Client Alert
NBAA & NATA Submit Comments Addressing NPRM on FET Exemption for Business Aircraft Management Services

September 29, 2020

The National Business Aviation Association (NBAA) and National Air Transportation Association (NATA) joined forces to draft and submit to the IRS and Department of the Treasury detailed comments in response to the July 31, 2020 proposed Excise Taxes; Transportation of Persons by Air; Transportation of Property by Air; Aircraft Management Services regulations. This notice of proposed rulemaking (NPRM) involved legislative exemption from federal excise taxes (FET) on aircraft management services paid for by aircraft owners.

As noted in this NBAA press release, the joint comments from NBAA and NATA raise “several significant issues, including suggesting a broader definition of aircraft leases to qualify for the FET exemption. With the wide variety of lease structures utilized by business aircraft owners and operators, the IRS should provide additional flexibility in applying the exemption and deeming that lessees are owners for purposes of the exemption.”

The comments also contain:

• A request for the IRS to amend its explanation of disqualified leases so as to better conform with the statute enacted by Congress and to ensure that common types of leases are not disqualified from the exemption;
• Reinforcement that aircraft owners should qualify for the FET exemption whether flights are conducted under Part 91 or Part 135 of the Federal Aviation Regulations;
• Prompting for the IRS to develop documentation standards that allow management companies to substantiate that payments they receive from aircraft owners to meet the requirements to qualify for the exemption;
• Suggestions for improved regulations as to how FET is collected and remitted for charter flights arranged by a broker.

Please do not hesitate to contact a member of GKG Law’s Business Aviation team with questions about the NPRM or the NBAA/NATA comments as they relate to your business needs and decisions.