The release of an Internal Revenue Service (IRS) memo on March 9 outlining guidance on how to apply the federal excise tax (FET) to fees paid to aircraft management companies adds to business aviation’s burden at a time when the industry continues to suffer from weak demand, high fuel prices and public criticism of this form of travel. This memo isn’t the first time the IRS has attempted to apply the 7.5-percent FET to non-commercial Part 91 flight operations. And it comes on the heels of the government’s attempt to apply FET to fractional operations and a counterclaim to a lawsuit filed by NetJets, justifying the government’s assertion that the company failed to pay years’ worth of FET on non-commercial flights. To top that off, a California bill has been proposed that would tax the sale of services at 4 percent, which industry experts fear could include aircraft management and charter services.
Clearly government agencies seeking to make up for budget shortfalls see business aviation as a target for generating revenue. And the FET memo, the government’s ongoing fight with NetJets and state efforts such as California Assembly Bill No. 1963 indicate that there is serious intent to extract more money from business aviation.
More In Charter & Fractional
