On March 26 an NBAA and NATA working group met with Internal Revenue Service (IRS) officials to discuss the Federal Excise Tax (FET) issue. IRS auditors are applying the FET to management fees and expenses paid by Part 91 (non-commercial) operators to management companies.
While the 7.5-percent FET applies to charter flights, the release of an IRS Chief Counsel Advice memo in March last year seemed to encourage IRS auditors to apply the FET to management fees and expenses related to Part 91 operations.
During the March 26 meeting, according to Scott O’Brien, NBAA senior finance and tax policy manager, “Progress was made in that the IRS indicated it is going to support a request to have this issue on its priority guidance plan.”
The working group is planning another meeting with the IRS’s audit division, according to NATA, “to discuss the possibilities of putting a hold on audits until the IRS issues clarity and precision for our industry.” O’Brien added, “We hope this will slow the pace of audits; that’s something we’re pursuing now.”