The Internal Revenue Service’s rules about corporate jets and non-business use, disallowing tax deductions for entertainment, are “overly burdensome,” said the National Business Aviation Association.
Scott O’Brien, senior manager of finance and tax policy of the National Business Aviation Association, said the American Jobs Creation Act of 2004 introduced the rule but it wasn’t finalized until last week.
The IRS defines non-business use of aircraft as entertainment use, and though the rules are complicated, that can include transporting guests on an aircraft that is actually being used for business purposes.
“They can have you unfairly skew disallowance in the way they have you calculate this,” O’Brien said.
“If you have one entertainment-use flight with a lot of individuals, the way they look at it is the proportion of business to entertainment flights,” he said.
That would be a large disallowed deduction, “so the way the IRS set this all up is really unfair.”
O’Brien said the National Business Aviation Association made about 10 suggestions which the IRS ignored, including a “primary purpose test.”
“If you have an airplane already flying on a business trip and it just so happens that some individuals come along for non-entertainment purpose, it’s not like it costs more for non-business passengers,” he said. ”We felt like that goal was consistent with what Congress wanted in the law.”
“We think that the intent is to disallow the cost of entertainment for that flight, not for the full year,” O’Brien said.
Because the policy has already been in place for a number of years, O’Brien said he did not anticipate it would affect the aviation industry or individual businesses.