An NPRM from the Treasury Department on the assessment of federal excise taxes (FET) in the aircraft management industry could be issued as early as August, according to Jorge Castro, a consultant to the National Air Transportation Association. Speaking at the group’s annual Air Charter Summit in Washington, D.C., last week, he told the audience that dialog has heated up between the Internal Revenue Service and FAA regarding regulation of the FET laws.
Internal Revenue Service
Wayne Rizzi, the owner of 20-year-old air charter broker Air Royale International, pleaded guilty yesterday to “willfully failing to pay over collected Federal Excise Taxes [FET] to the IRS.” The IRS said that from Oct. 1, 2008, through Dec. 31, 2010 Air Royale collected FET from its customers totaling $489,784, but passed on only $29,286 of this amount to the agency.
The process of buying a business jet is fraught with potential pitfalls, among them the many ways that owners can fall afoul of legal constraints. The 2014 NBAA Tax Seminar & Conference, held last month in San Francisco, offered a one-day summary of the issues facing aircraft owners, not only summarizing the key problems that can develop but also giving participants a foundation for understanding how best to set up a flight department from a legal standpoint and how to satisfy taxing authorities with the minimum hit.
On May 2, NBAA is holding its one-day Business Aviation Tax Seminar at the Hilton San Francisco Financial District. The seminar begins at 8 a.m. Among the subjects to be covered are two key tax issues for business aircraft operators: the application of the federal excise tax (FET) to managed aircraft flying under Part 91; and “Federal Audit Traps and Solutions for Aircraft Leasing Structures.”
Flight Dept Advantage (FDA), a provider of start-up and operational services for flight departments, launched a program that “relieves an aircraft owner of all direct obligations related to payroll taxes, benefits and workers compensation while addressing IRS, FAA and other regulatory pitfalls.” Called FDA HR Advantage, it works with clients’ professional advisors to create a customized solution specific to each aircraft owner’s operation, business structure and goals.
NBAA has released an updated version of its Federal Excise Taxes Guide: Details on Air Transportation and Fuel Taxes. Last published in 2005 as the NBAA Federal Excise Tax Handbook, the new guide includes areas that have seen changes–such as the application of FET on fractional aircraft ownership operations; IRS legal interpretations regarding aircraft service and pilot service agreements; and reimbursement under the “Schwab re-interpretation,” based upon the latest information from the IRS, and other sources.
NBAA released its new Federal Excise Taxes Guide late last week, marking the first time the guidelines have been updated since 2005. It is intended to provide business aircraft owners, flight departments and charter operators with a basic understanding of the federal excise taxes (FET) that apply to business aircraft activity.
NBAA has issued a new resource about the net investment income tax (NIIT), having now fully reviewed the U.S. Treasury Department and IRS regulations on this tax, which was enacted as part of the 2010 healthcare overhaul. Beginning this year, the law imposes a 3.8-percent tax on the investment income of certain individuals, and it will affect many common airplane leasing arrangements, NBAA said.
The U.S. Internal Revenue Service has agreed to suspend possible tax assessments against aircraft management companies now undergoing federal excise tax (FET) audits.
On March 26 an NBAA and NATA working group met with Internal Revenue Service (IRS) officials to discuss the Federal Excise Tax (FET) issue. IRS auditors are applying the FET to management fees and expenses paid by Part 91 (non-commercial) operators to management companies.
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