The US public school system depends largely on revenue from property taxes, both “real” property and personal property. Most local governments tax personal property, which in many states, include private aircraft.
For communities with private airports, ensuring compliance across all aircraft ensures schools get the funds they need.
The Role of Millage Rates
Local property taxes are typically the largest source of local funding for public schools. They provide a stable and consistent revenue stream that help fund everything from day-to-day school operations including teacher salaries, utilities, and instructional materials to bond repayment.
The process of setting millage rates is a difficult balancing act for elected officials. Cities set rates through a process involving local government bodies and public participation. After estimating the city’s total expenditures, they subtract anticipated revenues from other sources (e.g., state funding, fees).
Personal property values also help create the annual tax digest and tax base for each jurisdiction. Whatever deficit exists, property taxes are responsible for bridging the gap.
We can see how just one aircraft, valued at a million dollars, that actively avoids its tax responsibility can affect the entire budgeting process. It increases taxes on the jurisdiction's other payees, namely homeowners. That’s an unfair shift. Often, there are laws to prevent a drastic millage rate increase. In Florida, for example, any significant increase in millage rates requires higher approval thresholds and public notifications. That one aircraft may prevent much-needed improvements to the community — namely the schools.
There's no standard percentage across the U.S. for how much of aircraft tax revenue goes to schools. Each locale would be different. What is known for sure is that without full compliance, schools lose out.
Aircraft Taxation as Property Taxes
States likewise give money to local education systems. In many states, private aircraft are included in property taxes as a form of personal property. Taxes owed are based on the aircraft’s fair market value. The actual site where the aircraft is based, rather than the owner's residence, generally determines where it’s taxed. After all, aircraft benefit from the protection of the state or local jurisdiction where it’s kept. For tax purposes, we measure the situs, nexus, and domicile of an aircraft to determine its home base.
The following states have personal property taxes that may apply to aircraft: Alabama, Arkansas, California, Georgia, Kansas, Kentucky, Louisiana, Minnesota, Missouri, Nebraska, Nevada, North Carolina, South Carolina, Tennessee, Texas, Virginia, West Virginia, and Wyoming.
Property money often contributes to local general funds, which can include the public school system. In some areas, personal property taxes on aircraft might contribute to school funding in the same proportion as real property taxes. In other jurisdictions, aviation-specific taxes might be entirely dedicated to aviation-related expenses. Some states also have aircraft registration fees in place of property taxes, and others levy both. The percentage can vary widely by location.
Aircraft Taxation for Schools in Texas
Taking a deeper look at Texas, the allocation of those aircraft tax revenues to schools is complex. Aircraft are generally subject to property taxes, which are a significant source of funding for schools. There isn't a specific percentage of aircraft property taxes that is mandated to go to schools. Instead, aircraft are typically taxed as part of the overall property tax base.
The impact of aircraft taxes on school funding can vary significantly depending on the local tax base. Areas with more valuable aircraft or a higher concentration of aircraft ownership may see a larger contribution to their school funding from this source.
Aircraft are typically subject to property taxes based on the assessed value of the aircraft. A large portion of property tax revenue in Texas goes to fund local school districts, the exact percentage varying by district.
Texas uses a system known as the "Robin Hood" plan (officially called "recapture") where property-wealthy districts share some of their local tax revenue with property-poor districts. This can affect how much of the local aircraft tax revenue stays within a particular school district.
Property taxes are a significant factor in funding Texas public schools. While this is just one state, they’re not alone. It’s no secret that American schools often face funding issues. Increasing aircraft compliance helps.
Ensuring Compliance Is a Priority
Tax offices are tasked with managing these property types and ensuring that every single asset is valued correctly each year. What a job!
(We can help.)