What consideration was taxable when homeowners granted avigation easements for sound insulation?

Subject

Avigation Easements

Plain-English summary

The authority had to pay documentary stamp tax using $2,400 as consideration for each recorded avigation easement. An avigation easement transferred an interest in real property, so it was taxable rather than merely a nontaxable flight license.

The FAA had approved $2,400 as the easement's reasonable value. Home sound-insulation costs were a separate benefit of participating in the federal program—a grant—and were not additional consideration for the easement.

What this means for you

The tax base followed the established value of the property interest conveyed, not the cost of separate improvements provided through the program.

Common questions

Q: Was an avigation easement an interest in real property? Yes.

Q: What amount was subject to documentary stamp tax? $2,400 for each easement.

Q: Did insulation construction costs increase the tax base? No.

Citations and references

• Fla. Stat. § 201.02(1) — documentary stamp tax on real-property conveyances
• Fla. Admin. Code r. 12B-4.013(14) — easements
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 00B4-015

Original ruling text

SUMMARY

QUESTION:Are avigation easements granted by participants in
a sound insulation program which acknowledge a right of
flight over and above real property subject to documentary
stamp taxes based on consideration of $2,400 (the
established value for the easement by the FAA), or based on
the cost of the construction to insulate the homes?

ANSWER - BASED ON THE FACTS BELOW: Since the FAA has
determined that a reasonable value of the easements is
$2,400, any additional construction costs for sound
insulation to homes constitute a benefit of participating
in the Federal program and are not taxable for documentary
stamp tax. The tax is to be based on consideration of
$2,400.

Nov 22, 2000

Re: Technical Assistance Advisement No. 00B4-015
Documentary Stamp Tax; Avigation Easements
Section 201.02(1), F.S.
XXX (Authority)
XXX (Airport)
XXX (FAA)

Dear :

This is in response to your recent request for a Technical
Assistance Advisement dated September 18, 2000, regarding
application of documentary stamp tax to avigation easements for
a sound insulation program.

FACTS AS PRESENTED BY THE PETITIONER

The Authority is a body politic and corporate organized and
existing under the laws of the state, and is the owner of the
Airport. The Authority is the grantee of avigation easements

from owners of properties surrounding the Airport pursuant to
Noise Compatibility Programs. An avigation easement can be
described as a right to fly over one's property. The avigation
easement document acknowledges the right of aircraft to fly over
the property, restricts the land owner from taking certain
action which might interfere with air travel, and releases the
Authority from liability for noise, dust and related emissions
that arise by reason of the air traffic. When the easement is
given, the landowner's property has already experienced the
overhead air travel, but the document formalizes the right of
flight over the property, and contains the additional provisions
described above.

Acquisition Program - Pursuant to FAA regulations, the
Authority adopted a program which was approved and funded by the
FAA to acquire avigation easements from homeowners whose
properties surrounded the Airport and who suffered measured
increase in the noise level due to proximity to the Airport. As
part of the program, the Authority agreed to compensate the
homeowner for the grant of the easement. In order to determine
the value of the easement, Federal guidelines required that an
appraiser determine the value of the real property before and
after the grant of the easement. In making this determination,
the location of the property in an already noise sensitive area
was considered. The analysis determined that the market value
impact of placing an avigation easement of record could be as
little as zero, and as much as $2,400. The FAA approved $2,400
as the established value for the easement in this avigation
easement program. Accordingly, the Authority obtained numerous
easements from surrounding neighbors, paying each owner $2,400,
and recording the avigation easements with documentary stamp
taxes based on consideration of $2,400.

Insulation Program - The Authority then moved into the next
program, called the Sound Insulation Program. As part of
federal and local policy, it was generally understood that the
properties surrounding the Airport experience an increase in the
noise level by reason of proximity to the Airport. Pursuant to
FAA regulations, the Authority adopted a Sound Insulation
Program, whereby acoustical improvements such as new windows,
doors and insulation are provided to diminish interior noise

levels. The improvements help to reduce the noise level through
incorporation of noise attenuation in the design and
construction of the home. The FAA does not require airports to
acquire avigation easements in connection with eligibility for
funding for this type of program. However, the Authority thought
it prudent to obtain easements. The Authority's program,
approved by the FAA, requires the landowner to grant an easement
in connection with participation in the program. In order to
participate, an owner executes a document evidencing his
willingness to participate in the program and agreeing to
execute an avigation easement. Ownership of the property is
verified through a title search and the owner then executes the
avigation easement. The Authority obtains bids from contractors
to perform sound insulation work on their home, and ultimately
enters into a construction contract for the work to be done.
The owner joins in that contract to show his willingness to have
the work done but is not responsible for the payment of the
work. The actual cost of the work varies greatly, and often the
final amount is not determined until the construction is
completed, due to change orders that occur. Typically, the
easement is recorded prior to the start of construction. The
participating owner receives no monetary compensation in
connection with his participation in the program or for
executing the easement. The eligible landowner can opt to
receive the $2,400 for execution of an avigation easement in
lieu of participating in the sound insulation program.
Accordingly, he may choose between $2,400 and obtaining sound
insulation.

REQUESTED RULING

It is the taxpayer's position that only minimum documentary
stamp tax is due on the execution of the avigation easements for
the sound insulation program, since the easement does not
transfer an interest in real property. The taxpayer suggests
that it can be viewed as a license agreement acknowledging a
right of flight over and above real property.

As a secondary position, the consideration for the easement
should be valued at $2,400, since that is the value previously
determined by the Authority and its appraiser. It should not be

based on the cost of the construction to insulate the homes,
since the value to the homeowner is not related to the
construction cost, nor is the cost known when the easement is
executed.

DISCUSSION AND LAW

Section 201.02(1), F.S., imposes the documentary stamp tax
on "deeds, instruments or writings whereby any lands, tenements,
or other real property, or any interest therein, shall be
granted, assigned, transferred, or otherwise conveyed to, or
vested in, the purchaser or any other person by his or her
direction...." The tax is imposed at the rate of $.70 "on each
$100 of the consideration" for the conveyance. Consideration is
defined to include "... money, mortgages, other encumbrances,
discharge of debt, and property other than money."

Regarding air space, sovereign states have jurisdiction to
control the use of the air space above their respective
territories. See section 72, 45 Am. Jur. 2nd. Therefore, an
avigation easement represents the granting of an interest in
real property, and falls under s. 201.02(1), F.S. An easement
constitutes a transfer of interest in realty and is subject to
tax. Rule 12B-4.013(14), F.A.C.

The FAA has determined that a reasonable value of the
easements in question is $2,400. Any additional construction
costs for sound insulation to homes constitute a benefit of
participating in the Federal program, (i.e., a grant). These
additional costs do not constitute consideration for the
avigation easement in the sound insulation program.

DEPARTMENT RESPONSE

The value of the avigation easements has been determined to
be $2,400 each. Therefore, this amount would be the
consideration for the easements for participants in the sound
insulation program. Documentary stamp tax should be remitted on
this amount when the easements are recorded.

This response constitutes a Technical Assistance Advisement

under s. 213.22, F.S., which is binding on the Department only
under the facts and circumstances described in the request for
this advice, as specified in s. 213.22. Our response is
predicated on those facts and the specific situation summarized
above. You are advised that subsequent statutory or
administrative rule changes or judicial interpretations of the
statutes or rules upon which this advice is based may subject
similar future transactions to a different treatment from that
which is expressed in this response.

You are further advised that this response, your request
and related backup are public records under Chapter 119, F.S.,
and are subject to disclosure to the public under the conditions
of s. 213.22, F.S. Confidential information must be deleted
before public disclosure. In an effort to protect
confidentiality, we request you provide the undersigned with an
edited copy of your request for Technical Assistance Advisement,
the backup material and this response, deleting names, addresses
and any other details which might lead to identification of the
taxpayer. Your response should be received by the Department
within 15 days of the date of this letter.

Sincerely,

Joy B. Eldred, C.P.A.
Tax Law Specialist
Technical Assistance and Dispute Resolution
Office of the General Counsel

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