Federal Taxes
Federal Tax News
- NBAA Testifies at IRS Public Hearing on New 3.8 Percent Medicare Tax
- April 8, 2013
NBAA Tax Committee member John Hoover testified on behalf of the Association at an IRS public hearing regarding Proposed Regulations on a new 3.8 percent Medicare contribution tax on net investment income. The tax becomes effective this year as part of President Obama’s healthcare reforms. The tax on investment income would apply to rental income, unless the income is earned in the ordinary course of a trade or business. Therefore, the tax could apply to companies that hold an aircraft in one entity and lease it to a related entity. Hoover’s comments covered the standard IRS will use to define a trade or business; and the ability of taxpayers to change their activity grouping for the purposes of passive loss rules as well as the 3.8 percent tax. Review NBAA’s Comments (55 KB, PDF) and Hoover's Testimony (13 KB, PDF). - NBAA Meets with Treasury Department Officials on Key Tax Issues
- February 22, 2013
NBAA staff and members of the Association’s Tax Committee met with high level officials in the U.S. Department of the Treasury’s Office of Tax Policy. During the meeting, NBAA requested that Treasury and IRS officials deal with the “leasing company trap” which unfairly penalizes aircraft owners that lease an aircraft to related parties for legitimate business reasons. NBAA also requested a revision of listed property rules to eliminate a situation where owners can be penalized for making their aircraft available for charitable purposes. Review NBAA’s submission to Treasury officials (225 KB, PDF)
Federal Excise Taxes
Both private and commercial business aircraft operators pay Federal excise taxes (FET) either on fuel or on the transportation of persons or property. This section provides information on FET applicability, current tax rates, and best practices for collecting and remitting the tax. Learn More
Depreciation
Aircraft that are owned and operated by businesses are often depreciable for income tax purposes under the Modified Accelerated Cost Recovery System (MACRS) or the Alternative Depreciation System (ADS). Learn More
Passive Activity Loss
Individual taxpayers must aggregate the income and loss from their passive activities each year to determine their net passive income or loss. A net passive loss for the year generally is nondeductible for that year but may be carried forward to reduce net passive income in future years. Learn More
Charitable Flights
Many businesses generously make their aircraft available for charitable flights. Prior to doing so, it is important to know the FAA and IRS rules applicable to these flights and any tax deductions the company might want to take associated with the contributions. Learn More
Hobby Loss Rules
Business owners can use different legal entities, including C corporations, S corporations, partnerships, and LLCs. Although these arrangements generally do not create income tax benefits, the depreciation rules often cause the entity owning the aircraft to have a tax loss. IRS auditors can disallow deduction of these losses, relying on the “hobby loss” rules. Learn More
