Federal Taxes

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Federal Tax News

FAA Clarifies Policy That Fuel-Tax Revenue Must Fund Aviation
November 26, 2014
The FAA has amended its airport revenue usage policy to emphasize that tax revenue from aviation fuel sales must go back into the aviation system. The change is effective Dec. 8, and reconfirms policy that has been followed for nearly three decades, but has faced periodic challenges because of perceived ambiguity in the regulations. "When states, counties, cities and other local jurisdictions tax aviation fuel, it is critical that the proceeds are used for the capital or operating costs of an airport, a local airport system or any other airport facility," said Scott O’Brien, NBAA’s senior manager, finance and tax policy. "The amended Revenue Use Policy is helpful in clarifying the prohibition on taxes of any kind on aviation fuel, unless the revenues are used in a manner that is consistent with federal law and policy." Read more.
Grassroots Advocacy Drives Legislation to Resolve Tax Policy on Aircraft Management Companies
November 14, 2014
A group of NBAA Members, led by several Ohio-based aircraft management companies, has been working with their representatives in Congress to introduce legislation clarifying that flights by aircraft owners with the assistance of a management company are non-commercial. "As an industry, we’re taking two parallel approaches to this issue," said Scott O'Brien, NBAA senior manager for finance and tax policy. "With the regulatory approach, we're talking to the IRS and Treasury Department in Washington and educating government officials about how aircraft management arrangements work. At the same time, we are supporting Member Companies in their legislative approach." Read more.
NBAA Engaged in Latest SEC Disclosure, Tax Reform Discussions
Aug. 15, 2014
While Congress may be in recess for August, the policymaking work in Washington, DC continues throughout the summer, and NBAA remains focused on a host of issues relevant to business aircraft operators, including federal taxes. Learn about a recent hearing on tax reform and a plan to modernize SEC disclosures. Read more.
NBAA Resource Clarifies Net Investment Income Tax Regulations
July 11, 2014
The Treasury Department and the IRS recently published final regulations implementing the net investment income tax (NIIT), which was enacted as part of the 2010 healthcare overhaul. The NIIT imposes a 3.8-percent tax on the investment income of certain individuals, estates and trusts. The final regulations revise and clarify several issues in the 2012 proposed rules that will affect many common airplane leasing arrangements. The NBAA Tax Committee has prepared a new resource on the final NIIT regulations for Members. Review the NIIT Article.
IRS, Treasury Department Release Priority Guidance Plan
August 19, 2013
Two tax issues that affect many NBAA Members have been included in the 2013–2014 Priority Guidance Plan released by the Department of the Treasury and IRS. First, NBAA, in collaboration with NATA, succeeded in urging the IRS and Treasury to list developing guidance on the application of federal excise taxes to aircraft management fees in the guidance plan. Second, the plan proposes to address the "leasing company trap," which unfairly penalizes aircraft owners that lease an aircraft to related parties for legitimate business reasons. Learn about the Priority Guidance Plan.

Federal Excise Taxes

Both private and commercial business aircraft operators pay Federal excise taxes (FET) either on fuel or on the transportation of persons or property. This section provides information on FET applicability, current tax rates, and best practices for collecting and remitting the tax. Learn More


Aircraft that are owned and operated by businesses are often depreciable for income tax purposes under the Modified Accelerated Cost Recovery System (MACRS) or the Alternative Depreciation System (ADS). Learn More

Passive Activity Loss

Individual taxpayers must aggregate the income and loss from their passive activities each year to determine their net passive income or loss. A net passive loss for the year generally is nondeductible for that year but may be carried forward to reduce net passive income in future years. Learn More

Charitable Flights

Many businesses generously make their aircraft available for charitable flights. Prior to doing so, it is important to know the FAA and IRS rules applicable to these flights and any tax deductions the company might want to take associated with the contributions. Learn More

Hobby Loss Rules

Business owners can use different legal entities, including C corporations, S corporations, partnerships, and LLCs. Although these arrangements generally do not create income tax benefits, the depreciation rules often cause the entity owning the aircraft to have a tax loss. IRS auditors can disallow deduction of these losses, relying on the ”hobby loss’ rules. Learn More