U.S. Rep. Pat Tiberi (R-Ohio) reintroduced legislation (H.R.896) yesterday clarifying that aircraft management services are not subject to federal excise taxes (FET). Senator Sherrod Brown (D-Ohio) is expected to introduce the Senate companion bill today, according to the National Air Transportation Association (NATA). The House Committee on Ways and Means approved similar legislation in July, though it didn’t advance beyond this stage.
The bills are in response to a March 2012 IRS Chief Counsel opinion that aircraft owners using aircraft management services who also allow the use of the airplane for occasional charter should have the 7.5 percent “ticket tax” assessed on aircraft management fees. In May 2013, the IRS put the opinion on hold pending further clarifying regulations. This status quo continues today.
NATA president Martin Hiller said this legislation is “so important to small aviation businesses vulnerable to potentially enormous IRS assessments.” He added that FET being imposed on management fees would amount to double-taxation on aircraft owners who seek to defray ownership costs by chartering out their aircraft.
The congressional Joint Tax Committee previously found that these FETs would contribute less than $500,000 to the government over the next 10 years. Such a finding—that a tax bill is essentially considered revenue neutral—is crucial to gaining support from both sides of the aisle to move the legislation.