WASHINGTON, D.C. — As Congress returns from its break, one of the important issues it will take up is the Tax Relief Act of 2005, which contains two harmful proposals for general aviation.
The bill —S. 2020 — passed the Senate with these provisions. The House version is different, so it will go to conference, meaning there is time for people in general aviation to send messages to congressional representatives.
One provision expands limitations on entertainment use of business aircraft to all employees, not just CEOs and top executives. The second provision says that anyone flying along on a business flight but not involved in the reason for the flight must count the trip as a fringe benefit and be taxed on it. As an example, if a lawyer is flying to meet a client and a co-worker would like a ride to the same destination but is not involved in the business reason for the flight, it would be considered a fringe benefit for the co-worker, who must add an amount to their personal income and be taxed on it.
The amendments added by Senator Mark Dayton (D-Minn.) change the fringe benefit definition to the cost of operating the flight or the cost of a charter for the same destination, whichever is greater. If that same lawyer wanted to take his wife along on the trip, she would have to add to their income the cost of a charter to the same destination. Another example: if a family member of an employee is ill or dies suddenly and the company airplane is used to fly the employee, it is a personal benefit, not business, and therefore taxed.
If the Tax Relief Act passes with these two provisions, it will mean serious limitations on the use of business aircraft, but the provisions apply to more than big corporate use. If passed, these amendments will apply to a person with a Cherokee or 172, for instance, who writes off trips for business.
This could result in much less flying with severely limited deductions and extensive taxation. In many cases, use of a scheduled airline would be less costly, a situation that would please the scheduled airlines.
The National Business Aviation Association (NBAA) has been doggedly fighting these proposals with President and CEO Ed Bolen calling on member companies to contact their senators and representatives. Mike Nichols, NBAA’s director of tax, economic and operational services, says the impact of the reduced flying would adversely affect FBOs, sales personnel, line service personnel and just about everyone involved in general aviation. He says there is still time for people in all segments of general aviation to express their opinions to Congress before the bill is taken up in committee.
By making it as costly or even more costly for individuals to travel in general aviation aircraft than buying a seat on a commercial flight, the airlines will win a major victory in their longtime efforts to restrict use of private and business planes. With the amendments to the bill being offered by a senator whose home area is the corporate base of a major (and troubled) airline, one has to wonder where the idea originated.
Charles Spence is GAN’s Washington, D.C., correspondent.