NBAA Welcomes Progress on Bill Resolving Federal Excise Tax Issues for Management Companies
Washington, DC, July 13, 2016 – The National Business Aviation Association (NBAA) today welcomed action by the House Ways & Means Committee that advances congressional legislation making clear management services provided to assist an aircraft owner in the operation of its aircraft are not subject to the ticket tax imposed on commercial air transportation. Committee passage of the legislation means that it can now move forward to be considered by the full House of Representatives.
Introduced by Rep. Pat Tiberi (R-12-OH), House Bill 3608 would exempt from the ticket tax component of federal excise tax, any 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. The exemption is limited to non-commercial flights by the aircraft owner on its aircraft or an aircraft obtained through a qualifying lease.
“Since the introduction of this bill, NBAA has worked to build bipartisan support for the measure, and we applaud Rep. Tiberi for his continued commitment to protecting the more than 900 aircraft management companies, most of which are small businesses, from crippling retroactive tax assessments.,” 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. However, guidance issued to IRS auditors in 2008 sought to impose the commercial ticket tax on flights where an aircraft owner obtained support services from a management company, treating them as if they were conducting airline or air charter operations.
A March 2012 Chief Counsel Advice memo to IRS field agents also incorrectly took the position that the commercial ticket tax applies to management fees and other amounts paid by an aircraft owner to an aircraft management services company.
This policy, 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 often conflicting IRS legal interpretations.
“Management companies are small- to medium-sized businesses employing pilots, aircraft maintenance technicians and flight schedulers, and are unable to bear the significant financial burden after being found liable for past taxes that are often impossible to collect from clients.” noted NBAA Senior Manager of Tax & Finance Policy Scott O’Brien.
Following a coordinated advocacy effort from industry stakeholders, including NBAA, in May 2013 the IRS suspended federal excise tax assessments on audits involving management services companies and aircraft owner flights; however the lack of clear guidance and improper application of the ticket tax still is a significant challenge for the industry.
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Founded in 1947 and based in Washington, DC, the National Business Aviation Association (NBAA) is the leading organization for companies that rely on general aviation aircraft to help make their businesses more efficient, productive and successful. The association represents more than 10,000 companies and provides more than 100 products and services to the business aviation community, including the NBAA Business Aviation Convention & Exhibition, the world’s largest civil aviation trade show. Learn more about NBAA at www.nbaa.org.
SOURCE: NBAA