This is bad news from the IRS

[gret]

IRS Memo Points to Effort To Tax Aircraft Management AIN Alerts

The U.S. Internal Revenue Service Office of Chief Counsel issued a memo on March 9 that justifies applying the 7.5-percent federal excise tax to aircraft management fees paid by Part 91 operator customers. The memo responds to a key question: “Are the monthly management fees paid to the aircraft management company…‘amounts paid for taxable air transportation of persons,’ and thus taxable?” It 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.” According to Andrew Richmond, CEO of charter/management firm TWC Aviation, “What they’ve attempted to do is take a simplistic issue and create a ruling without understanding all the potential variations that actually take place in the industry.” Added Keith Swirsky, a tax expert and attorney at GKG Law, “I think there is going to be an evolution of thought process on this, but the pace of IRS audits of aircraft management companies has already accelerated and will continue to accelerate.” A management company executive told AIN, “This could be devastating for the aircraft management business.” Both NBAA and NATA are concerned about the IRS memo, and NBAA officials are planning a meeting with the IRS’s chief counsel’s office. NATA noted that the memo “heightens concern that the IRS is intent on trying to collect taxes on aircraft management situations that have historically been viewed, by both the FAA and the IRS, as noncommercial.”​

This also was published last week-

Buffett’s NetJets Countersued by U.S. for Unpaid Taxes

​

http://www.bloomberg.com/news/2012-...-is-countersued-by-u-s-over-unpaid-taxes.html​

A whole bunch of money to the Feds....

 

[CALRepublic]

This is really bad news for all the fractionals, because if the IRS beats Netjets in court, they will go after the other frax.

And here's the thing, if Netjets can't afford to eat this, the other fractionals sure as hell CANNOT. The IRS might deliver a huge blow to the fractional industry should they win this case

 

[gret]

Hurts frac's and a/c mgmt companies.

The mgmt companies may have an out by using a client credit card for all fuel, mtx, hangar, etc. Still would have to deal with dispatch, crewmembers, etc costs. Mgmt fee will be taxable, but compared to the pass thru costs, it is nothing. Not an option for fractional companies.

Major blow for both...where is the cash going to come from for past due taxes? Big numbers.

If I read the NJ article correctly, their bill is up to almost $1 billion.

 

[gunfyter]

This is good for the economy. When the rich pay more taxes ... We can all get jobs as fries cooks after this....

 

[t-bone]

Would this be an equivalent tax to the FETs I believe 135 operators have been paying?

 

[DieselDragRacer]

Next thing you know Occupy Wall St will protesting at FBO near you.

 

[gunfyter]

You shouldn't have to pay a ticket tax to fly on your own plane.

What's next? Pay Hotel taxes just because your house is as big as a hotel and you have maids and staff working for you?

 

[gret]

Agree...and you should haven't to pay estate taxes when you die or give something to your children or friends over a certain amount, while if you give it to a charity, you get to deduct it...simply a way for the government to generate revenue and it never makes sense.

The argument about owning the plane doesn't work because if you own stock in an airline, you own a piece of the plane. It is nuts.....

 

[gunfyter]

You don't have operational control .... you are not the owner.

 

[gret]

Not saying it is right, it is just how they look at it. They are saying an owner with an interest in an a/c flown with a mgmt company or frac doesn't have control either and are paying someone else for transportation and therefore they want to tax it. They don't care what the FAA rules are, they have their own.

Horrible situation.