IRS Issues FAQ on Federal Excise Tax Suspension Reporting Issues

May 14, 2020

The IRS released FAQs: Aviation Excise Tax Holiday under the CARES Act. The FAQs provide interim guidance on tax reporting issues raised by NBAA regarding the tax holiday on air transportation excise tax and fuel tax under § 4007 of the CARES Act. It also explains that the relevant tax forms (IRS Forms 720, 4136 and 8849) and instructions will be updated in the future.

NBAA recently discussed these tax reporting issues with IRS staff and received additional clarifications on questions raised by members. Review an article summarizing this information.

As interim guidance on claiming credits or refunds of fuel tax on jet fuel (kerosene) used in commercial flights, the FAQ instructs ultimate purchasers and ultimate vendors to report the claim as nontaxable use No. 15 for “an aircraft or vehicle owned by an aircraft museum” with a statement attached referencing the tax holiday. The FAQ provides specific instructions for ultimate purchasers and ultimate vendors filing of Forms 720, 4136, and 8849.

For ultimate purchasers filing Form 720, the fuel tax credit for jet fuel (kerosene) used in commercial flights should be claimed on Schedule C, lines 5(c) or 5(d) which are ordinarily for nontaxable use. On lines 5(c) or 5(d), the full amount of fuel tax (except for the 0.1 cent per gallon LUST tax) can be claimed as a credit, resulting in fuel tax credits of 24.3 cents per gallon or 21.8 cents per gallon.

Absent the tax holiday, the credit with respect to commercial flights would otherwise be claimed on Form 720, Schedule C, lines 5a and 5b, which would only allow credits for the excess of the noncommercial fuel tax rates over the commercial fuel tax rates (20.0 cents gallon or 17.5 cents per gallon).

The FAQ does not discuss the appropriate procedure for ultimate purchasers who have (as required) already filed their Forms 720 for the first quarter and did not claim the full fuel tax credit for commercial flights during the first four days of the tax holiday (March 28-31, 2020). Presumably, such credits could be claimed by filing an amended excise tax return (Form 720X).

The CARES Act made a number of other important tax changes that will impact business aircraft owners and operators. Review an article describing these changes.