Fractional aircraft operators are facing a sunset of tax relief when the current FAA authorization expires on September 30. In the previous FAA reauthorization bill, Congress provided a temporary change in the tax structure for operators, exempting aircraft enrolled in fractional programs from the 7.5-percent air transportation tax. Instead they were subject to the fuel tax along with a 14.1 cent-per-gallon fuel surcharge. The change, which took effect March 31, 2012, included a Sept. 30, 2015 expiration date for relief from the air transportation tax.

Speaking at this week’s Conklin & de Decker/NATA Commercial Operators Tax Seminar in Chantilly, Va., Conklin & de Decker co-owner and tax expert Nel Stubbs noted the measure was designed to provide temporary relief as the fractional operators hashed out larger tax issues with the IRS. Fractional ownership companies had been mired in lawsuits with the IRS for years over whether fractional fees are subject to the transportation tax. 

Should the tax relief sunset without renewal, the tax structure reverts back to the 7.5-percent air transportation tax. At the same time, though, fractional operators could also be subject to the fuel surcharge since that is not set to expire until Sept. 30, 2021. Complicating matters is the potential delay of a comprehensive FAA reauthorization bill beyond the September 30 deadline. While Congress likely would temporarily extend FAA’s authorization, such bills typically don’t address many specific issues, such as fractional taxation.