Internal Revenue Service
Since business aviation operators are increasingly turning to independent contractors to contain costs and do more while conserving resources, NBAA has published a guide aimed at helping flight operators to properly classify these workers as either employees or independent contractors. “If a worker is classified incorrectly, there are significant tax, liability and legal risks for the employer,” NBAA said.
The release of an Internal Revenue Service (IRS) memo on March 9 outlining guidance on how to apply the federal excise tax (FET) to fees paid to aircraft management companies adds to business aviation’s burden at a time when the industry continues to suffer from weak demand, high fuel prices and public criticism of this form of travel. This memo isn’t the first time the IRS has attempted to apply the 7.5-percent FET to non-commercial Part 91 flight operations.
The U.S. Internal Revenue Service Office of Chief Counsel issued a memo on March 9 that justifies applying the 7.5-percent federal excise tax to aircraft management fees paid by Part 91 operator customers.
The U.S. government claims that NetJets owes the Internal Revenue Service (IRS) nearly $643 million in federal excise taxes, assessed penalties and interest. The amount is just $125 million less than the $768 million in pre-tax earnings that NetJets parent Berkshire Hathaway reported in its last financial report for the “other” category of subsidiaries that includes NetJets, FlightSafety International and other businesses.
Four of NetJets’ subsidiaries–NetJets Aviation, NetJets International, NetJets Large Aircraft and Executive Jet Management (EJM)–are suing the U.S. government over a $642.7 million IRS tax bill for past federal excise taxes (aka “ticket tax”) and assessed penalties and interest.
In addition to the costs of acquisition, prospective buyers must consider the costs–especially insurance and taxes–they will incur once they own the aircraft. To that end, aircraft management contracts with well thought-out insurance provisions should be integral to the aircraft acquisition process, said Bill Kingsley, an account executive with the Addison, Texas-based brokerage AirSure.
When the FAA called in March for public comment on its notice of proposed rulemaking (NPRM) on ADS-B equipage, it was with the understanding that there was wide user community acceptance of the system as the vital stepping stone to modernizing the National Airspace System. Everyone appeared to agree that ADS-B would be an essential element in the agency’s NextGen project.
With the beginning of this month marking the halfway point in the 90-day public comment period on the FAA’s notice of proposed rulemaking (NPRM) to regulate fractional- ownership operations under Part 91 Subpart K and make some modifications to Part 135, much of the early criticism by some NBAA members about the rule and the position taken by their association seems to have ebbed, or at least given way to more reasoned discourse.
“The FAA, and the IRS…they really don’t think alike,” began tax attorney Gary Garofalo, first speaker at the NBAA Federal Aviation Tax Forum in Arlington, Va., on May 7. Some 80 specialists, accountants and financial officers attended the most advanced forum the NBAA tax committee has held on aircraft taxation.