September 30, 2020

NBAA, NATA Submit Comments to IRS on Excise Tax Exemption for Business Aircraft Management Services

Holland & Knight Alert
John B. Hoover

The National Business Aviation Association (NBAA) joined with the National Air Transportation Association (NATA) to submit to the Internal Revenue Service (IRS) and the U.S. Department of the Treasury on Sept. 29, 2020, detailed comments on a notice of proposed rulemaking (NPRM) regarding an industry-championed legislative exemption from federal excise taxes (FET) on aircraft management services paid for by aircraft owners.

Holland & Knight Partner and NBAA Tax Committee Chair John Hoover led the team of NBAA Tax Committee members in writing the comments, which focus on issues arising under the proposed regulations interpreting the aircraft management services exemption that was adopted in the Tax Cuts and Jobs Act of 2017 (TCJA). Passage of the FET exemption in the TCJA represented the successful culmination of a years-long effort to seek relief for aircraft management companies that had been subject to crippling retroactive tax assessments.

The proposed regulations addressed several comments previously submitted by NBAA regarding the exemption. NBAA and NATA submitted the additional comments yesterday to request modifications to specific provisions in the proposed regulations. Among the comments submitted are a request for guidance regarding circumstances in which a constructive lease of an aircraft will be respected for FET purposes, a request that both the trustee and the beneficial owner in owner trusts be eligible for the exemption, suggestions for the anti-abuse rules regarding disqualified leases and fractional ownership, and suggested guidance regarding FET and fuel tax on charter flights provided to aircraft owners. In addition, the comments request that the IRS develop guidance on the FET collection responsibilities of charter brokers.

For more information, contact Mr. Hoover.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.

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