S.B. 237 Enrolled

1

COMMERCIAL AIRLINE AND AIRPORT
2 TAXATION AMENDMENTS
3 2008 GENERAL SESSION
4 STATE OF UTAH
5 Chief Sponsor: Wayne L. Niederhauser
6 House Sponsor: John Dougall
7
8 LONG TITLE
9 General Description:
10 This bill amends the Revenue and Taxation title relating to commercial airlines and
11 airports.
12 Highlighted Provisions:
13 This bill:
14 . defines terms;
15 . addresses the apportionment and interstate allocation of mobile flight equipment for
16 purposes of taxation under Title 59, Chapter 2, Property Tax Act;
17 . addresses the apportionment of the following for purposes of taxation under Title
18 59, Chapter 7, Corporate Franchise and Income Taxes:
19 . mobile flight equipment;
20 . compensation of flight personnel; and
21 . transportation revenues;
22 . provides a sales and use tax exemption for sales of certain construction materials
23 purchased on or after July 1, 2010, by or on behalf of an international airport;
24 . provides a sales and use tax exemption for sales of certain construction materials
25 purchased on or after July 1, 2008, by or on behalf of a new airport located within a
26 county of the second class; and
27 . makes technical changes.
28 Monies Appropriated in this Bill:
29 None

30 Other Special Clauses:
31 This bill provides effective dates.
32 Utah Code Sections Affected:
33 AMENDS:
34 59-2-102, as last amended by Laws of Utah 2007, Chapters 107, 234, and 329
35 59-2-801, as last amended by Laws of Utah 1999, Chapter 134
36 59-7-302, as last amended by Laws of Utah 1993, Chapter 169
37 59-7-312, as renumbered and amended by Laws of Utah 1987, Chapter 2
38 59-7-313, as renumbered and amended by Laws of Utah 1987, Chapter 2
39 59-7-314, as last amended by Laws of Utah 1994, Chapter 83
40 59-7-315, as renumbered and amended by Laws of Utah 1987, Chapter 2
41 59-7-316, as renumbered and amended by Laws of Utah 1987, Chapter 2
42 59-7-317, as renumbered and amended by Laws of Utah 1987, Chapter 2
43 59-7-318, as last amended by Laws of Utah 1994, Chapter 83
44 59-7-319, as last amended by Laws of Utah 1992, Chapter 165
45 59-12-104, as last amended by Laws of Utah 2007, Chapters 76, 195, 214, 224, 288,
46 295, and 329
47 ENACTS:
48 59-2-804, Utah Code Annotated 1953
49
50 Be it enacted by the Legislature of the state of Utah:
51 Section 1. Section 59-2-102 is amended to read:
52 59-2-102. Definitions.
53 As used in this chapter and title:
54 (1) "Aerial applicator" means aircraft or rotorcraft used exclusively for the purpose of
55 engaging in dispensing activities directly affecting agriculture or horticulture with an
56 airworthiness certificate from the Federal Aviation Administration certifying the aircraft or
57 rotorcraft's use for agricultural and pest control purposes.

58 (2) "Air charter service" means an air carrier operation which requires the customer to
59 hire an entire aircraft rather than book passage in whatever capacity is available on a scheduled
60 trip.
61 (3) "Air contract service" means an air carrier operation available only to customers
62 who engage the services of the carrier through a contractual agreement and excess capacity on
63 any trip and is not available to the public at large.
64 (4) "Aircraft" is as defined in Section 72-10-102 .
65 [(5) "Airline" means any air carrier operating interstate routes on a scheduled basis
66 which offers to fly passengers or cargo on the basis of available capacity on regularly scheduled
67 routes.]
68 (5) (a) Except as provided in Subsection (5)(b), "airline" means an air carrier that:
69 (i) operates:
70 (A) on an interstate route; and
71 (B) on a scheduled basis; and
72 (ii) offers to fly one or more passengers or cargo on the basis of available capacity on a
73 regularly scheduled route.
74 (b) "Airline" does not include an:
75 (i) air charter service; or
76 (ii) air contract service.
77 (6) "Assessment roll" means a permanent record of the assessment of property as
78 assessed by the county assessor and the commission and may be maintained manually or as a
79 computerized file as a consolidated record or as multiple records by type, classification, or
80 categories.
81 (7) (a) "Certified revenue levy" means a property tax levy that provides the same
82 amount of ad valorem property tax revenue as was collected for the prior year, plus new
83 growth, but exclusive of revenue from collections from redemptions, interest, and penalties.
84 (b) For purposes of this Subsection (7), "ad valorem property tax revenue" does not
85 include property tax revenue received by a taxing entity from personal property that is:

86 (i) assessed by a county assessor in accordance with Part 3, County Assessment; and
87 (ii) semiconductor manufacturing equipment.
88 (8) "County-assessed commercial vehicle" means:
89 (a) any commercial vehicle, trailer, or semitrailer which is not apportioned under
90 Section 41-1a-301 and is not operated interstate to transport the vehicle owner's goods or
91 property in furtherance of the owner's commercial enterprise;
92 (b) any passenger vehicle owned by a business and used by its employees for
93 transportation as a company car or vanpool vehicle; and
94 (c) vehicles which are:
95 (i) especially constructed for towing or wrecking, and which are not otherwise used to
96 transport goods, merchandise, or people for compensation;
97 (ii) used or licensed as taxicabs or limousines;
98 (iii) used as rental passenger cars, travel trailers, or motor homes;
99 (iv) used or licensed in this state for use as ambulances or hearses;
100 (v) especially designed and used for garbage and rubbish collection; or
101 (vi) used exclusively to transport students or their instructors to or from any private,
102 public, or religious school or school activities.
103 (9) (a) Except as provided in Subsection (9)(b), for purposes of Section 59-2-801 ,
104 "designated tax area" means a tax area created by the overlapping boundaries of only the
105 following taxing entities:
106 (i) a county; and
107 (ii) a school district.
108 (b) Notwithstanding Subsection (9)(a), "designated tax area" includes a tax area created
109 by the overlapping boundaries of:
110 (i) the taxing entities described in Subsection (9)(a); and
111 (ii) (A) a city or town if the boundaries of the school district under Subsection (9)(a)
112 and the boundaries of the city or town are identical; or
113 (B) a special service district if the boundaries of the school district under Subsection

114 (9)(a) are located entirely within the special service district.
115 (10) "Eligible judgment" means a final and unappealable judgment or order under
116 Section 59-2-1330 :
117 (a) that became a final and unappealable judgment or order no more than 14 months
118 prior to the day on which the notice required by Subsection 59-2-919 (4) is required to be
119 mailed; and
120 (b) for which a taxing entity's share of the final and unappealable judgment or order is
121 greater than or equal to the lesser of:
122 (i) $5,000; or
123 (ii) 2.5% of the total ad valorem property taxes collected by the taxing entity in the
124 previous fiscal year.
125 (11) (a) "Escaped property" means any property, whether personal, land, or any
126 improvements to the property, subject to taxation and is:
127 (i) inadvertently omitted from the tax rolls, assigned to the incorrect parcel, or assessed
128 to the wrong taxpayer by the assessing authority;
129 (ii) undervalued or omitted from the tax rolls because of the failure of the taxpayer to
130 comply with the reporting requirements of this chapter; or
131 (iii) undervalued because of errors made by the assessing authority based upon
132 incomplete or erroneous information furnished by the taxpayer.
133 (b) Property which is undervalued because of the use of a different valuation
134 methodology or because of a different application of the same valuation methodology is not
135 "escaped property."
136 (12) "Fair market value" means the amount at which property would change hands
137 between a willing buyer and a willing seller, neither being under any compulsion to buy or sell
138 and both having reasonable knowledge of the relevant facts. For purposes of taxation, "fair
139 market value" shall be determined using the current zoning laws applicable to the property in
140 question, except in cases where there is a reasonable probability of a change in the zoning laws
141 affecting that property in the tax year in question and the change would have an appreciable

142 influence upon the value.
143 (13) "Farm machinery and equipment," for purposes of the exemption provided under
144 Section 59-2-1101 , means tractors, milking equipment and storage and cooling facilities, feed
145 handling equipment, irrigation equipment, harvesters, choppers, grain drills and planters, tillage
146 tools, scales, combines, spreaders, sprayers, haying equipment, and any other machinery or
147 equipment used primarily for agricultural purposes; but does not include vehicles required to be
148 registered with the Motor Vehicle Division or vehicles or other equipment used for business
149 purposes other than farming.
150 (14) "Geothermal fluid" means water in any form at temperatures greater than 120
151 degrees centigrade naturally present in a geothermal system.
152 (15) "Geothermal resource" means:
153 (a) the natural heat of the earth at temperatures greater than 120 degrees centigrade;
154 and
155 (b) the energy, in whatever form, including pressure, present in, resulting from, created
156 by, or which may be extracted from that natural heat, directly or through a material medium.
157 (16) (a) "Goodwill" means:
158 (i) acquired goodwill that is reported as goodwill on the books and records:
159 (A) of a taxpayer; and
160 (B) that are maintained for financial reporting purposes; or
161 (ii) the ability of a business to:
162 (A) generate income:
163 (I) that exceeds a normal rate of return on assets; and
164 (II) resulting from a factor described in Subsection (16)(b); or
165 (B) obtain an economic or competitive advantage resulting from a factor described in
166 Subsection (16)(b).
167 (b) The following factors apply to Subsection (16)(a)(ii):
168 (i) superior management skills;
169 (ii) reputation;

170 (iii) customer relationships;
171 (iv) patronage; or
172 (v) a factor similar to Subsections (16)(b)(i) through (iv).
173 (c) "Goodwill" does not include:
174 (i) the intangible property described in Subsection (20)(a) or (b);
175 (ii) locational attributes of real property, including:
176 (A) zoning;
177 (B) location;
178 (C) view;
179 (D) a geographic feature;
180 (E) an easement;
181 (F) a covenant;
182 (G) proximity to raw materials;
183 (H) the condition of surrounding property; or
184 (I) proximity to markets;
185 (iii) value attributable to the identification of an improvement to real property,
186 including:
187 (A) reputation of the designer, builder, or architect of the improvement;
188 (B) a name given to, or associated with, the improvement; or
189 (C) the historic significance of an improvement; or
190 (iv) the enhancement or assemblage value specifically attributable to the interrelation of
191 the existing tangible property in place working together as a unit.
192 (17) "Governing body" means:
193 (a) for a county, city, or town, the legislative body of the county, city, or town;
194 (b) for a local district under Title 17B, Limited Purpose Local Government Entities -
195 Local Districts, the local district's board of trustees;
196 (c) for a school district, the local board of education; or
197 (d) for a special service district under Title 17A, Chapter 2, Part 13, Utah Special

198 Service District Act:
199 (i) the legislative body of the county or municipality that created the special service
200 district, to the extent that the county or municipal legislative body has not delegated authority to
201 an administrative control board established under Section 17A-2-1326 ; or
202 (ii) the administrative control board, to the extent that the county or municipal
203 legislative body has delegated authority to an administrative control board established under
204 Section 17A-2-1326 .
205 (18) (a) For purposes of Section 59-2-103 :
206 (i) "household" means the association of persons who live in the same dwelling, sharing
207 its furnishings, facilities, accommodations, and expenses; and
208 (ii) "household" includes married individuals, who are not legally separated, that have
209 established domiciles at separate locations within the state.
210 (b) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
211 commission may make rules defining the term "domicile."
212 (19) (a) Except as provided in Subsection (19)(c), "improvement" means a building,
213 structure, fixture, fence, or other item that is permanently attached to land, regardless of
214 whether the title has been acquired to the land, if:
215 (i) (A) attachment to land is essential to the operation or use of the item; and
216 (B) the manner of attachment to land suggests that the item will remain attached to the
217 land in the same place over the useful life of the item; or
218 (ii) removal of the item would:
219 (A) cause substantial damage to the item; or
220 (B) require substantial alteration or repair of a structure to which the item is attached.
221 (b) "Improvement" includes:
222 (i) an accessory to an item described in Subsection (19)(a) if the accessory is:
223 (A) essential to the operation of the item described in Subsection (19)(a); and
224 (B) installed solely to serve the operation of the item described in Subsection (19)(a);
225 and

226 (ii) an item described in Subsection (19)(a) that:
227 (A) is temporarily detached from the land for repairs; and
228 (B) remains located on the land.
229 (c) Notwithstanding Subsections (19)(a) and (b), "improvement" does not include:
230 (i) an item considered to be personal property pursuant to rules made in accordance
231 with Section 59-2-107 ;
232 (ii) a moveable item that is attached to land:
233 (A) for stability only; or
234 (B) for an obvious temporary purpose;
235 (iii) (A) manufacturing equipment and machinery; or
236 (B) essential accessories to manufacturing equipment and machinery;
237 (iv) an item attached to the land in a manner that facilitates removal without substantial
238 damage to:
239 (A) the land; or
240 (B) the item; or
241 (v) a transportable factory-built housing unit as defined in Section 59-2-1502 if that
242 transportable factory-built housing unit is considered to be personal property under Section
243 59-2-1503 .
244 (20) "Intangible property" means:
245 (a) property that is capable of private ownership separate from tangible property,
246 including:
247 (i) moneys;
248 (ii) credits;
249 (iii) bonds;
250 (iv) stocks;
251 (v) representative property;
252 (vi) franchises;
253 (vii) licenses;

254 (viii) trade names;
255 (ix) copyrights; and
256 (x) patents;
257 (b) a low-income housing tax credit; or
258 (c) goodwill.
259 (21) "Low-income housing tax credit" means:
260 (a) a federal low-income housing tax credit under Section 42, Internal Revenue Code;
261 or
262 (b) a low-income housing tax credit under:
263 (i) Section 59-7-607 ; or
264 (ii) Section 59-10-1010 .
265 (22) "Metalliferous minerals" includes gold, silver, copper, lead, zinc, and uranium.
266 (23) "Mine" means a natural deposit of either metalliferous or nonmetalliferous valuable
267 mineral.
268 (24) "Mining" means the process of producing, extracting, leaching, evaporating, or
269 otherwise removing a mineral from a mine.
270 (25) (a) "Mobile flight equipment" means tangible personal property that is:
271 (i) owned or operated by an:
272 (A) air charter service;
273 (B) air contract service; or
274 (C) airline; and
275 (ii) (A) capable of flight;
276 (B) attached to an aircraft that is capable of flight; or
277 (C) contained in an aircraft that is capable of flight if the tangible personal property is
278 intended to be used:
279 (I) during multiple flights;
280 (II) during a takeoff, flight, or landing; and
281 (III) as a service provided by an air charter service, air contract service, or airline.

282 (b) (i) "Mobile flight equipment" does not include a spare part other than a spare engine
283 that is rotated:
284 (A) at regular intervals; and
285 (B) with an engine that is attached to the aircraft.
286 (ii) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
287 commission may make rules defining the term "regular intervals."
288 (26) "Nonmetalliferous minerals" includes, but is not limited to, oil, gas, coal, salts,
289 sand, rock, gravel, and all carboniferous materials.
290 (27) "Personal property" includes:
291 (a) every class of property as defined in Subsection (28) which is the subject of
292 ownership and not included within the meaning of the terms "real estate" and "improvements";
293 (b) gas and water mains and pipes laid in roads, streets, or alleys;
294 (c) bridges and ferries;
295 (d) livestock which, for the purposes of the exemption provided under Section
296 59-2-1112 , means all domestic animals, honeybees, poultry, fur-bearing animals, and fish; and
297 (e) outdoor advertising structures as defined in Section 72-7-502 .
298 (28) (a) "Property" means property that is subject to assessment and taxation according
299 to its value.
300 (b) "Property" does not include intangible property as defined in this section.
301 (29) "Public utility," for purposes of this chapter, means the operating property of a
302 railroad, gas corporation, oil or gas transportation or pipeline company, coal slurry pipeline
303 company, electrical corporation, telephone corporation, sewerage corporation, or heat
304 corporation where the company performs the service for, or delivers the commodity to, the
305 public generally or companies serving the public generally, or in the case of a gas corporation or
306 an electrical corporation, where the gas or electricity is sold or furnished to any member or
307 consumers within the state for domestic, commercial, or industrial use. Public utility also means
308 the operating property of any entity or person defined under Section 54-2-1 except water
309 corporations.

310 (30) "Real estate" or "real property" includes:
311 (a) the possession of, claim to, ownership of, or right to the possession of land;
312 (b) all mines, minerals, and quarries in and under the land, all timber belonging to
313 individuals or corporations growing or being on the lands of this state or the United States, and
314 all rights and privileges appertaining to these; and
315 (c) improvements.
316 (31) "Residential property," for the purposes of the reductions and adjustments under
317 this chapter, means any property used for residential purposes as a primary residence. It does
318 not include property used for transient residential use or condominiums used in rental pools.
319 [(32) For purposes of Subsection 59-2-801 (1)(e), "route miles" means the number of
320 miles calculated by the commission that is:]
321 [(a) measured in a straight line by the commission; and]
322 [(b) equal to the distance between a geographical location that begins or ends:]
323 [(i) at a boundary of the state; and]
324 [(ii) where an aircraft:]
325 [(A) takes off; or]
326 [(B) lands.]
327 [(33)] (32) (a) "State-assessed commercial vehicle" means:
328 (i) any commercial vehicle, trailer, or semitrailer which operates interstate or intrastate
329 to transport passengers, freight, merchandise, or other property for hire; or
330 (ii) any commercial vehicle, trailer, or semitrailer which operates interstate and
331 transports the vehicle owner's goods or property in furtherance of the owner's commercial
332 enterprise.
333 (b) "State-assessed commercial vehicle" does not include vehicles used for hire which
334 are specified in Subsection (8)(c) as county-assessed commercial vehicles.
335 [(34)] (33) "Taxable value" means fair market value less any applicable reduction
336 allowed for residential property under Section 59-2-103 .
337 [(35)] (34) "Tax area" means a geographic area created by the overlapping boundaries

338 of one or more taxing entities.
339 [(36)] (35) "Taxing entity" means any county, city, town, school district, special taxing
340 district, local district under Title 17B, Limited Purpose Local Government Entities - Local
341 Districts, or other political subdivision of the state with the authority to levy a tax on property.
342 [(37)] (36) "Tax roll" means a permanent record of the taxes charged on property, as
343 extended on the assessment roll and may be maintained on the same record or records as the
344 assessment roll or may be maintained on a separate record properly indexed to the assessment
345 roll. It includes tax books, tax lists, and other similar materials.
346 Section 2. Section 59-2-801 is amended to read:
347 59-2-801. Apportionment of property assessed by commission.
348 (1) Before May 25 of each year, the commission shall apportion to each tax area the
349 total assessment of all of the property the commission assesses as provided in Subsections (1)(a)
350 through (f).
351 (a) (i) The commission shall apportion the assessments of the property described in
352 Subsection (1)(a)(ii):
353 (A) to each tax area through which the public utility or company described in
354 Subsection (1)(a)(ii) operates; and
355 (B) in proportion to the property's value in each tax area.
356 (ii) Subsection (1)(a)(i) applies to property owned by:
357 (A) a public utility, except for the rolling stock of a public utility;
358 (B) a pipeline company;
359 (C) a power company;
360 (D) a canal company; or
361 (E) an irrigation company.
362 (b) The commission shall apportion the assessments of the rolling stock of a railroad:
363 (i) to the tax areas through which railroads operate; and
364 (ii) in the proportion that the length of the main tracks, sidetracks, passing tracks,
365 switches, and tramways of the railroads in each tax area bears to the total length of the main

366 tracks, sidetracks, passing tracks, switches, and tramways in the state.
367 (c) The commission shall apportion the assessments of the property of a car company
368 to:
369 (i) each tax area in which a railroad is operated; and
370 (ii) in the proportion that the length of the main tracks, passing tracks, sidetracks,
371 switches, and tramways of all of the railroads in each tax area bears to the total length of the
372 main tracks, passing tracks, sidetracks, switches, and tramways of all of the railroads in the
373 state.
374 (d) (i) The commission shall apportion the assessments of the property described in
375 Subsection (1)(d)(ii) to each tax area in which the property is located.
376 (ii) Subsection (1)(d)(i) applies to the following property:
377 (A) mines;
378 (B) mining claims; or
379 (C) mining property.
380 (e) (i) As used in this Subsection (1)(e), "ground hours" means the total number of
381 hours during the calendar year immediately preceding the January 1 described in Section
382 59-2-103 that aircraft owned or operated by the following are on the ground:
383 (A) an air charter service;
384 (B) an air contract service; or
385 (C) an airline.
386 (ii) The commission shall apportion the assessments of the property described in
387 Subsection (1)(e)[(ii)] (iii) to:
388 (A) each designated tax area; and
389 (B) in the proportion that the [route miles] ground hours in each designated tax area
390 bear to the total [route miles] ground hours in the state.
391 [(ii)] (iii) Subsection (1)(e)[(i)] (ii) applies to the mobile flight equipment owned by an:
392