Federal Taxes

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Net Investment Income Tax

July 11, 2014

On Dec. 5, 2012, the Treasury Department and the IRS issued proposed regulations on the new Net Investment Income Tax (NIIT) enacted as part of the 2010 healthcare overhaul that imposes a 3.8 percent tax on the investment income of certain individuals, estates and trusts. The NIIT impacts many common airplane leasing arrangements in which an individual owns an interest in an airplane through a C corporation, an S corporation, a partnership (including a limited liability company) or a trust.

NBAA Tax Committee member John Hoover provided testimony on behalf of the Association at a public hearing on the proposed regulations. Hoover’s comments covered the standard IRS will use to define a trade or business; and the ability of taxpayers to change their activity grouping for the purposes of passive loss rules as well as the 3.8 percent tax. 

In December 2013, the Treasury Department and the IRS published final regulations implementing the NIIT. The final regulations revise and clarify several rules in the 2012 proposed regulations that apply to common airplane leasing arrangements.

An article about NIIT has been prepared by Michala Irons of Barnes & Thornburg LLP, Indianapolis, Indiana and Clifford G. Maine of Barnes & Thornburg LLP, Grand Rapids, Michigan.

Review the full article "Final Net Investment Income Tax Regulations Clarify Rules Applicable to Common Airplane Leasing Arrangements" (595 KB, PDF)

For more information regarding the issues described in this document, please contact Clifford G. Maine, Aviation Attorney, at (616) 742-3944 or cmaine@btlaw.com, or Michala Irons, Tax Attorney, at (317) 231-7463 or michala.irons@btlaw.com.