Federal Taxes

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Net Investment Income Tax

Updated July 1, 2013

On Dec. 5, 2012, the Treasury Department and the IRS issued regulations on the new Net Investment Income Tax (NIIT) enacted as part of the 2010 healthcare overhaul. Beginning this year, a 3.8 percent tax will be imposed on the investment income of certain individuals, estates and trusts. The NIIT will impact many common airplane leasing arrangements in which an individual owns an interest in an airplane through a C corporation, an S corporation, a partnership (including a limited liability company) or a trust.

NBAA Tax Committee member John Hoover provided testimony on behalf of the Association at a public hearing on the proposed regulations. 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. 

The proposed regulations confirm that the NIIT will impact common airplane leasing arrangements. The Treasury Department and the IRS intend to finalize the regulations by the end of 2013. However, taxpayers may rely on the proposed regulations until the effective date of the final regulations.

An article about NIIT has been prepared by Michala Irons of Barnes & Thornburg LLP, Indianapolis, Indiana and Clifford G. Maine of Barnes & Thornburg LLP, Grand Rapids, Michigan.

Review the full article "Proposed Regulations Implementing New 3.8 Percent Net Investment Income Tax Will Impact Common Airplane Leasing Arrangements" (100 KB, PDF)

For more information regarding the issues described in this document, please contact Clifford G. Maine, Aviation Attorney, at (616) 742-3944 or [email protected], or Michala Irons, Tax Attorney, at (317) 231-7463 or [email protected].