januaryfebruary2021 - 27

LEGAL MATTERS
used to defray the costs of maintaining
an airport.
Assuming that the airport property
is not exempt from taxation and/or
the tenant cannot avail itself of the
exemption, the last area of inquiry is
whether the jurisdiction allows for taxes
to be levied against a leasehold interest.
A state statute rendering leasehold
interests exempt from taxation would
clearly answer that question. In many
jurisdictions, however, there is no statute
providing that leasehold interests are not
taxable. Instead, in many jurisdictions,

a municipality lacks the authority to
levy taxes unless specifically provided
for by statute. In those jurisdictions, it
is the absence of a statute providing for
the taxation of a leasehold interest that
renders the leasehold interest not taxable.

WHAT HAPPENS WHEN A LEASE
OBLIGATES A TENANT TO
PAY TAXES AND THE TENANT
SUBSEQUENTLY DETERMINES
THE PROPERTY AND/OR
LEASEHOLD ARE NOT TAXABLE?
Many airport leases contain language
that provides " The Tenant shall be solely
responsible for any real and/or personal
property taxes, charges, and assessments
levied by any governmental entity against it
for the use of the Leased Premises. " Before
entering into a lease, prospective
tenants should be mindful of whether
the leasehold interest in the property is
taxable. Prospective tenants and their

counsel should do due diligence relating
to taxes before executing a lease. The
due diligence should include (1) requests
for information from the airport or
landlord; and (2) a search of the tax
rolls of the municipality with the taxing
authority over the airport to determine
what, if any, taxes have previously been
levied against the property being leased
as well as the airport property generally.
What happens if you sign the
lease and determine that the property
is not taxable? It depends on the
language of your lease and the facts
and circumstances presented. In order
to avoid paying the taxes levied, you
may have to assert a tax appeal or other
legal challenge to the municipality's
taxing authority. Litigating a tax
appeal or other legal challenge to
the municipality's taxing authority
could be costly and time consuming.
Therefore, before you embark upon
a legal challenge you should make
sure you exhausted all avenues for
resolution. Efforts at resolution should
include, discussing with your landlord
and asking for their thoughts on the
situation. If they view your situation
favorably, they may have some ideas for
how to approach the taxing authority
in an attempt to get them to view your
position more favorably. If it cannot be
resolved, determine what the budget is
for a legal challenge. You don't want
to spend more money litigating then
you would spend in taxes through the
conclusion of your lease.

WHAT HAPPENS WHEN THE
TAXING AUTHORITY CHANGES
ITS POSITION ON WHETHER
YOUR PROPERTY IS TAXABLE
MID-LEASE?
This issue recently made headlines when
the Hillsborough County Property
Appraiser refused to provide exemptions
for fifteen (15) leaseholds at Tampa
International Airport, Tampa Executive
Airport and Peter O. Knight Airport.
The Hillsborough County Aviation
Authority had previously filed for and
received exemptions for those properties.
As a result of the Property Appraiser's
changed position, Hillsborough County
Aviation Authority challenged the
Property Appraiser's refusal to provide
the exemptions. In November 2020,

a Circuit Judge ruled in favor of
the Hillsborough County Property
Appraiser but the Hillsborough County
Aviation Authority, recognizing the
economic impact on the Airport vowed
to appeal.
It is important to note that not all
airport landlords are willing to wage
years of litigation aimed at overturning
a taxing authority's determination
like Hillsborough County Aviation
Authority. Therefore, when a tenant
finds itself in the position of suddenly
being taxed for its leasehold interest in
airport property that had previously
been exempt, it is important for the
tenant to review their lease and verify
that they are responsible for paying the
taxes. Whether the tenant agreed to pay
taxes on the leasehold interest will likely
impact whether the landlord will aide in
a challenge of the assessment. Thereafter,
the tenant should immediately begin a
dialogue with the landlord and discuss
the economic implications not only to
the tenant but to the airport community
as a whole. The tenant should urge the
landlord to intervene on their behalf
either formally or informally. Even if
the landlord is not willing to undertake
a legal challenge, they may be willing
to engage the taxing authority in a
dialogue. If the landlord is unwilling
to assist either formally or informally in
challenging the assessment, the tenant
may be able to negotiate a remedy
with the landlord that accounts for
the tenant's changed circumstances of
having to pay the newly assessed taxes.
While this article provides some
useful information relating to how
to determine whether a leasehold
interest in an airport is taxable and
what to do if the leasehold interest
is being taxed unlawfully, it is
important for prospective tenants to
engage in the due diligence efforts
discussed herein and to consult with
counsel in an effort to prevent being
surprised. Notwithstanding having
taken all reasonable efforts to avoid a
surprise assessment, as we saw in the
Hillsborough County case, a change
of position of a taxing authority could
blindside a tenant. Knowing and
understanding remedies will leave the
tenant better prepared in the event that
they do receive a surprise assessment. 

JANUARY/FEBRUARY 2021 \ AVIATIONPROS.COM / 27
http://www.AVIATIONPROS.COM
januaryfebruary2021

Table of Contents for the Digital Edition of januaryfebruary2021
