Private Jet Expenses

Discounts previously granted to private aeroplane owners were an area offering significant potential reductions in taxes, but after the introduction of the fiscal reforms the potential for saving was significantly diminished. According to applicable legislation, the Internal Revenue Code provided for employer discounts for the operation of private aeroplanes resulting from corporate travel, with a large discount for non-entertaining aeroplanes and a general prohibition on private entertainment-related expenses.

However, the possibility for airlines to reduce or eliminate the cost of air travel due to travel on corporate and certain non entertaining staff travel has been significantly removed by TCJA. There has been no change in the amount calculated and included in an employee's earnings for the individual use of an aeroplane provided by the Employer. Amount that can be included in an employee's earnings for face-to-face travel is either calculated on the basis of the FMV of the transportation offered (using FMV with similar charters rate) or the Standard Industry Fare Level (SIFL rate).

Part of the employee's earnings may not be ignored if the employers are prepared to waive the right to deduct. IRS may assume a much higher level of incorporation of charter rates if the employers do not adequately attribute the integration amount to the worker. Nor have the regulations regarding the amount of revenue included in the calculation change if the company provides an aeroplane without a pilots.

Valuable benefit regulations shall be applicable to all air transport operations performed in the context of the provision of ser-vices. They use the word "employee" to refer to such suppliers, but the word covers partner, director and impartial contractor. Former staff, associates, directors as well as third-party suppliers are also subject to these regulations. The regulations on incomes for staff members' visitors have not changed either.

There has been no change in the value in money rule for individual entrepreneurs, as individual entrepreneurs are not regarded as workers. According to applicable legislation, a trip to a place (holiday or non-holiday) could be regarded as a commercial air trip, even if the trip included amusement, as long as the trip fulfilled either the "directly related" or "test related" test in Section 274.

Following the introduction of the Technical Assistance for Children (TCJA), 100 per cent of expenses for maintenance are no longer tax deductable, compared to 50 per cent in the past, as described in our earlier paper. There has been no adjustment to deduction resulting from journeys for an employee's wife, relative or guest, and the cost allocable to such passenger has been previously capped unless it meets operating expenses standard.

Previously, the cost of all non-maintenance trips was deductable for the employers. Under the new Act, however, expenditure resulting from commute between the worker's place of residence and his place of work is now prohibited, unless this is necessary to ensure the worker's security. For pre-TCJA travel, the cost of the journey between the employee's place of domicile and the workplace was regarded as a non-commercial individual travel, for which the worker was a countervailing benefit, but the employers could subtract any cost associated with the shuttle.

Special emphasis should be given to miscellaneous and/or multihaul use.