From the FAA to the IRS, business aviation is a highly regulated industry. Aircraft owners constantly must be on the lookout for new rules and regulations that can have an impact on your carefully planned ownership and operating structures. Understanding federal and state tax policies, and being prepared for potential audits should be a critical part of your operating strategy.
The National Business Aviation Association (NBAA), based in Washington, D.C., represents the more than 10,000 companies and individuals who rely on general aviation aircraft to help make their businesses more efficient, productive, and successful, and to advocate for fair and equitable tax treatment for the industry. Here are three ways NBAA is working for you:
Seeking Regulatory Solutions to Tax Challenges
Through a Tax Committee made up of 30 highly regarded aviation attorneys, CPAs, and advisors, NBAA works to identify tax challenges for business aviation. For example, the association succeeded in securing inclusion of two issues on the IRS and Treasury Department’s Priority Guidance Plan, which identifies and prioritizes federal tax policies. The first item urges the IRS and Treasury to develop guidance on the application of federal excise taxes to aircraft management fees, which continues to be a complex and confusing issue for the industry. The second requests guidance to address the “leasing company trap,” which unfairly penalizes aircraft owners who lease an aircraft to related parties for legitimate business reasons. NBAA regularly meets with these agencies on both matters, and progress is being made toward addressing these concerns.
Advancing Tax Policies on Capitol Hill
In addition to advancing positive tax policies at the regulatory level, the association is actively engaged on Capitol Hill. Recently, NBAA secured introduction of legislation that makes clear that management services provided to assist aircraft owners in the operation of their aircraft are not subject to the ticket tax imposed on commercial air transportation.
Introduced by Rep. Pat Tiberi (R-12-OH), House Bill 3608 would exempt from the ticket tax component of federal excise tax, any amounts paid by the aircraft owner for maintenance and support of his/her aircraft by a management services company, such as for crew scheduling and dispatch, flight planning services, insurance, and aircraft maintenance. The exemption is limited to non-commercial flights by the aircraft owner on his/her aircraft or an aircraft obtained through a qualifying lease.
NBAA also continues to advocate for the extension of bonus depreciation, which allows aircraft owners and owners of other capital assets to realize the depreciation benefits of an eligible asset more quickly. Bonus depreciation delivers long-term stimulus to industries like general aviation, which provides high-skill, high-paying jobs for more than 1.2 million Americans, and generates $150 billion in economic activity annually in the U.S.
Current legislation allowing 50 percent bonus depreciation expired on Jan. 1, 2015, and bills have been introduced in the House and Senate to either make 50 percent bonus depreciation permanent or extend it for another two years. NBAA strongly supports both efforts, and recently joined more than 2,000 organizations in urging Congress to take action on bonus depreciation and other expiring tax extenders.
Providing Educational Resources to Members
Through seminars and website resources, NBAA works to provide its members with the latest information on tax policy issues. For example, the State Aviation Tax Report details the aviation-specific tax rules and regulations in each of the 50 states. The report is updated by NBAA’s Tax Committee on a yearly basis.
On Nov. 15 and 16 in Las Vegas, NBAA will host its Tax, Regulatory and Risk Management Conference, which provides two days of education focused on how effective tax and regulatory planning drives successful aircraft transactions and leads to efficient business aircraft operations. The association is proud to have Business Aviation Advisor as its media partner for this event. BAA
Scott O’Brien, Senior Manager, Finance & Tax Policy, NBAA, manages the organization’s interactions with regulatory agencies, including the IRS, Treasury Dept., and SEC. The staff liaison to NBAA’s Tax Committee, he is a licensed pilot.