Proficient in Federal Tax and Corporate Structuring
Aerlex Law Group’s comprehensive tax practice strategically addresses all aspects of the federal, state and local taxation issues that can arise in connection with the purchase, lease, use, sale and ownership of aircraft.
Our Aerlex attorneys review an aircraft buyer’s proposed ownership structure to ensure it complies with both the Federal Aviation Regulations and Internal Revenue Service rules to avoid the creation of illegal “flight department companies,” and to minimize exposure to federal excise tax assessment and tax liabilities while maximizing tax advantages.
Aerlex attorneys will review and/or draft aircraft purchase agreements while consulting clients on preparing the acquisition to qualify for bonus depreciation, if available. Applying our astute knowledge of the most current laws, opinions and rulings of the IRS, we also guide taxpayers on options for avoiding the recapture of depreciation previously taken.
Aerlex attorneys will guide aircraft owners through the process of valuing non-business flights, using either the charter rate or Standard Industry Fare Level method. We will consult taxpayers on how to strategically limit personal use in order to minimize the impact of these limitations on deductibility.
Both private and commercial aircraft operators need to pay federal excise tax (“FET”) on either the purchase of fuel or the transportation of persons or property for hire. In some instances, the only obligation for FET are the taxes “paid at the pump” (added to the cost of aviation fuel when it is purchased), but in other instances, taxpayers must collect and remit tax to the U.S. Treasury, and file quarterly reports with the IRS. Aerlex attorneys provide guidance on when FET should be collected and remitted, and assist in tax calculations, as well as the most recent IRS opinions, including the IRS Chief Counsel Advice as pertaining to aircraft being operated for the private use of the aircraft owner.
In recent years, both federal and state revenue agencies have become increasingly aggressive in their pursuit of potentially taxable income from the use of aircraft. The IRS has initiated a formal audit program aimed specifically at aircraft. As a result, more taxpayers are being audited and deductions are being disallowed due to passive activity loss limitations, hobby loss rules and ordinary and necessary use restrictions on aircraft. Aerlex attorneys are experienced in responding to and defending IRS audits and can assist clients in properly documenting their flights and preemptively protecting themselves from future audits.
State and Local Tax Compliances and Exemptions
No one is more skilled than the Aerlex legal team in advising clients on how to legally avoid California sales and use taxes on aircraft acquisitions through the use of key California exemptions, including interstate commerce and common carrier exemptions. We help clients identify exemptions applicable to their unique situation and guide them on how to properly record and collect documentation to support exemption claims.
Aerlex also reviews documents to be submitted to the California California Department Tax and Fee Administration, prepares and submits the final package to the “CDTFA” and regularly communicates with the CDTFA’s tax representative until an exemption has been granted. Aerlex can also monitor aircraft usage on a monthly basis to determine the percentage of exempt use and facilitate necessary changes in aircraft use to preserve the exemption.
Aerlex attorneys file dozens of property tax appeals every year for aircraft owners who disagree with the assessed value of their aircraft, while also defending taxpayers before county assessment appeals boards throughout California. Prior to the appeals process, we draw upon expert appraisers, including comparables and other documents to determine the fair market value of a client’s aircraft and ensure it was not over-assessed.
Because Aerlex specializes in California sales, use and property tax, our firm has the expertise to support taxpayers in audits by both California counties and the State BOE. Aerlex assists clients in the collection, review and submission of documents requested by the taxing authorities. Our expert knowledge of state tax law has frequently resulted in the reduction or elimination of property tax assessments and even former tax liabilities.