Page 445 - Small Business IRS Training Guides

In March 2012, the IRS issued a nonprecedential legal opinion that determined that a management company provides all

of the essential elements necessary for providing transportation by air and that the aircraft owner relinquishes possession,

command and control to the management company. Thus, the legal opinion concluded that the management company
provides taxable transportation to the aircraft owner and is required to collect the appropriate federal excise tax from the

aircraft owner and remit it to the IRS.

New Tax Exemption for Certain Aircraft Management Services

IRC § 4261(e)(5) exempts certain payments related to the management of aircraft from the excise taxes imposed on

taxable transportation by air. Exempt payments are those amounts paid by an aircraft owner for aircraft management
services related to maintenance and support of the aircraft owner’s aircraft or flights on the aircraft owner’s aircraft.

Additionally under the provision, a lessee of an aircraft is considered to be an aircraft owner provided that the lease is not

a “disqualified lease.” A disqualified lease is any lease of an aircraft from an aircraft management company (or a related
party) for a term of 31 days or less.

Aircraft management services that are not subject to tax include:

• Support activities related to the aircraft itself, such as:

 Storage

 Maintenance

 Fueling

• Services related to the aircraft’s operation, such as:

 Hiring and training of pilots and crew

73233-102 13822-4 Tax Cuts and Jobs Act