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Conference to Advise Operators on Recent Changes in IRS ‘Entertainment Use’ Regs

August 20, 2012

Recent developments concerning taxes on the use of business aircraft – most notably, the recent Internal Revenue Service (IRS) final ruling on "entertainment use" disallowances for business aircraft – have left many operators scrambling with questions about compliance, and which deductions may still be taken.

Issuance of the final rule follows action by Congress to limit the deductions owners and operators may take for the entertainment use of business aircraft, under the American Jobs Creation Act of 2004. The IRS issued its proposed rules in 2007; NBAA was among the industry groups that issued comments requesting changes to that proposal, stating the regulations were "administratively burdensome" and produced "unfairly skewed disallowances for many taxpayers."

"NBAA Members have always been prepared to pay the taxes required under the law for various uses of their business aircraft,” said Scott O'Brien, NBAA senior manager, finance & tax policy. “The concern with this tax has long been the onerous process involved for compliance. So, NBAA has spent that past several years working with the IRS on helpful suggestions that would ensure the disallowance could be fairly calculated in a more simplified manner."

O’Brien said earlier this month, the IRS issued its final regulations on the matter. "Unfortunately," he reported, "the IRS pretty much said 'no' to our comments and suggestions, which we felt were reasonable and maintained Congressional intent."

Review the NBAA article “IRS Releases Final Regulations on Deduction Limitations for Personal Entertainment Flights.”

With the final rules now in place, operators should consult with their tax advisors to determine a strategy to comply with the official regulations. "While operators should find the new regulations follow what they've been doing over the past few years anyway, they must keep in mind that these rules are now final and represent the IRS view on this issue," O'Brien stressed.

This final IRS ruling on entertainment use compliance is one of the many tax issues that will be addressed during the NBAA Tax, Regulatory & Risk Management Conference, which takes place Oct. 28 to 29 in Orlando, FL. The upcoming conference is expected to attract a wide variety of professionals, including charter operators and other aviation professionals, as well as business managers, chief financial officers, accountants, and anyone who has an interest in aviation tax, operational and regulatory issues.

"We will cover the non-business use issue in great detail at the conference, from an overview of the fringe benefit rules to a detailed breakout session on the IRS final rules," O'Brien noted. "Additional sessions will cover specific tax questions, including, recent IRS guidance on the potential application of federal excise tax to managed aircraft.”

The Tax, Regulatory & Risk Management Conference is being held in conjunction with NBAA's 65th Annual Meeting and Convention, which will run from Oct. 30 to Nov. 1 at the Orange County Convention Center.