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US Bill To Give Aircraft Management Services Tax Break

by Scott Hamilton, Tax-News.com, Washington

10 February 2017


Companion bills to provide an exemption from the excise tax on air transportation for payments by aircraft owners for aircraft management services have been reintroduced into the US Senate and House of Representatives.

Existing law states that non-commercial flights are generally subject to a 21.9 cents per gallon tax on jet fuel, and not the 7.5 percent federal excise tax, also known as the "commercial ticket tax."

The exemption from commercial ticket tax in the bipartisan, bicameral bills reintroduced by Representative Pat Tiberi (R - Ohio) and Senator Sherrod Brown (D – Ohio) is a response to the continued uncertainties surrounding an Internal Revenue Service (IRS) Chief Counsel's opinion in March 2012 that sought to impose the commercial ticket tax on flights where aircraft owners obtain support services from management companies for occasional charter flights, treating the owners as if they were conducting full airline or air charter operations.

In 2013, following representations from aircraft owners, the IRS decided to suspend the assessment of the tax for audits involving aircraft-owner flights. However, the underlying policy issues have remained unresolved.

The President of the National Air Transportation Association, Martin Hiller, welcomed the moves by Tiberi and Brown "to advance legislation that is so important to numerous small aviation businesses vulnerable to potentially enormous IRS assessments. … The position the IRS took in 2012 represents double taxation on aircraft owners who may seek to defray the costs associated with ownership through the chartering of the aircraft when it is not in use."

"For more than four years, many management companies have had open IRS audits hanging over their heads because of conflicting IRS guidance," added National Business Aviation Association Senior Manager of Tax & Finance Policy Scott O'Brien. "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."

In July last year, the Ways and Means Committee passed similar legislation, which was then not taken up for a full vote in the House.

TAGS: tax | business | revenue guidance | law | aviation | excise duty | Internal Revenue Service (IRS) | tax authority | legislation | United States | tax breaks | services | Tax

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