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.
Taxation in the United States
Idaho Governor Butch Otter has signed bill H.417, which exempts sales tax on aircraft parts installed on out-of-state aircraft. An emergency clause included in the legislation makes the bill take effect immediately.
With the House of Representatives scheduled to vote this week on H.R.7, a Federal Highway Administration reauthorization bill, NATA is lobbying to get a provision included in the bill that would repeal the “onerous fuel fraud tax.” The fuel fraud provision, which was included in a 2005 FHA bill, changed the collection of taxes for noncommercial aviation jet fuel and required the funds to be deposited into the Highway Trust Fund.
NBAA joined more than 60 businesses and organizations nationwide in signing a letter urging Congress to extend “bonus” depreciation, which allows for accelerated cost recovery of strategic purchases, including business aircraft. Bonus depreciation included in legislation signed into law in 2010 fell from 100 percent to 50 percent this year.
Italy’s parliament has approved plans for a new tax on all business aircraft, regardless of country of registration, as part of the effort to reduce the country’s massive national debt. Business aviation interests expect to learn the details of how the legislation will work by the end of February, but it could impose a tariff of several hundred thousand dollars on the owner of a large jet that spends more than 48 consecutive hours in the country.
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.
Accelerated depreciation for private aircraft became a hot topic again this past June when President Obama repeatedly cited it as a prime example of special tax breaks for the rich he wanted to eliminate.
As Congress prepared to adjourn for recess just before Easter, the House and Senate were gearing up for a joint conference committee to begin resolving the differences between two versions of a long-term FAA reauthorization bill. The two bills vary significantly, raising some uncertainties about reaching a compromise.
Operators of Bombardier jets are dismayed because they now have to pay state sales taxes on parts purchased through Bombardier’s Smart Parts program. Several operators who spoke to AIN on condition of anonymity said one of the primary reasons they participate in Smart Parts is to control and budget annual operating costs. “This adds a new dimension to overhead we didn’t budget for 2010,” one said.