Business Aviation Group Requests Guidance on Tax Treatment of Aircraft Leasing Activity

Thank you for taking time this week to discuss regulatory issues of importance to the business aviation industry. Please also convey our thanks to your colleagues for participating in the meeting. We urge you to include the issues we discussed in the current and future Treasury/IRS Priority Guidance Plan.

We believe the I.R.C. § 280F(b) issue we discussed can be clarified with interpretative guidance in the form of a Notice or public Revenue Ruling and does not require a formal rulemaking proceeding to be resolved. Guidance explaining that business use of an aircraft by a lessee, who is a 5-percent owner or related party of the aircraft lessor, is qualified business use for § 280F purposes would bring clarity to what is a very confusing area for the industry. As discussed more fully in our prior submission, we feel that IRS has the authority to "look thru" to determine the actual use of the aircraft by the lessee when determining the qualified business use percentage. Taxpayers should not be required to take depreciation deductions under a less favorable schedule or be ineligible for bonus depreciation simply because they place an aircraft in one entity and lease it to other entities for legitimate reasons, such as compliance with FAA regulations.

Separately, we urge you to clarify a regulatory glitch that creates a disincentive for business aircraft owners to use their aircraft for charitable purposes. Currently, the tax regulations and guidance can be interpreted to deny depreciation and other tax deductions related to fixed costs, if an aircraft is used for charitable purposes. We do not believe this is Congressional intent and urge you to clarify this area of the law.

Thank you again for considering these important issues, please contact me directly at (202) 783-9451 or sobrien@nbaa.org if I can provide further information.