Management Company

[JJET44]

7.5% on our total budget? That can't be right. Maybe on the management fee. The only thing they're selling us are their services. This will never pass, it has no merit.

 

[gret]

7.5% on our total budget? That can't be right. Maybe on the management fee. The only thing they're selling us are their services. This will never pass, it has no merit.

Sorry…GCPA is right on. Below is an excerpt from a piece in AIN in May. If you read the “IRS Memo”, you will see they want to tax everything, including reimbursements for fuel, pilot salaries, hangar, insurance…the works. This is what NetJets is tax court for and the total is approaching $1 billion for taxes, penalties, and interest.

The good news for NetJets is they lobbied hard and just got a change in the tax laws passed on a prospective basis for “fractional owners”. Still up in the air for Part 91 a/c managed by a mgmt company, or even a wholly owned subsidiary. Guidance should be forthcoming in the next few months as it is a mess right now.


IRS Memo Triggers Federal Excise Tax Fears

The IRS memo is not an official revenue ruling; however, it seeks clarification of issues that support previous revenue rulings and thus, according to one aviation charter/management expert with a background in accounting, justification for IRS auditors to impose the FET on the fees paid to management companies.

The memo responds to the IRS’s chief of the excise tax program regarding three scenarios at aircraft management companies. A key issue to which the chief seeks an answer is: “Are the monthly management fees paid to the aircraft management company in each of the three scenarios…‘amounts paid for taxable air transportation of persons,’ and thus taxable…?” The memo concludes that taxable air transportation of persons is occurring and thus “The monthly management fees, as well as the separately reimbursed amounts, paid to Management…are taxable.”​

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http://www.ainonline.com/aviation-n...04/irs-memo-triggers-federal-excise-tax-fears