Laws, Regulations & Annotations

Property Taxes Law Guide – Revision 2010
 

Revenue and Taxation Code

Property Taxation

Part 2. Assessment

CHAPTER 5. Special Types of Property


Chapter 5. Special Types of Property

Article 1. Generally

981. Property on consignment. [Repealed by Stats. 1984, Ch. 678, in effect January 1, 1985.]

982. Decedents' estates. The undistributed or unpartitioned property of deceased persons may be assessed to the heirs, guardians, conservators, executors, or administrators. A payment of taxes by any one of them binds each of the other parties in interest for his proportionate share.

History.—Stats. 1979, Ch. 730, in effect January 1, 1980, operative January 1, 1981, added "conservators," after "guardians," in the first sentence of the first paragraph.

Note.—On payment of taxes as a condition precedent to distribution see Probate Code Section 1024.

Actions.—Actions for taxes due from an estate are properly bought against the custodian of the estate under the provisions of this section. San Francisco v. Pennie, 93 Cal. 465.

982.1. Property distributed to State. If real property of a deceased person is distributed to the State because there are no known heirs or because the estate or any portion thereof is to be distributed to heirs, devisees, or legatees whose whereabouts are unknown, such real property shall be assessed to the estate of the decedent and to the State of California. Such assessment shall involve no liability on the part of the State to pay taxes except as provided by Sections 4986.5 and 4986.6.

History.—Added by Stats. 1951, p. 377, in effect September 22, 1951.

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983. Property in legal custody. Property in litigation in possession of a county treasurer, court, county clerk, or receiver shall be assessed to the officer in possession, and the taxes shall be paid under the direction of the court.

Funds in litigation.—Money placed in a bank as special deposits pursuant to court orders and stipulations of the parties to await the outcome of the litigation is subject to assessment for taxation as money in litigation in possession of a "receiver." Spring Valley Water Co. v. San Francisco, 246 U.S. 391.

The amount of an award paid by the city to the county treasurer for the benefit of a property owner in a condemnation proceeding is not a solvent credit of the property owner for purposes of taxation, but is to be assessed to the county treasurer under the provisions of this section, and no deduction is allowable on account of debts owed by the property owner. Bessolo v. City of Los Angeles, 176 Cal. 597.

When money deposited with the county treasurer pursuant to a court order is assessed to one of the parties to pending litigation instead of to the treasurer, the assessment is void, and in the following year the money is properly assessed as property which has escaped assessment. City of San Luis Obispo v. Pettit, 87 Cal. 499.

Under this section the court is authorized to ascertain the amount of taxes to be paid on funds and solvent credits in the hands of the receiver, and to order that the tax be paid by the receiver. City of Los Angeles v. Los Angeles City Water Co., 137 Cal. 699.

Tangible personal property.—Jewelry which was left by the owner in Los Angeles County when he changed his residence to Ventura County and was impounded with the clerk of Los Angeles County in a divorce action was properly taxed by that county while in the possession of the clerk as required by this section even though the owner did not consent to the impounding. Howard v. City of Los Angeles, 143 Cal.App.2d 195.

Levy of attachment.—An airplane under a levy of attachment by the county sheriff before and on the tax lien date was not property "in litigation" and was not assessable to the sheriff. United States Overseas Airline v. Alameda County, 235 Cal.App.2d 348.

984. Water ditches. Water ditches constructed for mining manufacturing, or irrigation purposes and toll roads shall be assessed like real estate, at a rate per mile for that portion of the property lying within the county.

Assessment by Districts.—When a ditch runs through several districts, a failure to assess separately the portion situated in each district renders the assessment void. Kern Valley Water Co. v. Kern County, 137 Cal. 511, and 150 Cal. 801.

Appurtenant Ditches.—Apparently the ditches referred to in this section are those which are constructed on a large and extensive scale, not appurtenant to any particular parcel of land, but operated for the benefit of communities and neighborhoods for mining, manufacturing, irrigating and other purposes. See Coonradt v. Hill, 79 Cal. 587; Gartlan v. C. A. Hooper & Co., 177 Cal. 414; Ayer v. Grondoni, 45 Cal.App. 218.

A municipal corporation may assess part of a water system, that is, canals, pipe lines, and rights of way, located in the city limits, although the system is appurtenant to lands without the municipality. Temescal Water Co. v. Niemann, 22 Cal.App. 174.

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985. Toll bridges. Every toll bridge connecting two or more counties shall be assessed in equal proportions in the counties it connects.

986. Works of art. The full value of a work of art, still owned by the artist who created it and which has never been sold nor exhibited for profit, is the full value of the materials which constitute the work of art.

History.—Stats. 1974, Ch. 311, p. 611, in effect January 1, 1975, substituted "full value" for "cash value" in both places.

987. Lands owned by local governments. The assessment of lands owned by a local government that are located outside its boundaries shall be as specified in Section 11 of Article XIII of the Constitution. The State Board of Equalization shall compute for each assessment year, on or before the lien date of that assessment year, the ratio to be applied to land assessed as of the 1966 lien date and the ratio to be applied to land assessed as of the 1966 lien date in the manner specified in subdivision (b) of Section 11 of Article XIII of the Constitution.

History.—Added by Stats. 1977, Ch. 246, in effect January 1, 1978.

988. Motion pictures. (a) The full value of motion pictures, including the negatives and prints thereof, is the full value of only the tangible materials upon which such motion pictures are recorded. Such full value does not include the value of, or any value based upon, any intangible rights, such as the copyright or the right to reproduce, copy, exhibit or otherwise exploit motion pictures or the negatives or prints thereof.

(b) As used in this section, "motion pictures" includes those intended for transmission, exhibition, or exploitation, by any means or method and whether or not production thereof has been completed.

(c) As used in this section, "negatives and prints" includes any film or other tangible property, and reproductions thereof, upon which is recorded by any means or method the sound or action of motion pictures, in positive, negative, or any other form.

History.—Added by Stats. 1968, p. 1762, in effect November 13, 1968. Stats. 1974, Ch. 311, p. 611, in effect January 1, 1975, substituted "full value" for "cash value" in both places in the first sentence and in the second sentence of subdivision (a).

989. Pledged goods. Unredeemed pledged goods in the possession of a pawnbroker, but not owned by him to hold and dispose of as his property, shall not be assessed to him.

History.—Added by Stats. 1968, p. 875, in effect November 13, 1968.

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990. Migratory livestock. Where migratory livestock are ranged in two or more counties during the year, the assessors of the counties interested may meet and prorate the number of stock to be assessed in each county, taking into consideration the time such stock ranged in each county.

History.—Added by Stats. 1968, p. 1201, in effect November 13, 1968.

Note.—Stats. 1968, p. 1201, provides that it is not the intent of the Legislature to increase the burden of livestock owners in reporting information to county assessors. Stats. 1968, p. 1201, in effect November 13, 1968, which provided that Section 990 would not be operative after July 1, 1970, was repealed by Stats. 1970, p. 1075, in effect November 23, 1970.

991. Baled cotton; tax rate. [Repealed by Stats. 1979, Ch. 1150, in effect September 28, 1979.]

992. Wine or brandy. [Repealed by Stats. 1984, Ch. 678, in effect January 1, 1985.]

993. Distilled spirits. [Repealed by Stats. 1984, Ch. 678, in effect January 1, 1985.]

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994. Steel-wheeled, track-laying, and rubber-tired equipment. The following vehicles and equipment, with the exception of implements of husbandry which are subject to the provisions of Sections 410 to 414, inclusive, shall be subject to the provisions of this section, notwithstanding the provisions of Section 10758:

(a) Steel-wheeled and track-laying equipment shall not be subject to the license fees imposed pursuant to Part 5 (commencing with Section 10701) of Division 2 of this code, but shall be assessed in the county where it has situs on the lien date.

(b) Rubber-tired equipment, except commercial vehicles and cranes registered under the Vehicle Code and which are licensed under Part 5 (commencing with Section 10701) of Division 2 of this code, which must be moved or operated under permit issued pursuant to Section 35780 of the Vehicle Code, shall be assessed in the county where it has situs on the lien date, but the assessee of such property shall be allowed to deduct from the amount of property tax the amount of any fee paid on such vehicle under Part 5 (commencing with Section 10701) of Division 2 of this code, if such fee is paid prior to the lien date for the calendar year in which the lien date occurs.

(c) Rubber-tired cranes and commercial vehicles which must be moved or operated under permit issued pursuant to Section 35780 of the Vehicle Code, and rubber-tired equipment that does not require a permit, which cranes, vehicles, and equipment are registered under the Vehicle Code and licensed under Part 5 (commencing with Section 10701) of Division 2 of this code, shall not be otherwise assessed for purposes of property taxation.

History.—Added by Stats. 1971, p. 3581, in effect March 4, 1972, operative on the lien date in 1972. Stats. 1972, p. 2, in effect January 25, 1972, operative March 4, 1972, repealed section 994 as added by Stats. 1971, p. 3581, Stats. 1972, p. 2, in effect January 25, 1972, operative on the lien date in 1972 added the present section 994. Stats. 1973, Ch. 841, p. 1505, in effect January 1, 1974, eliminated reference to sections 565, 570, and 575 of the Vehicle Code in the introduction and added the reference to sections 410 to 414; substituted "Steel-wheeled and" for "Any steel/wheeled or" in subdivision (a); and Sec. 2 of the act provides it does not exempt property taxable January 1, 1973. Stats. 1974, Ch. 1430, p. 3133, in effect January 1, 1975, added ", except commercial vehicles and cranes registered under the Vehicle Code and which are licensed under Part 5 (commencing with Section 10701) of Division 2 of this code," after "equipment", and added "issued pursuant to Section 35780 of the Vehicle Code," after "permit" in subdivision (b); and added "Rubber-tired cranes and commercial vehicles which must be moved or operated under permit issued pursuant to Section 35780 of the Vehicle Code, and" at the beginning of, and substituted ", which cranes, vehicles, and equipment are registered under the Vehicle Code and" for "and which is" in subdivision (c). Sec. 3 thereof provided no payment by state to local governments because of this act. Stats. 1977, Ch. 246, in effect January 1, 1978, substituted paragraph before subdivision (a) for "Notwithstanding the provisions of section 410 to 414, inclusive, and 10758:"

Note.—There has been a conflict of opinion as to whether special construction equipment and special mobile equipment referred to in this act is subject to the general property tax or to the Vehicle License Fee Law. In order that certainty concerning the taxation of such equipment be established at the earliest possible time it is necessary that this act go into immediate effect.

Note.—Section 3 of Stats. 1974, Ch. 1430, p. 3134, stated that the property affected by the amendments to the section was not subject to local assessment and taxation as of January 1, 1973, when only special construction equipment and special mobile equipment were subject to local assessment and taxation thereunder. Cranes are expressly excluded from the definition of special construction equipment in subdivision (b) of Section 570 of the Vehicle Code. Further, cranes are not within the definition of special mobile equipment. Commercial vehicles are neither special construction equipment nor special mobile equipment. Accordingly, such amendments specifically revert cranes and commercial vehicles to the tax status they were as of January 1, 1973.

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995. Storage media for computer programs. Storage media for computer programs shall be valued on the 1972 lien date and thereafter as if there were no computer program on such media except basic operational programs. Otherwise, computer programs shall not be valued for purpose of property taxation.

As used in this section, storage media for computer programs may take the form of, but are not limited to, punched cards, tapes, discs or drums on which computer programs may be embodied or stored.

As used in this section, a computer program may be, but is not limited to a set of written instructions, magnetic imprints, required documentation or other process designed to enable the user to communicate with or operate a computer or other machinery.

History.—Added by Stats. 1972, p. 385, in effect June 23, 1972. Stats. 1973, Ch. 990, p. 1906, in effect January 1, 1974, substituted "lien date and thereafter" for "and 1973 lien dates" after "1972" in the first sentence; and Sec. 5 of the act provides no state payment to local government because of the act.

Note.—Stats. 1972, p. 385, provided: It is the intent of the Legislature that storage media, except basic operational programs, for computer programs shall be valued as if it had no computer program placed on it, except any basic operational programs. The Legislature recognizes that it is not in the public interest to value storage media for computer programs except as provided above. Basic operational programs, like law books or other standard reference books, have value which is measurable, but any other programs, like an attorney's brief, an engineer's calculations, or business records would be highly speculative.

It is the intent of the Legislature that only those basic operational programs which are presently being assessed and taxed in the various counties continue to be assessed and taxed during the effective period of this act. The value of other computer programs is not now subject to property tax, was not intended to be subject to property tax and shall not be subject to property tax, either directly or indirectly or through the inclusion of the value of such computer programs in evaluating related storage media for computer programs. Taxation of these expressions of creativity would be detrimental to research and an expansion of business activity within the state.

Construction.—The Board's 1996 amendment to Property Tax Rule 152 properly clarified what constitutes a computer's basic operational program, as opposed to other, separate programs, was a legitimate exercise of the Board's rulemaking authority, and it was consistent with the Legislature's intent in enacting this section to exempt basic computer programs from taxation. Hahn v. State Board of Equalization, 73 Cal.App.4th 985.

Construction.—"Application" (or "processing") programs, unlike "basic operational" software, are not to be valued for the purposes of property taxation even if the application software is embedded in the equipment. Property Tax Rule 152 allows taxpayers to demonstrate that a portion of the value of a computer represents nontaxable application software despite the fact that it came bundled inside the computer when the customer bought or leased it. Cardinal Health 301, Inc. v. County of Orange, 167 Cal.App.4th 219.

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995.1. Storage media for computer programs; escape assessments.[Repealed by Stats. 1983, Ch. 1281, in effect September 30, 1983.]

995.2. Basic operational program. The term "basic operational program," as used in Section 995, means a computer program that is fundamental and necessary to the functioning of a computer. A basic operational program is that part of an operating system including supervisors, monitors, executives, and control or master programs that consist of the control program elements of that system.

For purposes of this section, the terms "control program" and "basic operational program" are interchangeable. A control program, as opposed to a processing program, controls the operation of a computer by managing the allocation of all system resources, including the central processing unit, main storage, input/output devices and processing programs. A processing program is used to develop and implement the specific applications that the computer is to perform. Its operation is possible only through the facilities provided by the control program. It is not in itself fundamental and necessary to the functioning of a computer.

Excluded from the term "basic operational program" are processing programs, which consist of language translators, including, but not limited to, assemblers and compilers; service programs, including but not limited to, data set utilities, sort/merge utilities, and emulators; data management systems, also known as generalized file-processing software; and application programs, including, but not limited to, payroll, inventory control, and production control. Also excluded from the term "basic operational program" are programs or parts of programs developed for or by a user if they were developed solely for the solution of an individual operational problem of the user.

A control program, as used in this section, includes the following functions: selection, assignment, and control of input and output devices; loading of programs, including selection of programs from a system resident library; handling the steps necessary to accomplish job-to-job transition; controlling the allocation of memory; controlling concurrent operation of multiple programs or computers; and protecting data from being inadvertently destroyed as a result of operator program error.

History.—Added by Stats. 1973, Ch. 990, p. 1907, in effect January 1, 1974. Sec. 5 of the act provides no state payment to local government because of the act. Stats. 1998, Ch. 583 (SB 1103), in effect January 1, 1999, deleted "and for purposes of Section 995.1," after "Section 995" in the first sentence of the first paragraph; deleted "; however," after "control program" in the fourth sentence and created the fifth sentence with the balance of the former fourth sentence after "program" in the second paragraph; deleted "such" after "includes" in the first sentence of the fourth paragraph; and substituted "that" for "which" throughout text. Stats. 1999, Ch. 83 (SB 966), in effect January 1, 2000, added a comma after "Section 995" in the first sentence and added a comma after "executives" in the second sentence of the first paragraph; added a comma after "section" in the first sentence of the second paragraph; added a comma after the first "including", and substituted "programs, including, but not limited to, payroll, inventory control," for "programs including but not limited to payroll, inventory control" after "and application" in the first sentence of the third paragraph; substituted "the following functions: selection, assignment," for "functions as: selection, assignment" after "includes" in the first sentence of the fourth paragraph.

Construction.—Bundling by itself is not dispositive of whether application software included in a bundled programming package was taxable. Cardinal Health 301, Inc. v. County of Orange, 167 Cal.App.4th 219.

Burden of Proof.—Pursuant to Property Tax Rule 152, a taxpayer is allowed to demonstrate that a portion of the value of a computer represents nontaxable application software despite the fact that it came bundled inside the computer when the customer bought or leased it. Cardinal Health 301, Inc. v. County of Orange, 167 Cal.App.4th 219.

Medical Equipment.—An assessor, when valuing medical equipment, must deduct or offset any proprietary computer software embedded in the medical equipment. "Application" software, unlike "basic operational" software, is not to be valued for purposes of property taxation. Cardinal Health 301, Inc. v. County of Orange,167 Cal.App.4th 219.

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996. Returnable containers for soft drink beverages. (a) Returnable containers shall be assessed only to the person in possession thereof on the lien date, provided such person is not under a legally enforceable duty to return the containers for reuse. For the purpose of this section, a person is not under a legally enforceable duty to return returnable containers for reuse merely because such person has the right to return such containers at his election for a sum of money equal to the deposit or similar charge paid by him upon his acquisition of the containers.

(b) If a deposit or similar charge is paid by the buyer of the contents with respect to returnable containers assessable in the manner provided by this section, the cash value of such returnable containers after initial use shall be the cost of such containers, less depreciation, but shall not be less than the deposit or similar charge.

(c) As used in this section the term "returnable containers" means containers used to package soft drink beverages and of a kind customarily returned by the buyer of the contents for reuse.

History.—Added by Stats. 1973, Ch. 1044, p. 2069, in effect January 1, 1974, operative on March 1, 1974. Sec. 2 of the act provides no state payment to local government because of the act.

Reusable containers.—Only returnable containers used to package soft drink beverages are exempt under this section. Thus, the section does not apply to reusable containers in which a soft drink manufacturer supplied carbon dioxide gas and component syrup to its wholesale customers because the former was not a liquid and the latter was not palatable in its packaged state and was not intended to be imbibed as a refreshment. Westinghouse Beverage Group, Inc. v. San Diego County, 203 Cal.App.3d 1442.

997. Business records. (a) The cash value of records of persons engaged in a business or profession for purposes of this division is the cash value only of the tangible material upon which, or in which, such records are recorded, maintained or stored. Such cash value shall be determined without inclusion of or consideration of the intangible value of the information or data so recorded, maintained or stored, nor the intangible right to utilize such information or data.

(b) As used in this section "records" includes all written documents and photographic reproductions thereof, recorded data, research notes, calculations, and indices maintained or utilized by persons engaged in a business or profession.

(c) Nothing in this section shall prohibit a determination of full cash value for (1) books, (2) old newspapers on microfilm, (3) computer programs and storage media for such programs taxable pursuant to Section 995, (4) records which are held for sale in the ordinary course of business, or (5) records which are purchased from a person who held such records in an inventory of goods for sale in the ordinary course of business. Records sold only when a business is sold shall not be considered as "held for sale in the ordinary course of business."

(d) Nothing in this section shall prohibit the consideration of research and development, engineering or similar costs in the valuation of tangible property, other than records.

History.—Added by Stats. 1974, Ch. 456, p. 1077, in effect July 11, 1974, operative with respect to assessments for the 1974–75 fiscal year. Stats. 1975, Ch. 1207, in effect January 1, 1976, amended Sections 2, 3, and 4 of Stats. 1974, Ch. 456, p. 1078. Stats. 1979, Ch. 928, in effect January 1, 1980, repealed Section 3 of Stats. 1974, Ch. 456, as amended by Section 3 of Stats. 1975, Ch. 1207.

Note.—Section 2(c) of Stats. 1974, Ch. 456, p. 1078, provided for state reimbursement for revenue lost. Section 3 provided that the section shall remain in effect only through the 1978–79 fiscal year, and as of such date is repealed, unless a later enacted statute, which is chaptered before March 1, 1979, deletes or extends such date. Section 4 provided that the Legislative Analyst shall report to the Legislature on or before October 15, 1977, on the economic effect of the section, including the type of records which have been classified pursuant to the section.

Note.—Section 2(c) of Stats. 1975, Ch. 1207, provided for state reimbursement for revenue lost. Section 3 provided that the section shall remain in effect only through the 1979–80 fiscal year, and as of such date is repealed, unless a later enacted statute, which is chaptered before March 1, 1980, deletes or extends such date. Section 4 provided that the Legislative Analyst shall report to the Legislature on or before October 15, 1978, on the economic effect of this act, including the type of records which have been classified pursuant to this act. Section 5 provided that no escape assessment shall be levied against property of a type classified in Section 997 of the Revenue and Taxation Code by any local agency which did not assess property of that type for the 1971–72, 1972–73, 1973–74, and 1974–75 fiscal years. Section 6 provided that Section 1 of Chapter 456 of the Statutes of 1974 is declaratory of existing law; and Sections 2 and 3 of Chapter 456 of the Statutes of 1974 are intended to provide equitable reimbursement to local agencies that have relied for the period required by this act upon the tax revenue from the assessment of the value of the intangible property classified in Section 1 of Chapter 456 of the Statutes of 1974.

Note.—Section 2 of Stats. 1979, Ch. 928, provided that notwithstanding Section 2231 or 2234 of the Revenue and Taxation Code, no appropriation is made by this act pursuant to these sections because the duties, obligations, or responsibilities imposed on local agencies or school districts by this act are such that related costs are incurred as part of their normal operating procedures. It is recognized, however, that a local agency or school district may pursue any remedies to obtain reimbursement available to it under Chapter 3 (commencing with Section 2201) of Part 4 of Division 1 of that code.

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998. Timeshare estate, timeshare use, and timeshare interest. (a) The full value of a time-share estate or a time-share use subject to tax under this division shall be determined by finding the real property value of the interest involved and shall not include the value of any nonreal property items, including, but not limited to, vacation exchange rights, vacation conveniences and services, and club memberships. Accordingly, the full value of a time-share estate or time-share use may be determined by reference to resort properties, condominiums, cooperatives, or other properties which are similar in size, type, and location to the property subject to time-share ownership and are not owned on a time-share basis. The aggregate assessed value of all the time-share estates or uses relating to a single lot, parcel, unit, or other segment of real property shall be determined by adding (1) the fair market value of the similar lot, parcel, unit, or other segment not owned on a time-share basis, and (2) an amount necessary to reflect any increase or decrease to the market value attributable to the fact that the property is marketed in increments of time, or by any alternate method which will determine the real property value without regard to any nonreal property items which may be included.

(b) Nothing in this section shall authorize a reassessment of real property as a result of the creation or transfer of a time-share interest in the property unless the creation or transfer of the time-share interest constitutes a change in ownership under Chapter 2 (commencing with Section 60) of Part 2 and Section 2 of Article XIII A of the California Constitution.

(c) For purposes of this section, "time-share estate" and "time-share use" shall have the meanings set forth paragraph (x) in Section 11212 of the Business and Professions Code, and "time-share interest" shall refer to both time-share estates and time-share uses.

(d) Nothing in this section may be construed as requiring the assessment of any property at less than fair market value as required by Section 401.

History.—Added by Stats. 1983, Ch. 1110, in effect January 1, 1984. Stats. 1991, Ch. 646, in effect January 1, 1992, deleted subdivision (e) which provided "The State Board of Equalization shall adopt by June 30, 1984, regulations to carry out the provisions of this section.". Stats. 2003, Ch. 62 (SB 600), in effect January 1, 2004, substituted "may" for "shall" after "in this section" in the first sentence of subdivision (d) and substituted "time-share" for "time share" throughout the text. Stats. 2004, Ch. 697 (AB 2252), in effect January 1, 2005, substituted "paragraph (x) of Section 11212" for "Section 11003.5" after "set forth in" in the first sentence of subdivision (c).

Note.—Section 1 of Stats. 1983, Ch. 1110, provided that the Legislature finds that the development and sale of timeshare interests is an important and growing segment of the real estate industry in California and that certainty and uniformity in the assessment of such interests is important to the continued development of timeshare projects in this state.

The Legislature also finds that a significant portion of the purchase price of a timeshare interest may be attributable to features and services that are not real property, in addition to the ownership of real property. These nonreal property items may include vacation exchange rights, vacation conveniences and services, club memberships, and other intangible rights and services which are not real property and are not subject to assessment for property tax purposes.

It is, therefore, the intent of the Legislature in enacting this act to provide uniformity and certainty in the assessment of timeshares by providing a method for valuing timeshare interests which identifies only that portion of the interest constituting real property subject to property tax in accordance with Article XIII and Section 1 of Article XIII A of the California Constitution. Sec. 3 thereof provided that the Legislature finds and declares that Section 2 of this act is declaratory of, and not a change in existing law. It is the intent of the Legislature in enacting this act to clarify the application of existing law and provide uniformity and certainty in the assessment of timeshare estates and uses. Sec. 4 thereof provided that no appropriation is made by this act and the state shall not reimburse any local agency for any property tax revenues lost by it under this act, since this act is declaratory of existing law.

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Article 2. Goods in Transit

1016. "Intrastate water carrier." As used in this article, "intrastate water carrier" means a person engaged in the intrastate transportation of goods by water.

1017. "Goods in transit." As used in this article, "goods in transit" means personal property which, on the lien date, is in transit and is possessed or controlled and managed by an intrastate water carrier.

1018. "Residence of the owner." As used in this article, "residence of the owner" means the county where the goods in transit where produced or from which the shipment was made, if the owner owns real property other than possessory interests there, or, if he does not own real property other than possessory interests there, his place of domicile.

1019. Situs. Goods in transit have the residence of the owner as their situs for taxation.

1020. Water carriers' returns. Every intrastate water carrier shall file a copy of the bill of lading or manifest for all goods in transit with the forwarding agent or warehouse proprietor for delivery to the assessor of his county. If the goods are delivered for transportation by other persons, the intrastate water carrier shall report the goods in transit to the assessor of the county from which they were received.

1021. Contents. The copy of the bill of lading or manifest shall show the description, value, consignor and consignee of the goods.

1022. Penalty. Every person who violates any provision of this article is guilty of a misdemeanor.

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Article 5. Vessels

1136. "Ferry." A ferry is a place where passengers and freight are regularly transported by water between two fixed termini under authority of law so to do.

1137. Intercounty ferries. Where a ferry connects points in more than one county, the wharves, storehouses, and stationary property connected with it shall be assessed in the county where located, and the ferryboats shall be assessed in equal proportions in the counties it connects.

1138. Documented vessels. Vessels documented outside of this State and plying in whole or in part in its waters, the owners of which reside in this State, shall be assessed in this State.

Constructions—"Documented" means registered, enrolled and licensed, or licensed. 46 U.S. Code 18.

Vessels employed in foreign or interstate commerce which have not by the manner of their use acquired an actual situs elsewhere are properly assessed for taxation at the port of domicile of the sole owner where they are registered under the laws of the United states, regardless of the fact that they were outside the waters of the State from a date preceding the first Monday in March in the year of the assessment and that some of them had never been within its waters. California Shipping Co. v. San Francisco, 150 Cal. 145. For the proper construction of this and the following three sections see also Olson v. San Francisco, 148 Cal. 80.

"Plying" implies regularity, and is not the term used to express the character of the irregular and transient visitations of a ship to a port. San Francisco v. Talbot, 63 Cal. 485.

Decommissioned, undocumented and inoperative navel landing craft owned by a foreign corporation and moored in a harbor in this State acquired a tax situs here. Ships and Power Equipment Corp. v. San Diego County, 93 Cal.App.2d 522.

Constitutionality.—See San Francisco v. Talbot and Olson v. San Francisco, both supra.

Situs.—A finding of ultimate fact that a tug had no taxable situs in this State was supported by the findings of probative facts where the latter showed that the owner resided and the tug was registered in Alaska, that although the tug was chartered to a corporation having its principal place of business in Los Angeles county, by the charter the tug was not completely turned over to the charterer to be used as its own property, and that the tug spent its time partly outside the State and partly in each of several different counties, there being no showing as to the proportion of time spent in the various places. Sayles v. Los Angeles County, 59 Cal.App.2d 295.

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1139. County where habitually moored. Except as otherwise provided in this article, when the owner or master of a taxable vessel gives written notice of its habitual place of mooring when not in service to the assessor of the county where the vessel is documented, the vessel shall be assessed only in the county where habitually moored.

1140. County where documented. Vessels, except ferryboats, regularly engaged in transporting passengers or cargo between two or more ports and vessels concerning which notice of habitual place of mooring has not been given shall be assessed only in the county where documented.

Construction.—This and the preceding section establish the principle of the "home port rule" as between counties in this state and have no application where the vessel is permanently located in a county other than the county where documented. Smith-Rice Heavy Lifts, Inc. v. Los Angeles County, 256 Cal.App.2d 190.

1141. Nondocumented vessels. Vessels not required to be documented shall be assessed in the county where habitually moored when not in service.

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Article 6. Certificated Aircraft*

* Article 6 was added by Stats. 1968, p. 2460, in effect August 13, 1968.

1150. "Certificated aircraft" defined. As used in this article, "certificated aircraft" means aircraft operated by an air carrier or foreign air carrier engaged in air transportation, as defined in subdivisions (3), (5), (10), and (19) of Section 101 of Title I of the "Federal Aviation Act of 1958" (P.L. 85-726; 72 Stat. 731), while there is in force a certificate or permit issued by the Civil Aeronautics Board of the United States, or its successor, or a certificate or permit issued by the California Public Utilities Commission, or its successor, authorizing such air carrier to engage in such transportation.

Construction.—These sections do not impose a property tax on the value of certificated aircraft operated by an airline, but merely provide an allocation formula to determine the extent to which certificated aircraft are situated, for taxing purposes, in different taxing jurisdictions. American Airlines, Inc. v. San Diego County, 220 Cal.App.3d 164.

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1151. Situs of aircraft. Certificated aircraft shall be deemed to be situated in this state only to the extent that such aircraft are normally physically present within the state, whether in flight or on the ground. To determine such extent for purposes of property taxation, the allocation formula specified by Section 1152 shall be applied.

Construction.—By the provision that aircraft are to be deemed situated in the state only to the extent that they are normally physically present, the Legislature intended to exclude unscheduled aircraft present in the state because of an abnormal, unusual, or nonrecurrent event. Substitution of periods of normal activity for atypical periods was consistent with such intent and with the constitutional principle that tax on aircraft having a multiple tax situs have relation to opportunities, benefits, or protection conferred or afforded by the taxing state. Alameda County v. State Board of Equalization, 131 Cal.App.3d 374.

1152. Allocation formula. The allocation formula to be used by each assessor is as follows:

(a) The time in state factor is the proportionate amount of time, both in the air and on the ground, that certificated aircraft have spent within the state during a representative period as compared to the total time in the representative period. For purposes of this subdivision, all time, both in the air and on the ground, that certificated aircraft have spent within the state prior to the aircraft's first entry into the revenue service of the air carrier in control of the aircraft on the current lien date shall be excluded from the time in state factor. This factor shall be multiplied by 75 percent.

(b) The arrivals and departures factor is the proportionate number of arrivals in and departures from airports within the state of certificated aircraft during a representative period as compared to the total number of arrivals in and departures from airports during the representative period. This factor shall be multiplied by 25 percent.

(c) For the 1983–84 fiscal year and fiscal years thereafter, in computing the time-in-state factor, on each occasion during the representative period that a certificated aircraft has spent 720 or more consecutive hours on the ground, all ground time in excess of 168 hours shall be excluded from the time in state attributable to that aircraft.

(d) The time in state factor shall be added to the arrivals and departures factor.

(e) The figure produced by application of subdivision (d) equals the allocation to be applied to full cash value to determine the value to which the assessment ratio shall be applied.

History.—Stats. 1973, Ch. 1169, p. 2444, in effect January 1, 1974, operative March 1, 1974, added "(1) For the 1974–75 fiscal year to the 1979–80 fiscal year, inclusive" after subdivision (a), and added "factor" after "state" in the first sentence of subdivision (a)(1); added the second sentence of subdivision (a)(1); and added subdivision (a)(2). Stats. 1980, Ch. 610, in effect July 18, 1980, deleted "(1)" at the beginning of, substituted "1980–81" for "1974–75" and "and fiscal years thereafter" for "to the 1979–80 fiscal year, inclusive," in the first sentence of, and deleted "and on groundtime that certificated aircraft has spent within the state in excess of 12 consecutive hours" after "revenue flight" in the second sentence of, and deleted subdivision (a)(2). Stats. 1982, Ch. 1219, in effect January 1, 1983, deleted "for the 1980–81 fiscal year and fiscal years thereafter," before "The" at the beginning of the first sentence, and substituted "have" for "has" after "aircraft", substituted "first entry . . . lien date" for "first revenue flight" before "shall be", and deleted "the computation of" before "the time" in the second sentence of subdivision (a); added "The" before "arrivals", added "factor" before and "proportionate" after "is the", and substituted "during" for "both within this state and elsewhere in" after the second "airports" in the first sentence of subdivision (b); added subdivision (c); relettered former subdivisions (c) and (d) is (d) and (e), respectively; and substituted "(d)" for "(e)" after "subdivision" in subdivision (e).

Note.—Section 3 of Stats. 1973, Ch. 1169, p. 2445, provided the State Board of Equalization shall compute the reduction in revenues because of this act which would have taken place had the act been in effect in 1972–73, and the reduction shall be the basis for computing reimbursement for 1974–75 and later years.

Note.—Section 11.5 of Stats. 1980, Ch. 610, provided no payment by state to local governments because of this act, however, a local agency or school district may pursue other remedies to obtain reimbursement.

Note.—Section 14 of Stats. 1980, Ch. 610, provided the Legislature finds and declares that time spent within the state by a certificated aircraft prior to its first revenue flight is not representative of that aircraft's "normal physical presence within the state" as that phrase is used in Section 1151 of the Revenue and Taxation Code. The inclusion of such pre-revenue flight time in the allocation formula established pursuant to subdivision (a) of Section 1152 of the Revenue and Taxation Code distorts the predicted pattern of usage within the state during the ensuing tax year and creates an arbitrary and discriminatory basis for allocation of the taxable value of the aircraft. Section 3 of this act, which provides for the continued exclusion of time-in-state prior to an aircraft's first revenue flight from the allocation formula established in Section 1152 of the Revenue and Taxation Code, is necessary to carry out the legislative scheme for taxation of certificated aircraft and to prevent arbitrary and discriminatory taxation of newly acquired aircraft. Accordingly, the application of Section 1152 of the Revenue and Taxation Code as amended by Section 3 of this act to the 1980–81 fiscal year is necessary to accomplish these public purposes.

Note.—Section 2 of Stats. 1982, Ch. 1219, provided the amendment to subdivision (a) of Section 1152 of the Revenue and Taxation Code made by this act is declaratory of existing law.

Construction.—An assessor's formula to account for time an aircraft is in other states may be used even if the combined valuation of the aircraft by the other state and California exceeds 100 percent of the value of the property so long as the assessor's formula is not arbitrary and is rationally related to the opportunities, benefits, and protections afforded to the taxpayer by California. Auerbach v. Los Angeles County Assessment Appeals Board No. 2; TWC Aviation, Inc., 167 Cal.App.4th 1415.

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1153. Representative period to be used. After consulting with the assessors of the counties in which aircraft of an air carrier normally make physical contact, the board shall designate for each assessment year the representative period to be used by the assessors in assessing the aircraft of the carrier.

Designation.—In selecting a representative period for nonscheduled aircraft, the Board did not abuse its discretion in designating the entire prior assessment year, modified by the substitution of days from an earlier assessment year for those days in the prior assessment year during which the aircraft were grounded due to strike or suspension of airworthiness certificates. Alameda County v. State Board of Equalization, 131 Cal.App.3d 374.

1153.5. Lead county assessment duties. (a) The Aircraft Advisory Subcommittee of the California Assessors' Association shall, after soliciting input from commercial air carriers operating in the state, do both of the following:

(1) On or before March 1, 2006, and on or before each March 1 thereafter, designate a lead county assessor's office for each commercial air carrier operating certificated aircraft in this state in that assessment year.

(2) Every third year thereafter, redesignate a lead county assessor's office for each of these air carriers, unless an air carrier and its existing lead county assessor's office concur to waive this redesignation.

(b) The lead county assessor's office described in subdivision (a) shall do all of the following:

(1) Calculate, pursuant to Section 401.17, an unallocated value of the certificated aircraft of each commercial air carrier to which he or she is designated.

(2) Electronically transmit to the assessor of each county in which the property described in paragraph (1) has situs for the assessment year the values determined by the lead county assessor's office under paragraph (1).

(3) Receive the property statement, as described in subdivision (l) of Section 441, of each commercial air carrier to which he or she is designated.

(4) Lead the audit team described in subdivision (d) when that team is conducting an audit of a commercial air carrier to which he or she is designated.

(5) Notify, in writing, each commercial air carrier for which he or she has been designated of this designation on or before the first March 15 that follows that designation.

(c) (1) Notwithstanding subdivision (b), the county assessor of each county in which the personal property of a commercial air carrier has situs for an assessment year is solely responsible for assessing that property, applying the allocation formula set forth in Section 1152, and enrolling the value of the property in that county, but, in determining the unallocated fleet value for each make, model, and series of certificated aircraft of a commercial air carrier, the assessor may consult with the lead county assessor's office designated for that commercial air carrier.

(2) The lead county assessor's office is subject to Section 322 of Title 18 of the California Code of Regulations and Sections 408, 451, and 1606 to the same extent as the assessor described in paragraph (1).

(d) Notwithstanding Section 469, an audit of a commercial air carrier shall be conducted once every four years on a centralized basis by an audit team of auditor-appraisers from at least one, but not more than three, counties, as determined by the Aircraft Advisory Subcommittee of the California Assessors' Association. An audit, so conducted, shall encompass all of the California Personal Property and fixtures of the air carrier and is deemed to be made on behalf of each county for which an audit would otherwise be required under Section 469.

(e) This section shall remain in effect only until December 31, 2010, and as of that date is repealed.

History.—Added by Stats. 2005, Ch. 699 (AB 964), in effect October 7, 2005.

Note.—Section 1 of Stats. 2005, Ch. 699 (AB 964) provided that:

(a) The Legislature finds and declares all of the following:

(1) A difficult and contentious property tax assessment issue concerns the assessment of certificated aircraft following the incident of September 11, 2001. The difficulty of measuring the economic obsolescence resulting from the incident, pertaining to a variety of aircraft types, many with tax situs in several counties, justifies a standardized approach to the appraisal of these aircraft.

(2) The difficulty of appraising certificated aircraft following the incident has given rise to much litigation and many tax appeals.

(3) The uncertainty created by pending litigation and appeals over the assessment of airline property is disruptive to both airline industry tax planning and local government and school finance.

(b) It is the intent of the Legislature in enacting this act to establish a unique methodology for the assessment of certificated aircraft in light of the special circumstances that befell this property and the airline industry following the September 11, 2001 incident. Specialized procedures, including the unique valuation methodology enacted herein, are justified by the multijurisdictional use of certificated aircraft property, and the manner in which valuations of this property are allocated. Therefore, in order to facilitate resolution of the disputes over the assessment of certificated aircraft, it is the intent of the Legislature to codify recommendations produced by a county and airline industry working group, to establish a uniform valuation methodology specifically designed and adopted for the unique circumstance of certificated aircraft property.

Section 5 thereof provided that the provisions of this measure are severable. If any provision of this measure or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.

Section 7 thereof provided that this act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are: In order to establish, for the current fiscal year, a uniform valuation methodology for certificated aircraft in light of the special circumstances affecting the airline industry following the September 11, 2001 incident, it is necessary that this act take effect immediately.

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1154. "Air taxi" defined; assessment. (a) As used in this section, "air taxi" means aircraft used by an air carrier which does not utilize aircraft having a maximum passenger capacity of more than 30 seats or a maximum payload capacity of more than 7,500 pounds in air transportation and which does not hold a certificate of public convenience and necessity or other economic authority issued by the Civil Aeronautics Board of the United States, or its successor, or by the California Public Utilities Commission, or its successor.

(b) Air taxis which are operated in scheduled air taxi operations are not subject to the provisions of Part 10 (commencing with Section 5301) of this division and shall be assessed in accordance with the allocation formula set forth in Section 1152.

(c) All other air taxis shall be assessed in the county where the aircraft is habitually situated in the same manner and at the same ratio as other personal property in the county subject to general property taxation. Such aircraft shall be taxed at the same rate and in the same manner as all other property on the unsecured roll.

History.—Stats. 1969, p. 1466, in effect August 14, 1969, added the subdivision letters, added "which are operated in scheduled air taxi operations" to subdivision (b), and added subdivision (c). Stats. 1977, Ch. 921, in effect January 1, 1978, substituted "having a maximum passenger capacity of more than 30 seats or a maximum payload capacity of more than 7,500 pounds" for "whose maximum certificated takeoff weight is greater than 12,500 pounds" in the first sentence of subdivision (a).

Construction.—An aircraft used for unscheduled air taxis constitutes a common carrier even though the aircraft is not a commercial aircraft used for scheduled airline operations. Such an aircraft would be exempt from sales and use tax under Revenue and Taxation Code Section 6366.1, subdivision (a), and, therefore, no amount attributed to sales tax should be included in an assessor's valuation of the aircraft. Auerbach v. Los Angeles County Assessment Appeals Board No. 2; CKE Assoc., 167 Cal.App.4th 1428.

1155. Jurisdiction of taxing agencies; flight time allocation. For purposes of Section 404, certificated aircraft shall be deemed to be situated only in those taxing agencies in which the aircraft normally make physical contact with sufficient regularity to entitle such agencies to tax the aircraft under the laws and Constitution of the United States. Flight time within the state shall be allocated as follows:

(a) If the aircraft takes off in one taxing agency which is entitled to tax (within the meaning of the preceding sentence) and lands in another agency which is entitled to tax, the flight time between such taxing agencies shall be allocated one-half to each such agency.

(b) If the aircraft arrives from out of state or leaves the state, the flight time from or to the state boundary shall be allocated to the taxing agency entitled to tax in which the aircraft first lands or last takes off, as the case may be.

1156. Right of taxing agency to tax; scope. Nothing in this article shall be construed to enlarge the right of any taxing agency to tax certificated aircraft in a manner not permitted by the laws or Constitution of the United States.

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Article 7. Fractionally Owned Aircraft*

* Article 7 was added by Stats. 2007, Ch. 180 (SB 87), in effect August 24, 2007.

1160. Fractionally owned aircraft; definitions; revenue allocation. For purposes of this article, all of the following apply:

(a) The following terms have the following meanings:

(1) "Aircraft" has the same meaning as specified in Section 5303.

(2) "Fleet" means all aircraft operated by a manager of a fractional ownership program.

(3) "Fleet type" means aircraft classified by make, model, and series operated by a manager of a fractional ownership program.

(4) "Fractionally owned aircraft" or "aircraft operated in fractional ownership programs" means those aircraft registered with the Federal Aviation Administration as fractionally owned aircraft.

(5) "Landing" means physical contact involving the embarking or disembarking of crew, passengers, or freight, and that physical contact did not arise unintentionally as the result of an emergency.

(b) Revenues derived from the taxation of fractionally owned aircraft under this article shall be distributed in accordance with Chapter 6 (commencing with Section 5451) of Part 10 of this division.

(c) Fractionally owned aircraft shall be assessed under this article only if a lead county assessor accepts a designation as lead county assessor under Section 1162.

History.—Added by Stats. 2007, Ch. 180 (SB 87), in effect August 24, 2007.

Note.—Section 1 of Stats. 2007, Ch. 180 (SB 87), provided that the Legislature finds and declares the following:

(a) A substantial portion of business aviation aircraft is now owned and operated under fractional ownership programs.

(b) Aircraft in fractional ownership programs have a significant presence in California.

(c) The size of some fractional ownership program fleets is quite large and the mix of ownership interests and unscheduled usage imposes a significant burden on both taxpayers and county assessors to assess and tax these fleets on an aircraft-by-aircraft basis; in order to reduce this burden, a simplified assessment approach is warranted.

(d) Section 1 of Article XIII of the California Constitution specifies that all nonexempt property is taxable. Therefore, fractionally owned aircraft are constitutionally required to be assessed.

(e) The purpose of Sections 2 and 4 of this act is to establish a simplified procedure for assessing fractionally owned aircraft that is appropriate and fair, that allocates assessed value among counties in a reasonable manner, and that reduces the administrative burden on taxpayers and county assessors.

Section 7 thereof provided that this act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are: In order to timely and properly implement the Budget Act of 2007.

1161. Assessment; administrative procedures. (a) Notwithstanding any other law, fractionally owned aircraft that has situs in this state shall be assessed on a fleetwide basis to the manager in control of the fleet and a notice of that assessment shall be issued to that manager.

(1) Any fractionally owned aircraft that has been annually assessed for the fiscal years preceding the 2007–08 fiscal year shall be assessed under this article commencing with the 2007–08 fiscal year.

(2) For fractionally owned aircraft that have not been annually assessed for the fiscal years preceding the 2007–08 fiscal year, assessment under this article applies for the 2007–08 fiscal year and for each fiscal year thereafter, and for preceding fiscal years for which an assessment was not made, and for which a statute of limitations either does not apply or has been waived.

(b) A fleet of fractionally owned aircraft establishes situs in this state if an aircraft within the fleet makes a landing in the state.

(c) A fleet of fractionally owned aircraft shall be assessed on an allocated basis. An allocation factor shall be established in each county for each fleet type of fractionally owned aircraft for which situs in this state has been established as described in subdivision (b). This allocation factor is a fraction, the numerator of which is the total number of landings and departures made by the fleet type in the county during the previous calendar year and the denominator of which is the total number of landings and departures made by the fleet type worldwide during the previous calendar year.

History.—Added by Stats. 2007, Ch. 180 (SB 87), in effect August 24, 2007.

Note.—See note following Section 1160.

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1162. Lead county duties. (a) On or before October 1, 2007, the Aircraft Advisory Subcommittee of the California Assessors' Association may designate a lead county assessor's office for each manager in control of a fleet of fractionally owned aircraft.

(b) If a lead county assessor's office is designated under subdivision (a), and that assessor's office accepts that designation, the lead county assessor's office described in subdivision (a) shall do all of the following:

(1) Notify, in writing, each manager in control of a fleet of fractionally owned aircraft for which the lead county assessor has been designated of this designation on or before the first October 15 that follows that designation.

(2) Receive the property statement, as described in subdivision (l) of Section 441, of each manager in control of a fleet of fractionally owned aircraft for which the lead county assessor has been designated.

(3) Calculate, pursuant to Sections 5363 and 5364, an unallocated value of all fractionally owned aircraft for each manager in control of a fleet of fractionally owned aircraft for which the lead county assessor has been designated.

(4) Electronically transmit to the assessor of each county in which a fleet of fractionally owned aircraft has situs for the assessment year the value determined by the lead county assessor's office under paragraph (3) and the allocation factor described in subdivision (c) of Section 1161.

(5) Lead the audit team described in subdivision (d) when that team is conducting an audit of each manager in control of a fleet of fractionally owned aircraft for which the lead county assessor has been designated.

(c) (1) Notwithstanding subdivision (b), the county assessor of each county in which a fleet of fractionally owned aircraft has situs for an assessment year is solely responsible for assessing that property by multiplying the unallocated value of each fleet type by the allocation factor described in subdivision (c) of Section 1161, and enrolling the total allocated value for the fleet type. In appraising the unallocated value of the fleet type, the assessor may consult with the lead county assessor's office designated for that fleet.

(2) The lead county assessor's office is subject to Section 322 of Title 18 of the California Code of Regulations and Sections 408, 451, and 1606 to the same extent as the assessor described in paragraph (1).

(d) Notwithstanding Section 469, an audit of each manager in control of a fleet of fractionally owned aircraft may be conducted once every four years on a centralized basis by an audit team of auditor-appraisers from at least one, but not more than three, counties, as determined by the Aircraft Advisory Subcommittee of the California Assessors'Association. An audit, so conducted, shall encompass all of the California personal property and fixtures of the manager of the fleet of fractionally owned aircraft and is deemed to be made on behalf of each county for which an audit would otherwise be required under Section 469.

History.—Added by Stats. 2007, Ch. 180 (SB 87), in effect August 24, 2007.

Note.—See Note following Section 1160.

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Article 7. Property of Historical Significance

[Repealed by Stats. 1977, Ch. 1040, in effect January 1, 1978.]

§ 1161. Valuation of property subject to an historical property contract. [Repealed.]

§ 1162. Board to adopt rules and regulations. [Repealed.]