Alternative SIFL Rates Available for 2021
January 27, 2022
The IRS announced in June and October of 2021, in Revenue Ruling 2021-11 and Revenue Ruling 2021-19, respectively, that alternative Standard Industry Fare Level (“SIFL”) rates can be used for the first half and second half of 2021 due to the COVID-19-related impacts on the standard SIFL rates.
Generally, when business aircraft are made available to employees for non-business flights, employers must impute the excess of the value of non-business flights over any amount paid by the employee as a fringe benefit as part of the employee’s taxable income. IRS regulations provide two methods for valuing the cost of the non-business flight. One of the methods operators can use to calculate the value of such non-business flights are SIFL rates, which are based, in part, on airline capacity and fuel and non-fuel costs.
Every six months the U.S. Department of Transportation calculates the SIFL rates, which are then published by the Department of Transportation and the IRS. The traditional calculation typically approximates a first-class fare.
The ongoing COVID-19 pandemic impacted the traditional SIFL calculation and resulted in nearly double the traditional SIFL rates. As a result, two alternative SIFL rates were offered to business aircraft operators for the first half of 2021 and extended to the second half of the year, as well. The alternative rates aim to mitigate the effect of Payroll Support Program (“PSP”) Grants and PSP Promissory Notes on the calculations for 2021, which were offered as government relief to U.S. airlines through the Coronavirus Aid, Relief and Economic Security (“CARES”) Act.
The alternative SIFL rates reflect more consistent changes to traditional SIFL rates and can be used by any operator for fringe benefit calculations due to the COVID-19 related impact on the standard rates. The two alternative rates for the first half of 2021 are approximately 30 to 40% less than the standard rate, and the alternative rates in the second half are approximately 50 to 60% less. Taxpayers may use any of the three rates, the standard rate or either of the two alternative rates, when determining the value of noncommercial flights of employer-provided aircraft for the first half and second half of 2021.
GKG Law, P.C.’s business aircraft practice group provides full-service tax and regulatory planning and counseling services to corporate aircraft owners, operators and managers. The group’s services include federal tax and regulatory planning, state sales and use tax planning, and negotiation and preparation of all manner of transactional documents commonly used in the business aviation industry, including aircraft purchase agreements, leases, joint-ownership and joint-use agreements, management and charter agreements, and fractional program documents.
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