In the upcoming 2018 general session of the Colorado General Assembly, CABA, through our sponsors, will introduce new legislation to modify the Colorado tax code pertaining
to the aircraft sales and use tax exemption.
Current Colorado
law exempts from sales and use tax, all aircraft
used in interstate commerce by a commercial airline, and parts permanently
affixed to those aircraft (C.R.S.
§ 39-26-711). This exemption applies to state, Regional Transportation
District/Scientific and Cultural Facilities District, county- and
state-collected local taxes.
A commercial
airline is defined as an airline carrying freight or passengers on regularly
scheduled flights for a fee (C.R.S. § 39-4-101(2)). On-demand air carriers, commonly referred to
as air charter or air taxi operators and operated under 41 C.F.R. Part 135,
generally fall outside of the definition of a commercial airline specifically because they are “on-demand,” as opposed to “regularly scheduled” flights.
Therefore,
purchasers of aircraft utilized in on-demand air carrier operations cannot
avail themselves of the sales and use tax exemption under C.R.S. § 39-26-711.
To remedy this inequity, CABA plans to introduce a straightforward bill to amend the exemption so as to
include on-demand air carriers. Over the past few months CABA has secured legislative sponsors Senator Jack Tate and
Representative Tracy Kraft-Tarp, as well as the support of the President
Pro-tem and Senate Majority Leader. We continue to meet with state representatives to gain
further support for the bill.
However,
CABA still needs additional assistance and support from you as we prepare to navigate through the legislative process.
The following anticipated benefits will help grow Colorado’s
aviation industry and benefit the entire state:
—
Aircraft purchasers will place additional aircraft in commercial service in
Colorado, which will increase jobs related to their operation. Such jobs
include pilots, maintenance and ground personnel, management, schedulers,
administrative staff, and a host of related services.
— Providers of services ancillary
to the purchase, placement and operation of charter aircraft will see more
business opportunities within Colorado. These services include aircraft
brokers and dealers, legal support, accounting, fuel sales and hangar services,
among others.
—
Colorado has a multitude of on-demand air carriers (approximately 40) which
will have access to additional aircraft. Often, charter companies do not
own their own aircraft, but instead lease them from owners. The expanded exemption will allow these air
carriers an opportunity to update their fleet with newer aircraft with enhanced
safety features.
—
Colorado rural communities will benefit through additional service.
Service providers critical to rural communities, such as medical transport, rely upon on-demand air
carriers to access communities with no airline service.
— Aviation in Colorado currently
supports 265,700 jobs with an annual payroll of $12.6 billion and an economic
impact of $32.2 billon as cited in the 2013 Economic Impact Study provided by
the Colorado Division of Aeronautics. Many companies supporting these
jobs will be more competitive and see increased growth through the proposed
expanded exemption.
— A recent survey of several Colorado
based on-demand air carriers, show that on average each aircraft creates 5.26
jobs to support its operation.
— A large cabin class aircraft requires
a crew of 5 with average salaries of $550,000 per aircraft.
— One on-demand air charter operator at
Centennial Airport stated that with passage of the bill it would assist them in
acquiring an additional three aircraft. Each of
these aircraft will have an approximate annual operating budget of $1,600,000
in variable expenses, of which about 70% remains here in Colorado adding another
$3,360,000 in funds spent here. Thus these 3 aircraft alone would add an additional $5,000,000 in economic impact.
— An on-demand aircraft operator based
at Rocky Mountain Metropolitan Airport in Broomfield with aircraft and crews
based at KBJC (Rocky Mt Metro), KAPA (Centennial), KEGE (Eagle/Vail), KTEX
(Telluride), and KASE (Aspen), stated that passage of the bill could help them acquire an additional 3-10 aircraft, adding
as many as 50 new jobs at multiple locations in the state.
— The impact on tax revenue will be minimal compared to the overall economic benefit. Aircraft owners utilize sophisticated tax planning to mitigate sales and use tax.
Often, this analysis results in owners simply basing aircraft in other states.
Incentivizing owners to keep these valuable assets in Colorado and place them
further down the stream of commerce through commercial service will create
opportunities that justify this legislation.
CABA needs to
raise $50,000 to cover expenses associated with the introduction of this bill
and the efforts needed to promote it through the 2018 legislative
session.
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