July 30, 2020
The IRS will soon publish a notice of proposed rulemaking (NPRM) to provide regulations in response to a legislative exemption from excise taxes on aircraft management services paid by aircraft owners. The NBAA-championed provision was contained in the 2017 Tax Cuts and Jobs Act.
The NPRM addresses industry concerns over a longstanding IRS policy in which aircraft owners utilizing an aircraft management company to provide certain support services were charged the commercial air transportation federal excise tax (FET) even when conducting flights on their own aircraft, said Scott O’Brien, NBAA’s senior director of government affairs.
“The IRS incorrectly asserted use of a management company by an aircraft owner meant that all owner flights were subject to FET,” said O’Brien. “NBAA believed that interpretation was not supported by the law and worked hard to seek clarification through the Tax Cuts and Jobs Act. This NPRM is an important step in finally resolving this issue.”
Earlier this year, NBAA joined with the National Air Transportation Association in sending a letter to the Department of the Treasury and the IRS seeking guidance on amending tax regulations in line with the exemption published in the earlier tax bill.
The associations requested clarification regarding the requirements to qualify for the excise tax exemption; payments arrangements by aircraft owners, affiliated groups or subsidiaries; Part 135 operations on behalf of the owner and third parties; and aircraft management expenses not specifically outlined in the statute, in addition to other related matters.
There will be a 60-day period for comments upon publication of the NPRM.
“NBAA championed the original legislative change addressing these concerns and we have continued advocating on behalf of our members for the IRS to implement the revised regulations,” O’Brien said. “We will carefully review the NPRM and will submit any additional comments necessary to ensure this matter is favorably resolved going forward.”