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The National Business
Aviation Association has welcomed the introduction
of bipartisan congressional legislation that would
put an end to the improper application of commercial
airline ticket taxes to aircraft management
companies.
The legislation makes clear that management services
provided to assist a business aircraft owner in the
operation of its aircraft are non-commercial
aviation in nature and are subject to the aviation
fuel tax.
Introduced by Rep.
Pat Tiberi (R-12-OH) and Sen. Sherrod Brown (D-OH),
H.R. 896 and S. 321 clearly state that amounts paid
by the aircraft owner for maintenance and support of
their aircraft by a management services company -
such as for crew scheduling and dispatch, flight
planning services, insurance and aircraft
maintenance - are not subject to the ticket tax. The
legislation only covers non-commercial flights by
the aircraft owner on its aircraft or an aircraft
obtained through a qualifying lease.
"NBAA is committed
to resolving this challenging tax issue for the
nearly 1,000 aircraft management companies, many of
which are small to mid-size businesses, and we are
grateful to Rep. Tiberi and Sen. Brown for
introducing this critical legislation,” said NBAA
President and CEO
Ed Bolen.
Existing law
states that non-commercial flights are generally
subject to the 21.9 cents per gallon tax on jet
fuel, and not the 7.5 percent commercial ticket tax
on amounts paid. However, IRS guidance has sought to
impose the commercial ticket tax on flights where an
aircraft owner obtained support services from a
management company, treating the owners as if they
were conducting airline or air charter operations.
This guidance, and
resulting IRS audit position, led to significant
retroactive tax assessments for management companies
that put many at risk of having to close their
doors. In addition, the IRS never provided
management companies with clear and precise guidance
as to how the federal excise tax should be applied,
but rather, companies had to sift through
conflicting IRS interpretations.
Following a
coordinated advocacy effort from industry
stakeholders, including NBAA, in 2013 the IRS
suspended federal excise tax assessments on audits
involving management services companies and aircraft
owner flights. However, the underlying policy issues
have remained unresolved.
“For more than
four years, many management companies have had open
IRS audits hanging over their heads because of
conflicting IRS guidance. This is unfair, and NBAA
will strongly advocate for passage of H.R. 896 and
S. 321.” said NBAA Senior Manager of Tax & Finance
Policy
Scott O’Brien. |
