Federal Taxes

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2017 Tax Cuts and Jobs Act

Passed into law in December 2017, the Tax Cuts and Jobs Act (TCJA) has implications for business aircraft owners and operators. NBAA has resources to help members understand key tax reform issues and will release additional content over the coming months. Learn More

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. Learn about 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 to own aircraft. In some cases, the depreciation rules cause the entity owning the aircraft to have a tax loss and IRS auditors can disallow deduction of these losses, relying on the "hobby loss" rules. Learn More

Non-Business Use of Employer-Provided Aircraft

Occasionally a business airplane is made available to employees for reasons not directly related to the business of the company. Access information on the tax and regulatory implications of these flights, including the NBAA Personal Use (SIFL) Calculator. Learn More

Federal Tax News

NBAA Requests Clarification on Bonus Depreciation Proposed Regulations
Oct. 12, 2018
NBAA recently submitted comments to the IRS on the definition of a “written binding contract” in proposed regulations relating to immediate expensing, also referred to as “bonus depreciation.” The Notice of Proposed Rulemaking followed passage of the Tax Cuts and Jobs Act, signed into law on Dec. 22, 2017, which amended Internal Revenue Code § 168(k) to provide 100 percent bonus depreciation of both new and used qualifying property acquired and placed in service after Sept. 27, 2017 and before Jan. 1, 2023, with phase downs until 2027. In its comments, NBAA requested guidance that the required threshold for liquidated damages apply only to the purchaser. Learn more.
IRS Issues Proposed Regulations on Bonus Depreciation
August 28, 2018
A recently issued notice of proposed rulemaking from the IRS on the extension and modification of 100 percent bonus depreciation includes key recommendations from NBAA’s formal request for guidance on the deprecation changes passed into law as part of the Tax Cuts and Jobs Act (TCJA). The TCJA amended the Internal Revenue Code to provide 100 percent bonus depreciation for both qualifying new and used property acquired and placed in service after Sept. 27, 2017, and before Jan. 1, 2027. The extension of bonus depreciation to used property was a significant legislative victory for NBAA, and since passage, the association has requested specific guidance on how the provision applies to business aviation. Read more about the SEC’s findings.
Recent SEC Settlement on Perquisite Disclosure is Reminder for Public Companies Using Business Aircraft
July 17, 2018
The recent $1.75 million fine imposed by the U.S. Securities and Exchange Commission (SEC) on Dow Chemical Company should serve as a reminder to public companies that operate business aircraft to review their executives’ perquisite (perk) disclosure policies and procedures, said Scott O’Brien, NBAA’s senior director, government affairs. “We encourage our members to review their procedures and policies on how they are calculating and reporting their aggregate incremental costs,” O’Brien. “Companies also need to be clear on what types of flights they are reporting.” Read more about the SEC’s findings.
NBAA Urges Members to Conduct Careful Tax-Reform Planning
June 28, 2018
With passage of the Tax Cuts and Jobs Act, NBAA is urging members to carefully review provisions that impact business aviation as they conduct tax planning. Last year, as Congress debated tax reform, NBAA successfully advocated for several provisions that are having a positive impact, such as the extension of 100-percent bonus depreciation to used property. However, as the IRS and Department of the Treasury are still working on guidance to clarify ambiguities in the law, it is critical to consult with qualified tax and legal advisors. Read more about federal tax planning.
Tax Reform Highlights for Business Aviation
Dec. 19, 2017
The House and Senate have both voted to pass major tax reform legislation, and are expected to send the Tax Cuts and Jobs Act (“Tax Bill”) to the president for his signature before Dec. 25, 2017. The legislation contains important changes for business aviation in several areas, including bonus depreciation, like-kind exchanges and more. Read more.
NBAA Members Urged to Contact Congress on Aviation-Related Tax Reform Issues
Dec. 7, 2017
As tax reform legislation moves forward in Washington, DC, NBAA continues its advocacy work, and urges association members to contact Congress on aviation-related issues included in the larger tax reform bills. Issues impacting business aviation include: immediate expensing, like-kind exchanges and taxes applicable to aircraft management companies. The next step for the legislation is the conference process, during which the House and Senate resolve differences in the respective bills. "NBAA will be actively working on this issue during the conference process," said Scott O'Brien, NBAA’s senior director of government affairs. "The association supports the language in the House bill, which allows immediate expensing for new and pre-owned business assets and preserves important tax benefits for businesses." Learn more.
Podcast: Prepare Your Flight Department Now For Tax Filing
Nov. 6, 2017
Fortune favors those who are prepared – especially for filing taxes. And now, according to experts, is the time for flight departments to work on their tax liability. "Maybe you need to have some more business flights in order to make sure you qualify for accelerated depreciation for example," said CPA Sue Folkringa. "Now is the perfect time to look through those flight logs and do some planning for the next month and a half." Also, there are new tax provisions if your aircraft was damaged by Hurricanes Harvey or Irma, said CPA Angel Houck, and out-of-pocket expenses may be deductible. Learn more in this week's NBAA Flight Plan.
Tax Court Decision Provides Insights into Hobby Loss Rules
Aug. 5, 2016
A case involving a physician who said that the use of an airplane was to further his medical practice, and attempted to claim tax deductions, highlights a potential tax trap. The doctor was one of several principals in a medical practice, as well as a pilot. He formed a disregarded entity LLC to own a plane, and reported losses for consecutive years. To apply “hobby loss” rules to an activity, it must first be ascertained. In this case, the physician elected to combine the airplane LLC and the medical practice as one activity for some years, but not others. With the court’s description of the case, the disallowance of aircraft-related deductions as a hobby loss was not surprising, according to Sarah Caplan, with Business Tax Services at Deloitte Tax LLP. Learn more.
Tax Case Highlights Risks of Bad Recordkeeping, Hobby Loss
May 11, 2016
To deduct aircraft expenses from taxable income, business owners must be able to show that the aircraft was used in a bona fide trade or business and not as a casual investment. That's a fairly basic principle, and strictly enforced under the IRS's hobby loss rules. A recent court case shows how one taxpayer ran afoul of the hobby loss rules, and presents a cautionary tale for all aircraft operators. "If you want to deduct your aircraft expenses, you should be prepared to show that you're using the aircraft as part of a business," said Phil Crowther, an attorney at Jackson & Wade and member of NBAA's Tax Committee. Read more about the case.
IRS Ruling Has Implications for Like-Kind Exchanges, Federal Tax Planning
Jan. 6, 2016
The IRS has released a memorandum that provides information to business aircraft owners considering like-kind exchanges or using special purpose entities to own and lease aircraft. Learn more about the ruling.
NBAA's Business Aviation Taxes Seminar Sets Attendance Record
May 14, 2015
NBAA's 2015 Business Aviation Taxes Seminar (BATS), held May 8 in Dallas, TX, attracted a record number of attendees interested in learning about emerging issues in federal and state tax regulations, and how to handle them. Read more.
FAA Clarifies Policy That Fuel-Tax Revenue Must Fund Aviation
November 26, 2014
The FAA has amended its airport revenue usage policy to emphasize that tax revenue from aviation fuel sales must go back into the aviation system. The change is effective Dec. 8, and reconfirms policy that has been followed for nearly three decades, but has faced periodic challenges because of perceived ambiguity in the regulations. Read more.
NBAA Engaged in Latest SEC Disclosure, Tax Reform Discussions
Aug. 15, 2014
While Congress may be in recess for August, the policymaking work in Washington, DC continues throughout the summer, and NBAA remains focused on a host of issues relevant to business aircraft operators, including federal taxes. Learn about a recent hearing on tax reform and a plan to modernize SEC disclosures. Read more.
NBAA Resource Clarifies Net Investment Income Tax Regulations
July 11, 2014
The Treasury Department and the IRS recently published final regulations implementing the net investment income tax (NIIT), which was enacted as part of the 2010 healthcare overhaul. The NIIT imposes a 3.8-percent tax on the investment income of certain individuals, estates and trusts. The final regulations revise and clarify several issues in the 2012 proposed rules that will affect many common airplane leasing arrangements. Review the NIIT Article.
IRS, Treasury Department Release Priority Guidance Plan
August 19, 2013
Two tax issues that affect NBAA Members have been included in the 2013–2014 Priority Guidance Plan released by the Department of the Treasury and IRS. First, NBAA succeeded in urging the IRS and Treasury to list developing guidance on 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.