The U.S. House Ways and Means Committee yesterday approved by voice vote a bill that clarifies that aircraft management fees are not subject to the 7.5-percent air transportation tax. Sponsored by Rep. Pat Tiberi (R-Ohio), H.R.3608 was among a number of tax measures cleared by the committee during a meeting yesterday afternoon.

The bill comes as industry groups have been awaiting IRS guidance on the tax treatment of aircraft management fees. In a determination that had led to numerous audits and costly tax bills, the IRS released Chief Counsel Advice Memorandum in March 2012 concluding that management services were taxable as air transportation. But following an industry uproar and inquiries from lawmakers, the IRS agreed to set aside the tax assessments while it worked on more permanent guidance.

In its evaluation of H.R.3608, the Joint Tax Committee determined that the bill would cost the government less than $500,000 over the next 10 years since those tax assessments are on hold anyhow. The bill addresses only management services related to the private ownership of the aircraft—not instances involving charter—and covers fees assessed from the date of enactment of the bill.

Bill Deere, senior v-p for government and external affairs for NATA, called the bill “common sense legislation” and noted, “While the IRS backed away from its original position, small aviation businesses are still vulnerable to potentially enormous tax liabilities and ongoing audits.”

NBAA also welcomed the panel’s consideration of the bill. “We applaud Rep. Tiberi for his continued commitment to protecting the more than 900 aircraft management companies, most of which are small businesses, from crippling retroactive tax assessments," said NBAA president and CEO Ed Bolen.

"Management companies are small- to medium-sized businesses employing pilots, aircraft maintenance technicians and flight schedulers, and are unable to bear the significant financial burden after being found liable for past taxes that are often impossible to collect from clients," added NBAA senior manager of tax and finance policy Scott O'Brien.