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President Joe Biden gave a State of the Union speech on Thursday night, referencing the intended crackdown on corporate jet usage, and aviation groups have responded. Groups like the NBAA and Alliance for Aviation Across America are challenging his comments, claiming he has unfairly singled out the business aviation industry.
On Feb. 21 the IRS announced plans to begin dozens of audits on business aircraft to determine whether the use of the jets was properly allocated between business and personal reasons. Using the Inflation Reduction Act funding as part of an ongoing effort to improve tax compliance for wealthy taxpayers and businesses, the IRS is examining areas that it says have not been closely scrutinized during the past decade. The NBAA questioned the plan, and the organization's President and CEO Ed Bolen said it was "an attempt to broadly paint with a negative brush the thousands of U.S. companies of all sizes that rely on business aircraft to effectively compete in a global marketplace."RELATED STORY:IRS plans dozens of audits over corporate jet usage
President Biden's speech addressed the increased tax scrutiny, stating he believed that corporations and wealthy people using corporate and private jets should pay their fair share.
"That's why he would eliminate a tax break that gives preferential treatment to corporate jets, compared to commercial aircraft," the White House statement said. "He would also increase the fuel tax on corporate and private jet travel, so that corporate executives and other wealthy Americans pay their fair share for the use of airspace and other public services related to air travel."
The IRS crackdown targets the wealthy but also looks into the businesses relying on private jets to operate. The White House said the IRS is projected to collect hundreds of billions of dollars in additional revenue over the next ten years and has already collected over $500 million in unpaid taxes from millionaires. The stringent look at the high taxpayers and corporations includes a stricter look at high-end tax evasion like deducting personal use of corporate jets as a business expense.RELATED STORIES:House advances bipartisan bill that would restore 100% bonus depreciation through 2025Changes coming to aircraft bonus depreciation tax in 2023
The tax code Congress passed allows for a business to deduct the expense of maintaining an asset, like a corporate jet if this asset is used for business purposes. The use of the aircraft is required to be allocated between business or personal use, and as this is a complex segment of tax law, it is difficult to track records. Business jets can be used for personal reasons by officers, executives, other employees, shareholders and partners. When these corporate jets are used for personal travel, it can impact the eligibility of some business deductions. The use of business jets is often approved by the company's directors, and some personnel are required to use company planes for travel for security or safety reasons.
"Business aviation allows companies to optimize efficiency, productivity and flexibility and access hard-to-reach communities across the country with little or no airline service," Bolen said. "That's why the president's own Cabinet members sometimes use business aircraft to do their jobs and visit with people in towns and cities across the nation. The IRS has not identified a compliance gap in business aviation, which in fact is an industry that supports 1.2 million jobs and contributes $250 billion to the nation's economy."
The companies using business jets are expected to be in full compliance with the tax laws and applicable Securities and Exchange Commission rules. The NBAA organizes tax seminars twice a year to educate its members on compliance. Bolen said that most business aircraft use is for business purposes. The NBAA said that independent studies have shown that the majority of business aviation flights carry mid-level personnel, including technical and engineering staff and managers, as well as company, customers and clients. Many of the businesses using corporate aircraft are small or medium-sized businesses.
"Of course, every American business should pay the taxes they owe, but President Biden has unfairly chosen to target those who use business aviation, even though the vast majority of flights are taken by U.S. companies to help them compete effectively in a global marketplace," Bolen said.
Another group, the Alliance for Aviation Across America, also believes the BizAv industry was unfairly singled out with the State of the Union Address.
"Aside from the rhetoric, the reality is that business aviation is a tool that allows companies to operate more efficiently and in rural and small markets that would otherwise present logistical challenges," said Devin Osting, interim executive director of the Alliance for Aviation Across America.
Osting added that the use of business aviation is diverse, with many relying on corporate aircraft to maintain a full and flexible schedule of meetings, notably in regions where travel options are limited or time-consuming. Some may use business aircraft to make numerous stops in a single business travel mission or carry specialized equipment or demonstration materials.
"Additionally, several studies have demonstrated that companies of all sizes utilizing business aviation outperform comparable companies that do not, across numerous standard business metrics including asset efficiency, shareholder value and overall growth," Osting said. "The President's comments tonight unfortunately reinforce an inaccurate stereotype of business aviation, which is essential to the nation's economy and transportation system."
On the other end of the spectrum, the International Association of Machinists and Aerospace Workers is again throwing its support behind the President. The group has endorsed Biden twice and said it looks forward to continuing work with the Biden-Harris administration to "grow the power of working families." The 600,000-member strong group said that under his leadership, 800,000 manufacturing jobs have been created, marking the strongest manufacturing recovery since WWII.
"We are building things in America again after the President's strengthening of Buy American rules," the IAM statement from President Brian Bryant said. "And our members have the peace of mind that their pensions are secure, thanks to President Biden's championing of the Butch Lewis Act. This is a president who champions workers' rights. He walks picket lines with striking workers and has given us a pro-worker majority on the National Labor Relations Board. Above all, President Biden puts working families first in every decision he makes. He is a champion for democracy, women's reproductive rights and unions that make life better for working people. He has our back - and we have his."From White House statement
The industry is working to rebuild its workforce, from the pilots to the mechanics. Initiatives like FAA grants and federal programs to boost education, training and hiring are crucial to maintaining safety and the gold standard of aviation within the U.S. While the country has seen a push to fund airports and promote education and safety after a series of highly publicized runway incursions and incidents, like the depressurization on a Boeing 737 MAX 9 after the door plug blew out midflight, or the pilot suffering from a possible mental health crisis who tried shutting off the plane midflight. However, the push has also seen increased criticism over corporate jet use, and the industry is standing firm in its assertion that these accusations are unfair and, in most cases, unwarranted.
The FAA Reauthorization was due to expire in 2023 but has been pushed back while officials get closer to finalizing and passing the Act, extending FAA authority. Many officials are pushing for the passage to protect the work being done to improve safety in the national airspace system, like continuing work to remove lead from avgas by 2030, bolstering the workforce, improving education and training, strengthening oversight and regulations. An important part of the industry officials are working hard to protect and improve is business aviation. The business aviation industry supports jobs and the economy and can provide crucial services to the public. Targeting the industry could hurt the very industry that the government is simultaneously trying to protect and strengthen.
"Business aviation is an industry that is essential to America's economy and transportation system," Bolen said. "It supports jobs, connects communities, helps companies succeed and provides humanitarian lift in times of crisis. This is an industry that should be promoted, not pilloried."