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08-08-2018, 02:25 PM
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Join Date: Nov 2007
Location: Pleasanton, CA
Posts: 188
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When does a kit become an aircraft (for tax purposes)
Any CA builders ever been in this situation: registered their kitplane w/FAA in year N, but didn't get final inspection, a/w cert, and make first flight until year N+1?
Did you receive a personal property tax bill from the county for tax year N+1, and if so, did you bother trying an appeal on the basis that it wasn't (yet) assessable as an aircraft?
The CA Tax and Revenue code defines an aircraft* as "...any contrivance used or designed for the navigation of or for flight in the air _which has been flown at least once_..." (Emphasis added.)
The lien date for assessing aircraft property tax is Jan 1st each year, but despite having an FAA N-number, a kitplane that has not flown is not yet assessable as an aircraft. Assuming the kitplane flies in year N+1, it is assessable in year N+2 and thereafter until its FAA registration is cancelled.
Always a dilemma, deciding if it's worth standing up to the tax man saying, "Notice me!"
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*Part 10, Chapter 1, sect. 5303 (a).
__________________
Kurt Haller
P-town, CA (10 min from KLVK!)
N748PK, RV-9A
Flying as of 13 July 2019
VAF dues last paid 28 Dec 2019
Last edited by DrillBit : 08-08-2018 at 02:27 PM.
Reason: Added forgotten footnote
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08-08-2018, 02:33 PM
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Join Date: Jun 2007
Location: Alexandria, MN
Posts: 304
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Quote:
Originally Posted by DrillBit
Any CA builders ever been in this situation: registered their kitplane w/FAA in year N, but didn't get final inspection, a/w cert, and make first flight until year N+1?
Did you receive a personal property tax bill from the county for tax year N+1, and if so, did you bother trying an appeal on the basis that it wasn't (yet) assessable as an aircraft?
The CA Tax and Revenue code defines an aircraft* as "...any contrivance used or designed for the navigation of or for flight in the air _which has been flown at least once_..." (Emphasis added.)
The lien date for assessing aircraft property tax is Jan 1st each year, but despite having an FAA N-number, a kitplane that has not flown is not yet assessable as an aircraft. Assuming the kitplane flies in year N+1, it is assessable in year N+2 and thereafter until its FAA registration is cancelled.
Always a dilemma, deciding if it's worth standing up to the tax man saying, "Notice me!" 
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I have no specific advise to CA; but as someone who deals with tax authorities quite often at my day job the "notice me" fear is very overblown. I would just call your taxing authority and ask them the question; typically their employees don't want you to pay any more tax than you legally have to either and are usually very helpful.
If you're correct that it should be deffered until next year, which it appears it should per your quote; they will likely take care of it quickly.
Edited to add: Looked up your registration on FAA website, you can show the airworthiness information is all blank may help for documentation.
__________________
Chris Odens
Alexandria, MN
RV-7 N914N
FLYING!!! as of 7/22/10
Build Log
Last edited by odens_14 : 08-08-2018 at 02:51 PM.
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08-08-2018, 02:51 PM
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Join Date: Nov 2007
Location: Pleasanton, CA
Posts: 188
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Unfortunately, no. The first person to answer the phone at the assessor's office said yes, having flown is a necessary condition. But she passed me to her supervisor, who thinks that registration alone is what makes the kit and airplane. We chatted for a while but it was clear he either didn't know about the first flight definition or for some reason thinks it doesn't apply.
__________________
Kurt Haller
P-town, CA (10 min from KLVK!)
N748PK, RV-9A
Flying as of 13 July 2019
VAF dues last paid 28 Dec 2019
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08-08-2018, 03:05 PM
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Join Date: Mar 2005
Location: Dallas area
Posts: 10,769
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As far as the FAA is concerned, the "project" becomes an airplane upon being issued an airworthiness certificate.
__________________
Mel Asberry, DAR since the last century.
EAA Flight Advisor/Tech Counselor, Friend of the RV-1
Recipient of Tony Bingelis Award and Wright Brothers Master Pilot Award
USAF Vet, High School E-LSA Project Mentor.
RV-6 Flying since 1993 (sold)
<rvmel(at)icloud.com>
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08-08-2018, 03:18 PM
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Join Date: Jun 2007
Location: Alexandria, MN
Posts: 304
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Quote:
Originally Posted by DrillBit
Unfortunately, no. The first person to answer the phone at the assessor's office said yes, having flown is a necessary condition. But she passed me to her supervisor, who thinks that registration alone is what makes the kit and airplane. We chatted for a while but it was clear he either didn't know about the first flight definition or for some reason thinks it doesn't apply.
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Bummer, did you give him the citation of the definition you posted? how was the tone of the conversation?
If you follow up again, I find it works best to make your tone assume he's right but you just wan't to better understand. "You obviously know more about this than me, but when I searched online and read the definition at Part 10, Chapter 1, sect. 5303 (a). it looks to me like the state doesn't define it as a taxable airplane until it's flown once, what am I missing?"
If he still is adamant, then you have to decide if the formal appeal is worth the hassle compared to the bill
__________________
Chris Odens
Alexandria, MN
RV-7 N914N
FLYING!!! as of 7/22/10
Build Log
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08-08-2018, 03:23 PM
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Join Date: Mar 2009
Location: San Diego, CA
Posts: 66
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The description in your last paragraph is how the county down here interpretes the tax codes. A couple of us have been told if it is registered and flys for the first time after 1Jan then you won?t see a property tax bill until the following year. I first flew in March ?18 and haven?t seen a letter from the tax man so far.
__________________
Craig Wheeler
San Diego, CA
RV-7A Sold
RV-14A Building
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08-08-2018, 04:19 PM
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Join Date: Mar 2006
Location: SoCal
Posts: 626
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Reserved N number
I had them send me a bill the same year I reserved my N number, years before completed. In the end I did first flight in November and they registered it the following year.
Don't let their simplistic scan of FAA N numbers throw you.
__________________
JD
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RV-7 N314SY (KWHP)
IO-360-B1B
CANbus based trim/flaps and electrical
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08-08-2018, 05:58 PM
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Join Date: Jan 2007
Location: Battle Ground
Posts: 480
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I received a notice every year when I reserved a N number. Every year I sent the form back with a letter stating it was a kit not an aircraft. Never heard anything from them until the next year. That went on for several years.
Now that is flying I'm sure they will send me a tax bill after I submit the form this year.
__________________
Scott
RV-7 N818BG (flying)
Bearhawk Patrol (building)
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08-08-2018, 06:07 PM
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Join Date: Jan 2005
Location: NC25
Posts: 3,508
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I built my airplane in Kalifornia and registered it two years before I had the Airworthiness Certificate. I also got a tax bill the following year. I let Tax Collector know that it was still a collection of parts. The bill went away with that notification. The airplane first flew in September 1997. I let the Tax Collector know in November that it was now a flying airplane. They sent me the tax questionnaire in 1998, then the tax bill, and I paid the personal property tax for the first time in 1998.
__________________
Gary A. Sobek
NC25 RV-6 Flying
3,400+ hours
Where is N157GS
Building RV-8 S/N: 80012
To most people, the sky is the limit.
To those who love aviation, the sky is home.
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08-08-2018, 06:43 PM
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Join Date: Mar 2007
Location: Sonoma County
Posts: 3,821
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Quote:
Originally Posted by DrillBit
Any CA builders ever been in this situation: registered their kitplane w/FAA in year N, but didn't get final inspection, a/w cert, and make first flight until year N+1?
Did you receive a personal property tax bill from the county for tax year N+1, and if so, did you bother trying an appeal on the basis that it wasn't (yet) assessable as an aircraft?
The CA Tax and Revenue code defines an aircraft* as "...any contrivance used or designed for the navigation of or for flight in the air _which has been flown at least once_..." (Emphasis added.)
The lien date for assessing aircraft property tax is Jan 1st each year, but despite having an FAA N-number, a kitplane that has not flown is not yet assessable as an aircraft. Assuming the kitplane flies in year N+1, it is assessable in year N+2 and thereafter until its FAA registration is cancelled.
Always a dilemma, deciding if it's worth standing up to the tax man saying, "Notice me!"
___
*Part 10, Chapter 1, sect. 5303 (a).
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Personal property tax is one thing........
But the sales tax will cause some pain.........
Don't ignore it, it grows over time with interest...... 
__________________
VAF #897 Warren Moretti
2019 =VAF= Dues PAID
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