FET Audit Assessments to Be Suspended While Guidance Developed
Washington, DC, May 16, 2013 - The National Business Aviation Association (NBAA) today welcomed action from the Internal Revenue Service (IRS) suspending tax assessments that could be applied to aircraft management companies during federal excise tax (FET) audits, giving the agency time to work with industry on additional guidance.
"We applaud this decision by the IRS as it addresses an issue that has caused unprecedented concern about potential retroactive and future tax liabilities throughout the business aviation community." said NBAA President and CEO Ed Bolen. "While the IRS will complete open audits, management companies can be secure in the fact that while additional guidance is developed, they will not face potentially crippling tax assessments as a result of those audits."
Last week, NBAA along with the National Air Transportation Association (NATA) met with senior leaders of the IRS Small Business/Self Employed Division to make the case for suspending FET audits dealing with aircraft management fees while the industry works with the IRS on developing additional guidance.
During the meeting, NBAA explained that previous guidance on FET applicable to management companies is unclear, and Members face uncertainty regarding their potential retroactive and future tax liability. Since the release of an audit technique guide in 2008 and a chief counsel advice memorandum in 2012, the IRS has become more aggressive in audits of aircraft management companies and charter operators. In particular, auditors were assessing FET on a wide variety of non-commercial flight operations, including flights by aircraft owners under Part 91 of the Federal Aviation Regulations in situations where services are provided by a management company.
"Since 2008, NBAA has been diligently working with senior officials at the IRS t address significant industry concerns about the applicability of FET to management companies," said Bolen. "Today's announcement that IRS will suspend any potential assessments on these audits until the work to develop formal guidance is complete frees hundreds of businesses from significant financial uncertainty."
NBAA will continue its work with IRS and Treasury Department officials to develop clear and precise guidance as to the applicability of FET to aircraft management arrangements. NBAA anticipates that this additional guidance will be issued in the coming months.
"We sincerely appreciate the willingness of IRS to meet with NBAA and NATA on this issue and look forward to continuing our constructive dialogue in the coming months." Bolen said.