IRS Final Regulations on Federal Excise Tax Exception For Aircraft Management Services

Updated Nov. 8, 2021

The Internal Revenue Service (IRS) issued final regulations on federal excise tax (FET) obligations for aircraft management companies and aircraft owners. These regulations represent the successful culmination of a years-long advocacy effort led by NBAA and its Tax Committee.

The final rules implement a provision in the Tax Cuts, and Jobs Act that made clear the 7.5% FET on commercial air transportation is not due when an aircraft owner pays for management services to support flights on the aircraft. The legislative provision explained that such flights are subject to the non-commercial fuel tax and exempt from the percentage tax, ending significant uncertainty for aircraft management companies.

This resource details the history of NBAA advocacy efforts and provides a complete analysis of the final regulations. Common scenarios involving how the exemption treats aircraft owner flights, leases and substitute aircraft are also covered in detail.

Download the NBAA Resource: IRS Final Regulations on Federal Excise Tax Exception For Aircraft Management Services (PDF)

Background Resources

NBAA/NATA Response to IRS: Distinction Between Typical Part 91 Management Company Arrangements and Rev. Rul. 74-123 (900 KB, PDF)

NBAA/NATA Response to IRS CCA (115 KB, PDF)

IRS CCA 2012-10026 States That Excise Tax Applies to Aircraft Management Service Arrangements, by John Hoover (110 KB, PDF)

An Analysis of the Recent IRS CCA Asserting That Management Companies are Subject to Transportation Tax, by Phil Crowther (110 KB, PDF)

New Excise Taxes Being Levied by the IRS on Business Aircraft Operations, by Keith G. Swirsky and Christopher B. Younger (26 KB, PDF)

IRS CCA 2012-10026: Taxability of Aircraft Management Fees