NBAA Lauds IRS Rule Exempting Managed Aircraft from FET

 - January 13, 2021, 10:38 AM

NBAA is praising issuance of a pre-publication final rule by the U.S. Internal Revenue Service (IRS) that clearly exempts owners who conduct flights on their own aircraft with a management company’s assistance from paying the 7.5 percent federal excise tax (FET) for commercial flights. The Tax Cuts and Jobs Act (TCJA) passed in 2017 included language specifying this exemption, but now the IRS’s final rule, which is pending publication in the Federal Register, will codify it.

“NBAA and its Tax Committee—led by Chair John Hoover, a partner with the law firm of Holland & Knight—championed industry efforts to work with the Department of the Treasury and IRS on regulations that correctly implement the TCJA management company provision,” NBAA said. “That effort has now resulted in a final rule from the IRS that represents the successful conclusion of the NBAA-led campaign to prevent the improper and retroactive application of FET to management companies and aircraft owners.”

In its final rule, the IRS adopted several significant changes suggested by NBAA, including the exemption for common business aircraft ownership structures, including owner trust arrangements used to register thousands of business aircraft for regulatory compliance purposes. The rule also eliminates a complicated allocation method that would have been required when owners take flights on a substitute aircraft and also clarifies that aircraft owners qualify for the FET exemption regardless of whether flights on their own aircraft are conducted under FAR Part 91 or 135.

“We applaud the IRS and the Department of the Treasury for their longstanding dedication to this regulatory project, which fully implements a key provision of the Tax Cuts and Jobs Act,” said NBAA president and CEO Ed Bolen. “This victory is the result of concerted efforts by NBAA and the business aviation community to achieve clear and equitable application of federal excise tax for thousands of aircraft owners and management companies.”