Did a facility performing complete scheduled overhauls and restoration of commercial aircraft or aircraft engines count as a manufacturer for Louisiana's inventory tax credit?

Plain-English summary

A commercial-aircraft or aircraft-engine facility performing complete overhaul and restoration to original design specifications qualified as a manufacturer for the inventory tax credit.

The operation did more than make broken equipment functional. It replaced or reworked systems, restored the aircraft or engine, and gave new qualities or combinations to matter that had already undergone artificial processing.

Activities described

The facilities performed scheduled overhauls of aircraft systems, sometimes replacing avionics or hydraulics or reconfiguring interiors. Specialized facilities completely overhauled and restored aircraft engines.

The ruling also noted their manufacturer classification under the North American Industry Classification System.

Common questions

Q: Did an ordinary repair shop automatically qualify?

A: No. The ruling distinguished complete restoration and overhaul from simply making nonfunctioning aircraft operational.

Q: Could an engine-only overhaul facility qualify?

A: Yes, when it performed the described complete restoration.

Citations and references

• La. R.S. 47:6006 — inventory tax credit and manufacturer definition
• North American Industry Classification System — classification noted in the ruling
• LAC 61:III.101.C — Revenue Ruling authority and reliance statement

Source

• Landing page: Louisiana Department of Revenue Policies
• Original PDF: LA Revenue Ruling 01-012

Original ruling text

Revenue Ruling
No. 01-012
September 17, 2001
Corporation Income Tax and Corporation Franchise Tax
Interpretation of “Manufacturer” for Application of the Inventory Tax Credit
This revenue ruling addresses the interpretation of the term “manufacturer” as it relates to the
applicability of the inventory tax credit to aircraft maintenance facilities.
Under the provisions of La. Rev. Stat. Ann. § 47:6006 (West 2001), a manufacturer that pays ad
valorem taxes to political subdivisions of the state on its inventory is eligible for a tax credit against
its state individual or corporation income tax, and its corporation franchise tax. “Manufacturer” is
defined in La. Rev. Stat. Ann. § 47:6006(C) (West 2001) as “a person engaged in the business of
working raw materials into wares suitable for use or which gives new shapes, qualities, or
combinations to matter which already has gone through some artificial process.”
Aircraft maintenance facilities are businesses that are operated either by commercial airlines or by
aircraft manufacturers and perform major maintenance on commercial aircraft. They are classified
as manufacturers under the North American Industry Classification System. Generally, these
facilities perform regularly scheduled overhauls of every system on each aircraft brought to the
facility. Often an entire system, such as the avionic system or the hydraulic system, is replaced, or
the interior of the airplane is upgraded or reconfigured. Once an aircraft is brought to the facility, it
is restored to meet original design specifications. Some of these facilities do not overhaul all types
of aircraft systems, but instead, specialize in the overhauling and restoration of aircraft engines.
Aircraft maintenance facilities are not repair operations. They do not simply take aircraft that are
non functional and make them operational. Instead, they completely restore and overhaul aircraft or
aircraft engines. The end product of the operation of the aircraft maintenance facility is a fully
restored aircraft or aircraft engine that meets the original design specifications of the manufacturer.
Because the process, as described, has the effect of giving new shapes, qualities, or combinations to
matter which already has gone through some artificial process; aircraft maintenance facilities meet
the definition of “manufacturer” for purposes of La. Rev. Stat. Ann. § 47:6006 (West 2001), and
are, thus, eligible for the inventory tax credit.
Cynthia Bridges
Secretary
By:

Leonore Heavey
Attorney
Policy Services Division

A Revenue Ruling is written to provide guidance to the public and to Department of Revenue employees. It is issued under
Section 61:III.101(C) of the Louisiana Administrative Code to apply principles of law to a specific set of facts. A Revenue
Ruling does not have the force and effect of law and is not binding on the public. It is a statement of the department's position
and is binding on the department until superseded or modified by a subsequent change in statute, regulation, declaratory
ruling, or court decision.