Month: July 2009

The Creeping Intangibles Tax

Florida Gets Creative in Taxing Struggling Aircraft Businesses – At my recent speaking engagement with the Florida Aircraft Trades Association (FATA) I heard from a lot of my friends with FBOs and the facilities they serve about the State of Florida’s new drive to impose an “intanbiles tax” on ground lease payments.

The last such push was the City of Vero Beach’s attempt some years ago to impose ad valorem (property) tax on Sun Aviation and others. That attempt was dead on arrival, as Florida law specifically exempts FBOs from this tax. Central to the court’s holding in favor of the FBO was that the statute clearly identifies an FBO, a private, non-governmental entity, as serving a “public purpose” not subject to ad valorem tax.

The State’s (not the county’s, now) approach to the intangibles tax is somewhat more problematic. While this tax was repealed several years ago for many purposes, it was NOT repealed for all purposes. One of the survivors were payments on ground leases from private entities to state or local lessors. Always one to shoot first and see what hits, the state has socked FBOs and operators with enormous tax bills, some assessing twenty years of back interest and penalties. This represents a radical change in enforcement procedures, and a clear economic threat to GA facilities.

Here’s the question – how can a lease to a facility that clearly serves an exempt “public interest” for one purpose be reasonably classified as a private party to private party “commercial lease” for another? There seems to be sparse authority as to whether the state can take with one hand what was clearly given with the other (they can, of course, but here?) Just as one does not pay BOTH sales and use tax (one, in theory, compensates for the loss of revenue when the other does not apply), FBOs and their tax attorneys should be vigilant in tracking down (or shooting down) any relevant statutory or common law authority to protect these vital businesses.