Navigating The Complexities Of Aircraft Management

In March 2012, the Internal Revenue Service (IRS) issued a memorandum that expanded scope of federal excise taxes (FET) on owner-operated use of aircraft being utilized in an aircraft management agreement. This provoked a great deal of concern by the National Air Transportation Association (NATA).

As we have previously reported, we have been working with the Internal Revenue Service for a number of months, and have had multiple meetings with multiple offices within the IRS.  Our efforts have changed the landscape, but we want to recognize the time and effort that the IRS has put into our issue and in listening to our concerns. 

Shortly after the release of the IRS memo, representatives from NATA reached out to the IRS to share concerns over expanding the scope of FETs. The IRS often gets a bad rap — they are the “tax man” after all — but in this particular case they went above-and-beyond to learn about our industry and to help find a solution to this complex issue. We met repeatedly with IRS officials and they listened carefully.  Marian Epps of Epps Aviation and Nel Stubbs of Conklin and de Decker Associates dived into the on-the-ground details of how owner-operation of aircraft in the aircraft management industry works, about the various agreements that are in place, the rights and responsibilities of aircraft owners, and those of the management companies. They listened carefully and agreed with the need for clear and precise guidance with respect to such management services.

In conclusion, those we worked with in the IRS’s Office of the Chief Counsel and in the Small Business/Self-Employed Division have done an outstanding job at navigating the complexities of the aircraft management industry and the complexities of owner-operated use of charter aircraft. This is just a first step in the process of resolving the proper scope of FETs. We look forward to continuing to work with the IRS in exploring the details of this issue and commend these public servants for their thoughtful work in this arena.

Submitted by: James W. Coon, NATA Executive Vice President

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