Congress is taking aim at personal use of corporate aircraft. In the House of Representatives, Rep. Rahm Emanuel (D-Ill.) and 10 other Democrat cosponsors introduced The Corporate Jet Tax Shelter Reform Act of 2004 (H.R.4352) seeking to restrict a company’s ability to deduct certain portions of a flight conducted for personal use.
The bill would amend the Internal Revenue Code of 1986 to deny a deduction for the portion of employer-provided vacation flights in excess of the amount of such flights that is treated as employee compensation. According to Emanuel, this legislation would plug a loophole that “allows executives who fly in corporate jets for personal travel to write off this perk for about half the price of a round-trip, first-class ticket from New York to Los Angeles, while at the same time the executive’s company is permitted to take a full tax deduction for the costs of owning and operating the airplane.” He further claims this loophole costs $287 million a year in lost tax revenues. H.R. 4352 was referred to the House Ways and Means Committee for further action.
At the same time in the Senate, an Amendment to the Jumpstart Our Business Strength Act (S.1637) was sponsored by Sens. Kay Bailey Hutchison (R-Texas) and Mary Landrieu (D-La.) in an attempt to limit the amounts of deductions, including depreciation, for expenses relating to personal travel on a business aircraft.
I suspect both of these bills are in response to the Sutherland Lumber case decided by the 8th Circuit in 2001 upholding these deductions. Hopefully both of these bills will not make it to full congressional votes. If they do, those involved in business aviation should contact their representatives and senators to lobby for defeat of these bills to preserve the current deduction.