- What is Business Aviation?
- Flight Department Administration
- Aircraft Operations
- Professional Development
- News & Publications
- Products & Services
The Pending Senate Tax Reconciliation Bill Singles Out Business Aviation for Punitive Tax Increases
Updated February 1, 2006
The Congress changed the rules related to the deductibility of general aviation aircraft in the American Jobs Creation Act of 2004 (Jobs Act), through an amendment that was added on the Senate floor without having been formally considered by either tax-writing committee. The Internal Revenue Service (IRS) used the Jobs Act amendment as the basis for the publication of Notice 2005-45 that treats general aviation aircraft differently than other transportation vehicles and has created great uncertainty in the community about how to comply with the new rules.
- Interim IRS Guidance on the Jobs Act amendment has created chaos.
- The IRS guidance raises grave concerns because it requires taxpayers to use an unprecedented methodology that has no specific statutory authority, produces arbitrary and irrational results, and inappropriately reduces tax deductions for the expenses of flights undertaken primarily for business purposes.
- The Congress should work with the IRS and the General Aviation industry to address the legitimate concerns raised by IRS interpretations
of the 2004 legislation, before expanding the scope of the disallowance rules.
- Section 5516 of the Senate amendment to the Highway Reauthorization and Excise Tax Simplification Act of 2005 (H.R. 3) included a proposal to expand the limitation on employer deductions but that expansion was rejected by the House in the conference.
- S. 2020 would not only expand the scope of the disallowance rules, it would also change the way in which an employee values a fringe benefit
flight for purposes of reporting compensation.
- Essentially, if these amendments become law, an employee could be charged with more income than the company is allowed to deduct.
- The Senate proposals fail to recognize the value of general aviation to our manufacturing base and economy.
- General aviation is a uniquely American industry. Seventy percent of all general aviation planes are manufactured in the United States and 75 percent of all general aviation flying occurs in the United States. General aviation directly contributes more than $41 billion ($102 billion indirectly) to the U.S. economy annually, and is one of the few industries to make a positive contribution to our nation’s balance of trade. Moreover, general aviation helps companies locate or remain in communities without robust commercial airline service.