Federal Taxes

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Federal Tax News

IRS, Treasury Department Release Priority Guidance Plan
August 19, 2013
Two tax issues that affect many NBAA Members have been included in the 2013–2014 Priority Guidance Plan released by the Department of the Treasury and IRS. First, NBAA, in collaboration with NATA, succeeded in urging the IRS and Treasury to list developing guidance on the application of federal excise taxes to aircraft management fees in the guidance plan. Second, the plan proposes to address the "leasing company trap," which unfairly penalizes aircraft owners that lease an aircraft to related parties for legitimate business reasons. Learn about the Priority Guidance Plan.
NBAA Has New Resource on Net Investment Income Tax
July 1, 2013
The Treasury Department and the IRS last December issued regulations on the new net investment income tax (NIIT), enacted as part of President Obama's healthcare reform. Beginning this year, the law imposes a 3.8 percent tax on the income of certain individuals, and it will impact many airplane leasing arrangements in which an individual owns an interest in an airplane through a company or trust. Review the NIIT Article.

Federal Excise Taxes

Both private and commercial business aircraft operators pay Federal excise taxes (FET) either on fuel or on the transportation of persons or property. This section provides information on FET applicability, current tax rates, and best practices for collecting and remitting the tax. Learn More

Depreciation

Aircraft that are owned and operated by businesses are often depreciable for income tax purposes under the Modified Accelerated Cost Recovery System (MACRS) or the Alternative Depreciation System (ADS). Learn More

Passive Activity Loss

Individual taxpayers must aggregate the income and loss from their passive activities each year to determine their net passive income or loss. A net passive loss for the year generally is nondeductible for that year but may be carried forward to reduce net passive income in future years. Learn More

Charitable Flights

Many businesses generously make their aircraft available for charitable flights. Prior to doing so, it is important to know the FAA and IRS rules applicable to these flights and any tax deductions the company might want to take associated with the contributions. Learn More

Hobby Loss Rules

Business owners can use different legal entities, including C corporations, S corporations, partnerships, and LLCs. Although these arrangements generally do not create income tax benefits, the depreciation rules often cause the entity owning the aircraft to have a tax loss. IRS auditors can disallow deduction of these losses, relying on the “hobby loss” rules. Learn More