NBAA and NATA are asking the IRS to provide guidance on the implementation of a recently passed tax measure that was designed to clarify the tax treatment of aircraft management fees. The provision, included in the Tax Cuts and Jobs Act, essentially exempts management fees from the application of the commercial air transportation federal excise tax. “While the congressional intent of the provision is clear, there are areas where additional guidance or scenarios will be helpful for tax administration,” the associations said in a letter to the IRS.
They note that a recent IRS publication that references the tax measure “is not consistent with the statute or congressional intent.“ This publication indicates that when an aircraft is available for third-party charter or involved in a fractional ownership program, “payments for management services are not covered by the exemption in the new provision.” The associations wrote, “We believe this to be incorrect, as the use of an owner’s aircraft for third-party charters, or as part of a fractional ownership program, should have no impact on applicability of the new provision.”
The publication creates the potential for confusion, they said, noting that some fractional programs presently face open audits. Thus, they asked the IRS for clarifications in a number of areas, such as the definition of “aircraft owners” as it pertains to payments of the fees.