Mississippi Supreme Court Upholds Airport Lease Ad Valorem Tax Exemption
By Jeff Wagner
Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C
On May 10, 2018, the Mississippi Supreme Court issued a unanimous decision in Rankin County Board of Supervisors v. Lakeland Income Properties, LLC upholding the exemption from ad valorem taxes for leases of airport authority-owned or controlled property (including all buildings and structures located on the property by the tenant), even if made for commercial, non-aeronautical purposes, under Miss. Code Ann. §61-3-21.
The statute at question provides that:
All contracts, leases and other arrangements entered into pursuant to this section are deemed to serve a public and governmental purpose as a matter of public necessity; therefore, all such contracts, leases, and other arrangements and all structures, improvements and other facilities erected, installed, constructed or located in connection therewith on an airport or air navigation facility owned or controlled by an authority, or any portion of facility thereof or space therein, shall be free and exempt from all state, county and municipal ad valorem taxes on real property and personal property for so long as may otherwise be lawful, and the charges, rentals and fees received by an authority in connection with such contracts, leases and other arrangements shall be deemed to be in lieu of said taxes.
Miss. Code Ann. §61-5-11 provides a similar exemption for municipally-owned and county-owned airport property.
Rankin County had made several arguments to the court, including that the Legislature intended for the statute to only apply to leases for aeronautical activities, notwithstanding that the statutory definition of “airport” includes “buffer areas and areas for airport compatible development.” The court found the language of the statute to be clear and unequivocal in its application to leases made for non-aeronautical purposes. Further, it expressly noted that the exemption is self-actuating (no requirement for the lessee to apply for the exemption or to protest a tax assessment that did not take the exemption into account).
In making its decision, the court noted the need for airports to develop additional revenue sources to help develop and maintain their aeronautical facilities. This decision affirms the great marketing (and economic development) tool that airports have under Miss. Code Ann. §61-3-11 and Miss. Code Ann. §61-5-11 in developing alternative revenue sources. However, efforts have been made in the Legislature in the past to remove or limit the exemption. Further efforts are likely in the future as a result of this decision. Although this decision involved property located at the Jackson-Medgar Wiley Evers International Airport, other airports in the state have used this statute to great effect to encourage industrial and commercial tenants to locate on airport property. All airports should carefully consider the potential effects of any change to the statute
Jeff Wagner is a shareholder in the Jackson, Mississippi, office of Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C., and may be reached at (601) 973-3610 or by email at [email protected]