IRS to Extend 7.5 Percent Federal Excise Tax to Cover Business Aircraft Operations -- Tax Significantly Impacts Business Aircraft Owners and Management Companies


If your aircraft is managed by a third party (or potentially by a related entity), or if your company manages aircraft, the IRS’s recent guidance expanding the applicability of federal excise tax will significantly impact your costs and tax collection obligations.

A 7.5 percent federal excise tax (“FET”) has long been assessed on amounts paid for commercial air transportation in the U.S. Until now, the IRS accepted that this FET for aircraft “transportation” only applies to Part 135 operations, such as aircraft charters or commercial aircraft flights. However, in a memorandum issued by the IRS Office of Chief Counsel on March 9, the IRS drastically departed from this standard, signaling that the IRS will broadly apply the excise tax to cover nearly all aircraft management fees and operational costs incurred by many non-commercial business aircraft owner/operators (i.e., Part 91 operators). This departure will have significant and broad impact on the business aviation community because many (if not most) aircraft owners hire aircraft management companies for their expertise in maintaining and operating aircraft. Owners often don’t want the burden or liabilities associated with aircraft management.

LOADING PDF: If there are any problems, click here to download the file.

Written by:

Published In:


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Lane Powell PC | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »

All the intelligence you need, in one easy email:

Great! Your first step to building an email digest of JD Supra authors and topics. Log in with LinkedIn so we can start sending your digest...

Sign up for your custom alerts now, using LinkedIn ›

* With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name.