UPDATE: After our investigation, several corporate plane owners are coming forward to declare their aircraft and pay 2011 personal property taxes.
KANSAS CITY, Missouri - An outdated federal registry, a patchwork of state tax rules, and a reliance on “self-reporting” make tracking airplane personal property tax payments difficult for Missouri’s county assessors.
During an investigation, NBC Action News reviewed hundreds of planes registered with the Federal Aviation Administration. With the help of Kansas City area assessment and collection departments, NBC Action News cross-referenced those aircraft with personal property tax rolls.
The investigation found legitimate reasons why some plane owners were not paying personal property taxes in Missouri. It also found planes that no longer exist, but still appear on the FAA registry. Finally, the investigation revealed plane owners who have been flying under the tax radar for years.
At a time of shrinking financial resources, it is costing local governments thousands of dollars of uncollected revenue.
McCaskill controversy fuels investigation
In March, Sen. Claire McCaskill announced that she owed about $320,000 of unpaid taxes on her private plane, including $80,000 of interest. The senator called the controversy a “big, serious, sloppy mistake.”
The revelation came as McCaskill was facing scrutiny for billing taxpayers for her use of the plane. As she reimbursed the funds, the senator said she discovered the issue with the property taxes.
The plane was purchased in 2006 and McCaskill co-owned it with her husband and other investors. Like many private planes, the pricey Pilatus PC-12 was registered in Delaware, where no taxes are imposed.
The plane was originally kept in a hangar in Illinois, which does not levy personal property taxes. It moved to the Spirit of St. Louis Airport in 2007.
|The receipt of taxes hinge on Missouri's self-reporting system. |
In Missouri, personal property taxes are due for all aircraft that are hangared in the state. McCaskill should have reported the plane to St. Louis County, but had never declared the plane on her personal property taxes.
The receipt of taxes hinge on Missouri’s self-reporting system. McCaskill insisted it was an honest mistake.
NBC Action News decided to look at aircraft owned in the Kansas City area to see if other plane owners are not paying taxes.
What are Missouri’s tax rules for aircraft?
According to the State Tax Commission , there are several different tax circumstances for plane owners who live or hangar a plane in Missouri.
Missouri residents who own planes are assessed in the county where they live. Individual owners are supposed to declare aircraft on annual property tax declaration forms .
However, if Missouri residents hangar their airplanes “more or less permanently” out of state (like Kansas), the personal property is not taxable in Missouri. On the flip side, if a Kansas resident hangars a plane in Missouri, then it is taxable in Missouri.
The rules for corporations are different. Corporate-owned plans are assessed in the county which they are based. For instance, if a Jackson County company keeps a plane at Charles B. Wheeler Downtown Airport, the taxes would be owed to Clay County.
Investigation finds dozens of planes don’t show up on county tax rolls
The popular plane-tracking website FlightAware.com compiled lists of planes registered with the FAA in Jackson, Platte, Clay and Cass counties—a compilation totaling more than 1,000 planes. FlightAware also provided a list of registered planes in Wyandotte County, so NBC Action News could see if any of these owners are hangaring planes in Missouri.
In some cases, NBC Action News worked with assessors and collectors to determine how many registered planes showed up on personal property tax rolls. In other instances, NBC Action News manually searched through online databases, which are available in Jackson and Clay counties.
County staff members looked at 84 planes owned by individuals, co-owned, or owned as a partnership. They found:
- 27 plane owners fully paid on their taxes
- 15 people had moved out of the county and were no longer on tax rolls
- 16 planes that were not registered to a valid Cass County address
- 21 people had personal property accounts in Cass County, but had not claimed a plane
County staff members cross-referenced 127 planes and found:
- 65 plane owners on file and fully paid
- 34 people not on file with the county
- 28 people who have personal property accounts, but had not claimed a plane (a handful of these people purchased planes in 2010, giving them no tax obligation until this year)
County staff members looked at 211 planes (out of 371) registered with individual owners in Jackson County. They found:
- 62 people who did not have any personal property account with the county
- 35 people had moved out of the county
- 19 people they were unable
- 44 people who had declared planes on their personal property taxes
- 46 people who had a personal property account, but had not declared a plane
The assessor’s office provided NBC Action News with a list of all its registered aircraft in 2010. That list was cross-referenced with the FAA registry of plane owners. Out of 65 planes, NBC Action News found:
- 17 planes that did not show up on the personal property tax rolls
Why do planes fly below tax radar?
Since planes are not licensed by the state of Missouri (like vehicles), it can be difficult to determine who owns a plane and where it is kept.
“It is almost impossible,” said Cathy Rinehart, Clay County’s assessor of 14 years. “There is no hammer to force anyone to give us information. It’s a self-declaring state.”
This can be especially true with corporations, since planes are taxed where they are kept instead of where the corporation is based.
According to Clay County collector Lydia McEvoy, the planes would owe a combined estimated total of about $850,000 from 2008 through 2010.
Rinehart said her office requests a list of people who hangar planes at airports within the county. She said airport managers sometimes comply, but it isn’t required.
Lee’s Summit Airport manager John Ohrazda said he keeps an updated list of people who own planes on the property. However, he said in his 30 years at the airport, Jackson County assessors have never requested a list.
Clay County stands to lose the most revenue because many of the area’s corporate jets are kept at Wheeler. As an example, Hallmark Cards paid more than $35,000 in property taxes for its two planes in 2010.
Rinehart would like to see a Missouri statute that requires airports to provide complete lists of aircraft owners to local assessment departments.
Investigation identifies corporate planes not on tax rolls
NBC Action News found several examples of corporations that keep a plane at Wheeler Airport, but were nowhere to be found on Clay County’s personal tax rolls:
- A plane registered to Kansas City, Kansas-based G.W. Van Keppel Company appears to be kept at Wheeler, based on dozens of recent flights to and from the airport. When contacted by NBC Action News, company president Bill Walker would only say, “No comment” when asked about personal property tax payments on a plane the company has owned since 1994.
- A plane registered to Stevenson Leasing, LLC showed the address of SPEC Building Materials Corporation in Kansas City, Kan. When contacted by NBC Action News, John Ruhlman said the company mistakenly thought it had a business tax exemption, but would declare the plane this year.
- A jet registered to Kansas City-based Clarkson Construction did not appear on tax rolls. When asked about it several different times, Don Clarkson could not provide an answer, only repeating, “Someone should call you about it.”
Rinehart said it is her policy to give property owners the benefit of the doubt and a fresh start on the tax rolls, no matter how much their property is worth.
No one from the Clarkson has contacted NBC Action News. However, an attorney representing the company contacted the assessor's office, stating the aircraft is housed in Johnson County, Kan. A look at the plane's 2011 flight history shows all 27 flights have either taken off or landed at Wheeler. The only flight from Johnson County was on January 2, when it flew from New Century Aircenter to Wheeler. The plane had been in Johnson County since December 29, 2010. Flight history shows the plane was also briefly moved to New Century Aircenter at the end of 2009 into 2010.
- A corporate jet registered to RFO, LLC and owned by Richard F. Owen also did not show up on Clay County’s tax rolls.
After trying to contact Owen, NBC Action News received a call from his attorney, Mark Gilgus, who said his client intended to declare the airplane on his 2011 personal property taxes. When asked about paying taxes for previous years (Owen has owned the jet since 2000), Gilgus said the airplane has not been situated in Clay County.
However, NBC Action News reviewed several years of flight history. In 2010, 88 percent of the flights took off or landed at Wheeler. Takeoffs and landings at Wheeler also accounted for 91 percent of flights in 2009, 79 percent in 2008, and 73 percent in 2007.
“The percentage of flights and time in the state would weigh in favor of finding tax situs in Missouri,” said Maureen Monagan, an attorney with the Missouri State Tax Commission. “In general, personal property must have a continuous presence in the state. Obviously, with such amorphous judicial guidance, a solid answer to the question at hand is difficult.”
Monagan pointed to the precedent of Peabody Coal Co. v. State Tax Commission, a case out of St. Louis involving a Delaware corporation, which contested tax situs of its
aircraft in Missouri. The corporation argued the plane could have tax situs in other states like Indiana, which represented 32 percent of the plane’s landings. The Missouri Supreme Court determined the tax situs in St. Louis was correct.
Gilgus later emailed NBC Action News and said upon further review, his client’s plane was in Clay County and would be willing to pay the 2010 tax bill.
“RFO, LLC does not think tax is owed for any years, but it is not worth fighting over,” Gilgus wrote. “The only contact the LLC has in Missouri is that the plane is hangared there. Due to the lack of clarity of the law and complexity of the facts, it is questionable whether this factor alone constitutes residency.”
Several other corporate plane owners did not return calls or were difficult to track down because the aircraft was registered to an obscure “LLC.”
Thousands of dollars uncollected
Five corporate planes identified by NBC Action News represent an estimated $220,000 if assessed at the full rate in 2011, according to the Clay County Assessor’s Office (many commercial planes choose to get a prorated assessment based on how many miles they fly within Missouri).
Legally, three years of back taxes with penalties and interest could also be assessed. However, Rinehart said it is her policy to give property owners the benefit of the doubt and a fresh start on the tax rolls, no matter how much their property is worth.
“I have no way of knowing specifically that they were there,” said Rinehart. “I think it’s fair and equitable to start assessing the property when we find out about it instead of tacking on penalties.”
According to Clay County collector Lydia McEvoy, the planes would owe an estimated $307,500 dollars from 2008 back taxes, $283,000 from 2009, and $260,000 from 2010—a combined total of about $850,000.
Even without that money being collected, county staff members say the NBC Action News investigation will bring more money into Clay County’s coffers in the future.
Plane owners call system confusing, unfairly slanted
NBC Action News contacted a long list of individual plane owners who did not show up on personal property tax rolls and heard several reasons why there was a discrepancy.
- A Platte County plane owner said he kept his plane in Leavenworth, Kan. and did not owe taxes in Missouri
- Another said she was building her experimental plane and it had still not passed an “air-worthy” inspection.
- One owner said he had bought some old parts—including an old tail number—but they were all still sitting in a cardboard box, yet to be assembled.
- Dozens of other calls were never returned.
NBC Action News also spoke with several other plane owners who had correctly claimed their planes and paid taxes for years.
Collectively, they described the system as complicated and tough to track. Some expressed frustration with a recent Department of Revenue effort to retroactively collect “use tax” for aircrafts purchased out of state.
Many of the individual owners have aircraft that are more than 25 years old or built from a kit. This makes the assessed value of their aircraft tiny compared to corporate jets or the pricey plane owned by McCaskill.
“We’re the low-hanging fruit,” said one plane owner. “We all have our planes registered to our addresses and have paid personal property taxes. Meantime, corporate jets evade taxes by registering their planes in places like Delaware.”
Rob Schmitt spent $15,000 and built his plane over an 8-year period. He keeps at Lee’s Summit airport and property taxes on the aircraft cost him between $200 to $300 per year.
“Everyone I know, the little guys, pay our property taxes when they’re due,” said Schmitt. “I find it a little bit incredible to believe there are corporations out there that aren’t paying their fair share of taxes on personal property.”
FAA seeking accurate registry
One thing that might make it easier on county assessors in the near future is the FAA’s effort to create a more accurate aircraft registration database .
The FAA is requiring re-registration of all civil aircraft over the next three years and renewal every three years after that.
Previous regulations required owners to report the sale of an aircraft, the scrapping or destruction of an aircraft, or a change in mailing address. However, many owners did not comply with the requirements, as shown by the NBC Action News investigation.
“We have too many inoperable or non-existent planes clogging up the registry,” said FAA spokeswoman Elizabeth Cory. “We want to make sure all the planes we have on the database are fit to fly.”
How Missouri airplane taxes are calculated
To assist county assessors, the State Tax Commission mails a list of plane owners registered with the FAA to each assessor. The list provides tail numbers, names and addresses of aircraft owners in each county. It is similar to the lists reviewed by NBC Action News and assessors are warned that the lists are not completely updated and need to
Aircraft are assessed at 33.3 percent of their market value. However, aircraft that are at least 25 years old and operated less than 50 hours per year, or aircraft that are home-built from a kit, are assessed at five percent of their market value.
Taxpayers who own aircraft weighing at least 3,000 pounds can make a request that their planes be assessed as “commercial aircraft.” This allows the assessed value to be apportioned based upon how many of the plane’s total miles are flown in Missouri. For instance, if a $1 million plane only flies 20 percent of its miles in Missouri, then just $200,000 is assessed at the full rate.
Ryan Kath can be reached via email at email@example.com . You can also follow him on Twitter or Facebook .
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