Dan Macy
Employers that operate private airplanes for the use of their executives may want to stay tuned to some controversy over a recent IRS legal memorandum outlining the tax collector’s stance on aircraft management fees.
The IRS shared its views on federal excise tax in Chief Counsel Advice Memorandum 201210026, which concludes that the tax applies to management fees that aircraft owners pay to management companies that operate the planes.
The private aviation community unleashed a torrent of criticism over the memo. Perhaps most visibly, the National Business Aviation Association, which represents private airplane owners and operators, weighed in with the IRS at a meeting in March, asking the agency to soften its stance. The guidance could “upend the industry,” the NBAA said in an April 30 press release.
NBAA spokesman Dan Hubbard said June 7 that the NBAA plans to have another meeting with the IRS sometime in mid-June, pending schedules and other logistics. “We’re preparing a submission to the IRS that details the industry’s concerns with the CCA the IRS published, and requests further guidance fromIRSregarding excise tax applicability for much more common scenarios than the three that the IRS included in their CCA,” he said.
The CCA analyzed three situations; that is, a basic scenario and two variations that the memo set out in detail. Under the basic scenario, an airplane owner is a company that uses the airplane to transport its executive employees; the company paid a management company, which employed pilots who operated the aircraft. The IRS analyzed that scenario and two slight variations on it to conclude that the employer would owe federal excise tax on the management fees it paid as payment for “taxable transportation.”
The excise tax imposed on taxable transportation turns on who has “possession, command and control” of an aircraft, the CCA memo said.