Please ensure Javascript is enabled for purposes of website accessibility

Blog

“IRS Crackdown” On Private Jet Usage To Focus On Appropriate Record-Keeping And Reporting: Advocate Clients Are Well-Equipped For The Challenge

By Suzanne Meiners-Levy

On February 21, 2024, the IRS announced it will use enforcement funds from the Inflation Reduction Act (PL 117-169) to initiate “dozens” of new audits focusing on tax noncompliance around personal usage of business aircraft by large corporations, partnerships, and high-wealth individuals. This effort is purportedly designed to identify if further audit activity is warranted. According to IRS Commissioner Danny Werfel, “The IRS is concerned that the use of these jets isn’t being properly allocated between business and personal activities,” noting that, “Personal use of corporate jets and other aircraft by executives and others have personal and business tax implications.”

This insight, that personal use has complex implications across a taxpayer’s business and personal returns, is one that Advocate clients have been aware of, and accounting for, for more than a decade. The proposed and final Reg. 1.274-10, Personal Use Disallowance Rules for Aircraft, guided the development and implementation of the Advocate Flight Log Tool. This powerful software is designed to equip clients and preparers to properly allocate use and calculate operating expense disallowance, fringe benefit income, and depreciation disallowance[1]. The Commissioner clarified, in speaking with the media, that the new examinations will look for potential violations of:

  • Code Sec. 280F qualified business use and business aircraft depreciation rules
  • Reg §1.274-10 personal use disallowance rules for aircraft
  • Reg §1.61-21 income inclusion rules for fringe benefits like air travel

In explaining the effort to the media, the Commissioner conceded that, “this is a complex area of tax law and recordkeeping can be challenging.” The IRS’s own software has, up to now, been unable to efficiently and effectively complete the necessary analytics to properly evaluate the application of the law and regulations to taxpayer deductions. Vigilant in our efforts to equip clients with the tools needed to properly comply, the Advocate tools, paired with the analysis and guidance provided by our professional team of lawyers and tax professionals, are the most comprehensive and up to date in the industry, facilitating the type of recordkeeping and reporting that the IRS appears to be focused on in this recent announcement.

Accordingly, our advice to current clients is to use the available tools to maintain your records accurately and completely. For those general aviation owners not yet working with specialized advisors, we encourage you to talk with your current tax professionals about the tools that they have to assist you in this challenging area and whether further guidance should be sought.

General aviation aircraft are essential to building, growing, and maintaining the American economy. In over twenty-five years of operation, working with clients across the United States, we have been honored to work with clients using aircraft to accomplish incredible advances in a wide range of critical industries. Simultaneously, we have witnessed an increasing complexity in legal and regulatory requirements, and reporting needs in the area of tax. We encourage everyone in this industry to take heed of this announcement and ensure that you are avoiding tax traps and protecting important and allowed business deductions through complete and accurate recordkeeping, reporting, and advice.

This article provides an introduction to a complex, and often ambiguous, area of law. Knowledgeable people may disagree as to outcomes in particular cases. Always consult with your advisor.

[1] Current clients can access the portal from our website at www.advocatetax.com

Suzanne Meiners-Levy is a Partner and the Pro Bono Coordinator at Advocate Consulting Legal Group, PLLC (ACLG). ACLG is a boutique legal practice consisting of a team of tax and legal professionals, whose primary focus is to provide turnkey Aviation “TLC”, or assistance with Tax, Legal, and Compliance matters for general aviation aircraft owners and operators. Suzanne has worked on hundreds of aircraft transactions on behalf of aircraft owners and operators, successfully represented clients in local, state, and federal audits, and has been certified as an aircraft leasing expert witness in both state and federal courts. She is a member of the Bar in Florida, Texas, Tennessee, New York, and the United States Tax Court. She is a sought-after public speaker on tax matters, presenting at a range of aviation professional events, and authors quarterly tax columns for several aviation publications, Suzanne graduated summa cum laude from Vanderbilt University and magna cum laude and Order of the Coif from NYU School of Law. She currently serves on the Board of Directors of and Executive Committee of Juvenile Law Center and is a Program Director and Team Coach for Odyssey of the Mind.

Share this article: 

Facebook
Twitter
LinkedIn
Email
Print

Advocate Covers:

Our Results

Service Agreements

Piston Aircraft Comprehensive Service Agreement

For Piston Aircraft  – $5,000 per year

Small Turboprop Comprehensive Service Agreement

For a single Turboprop Aircraft costing less than $2,000,000 – $7,500 per year

Large Turboprop Comprehensive Service Agreement

For Turboprop Aircraft costing more than $2,000,000 – $10,000 per year

Our Team

Meet the Attorneys

Jonathan Levy

Shareholder

Suzanne Meiners-Levy

Shareholder

Joseph Quackenbush

Managing Attorney

Richard Yan

Managing Attorney

Do you love aircraft? Work with our team of professionals!

Contact Us

Get in Touch
With Us

Get in Touch