Is the IRS Really Imposing FET on Managed Part 91 Aircraft?!
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- Harold Emory Logan
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3 Is the IRS Really Imposing FET on Managed Part 91 Aircraft?! Dave Weil, CEO, Flight Dept Solutions, LLC Washington, DC October 30, 2012
4 Introduction Very basic overview of the issue Not a lawyer but have a lot of experience in this area FET = 7.5% federal excise tax imposed on taxable transportation IRS Rule: if charge for transportation, then flights represent taxable transportation and subject to FET E.G. Part 135 charter operator charges clients to fly charter flights, thus flights subject to FET Important point: IRS does NOT follow the FAA rules in regard to what is taxable transportation 4
5 What Changed? Historically part 91 flights flown for the owner were not subject to FET Then IRS Chief Counsel memo issued in March 2012 Memo represents IRS opinion, NOT law Memo conclusion: most costs & fees paid to management company by client represent payment for transportation and thus are subject to 7.5% FET! Most aviation tax experts believe the memo s conclusions are wrong but IRS treating it like it s law 5
6 IRS Reasoning What IRS looks for Most critical factor: if management company employs the pilots, then it exercises control and the Part 91 flights are FET taxable Other key factors IRS looks for: Who provides the aircraft insurance Who pays the aircraft bills Who controls the flight scheduling Who arranges the maintenance 6
7 What should you do? Aviation attorneys divided on what to do Best way to avoid the tax is for Owner or entity besides the management company to employ the pilots. This is the most important factor the IRS considers. Other less important factors: Owner should get their own insurance Owner should enter into maintenance contracts and pay maintenance facility itself Owner should control actual scheduling of the aircraft Owner should pay aircraft expenses directly Note: This should not be relied upon as legal advice. Please consult your aviation attorney. 7
8 Questions 8
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10 W. Ashley Smith Jr. Vice Chairman, Domestic Operations Committee, NBAA Washington, DC October 30, 2012
11 History Credit for Previous Training was used nationwide Credit was given for pilot that were current and qualified in the make/model of aircraft Some operators were even giving credit for company specific subjects Regulations and guidance never allowed for this practice 11
12 FAA Action Some FAA inspectors started interpreting the regulations as written, or worse FAA-DC stated the practice was not allowed after being asked for an interpretation NBAA members met with FAA to discuss FAA issued Notice N to clear up policy and implementation 12
13 N Expect your POI to review this with you within the next 90 days Any credit for previous training will have to be removed from your training program You may allow for reduced training in your training program based on the qualifications of a new pilot Must have a means to evaluate this previous experience PRIA Previous training documents Logbook Other items showing qualifications 13
14 N cont. Training program must clearly specify what qualifies a pilot for a reduced training curriculum, and it must be documented in the pilot s training record Company specific items must be trained and checked. No reductions allowed All checks must be accomplished. No prior checks may be accepted from another operator Recurrent training may not be reduced 14
15 Summary This is not a regulatory change! What is the FAA trying to accomplish? Standardize POI interpretations of previous training Regulatory compliance Getting 135 operators involved in their own training!!!! 15
16 Questions? 16
17 Part 142 Instructor / Check Airman Qualification David Underwood, FlightSafety International Regional Director Regulatory Affairs Orlando, FL October 30, 2012
18 Contract Training Issues Current FAA Regulatory Environment Key Issues Facing the Part 135 Community Efforts Underway to Find a Path Forward 18
19 Current FAA Regulatory Environment Regulation by Policy and Guidance Inconsistency of Interpretation Within the FAA Budgetary Constraints for Both FAA and Industry Creates an Environment that Unnecessarily Restricts Simulator Training and Checking 19
20 Key Issues Facing the Part 135 Community Training and Qualification of Contract Check Airmen Training and Qualification of Contract Flight Instructors Acceptance of Part 142 Curriculum to Support Part 135 Training 20
21 Efforts Underway to Find a Path Forward FAA Proposed Aviation Rulemaking Committee (ARC) April 2013 Industry Wide Effort to get Current Guidance and Policy Revised Alternative Means to Qualify Simulator Instructors/Check Airmen for Part
22 Efforts Underway to Find a Path Forward FAA Proposed Aviation Rulemaking Committee (ARC) April 2013 Improved Interface between the Part 135 and Part 142 regulations Ways to Remove the Need for Regulation via Guidance More Efficient and Effective Ways to take Advantage of the Benefits of Contract Training 22
23 Efforts Underway to Find a Path Forward Industry Wide Effort to get Current Guidance and Policy Revised Representative Organizations NBAA and NATA Part 135 Certificate Holders Large and Small Operations Part 142 Training Centers FlightSafety, Boeing, Bombardier, CAE, SimCom 23
24 Efforts Underway to Find a Path Forward Alternative Means to Qualify Simulator Instructors/Check Airmen for Part 135 Better Definition of Acceptable Part 142 Training Alternatives More Efficient Methods to Conduct Contract Instructor/Check Airman Training within the Part 142 Training Environment Part 142 Conducted Training Air Carrier Equivalency (Additional 135 Subjects added to 142 Qualification) Part 135 Led Training - Contract Instructor/Check Airman Training 24
25 Contract Training Issues Questions? 25
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27 What are your Hot Topics? Al Mann, Reynolds Jet Management Domestic Operations Committee Part 135 Issues Lead
28 Sessions of Note While you are with us, consider attending the following sessions hosted by the Domestic Operations Committee: Safety Management Systems What Have You Mitigated Recently? Wednesday, , Room S320GH Best Practices for Corporate Shuttles Wednesday, , Room S210E 28
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