United States: IRS Issues Favorable Tax Regulations on Management Company Exception to FET
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Over the past several years, the Internal Revenue Service (IRS) has worked to issue final regulations that provide guidance to aircraft management companies and aircraft owners regarding their excise tax obligations. Federal (FET).
The final rule – under Internal Revenue Code § 4261(e)(5) – implements a provision of the Tax Cuts and Jobs Act of 2017 (TCJA) that provides an exception to FET 7.5% on commercial air travel when an aircraft owner pays for management services to support flights on the aircraft.
These regulations represent the successful culmination of a years-long advocacy effort led by the National Business Aviation Association (NBAA) and its tax committee. Since 2008, the NBAA has been involved in providing feedback to the IRS on all stages of these regulations, culminating in the release of the final regulations in January 2021. The NBAA Tax Committee’s advocacy effort was led by Holland & Knight Partner and Chairman of the NBAA Tax Committee. John Hoover.
Under Mr. Hoover’s leadership, the tax committee recently authored an article that provides NBAA members with details on the history of the association’s advocacy efforts and provides a comprehensive analysis of the final settlements. Additionally, the article discusses common scenarios regarding how the exemption deals with aircraft owner flights, rentals, and replacement aircraft.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
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