AUGUSTA — In 2007, Phil Boyer, the former president of the Aircraft Owners and Pilots Association, wrote a sharply-worded letter to Gov. John Baldacci criticizing the state’s “aggressive and unreasonable enforcement” of a law taxing owners of out-of-state aircraft.
Boyer described the law as punitive and urged Baldacci to change it. That never happened, prompting Boyer to advise AOPA’s 410,000 members to avoid flying here.
Opponents of the law have often said the sizable, and sometimes unexpected, tax bill discouraged aircraft owners with disposable incomes from flying into the state and spending money here. But after several unsuccessful attempts to change the law in the Democrat-controlled Legislature, opponents of the tax are hoping new leadership in Augusta has the will to get it done.
A bipartisan effort is already under way.
Senate President Kevin Raye, R-Perry, is reportedly introducing legislation that will amend the use tax provision, while Sen. Stan Gerzofsky, D-Brunswick, is hoping to remove a sales tax on airplane parts.
Rep. Bruce Bickford, R-Auburn, said he is supporting both proposals because they will have a positive impact on the state’s aviation industry.
Proponents say the bills will draw more visits from aircraft owners, while the sales tax repeal on service parts could help companies that repair and maintain aircraft.
“If they repeal those taxes, we’d definitely see a difference,” said Rick Cloutier, the airport manager for the Auburn-Lewiston Municipal Airport. Cloutier said the airport had noticed a significant decrease in out-of-state operators when Maine Revenue Services began enforcing the tax law in 2007.
He said repealing the law would mean the airport would sell more fuel and other services.
Currently, out-of-state aircraft owners who don’t pay a sales tax in another state can be hit with a tax equal to 5 percent of the plane’s value if their plane stays in Maine more than 20 days. The state in 2007 amended the law to exclude aircraft weighing more than 6,000 pounds, but the tax on lighter aircraft remained, angering AOPA, an advocacy group for aircraft owners.
The group pressed Baldacci to change the law, arguing that aircraft owners were sometimes getting hit with six-figure tax bills for staying too long. The organization published several stories about the issue, including one in which Steve Kahn, an airplane owner from Boston, was assessed a $26,000 tax bill several years after landing his plane at Knox County Regional Airport in Rockland.
Cloutier said he’d heard similar stories from other airplane owners.
“We received complaints from people who would spend a few weeks vacationing in Maine and later get hit with a bill,” he said. “A lot of those people ended up going elsewhere.”
Cloutier said changing the laws would impact every airport in the state. He said eliminating the sales tax on service parts, as Gerzofsky has proposed to do, would allow Maine companies performing aircraft repair and service work to be more competitive.
“It takes about 15 minutes for me to fly my plane to Portsmouth, N.H.,” he said. “If I’m doing major work on an airplane and I can save $20,000 or $30,000 in taxes if I take it to New Hampshire, I’m going to take it there. … It’s another cost of doing business here.”
Although there are few Maine companies that service or build aircraft, the arrival of a major player in the aviation industry could help people like Cloutier make their case. One player already has plans to come to Maine.
Kestrel Aircraft Co., the newly formed company headed by Cirrus Aircraft co-founder Alan Klapmeier, is expected to become an anchor tenant at the redeveloped Brunswick Naval Air Station. The Kestrel startup seeks to develop and manufacture a new prototype and hopes to employ about 300 people.
In an interview last summer, Klapmeier criticized the state’s use tax on out-of-state aircraft. Klapmeier plans to manufacture an airplane weighing more than 6,000 pounds, which qualifies for the current state tax exemption. However, Kestrel could benefit from removing the sales tax on aircraft parts.
Gerzofsky, who is sponsoring the bill, said he had the company in mind when he submitted the repeal legislation.
Steve Levesque, the executive director of the organization overseeing the redevelopment of the base, said Monday that changing both tax laws would benefit BNAS and all Maine airports.
“It helps every airport and any company that’s servicing aircraft or selling aircraft,” said Levesque, adding that he’d heard that some aircraft owners were flying into New Hampshire and renting cars there before coming to Maine.
“You have to ask how much Maine is losing by having this arcane tax law in place,” he said.
It’s not completely clear how eliminating the use tax will impact state revenues. According to information from Maine Revenue Services, the exemption for aircraft weighing more than 6,000 pounds would reduce state revenues by $827,427 in fiscal year 2011.
Since January 2004, the state has received $2.5 million in sales taxes on aircraft and parts. That’s about $360,000 annually, and about $264,000 over the last two years.
Although those impacts will ultimately be weighed by the Legislature, Levesque and Cloutier think advocates for the change have a better chance now with the lawmakers focusing on the economy and job growth.
Levesque noted AOPA’s 2007 letter to Baldacci, which he said caused real problems for airports in Maine.
“Maine is a beautiful place to fly,” Levesque, a pilot, said. “But we’ve been restricting people with disposable incomes from coming to Maine.”
The proposals by Raye and Gerzofsky are currently making their way through the Legislature’s reviser’s office, and have not yet been assigned a date for public hearing.
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