Airlines, Others Request Sept. 11 Tax Relief

Airlines, hotels and dozens of other firms that claim they’ve been financially hurt by the Sept. 11 attacks are seeking unprecedented breaks from their California property taxes under the state’s disaster relief law.

The companies assert that they qualify under a law designed to offer tax breaks for damage caused by earthquakes, fires and the like in California. Although the attacks happened 3,000 miles away, the firms contend that they’re entitled to help because the values of their businesses have dropped.

But some California county assessors, who determine property values in their regions, said the airlines and other companies are reaching too far.

“There’s not a single business, not many at least, in America that hasn’t been impacted negatively by the events of Sept. 11,” noted Santa Clara County Assessor Larry Stone. If tax relief is given “to the airlines because they were particularly hard hit, and they were, and then to the hotels and pretty soon the golf courses and amusement parks and the retail industry, then everybody’s trying to get healthy on the backs of the tax base in California.”

The staff of the state Board of Equalization, which provides oversight and guidance for the assessors, also has advised that the companies aren’t entitled to lower property taxes because the attacks happened in the East.

The board is scheduled to meet Thursday to review the matter.

“It’s something we’ve never had to deal with before,” said Bob Olson, Los Angeles County’s deputy assessor.

It’s unclear how much tax revenue California would lose if the airlines and other taxpayers get the relief they want, which according to assessors could run into the tens of millions of dollars. Each of the companies must file for a tax break in each county where it has property, such as a hotel building or, in the case of an airline, the terminal space it leases. Those claims aren’t consolidated into a statewide figure, government officials said.

Although the Board of Equalization could adopt its staff’s opinion and urge assessors to deny the tax breaks, each county assessor’s office can act as it pleases. And if the assessors don’t give the airlines and others relief, some of those companies are planning to file suit.

“We think we have a strong case,” said Jody Hann, a partner with tax consulting firm ITA in Chatsworth, which is representing many of the companies.

The carriers, airport concession firms, hotels, car rental agencies, amusement parks and at least one golf course claim that Sept. 11 and the subsequent plunge in U.S. travel and the economy overall mean the assessed value of their properties in California should be slashed. Some are asking for cuts of 30% to 50%.

UAL Corp.’s United Airlines and more than two dozen foreign airlines have filed for tax relief in Los Angeles and San Mateo counties, and many of those carriers are seeking lower property valuations in other counties with big airports, such as San Diego.

Hotel operators such as Hilton Hotels Corp. and Marriott International Inc. are among the hotels also seeking relief, on grounds that a drop in their occupancy rates since Sept. 11 have reduced the value of their properties too.

But the Los Angeles County’s assessor’s office thinks only the airlines and other tenants on the airport property should get relief, though its position could change pending the Board of Equalization’s decision, Olson said.

Olson and other tax officials said they also are struggling to determine how much of the travel firms’ problems stem from a U.S. economy that was heading toward recession before Sept. 11 and how much stem from the attacks.

Hann said his clients’ property values should be cut regardless of where the attacks occurred because the state law provides relief for “a catastrophic event beyond the control of the taxpayer.”

If the airport businesses at Los Angeles International Airport alone were granted the tax cut they want, they would see their combined California property tax bill cut by about $16 million for the current tax year that ends June 30, Hann estimated.

The airlines pay taxes on their leased airport terminals and other property, even on their jets. Although the planes fly around the world, assessors use a formula to determine how often the aircraft are in California to establish their state property values--and thus what they owe in taxes, said David Gau, deputy director of the Board of Equalization’s property tax unit.

But today “aircraft are not worth what they were before Sept. 11,” said Jim Hultquist, a spokesman for the airlines’ trade group, the Air Transport Assn.