held by FBOs, are exempt from intangible tax. This one change has a significant impact to Florida’s FBOs. The State’s Revenue Impact Conference estimated that the collection of the intangible tax from FBOs is currently in excess of $600,000 annually. However, the cumulative impact of the exemption from back taxes, penalties, and interest that would have been collected by FDOR from Florida FBOs was likely to be in excess of $20 million—and that’s $20 million that can stay invested in FBOs rather than being handed over to the government.
The intangible tax exemption language was championed by Senate President Pro Tempore Mike Bennett. Senator Bennett, a long-time friend of FATA, and a past Legislator-of-the-Year recipient, was eager to assist on the intangible tax issue, and he worked tirelessly to make sure the Senate adopted the change.
The Governor’s signature on HB 7087 also repealed another aviation-specific tax for the repair and maintenance of small aircraft. HB 7087 extends the current tax exemption for labor and parts on aircraft by lowering the weight threshold from a maximum certified takeoff weight of greater than 15,000 pounds to aircraft with a maximum certified takeoff weight of more than 2000 pounds. The Revenue Estimating Conference projects that the this change in lowering the exemption threshold will cost the State more than $12 million a year. However, the change brings Florida in line with many states that have long had either no taxes on repair and maintenance of aircraft or have had lower taxes than Florida. By making Florida competitive for aircraft repair and maintenance business, the general aviation community is sure to benefit.
As with the intangible tax exemption, Senator Bennett also filed the Senate bill on the parts and labor exemption and was never dismayed by the high price tag that the economists put on his legislation. Generally, any provision that costs the State more than $1 million is summarily stopped before it ever has a chance to move forward. Over in the House, State Representative Steve Crisafulli, filed the parts and labor exemption legislation and was instrumental in working with Speaker Dean Cannon, also a former Legislator-of-the-Year for FABA, and Representative Steve Precourt to have the exemption included in the House tax package, HB 7087. The commitment from Speaker Cannon and House leadership on the parts and labor exemption issue was tremendous and created momentum that carried over to the Senate when the intangible tax exemption was added to HB 7087.
In addition to our friends in the Legislature, we owe a hearty thanks to our aviation partners at AOPA for their assistance on the parts and labor exemption bill and the Florida Airports Council for their help on the intangible tax exemption. It’s always better to work as a team on legislation, and both AOPA and FAC worked hand-in-hand with FABA all the way to finish line. And most important, thank you to our many FABA members that made phone calls, sent e-mails, and wrote letters to legislators encouraging them to favorably consider our exemption issues. It worked!