Republicans Suddenly Discover That Private Jets Don’t Deserve a Tax Break
A couple of days ago I saw a tweet about a provision of the Republican tax bill that gave owners of private airplanes a tax break. That seemed well worth a snarky blog post, but then I foolishly checked up on what the provision actually did. It…wasn’t really that bad. So I never wrote about it.
This morning, however, the folks at National Review discovered that this tax provision had been cosponsored by a Democrat, and suddenly it became “disgraceful…rightly mocked.” That’s politics, I guess. But in case you’re curious, here’s the story, as explained by the Joint Committee on Taxation (p. 50-52):
When you fly on a commercial jet, you pay an excise tax on the ticket price. But what if you fly your own plane? Until 2012 there was no excise tax on private flights. After all, there’s no ticket price if you own the plane. This makes it critical to determine who has “possession, command, and control” of the aircraft, and in 2012 the IRS ruled that if you hire a management company to take care of your plane, you have effectively given up control. Therefore, the management company is providing transportation to the owner and is required to collect the appropriate federal excise tax.
A year later the IRS suspended audit assessments for taxes on aircraft management services, and in 2017, after losing a court case, more or less gave up on it. So this provision of the bill clears things up by specifying exactly which activities from a management company count as taxable and which don’t:
Exempt payments are those amounts paid by an aircraft owner for management services related to maintenance and support of the owner’s aircraft or flights on the owner’s aircraft.
Applicable services include support activities related to the aircraft itself, such as its storage, maintenance, and fueling, and those related to its operation, such as the hiring and training of pilots and crew, as well as administrative services such as scheduling, flight planning, weather forecasting, obtaining insurance, and establishing and complying with safety standards.
I don’t truly understand the distinctions here, but there doesn’t really appear to be anything corrupt going on. As for why the amendment was sponsored by the bipartisan team of Sherrod Brown and Rob Portman, it’s because they’re the senators from Ohio, and Ohio is where NetJets is headquartered. They’re the ones who sued the IRS earlier this year and won, so their home state senators were the obvious ones to take an interest and make the tax code clear on what’s taxable and what isn’t.