The National Business Aviation Association (NBAA) joined with the National Air Transportation Association (NATA) to submit to the Internal Revenue Service (IRS) and the U.S. Department of the Treasury on Sept. 29, 2020, detailed comments on a notice of proposed rulemaking (NPRM) regarding an industry-championed legislative exemption from federal excise taxes (FET) on aircraft management services paid for by aircraft owners.

Holland & Knight Partner and NBAA Tax Committee Chair John Hoover led the team of NBAA Tax Committee members in writing the comments, which focus on issues arising under the proposed regulations interpreting the aircraft management services exemption that was adopted in the Tax Cuts and Jobs Act of 2017 (TCJA). Passage of the FET exemption in the TCJA represented the successful culmination of a years-long effort to seek relief for aircraft management companies that had been subject to crippling retroactive tax assessments.

The proposed regulations addressed several comments previously submitted by NBAA regarding the exemption. NBAA and NATA submitted the additional comments yesterday to request modifications to specific provisions in the proposed regulations. Among the comments submitted are a request for guidance regarding circumstances in which a constructive lease of an aircraft will be respected for FET purposes, a request that both the trustee and the beneficial owner in owner trusts be eligible for the exemption, suggestions for the anti-abuse rules regarding disqualified leases and fractional ownership, and suggested guidance regarding FET and fuel tax on charter flights provided to aircraft owners. In addition, the comments request that the IRS develop guidance on the FET collection responsibilities of charter brokers.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.