Industry Advocates Hopeful on Fractional Taxes

Business aviation advocates are hopeful that Congress will renew the air transportation tax relief for fractional aircraft owners in the upcoming reauthorization or simply continue it in the case of a short-term extension. Congress in the most recent FAA reauthorization bill exempt fractional program aircraft from the 7.5-percent air transportation tax, instead subjecting them to the fuel tax along with a 14.1-cent-per-gallon fuel surcharge. The air transportation tax relief was set to sunset on September 30, but the fuel surcharge was put in place through 2021.

This gave rise to fears among some industry legal experts that should the air transportation tax relief expire, fractional programs could be subject to the 14.1-cent per gallon fuel surcharge, along with the air transportation tax.  But Scott O’Brien, senior manager, finance and tax policy for NBAA, cast doubt on those concerns. He notes a Joint Committee on Taxation report released on July 13 provided insight into the congressional views on the issue with the expectation that the current tax structure would continue. But he notes that NBAA continues to watch the issue as reauthorization progresses.

Congress agreed to change the tax structure as fractional firms were mired in lawsuits with the IRS over taxing of program fees.