Non-Business Use of Employer-Provided Aircraft

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NBAA Personal Use of Business Aircraft Handbook

Occasionally a business airplane is made available to employees for reasons not directly related to the business of the company. Aircraft operators must be familiar with the tax and regulatory implications of these flights.

The NBAA Personal Use of Business Aircraft Handbook summarizes the tax rules for companies to calculate the amount of the taxable fringe benefit to report to their employees, directors and independent contractors who use the company’s aircraft for personal purposes.

The handbook also addresses tax rules dealing with the calculation of a company’s nondeductible expenses under the entertainment disallowance as amended by the American Jobs Creation Act of 2004.

Download the NBAA Personal Use of Business Aircraft Handbook (685 KB, PDF)

Additional Personal Use Resources

FAA Compliance

The FAA has a general prohibition on employees reimbursing companies for personal flights when the aircraft is operated under Part 91 of the Federal Aviation Regulations. However, based on a 2010 FAA legal interpretation, some companies may be allowed to seek up to full-cost reimbursement for such trips if specific conditions are met. Review NBAA's resouce, FAA Legal Interpretation Permits Reimbursements for Certain Personal Flights.

Also, other exceptions to the general prohibition on reimbursement may be possible, such as a timeshare agreement between the company and the employee, or payment to the charter operator if the aircraft is on a Part 135 charter certificate.

IRS Compliance

In most cases since the employee cannot pay the company for non-business flights, there is a taxable fringe benefit to be calculated. The value of the flight, or a portion thereof, must be included in the employee’s income.

Valuing Non-Business Flights

When calculating the value of a flight deemed to be taxable, the IRS allows operators to choose between two different methods. The first method uses the fair market value or charter value of the flight. This method looks at the cost of chartering the same or comparable aircraft for the same or comparable flight. The second and more common method determines the value of the flight using a formula that the IRS calls the Standard Industry Fare Level (SIFL).

Deduction Limitations for Personal Entertainment Flights

A provision contained in the American Jobs Creation Act of 2004 limits the ability of a company to deduct the aircraft expenses for certain non-business flights for specified individuals. Under the Act, the difference between the actual cost of personal entertainment flights taken by “specified individuals” and the amount included in income by these employees is disallowed as a deduction to the corporation.

For additional, visit the American Jobs Creation Act of 2004 Web Resource.

SEC Compliance

Providing a company aircraft to an executive officer or director for his/ her personal use generally requires disclosure in Securities and Exchange Commission (SEC) reports for publicly held companies. Public companies must report the aggregate incremental cost associated with personal flights, which means the cost to the company of the personal flights, not the tax value of the benefit.

Additional Resources

If you have questions or feedback about these publications or related topics, contact NBAA's Scott O'Brien at (202) 783-9451 or sobrien@nbaa.org.