Recently, there have been some mischaracterizations and misunderstandings about a provision included in the “Tax Cuts and Jobs Act,” passed on Nov. 16 by the Senate Finance Committee, regarding taxes related to non-commercial, general aviation aircraft, and the companies managing those aircraft.

To be clear, the provision clarifies existing law with regard to taxes on general aviation, particularly as related to aircraft-management service companies, and according to government scorekeepers, it will not meaningfully impact government revenues.

Here is specifically what the provision says, and why it is not a “tax-break” for business aviation.

Fact #1: The provision clarifies existing law regarding commercial versus non-commercial flights.

This proposal makes clear that when aircraft owners conduct non-commercial, general aviation flights with assistance from an aircraft-management company, the flights have always been subject to the fuel tax, and not the commercial ticket tax.

For example, the Airport and Airways Revenue Act of 1970, which governs aviation taxes, states: “The dividing line between noncommercial aviation (subject to the fuel taxes) and commercial aviation (subject to the ticket tax) is use in a business of transporting persons or property for compensation or hire.”

Fact #2: The provision clarifies the proper IRS tax treatment of companies managing aircraft not affiliated with the airlines.

The proposal clarifies an arcane IRS memo from 2012, which mistakenly held aircraft-management companies responsible for commercial taxes on non-commercial flights. Many aircraft-management companies, which help to service aircraft, have been faced with large, wrongly assigned retroactive tax assessments, and as a result, were on the brink of closing their doors.

The more than 900 companies in the U.S., which manage more than 4,000 non-airline aircraft, are small businesses that do not themselves own aircraft. They simply act as a service provider, similar to a property-management company. As such, they act as a “deputy tax collector” on behalf of owners – and were not able to pay large retroactive IRS assessments on taxes they didn’t even know they were obligated to collect from owners.

Fact #3: In other words, the provision brings clarity to a decades-long confusion about taxes for non-commercial, general aviation aircraft, and the companies that manage those aircraft.

The language included as part of the Senate tax bill simply re-states the long-held legislative history that flights conducted by an aircraft owner – in their own aircraft – with the assistance of a management company, are neither the same as those conducted by airlines, nor subject to commercial ticket taxes.

When statements are made about business aviation and the tax bill, let’s have clarity, not confusion. Questions? Dan Hubbard, NBAA, 202-431-5970, [email protected].