NBAA-Led Effort in Texas Levels State Tax Playing Field for Business Aircraft Owners

Contact: Dan Hubbard, (202) 783-9360, dhubbard@nbaa.org

Washington, DC, June 17, 2015 – Texas Gov. Greg Abbott has signed into law Senate Bill 1396, which provides significant sales and use-tax reforms for general aviation (GA) aircraft based in or visiting Texas. After identifying the need to pursue reforms, the National Business Aviation Association (NBAA) and a coalition of stakeholders worked with state legislators and the Texas comptroller of public accounts to emphasize the need for legislation that provides clear guidance and objective standards in the Texas tax code for application of sales and use tax to aircraft owners and operators.

Based on feedback from Members in Texas, NBAA learned that over the past several years, GA aircraft owners and operators had been subjected to confusing and contradictory interpretations during the state tax audit process. In particular, under the administration of the previous Texas comptroller, operators utilizing a common sale for resale structure involving related party leases were often being subjected to double taxation and audit findings arguably not supported by Texas law.

“Using related party leases to own and operate a business aircraft is a common structure that also allows for compliance with complex FAA and IRS rules,” said Scott O’Brien, NBAA’s senior manager of finance and tax policy. “Prior to passage of SB 1396, the previous comptroller’s office was invalidating what we believed were legitimate aircraft leasing structures being used by many aircraft owners and operators in their normal course of business.

”With the new Texas comptroller taking office, there was a willingness to confer with industry on tax policy that would be both fair and equitable, and this was pursued during the recently ended Texas legislative session,” he added.

“By enacting this important statute, the state of Texas has shown that it wants to continue offering a positive business climate for aircraft transactions and the many other services and companies that support the state’s robust GA industry,” said Ed Bolen, NBAA president and CEO. “We congratulate Gov. Abbott, Comptroller Glenn Hegar and his staff, and the Texas Legislature – in particular, bill sponsors Sen. Royce West and Rep. Chris Paddie – on their efforts to successfully move this bill through the legislative process.”

NBAA was the lead national aviation association working in collaboration with Texas-based groups to address these important tax issues. By working with local aviation groups – including the efforts of a coalition formed and led by David Norton, an NBAA Member and partner with the Dallas law firm of Shackelford, Melton, McKinley & Norton, LLP, and assisted by Cindy Ohlenforst and Jack Erskine at K&L Gates, LLP – NBAA was able to play a key role in helping to prevent the adoption of an onerous rule proposed by the prior comptroller, and in working to secure passage of legislation that provides certainty for GA aircraft use and transactions going forward.

Erskine’s policy group, armed with NBAA’s extensive knowledge of aviation issues, assembled a bipartisan group of members in both chambers that passed the legislation by a vote of 31-0 in the Senate and 141-0 in the House.

NBAA’s Steve Hadley, director of regional programs and Southwest regional representative, praised the efforts of the aviation advocacy group Texans for General Aviation (TFGA), which worked closely with state legislators – especially members of the Texas General Aviation Caucus – to ensure the best outcomes for NBAA Members and other general aviation operators in the state. Together with Hadley, TFGA was instrumental in the formation of the caucus several years ago, which this legislative season proved to be a key driver of the positive new statute.

With the governor’s signature, SB 1396 takes effect on Sept. 1, 2015. NBAA will provide additional resources on the implementation of the bill in the coming months.

View an NBAA resource page on the aviation tax reform. 

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Founded in 1947 and based in Washington, DC, the National Business Aviation Association (NBAA) is the leading organization for companies that rely on general aviation aircraft to help make their businesses more efficient, productive and successful. The Association represents more than 10,000 companies and provides more than 100 products and services to the business aviation community, including the NBAA Business Aviation Convention & Exhibition, the world’s largest civil aviation trade show. Learn more about NBAA at www.nbaa.org.

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