June 29, 2004

NBAA Regulatory Forum

NBAA Regulatory Forum
Friday, August 27, 2004
DoubleTree Hotel Seattle Airport
Seattle, Washington
In conjunction with:
NBAA Maintenance Management Workshop
Wednesday, August 25, 2004
NBAA Business Aviation Regional
Thursday, August 26, 2004


11:15 a.m. – 12:00 p.m. International Issues
Alvaro Pascotto, Esq., Morrison & Foerster, LLP, Los Angeles, CA
Whether planning your first flight to Asia or a regular hop across the border into Mexico, the rules and regulations change and there are numerous considerations you must be aware of. This session will explore current regulatory issues related to international operations, including Value Added Taxes (VAT), cabotage, selected differences between the FARs and ICAO rules, and various definitions of commercial versus private ownership.

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FAA, IRS don’t regulate in the same language - "well that is just a shock"

NBAA forum discusses tax implications of aircraft ownership and operations
by Roger A. Mola

“The FAA, and the IRS…they really don’t think alike,” began tax attorney Gary Garofalo, first speaker at the NBAA Federal Aviation Tax Forum in Arlington, Va., on May 7. Some 80 specialists, accountants and financial officers attended the most advanced forum the NBAA tax committee has held on aircraft taxation.

“What I’m talking about is counterintuitive from a legal point of view, but there aren’t a lot of FAA regulations that are so clear,” continued Garofalo. “Your lawyers will tell you to operate as a flight department company to limit your liability, but the FAA says ‘No.’”

Regulators distinguish ownership from oversight, and flight management from financial management. Alan Goldstein, v-p of Citigroup Business Services and chairman of the NBAA tax committee, carved the distinction.

“Something might work from the tax side, but then you’re in trouble with the FAA,” said Goldstein. “With the FAA it’s all about ‘operational control,’ and with the IRS it’s about ‘possession, command and control.’”

A dozen speakers underscored the perils of navigating that gulf, giving practical tips for nearly all U.S. operators except those in Alaska, whose congressional leaders often land a “gravy plane” of tax relief.

Garofalo and Goldstein unmasked an adversary that has appeared on few screens: the Department of Transportation.

“Most flight departments have never heard of the DOT as a regulator of flight operations,” said Garofolo. A business incorporated in the U.S. can nonetheless be labeled a foreign company if only a single executive–its president–is not a U.S. citizen, in which case DOT Part 375 applies. Last July 7, NBAA published an initiative in the Federal Register for relief, and the matter remains open pending comments.

Goldstein pointed to global sourcing: “I can think of four U.S. companies just off the top of my head that have had or now have foreign leadership: Heinz; Ford Motor; Coca-Cola; and Citibank, which I know a little about. It’s odd to think of Ford as a foreign company.” Part 375 can bite even if executives over the president are U.S. citizens.

Garofalo dispelled a popular misconception with regard to aircraft interchange, FAR 91.501(c)(2).

“I emphasize swapping equal time because that’s the essence. A lot of people think with interchanges they can make up the difference in hours for unequal-cost aircraft. That’s a no-no. Interchange is a swapping of hour for hour.” No charge is made except one not to exceed the difference between the cost of owning, operating and maintaining the two airplanes.

“My personal opinion is that demonstration flights are not a lease, but I can’t point you to any FAA authority on that,” said Garofalo in the next section. “You can charge for demo time at the same fully allocated cost as time sharing. Joint-ownership agreements under 91.501(c) (3) are not available to fractional owners,” he cautioned. “The FAA was afraid you’d go below the level of a one-sixteenth share, a critical part of the fractional regulations.”

Incumbents Are Always Running

Many operators don’t realize that carriage of incumbents in federal office, well away from election time, is also subject to the rules governing carriage of political candidates.

“Here’s a reminder. Incumbents are always running for re-election,” said Garofalo.

Craig Weller took the podium. “I’m here to lead you out of the morass of Part 91, and seek the economic sense of Part 135,” began the Washington, D.C. attorney. Weller also warned of the growing regulatory lust by the DOT.

“Beyond FAA certification under Part 119, and operational requirements under Part 121 or 135, you have to get economic authority to operate from the DOT. They’re the ‘other regulator’ lurking out there. File the two-page Form 298.”

Weller advocated Part 135 for its freedom from regulatory restriction on passengers or payment, in contrast with Part 91.501 (Subpart F), adding that beyond marketing flexibility, no artificial restrictions on advertising or solicitation of business and pricing flexibility, Part 135 gives operational flexibility to carry a passenger from an unrelated entity, carry personnel from brother/sister companies or be flown for personal use with reimbursement by the executive.

“Under Part 91, you can’t put an ad in the paper and call yourself Time-Shares-R-Us,” but under Part 135, “Knock yourself out. And charge what you like.
“Under 91.501 reimbursement is pretty limited and you might need to use time share,” continued Weller. The disadvantages of Part 135? “You’re subject to the federal passenger excise tax–the ticket tax–of $3.10 per segment and 7.5 percent excise tax.” Then, there’s the paper.

“Some of these operations and maintenance manuals must be approved page by page by an FAA inspector.” Also, there is some operational disadvantage. “You can’t dispatch at a weight at which you can’t land within 60 percent of the destination runway. This is only a dispatch rule: once you take off, you can be safe.”

Most Part 91 operators worry about Big Brother being a bigger bother under 135.

“Part 135 surveillance is just a fact of life,” said Weller. “In the past, a lot of people looked at this as helpful, with experienced inspectors who can give good tips. Now you have less experienced inspectors, and they can be a hindrance. The Detroit FSDO might disallow something that the Dulles FSDO might OK.”

Ed Kammerer, with Edwards & Angell, is a frequent speaker at NBAA forums, but returned with advanced versions of familiar bullets on bonus depreciation.

“Under bonus depreciation you get the same amount of depreciation in the end, but with a dramatic difference, up to 60 percent, in the first year. So you need to ask yourself, do I really need this much depreciation in the first year or do I want to spread that out?” Kammerer spoke with regulators early in May, and concluded, “Congress intended bonus depreciation to be a benefit, and regulators are going to interpret it that way.”

With regard to reconditioned and rebuilt property, Kammerer said to look to the past–the old investment tax credit.

“If you can show that the property is 80-percent new content, OK, but an engine overhaul is probably not going to get you there.”

The key to most tax benefit is using the aircraft predominantly in the U.S.

“Look at every day of the year and ask, ‘Where did that aircraft spend 12 hours and one minute or more? That becomes a U.S. day or a foreign day. For example, 182 days with at least 12 hours within the U.S. makes it a U.S. airplane, but 183 days with at least 12 hours outside makes it a foreign aircraft.” Enforcement is forgiving, however, said Kammerer.

“One company had an elaborate plan to maximize U.S. time, but stuff happens with delays or weather. The IRS still allowed the depreciation because it understood the intent of the regulation to be liberally applied.”

Several speakers drew on the court experience of Sutherland Lumber, which centered on personal use of business aircraft. In that precedent, more than 80 percent of use was personal, with income imputed to the employees at the standard industry fare level or SIFL, “which is lower than actual [cost] as everyone knows,” said Kammerer. Sutherland was allowed to deduct full aircraft operating costs, and tax benefits from deductions far outweigh any income tax due by employees.

Repair vs Capital Improvement

Mark Burris, director of taxation for NetJets, echoed that recent IRS decisions have allowed significant expenses to be deducted by adopting a broad definition of property, but he warned of haze.

“Capitalization versus repair has always been a contentious issue, and there has been no clear guidance. The distinction between capital expenditures and ordinary and necessary business expenses evades easy description. Between the two extremes a point is approached at which it is difficult to determine whether the expenditure is capital or an expense.” Burris said it boils down to individual circumstance and facts, as decided by trial court.

Burris cited IRS guidance including letter ruling 9618004, where each periodic major engine inspection was considered to add a new service life of four years, reasoning that the inspections are required for the airworthiness certificate and without inspections the taxpayer would be unable to operate.

“One of the things the IRS conveniently forgot is that when you depreciate an aircraft, you take into account normal maintenance,” noted Burris. Still, ordinary and necessary business expenses make for deductible repairs, while the IRS says repairs adding to the property’s value or prolonging its life must be capitalized. In considering what portion is subject to regulation, management or tax accounting, Burris advised operators to ask, “Does the engine or airframe have any use without the other?”

One court found that FedEx engine shop visits (ESVs) did not materially increase the value of its aircraft, or adapt the property to another use, and were therefore ordinary and necessary business expense and a deductible maintenance repair. One factor was that FedEx removed its engines for maintenance, put in a spare, then made that original engine a spare once repaired; an ordinary Part 91 operator might take the aircraft from service for a prolonged period, making for a different circumstance for tax and trial purposes.

Patrick Dowdall, a manager with Atlantic Exchange Co., said that corporations might use a like-kind exchange to defer capital-gains taxes or depreciation recapture, but only if structured properly. A Section 1031 exchange of property held for productive use in a trade or business, as opposed to holding for resale, is eligible. Fractional interests qualify.

“You can exchange for other fractional shares or for an entire aircraft but the IRS approach is that transportation excise tax applies since the program organizer has ‘possession and control,’” said Dowdall, reiterating a common forum theme.

After a partial withdrawal, the IRS is under pressure to get tough, said Mary Hevener, of law firm Baker & McKenzie. Hevener had litigated the pivotal Sutherland Lumber case for about $100,000.

“For those of you not familiar with litigation, that’s really cheap,” she said.

High-flying stock schemes collapsed on their own after the tech boom, though the IRS had not even been auditing. “We’ve had only two audits in the last six years for all of my Fortune 500 clients on compensation issues. Now, in the wake of Enron, the IRS felt like the weak sister in these hearings when it was questioned as to why it wasn’t fulfilling its watchdog obligations. And lots of press coverage is raising questions about the use of business aircraft by executives. Now one of my clients, with a four-person tax department, has 23 IRS agents on its tail.”

“This level of audit is now in test with 24 companies,” noted Hevener, listing eight points of IRS attention. “They’re looking at the 20 highest-paid executives at each company, the same ones most likely to fly on the corporate aircraft.”

The IRS attack centers on fringe benefits, which include the personal use of corporate aircraft, and executive compensation subject to the cap of $1 million in deductibility via Code 162(m). The new thrust could upset the deductibility precedents from the Sutherland case, which allowed full cost of aircraft operation to be deducted, not just SIFL rates. Hevener predicts challenges, given lingering questions as to whether flights are treated as a business expense or as income.

Tim Tammany, of Cigna Corp., tackled the complex arena of the federal excise tax (FET) on fuel and transport, imposed on some Part 91 and most Part 135 ops. In response to a call by attendees for an all-day forum on the topic, Mike Nichols of NBAA promised to pursue a two-hour addition to this year’s annual meeting workshop schedule to focus on the excise tax, in which participants might complete a mock Form 720. Tammany praised the NBAA guidance on FET available in full via its Web site, which is even cited by the IRS in its own guidelines.

Alvaro Pascotto, counsel with Morrison & Foerster of Los Angeles, measured the hazards of personal use, whether the purely tax or public relations aspects. “The use of an aircraft by an executive in a public company has many implications in today’s regulatory environment,” said Pascotto, noting that Sarbanes-Oxley (the Public Company Accounting Reform and Investor Protection Act of 2002), which addresses financial disclosure and transparency as well as ethical conflict, has become the beacon for today’s accountant.

“The IRS requires that owners and executives either pay for personal use or be taxed as having received a fringe benefit.” Pascotto said that valuation of a non-commercial flight docks in a safe harbor, “if accurately and consistently applied using the SIFL for all employees. Otherwise, fringe-benefit valuation of personal flights is made using charter rates–that is, the fair market value.” The IRS recognizes only those two valuation methods.

Pascotto cited multiple legal precedents allowing a flight to be accounted as business. In each case the company proved that the aircraft was a time saver; enabled a number of meetings in one day; saved money by eliminating delays; and enhanced customer service. The legal victories are virtually a testimonial to NBAA’s Travel$ense software, which can help quantify these factors.

Pascotto crafted a sample manifest and recommended its completion regardless of the passenger load, though if at least 50 percent of the passenger seating capacity (excluding the jump seat) is occupied with business passengers, there is no taxable income charge for employees, their spouses and dependent children.

“If the personal use is treated as taxable business compensation, that’s deductible,” though he emphasized that the de minimis threshold for business use must remain at least 25 percent of the year for active conduct of the taxpayer’s trade, not in connection with entertainment. Pascotto, like others, underlined the Sutherland Lumber precedent.

“The IRS will no longer litigate in cases in which a taxpayer demonstrates that it has properly included in compensation and wages the value of an employee vacation flight in accordance with Treasury Regulation 1.61-21(g),” he concluded, though with a proviso. “But stay tuned to this issue.”

Pascotto wrapped his presentation, and captured the day’s tone, with a quote from Warren Buffett about financial disclosure. “Well, it seems to me that, in terms of getting better disclosure, there are four possible choices,” said Buffett. “One is the law. Second, the media. The third would be the owners. And the fourth would be conscience. I think the media can be very helpful and have been very helpful.”

For more details, visit http:// web.nbaa.org/public/ops/taxes/ for links to all forum topics, or call Mike Nichols at (202) 783-9254. The next NBAA tax committee event will be the 13th Annual Tax Conference in Las Vegas on October 10 and 11.

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June 12, 2004

NBAA forum discusses tax implications of aircraft ownership and operations

by Roger A. Mola

“The FAA, and the IRS…they really don’t think alike,” began tax attorney Gary Garofalo, first speaker at the NBAA Federal Aviation Tax Forum in Arlington, Va., on May 7. Some 80 specialists, accountants and financial officers attended the most advanced forum the NBAA tax committee has held on aircraft taxation.

“What I’m talking about is counterintuitive from a legal point of view, but there aren’t a lot of FAA regulations that are so clear,” continued Garofalo. “Your lawyers will tell you to operate as a flight department company to limit your liability, but the FAA says ‘No.’”

Regulators distinguish ownership from oversight, and flight management from financial management. Alan Goldstein, v-p of Citigroup Business Services and chairman of the NBAA tax committee, carved the distinction.

“Something might work from the tax side, but then you’re in trouble with the FAA,” said Goldstein. “With the FAA it’s all about ‘operational control,’ and with the IRS it’s about ‘possession, command and control.’”

A dozen speakers underscored the perils of navigating that gulf, giving practical tips for nearly all U.S. operators except those in Alaska, whose congressional leaders often land a “gravy plane” of tax relief.

Garofalo and Goldstein unmasked an adversary that has appeared on few screens: the Department of Transportation.

“Most flight departments have never heard of the DOT as a regulator of flight operations,” said Garofolo. A business incorporated in the U.S. can nonetheless be labeled a foreign company if only a single executive–its president–is not a U.S. citizen, in which case DOT Part 375 applies. Last July 7, NBAA published an initiative in the Federal Register for relief, and the matter remains open pending comments.

Goldstein pointed to global sourcing: “I can think of four U.S. companies just off the top of my head that have had or now have foreign leadership: Heinz; Ford Motor; Coca-Cola; and Citibank, which I know a little about. It’s odd to think of Ford as a foreign company.” Part 375 can bite even if executives over the president are U.S. citizens.

Garofalo dispelled a popular misconception with regard to aircraft interchange, FAR 91.501(c)(2).

“I emphasize swapping equal time because that’s the essence. A lot of people think with interchanges they can make up the difference in hours for unequal-cost aircraft. That’s a no-no. Interchange is a swapping of hour for hour.” No charge is made except one not to exceed the difference between the cost of owning, operating and maintaining the two airplanes.

“My personal opinion is that demonstration flights are not a lease, but I can’t point you to any FAA authority on that,” said Garofalo in the next section. “You can charge for demo time at the same fully allocated cost as time sharing. Joint-ownership agreements under 91.501(c) (3) are not available to fractional owners,” he cautioned. “The FAA was afraid you’d go below the level of a one-sixteenth share, a critical part of the fractional regulations.”

Incumbents Are Always Running
Many operators don’t realize that carriage of incumbents in federal office, well away from election time, is also subject to the rules governing carriage of political candidates.

“Here’s a reminder. Incumbents are always running for re-election,” said Garofalo.

Craig Weller took the podium. “I’m here to lead you out of the morass of Part 91, and seek the economic sense of Part 135,” began the Washington, D.C. attorney. Weller also warned of the growing regulatory lust by the DOT.

“Beyond FAA certification under Part 119, and operational requirements under Part 121 or 135, you have to get economic authority to operate from the DOT. They’re the ‘other regulator’ lurking out there. File the two-page Form 298.”

Weller advocated Part 135 for its freedom from regulatory restriction on passengers or payment, in contrast with Part 91.501 (Subpart F), adding that beyond marketing flexibility, no artificial restrictions on advertising or solicitation of business and pricing flexibility, Part 135 gives operational flexibility to carry a passenger from an unrelated entity, carry personnel from brother/sister companies or be flown for personal use with reimbursement by the executive.

“Under Part 91, you can’t put an ad in the paper and call yourself Time-Shares-R-Us,” but under Part 135, “Knock yourself out. And charge what you like.
“Under 91.501 reimbursement is pretty limited and you might need to use time share,” continued Weller. The disadvantages of Part 135? “You’re subject to the federal passenger excise tax–the ticket tax–of $3.10 per segment and 7.5 percent excise tax.” Then, there’s the paper.

“Some of these operations and maintenance manuals must be approved page by page by an FAA inspector.” Also, there is some operational disadvantage. “You can’t dispatch at a weight at which you can’t land within 60 percent of the destination runway. This is only a dispatch rule: once you take off, you can be safe.”

Most Part 91 operators worry about Big Brother being a bigger bother under 135.

“Part 135 surveillance is just a fact of life,” said Weller. “In the past, a lot of people looked at this as helpful, with experienced inspectors who can give good tips. Now you have less experienced inspectors, and they can be a hindrance. The Detroit FSDO might disallow something that the Dulles FSDO might OK.”

Ed Kammerer, with Edwards & Angell, is a frequent speaker at NBAA forums, but returned with advanced versions of familiar bullets on bonus depreciation.

“Under bonus depreciation you get the same amount of depreciation in the end, but with a dramatic difference, up to 60 percent, in the first year. So you need to ask yourself, do I really need this much depreciation in the first year or do I want to spread that out?” Kammerer spoke with regulators early in May, and concluded, “Congress intended bonus depreciation to be a benefit, and regulators are going to interpret it that way.”

With regard to reconditioned and rebuilt property, Kammerer said to look to the past–the old investment tax credit.

“If you can show that the property is 80-percent new content, OK, but an engine overhaul is probably not going to get you there.”

The key to most tax benefit is using the aircraft predominantly in the U.S.

“Look at every day of the year and ask, ‘Where did that aircraft spend 12 hours and one minute or more? That becomes a U.S. day or a foreign day. For example, 182 days with at least 12 hours within the U.S. makes it a U.S. airplane, but 183 days with at least 12 hours outside makes it a foreign aircraft.” Enforcement is forgiving, however, said Kammerer.

“One company had an elaborate plan to maximize U.S. time, but stuff happens with delays or weather. The IRS still allowed the depreciation because it understood the intent of the regulation to be liberally applied.”
Several speakers drew on the court experience of Sutherland Lumber, which centered on personal use of business aircraft. In that precedent, more than 80 percent of use was personal, with income imputed to the employees at the standard industry fare level or SIFL, “which is lower than actual [cost] as everyone knows,” said Kammerer. Sutherland was allowed to deduct full aircraft operating costs, and tax benefits from deductions far outweigh any income tax due by employees.

Repair vs Capital Improvement
Mark Burris, director of taxation for NetJets, echoed that recent IRS decisions have allowed significant expenses to be deducted by adopting a broad definition of property, but he warned of haze.

“Capitalization versus repair has always been a contentious issue, and there has been no clear guidance. The distinction between capital expenditures and ordinary and necessary business expenses evades easy description. Between the two extremes a point is approached at which it is difficult to determine whether the expenditure is capital or an expense.” Burris said it boils down to individual circumstance and facts, as decided by trial court.

Burris cited IRS guidance including letter ruling 9618004, where each periodic major engine inspection was considered to add a new service life of four years, reasoning that the inspections are required for the airworthiness certificate and without inspections the taxpayer would be unable to operate.

“One of the things the IRS conveniently forgot is that when you depreciate an aircraft, you take into account normal maintenance,” noted Burris. Still, ordinary and necessary business expenses make for deductible repairs, while the IRS says repairs adding to the property’s value or prolonging its life must be capitalized. In considering what portion is subject to regulation, management or tax accounting, Burris advised operators to ask, “Does the engine or airframe have any use without the other?”

One court found that FedEx engine shop visits (ESVs) did not materially increase the value of its aircraft, or adapt the property to another use, and were therefore ordinary and necessary business expense and a deductible maintenance repair. One factor was that FedEx removed its engines for maintenance, put in a spare, then made that original engine a spare once repaired; an ordinary Part 91 operator might take the aircraft from service for a prolonged period, making for a different circumstance for tax and trial purposes.

Patrick Dowdall, a manager with Atlantic Exchange Co., said that corporations might use a like-kind exchange to defer capital-gains taxes or depreciation recapture, but only if structured properly. A Section 1031 exchange of property held for productive use in a trade or business, as opposed to holding for resale, is eligible. Fractional interests qualify.

“You can exchange for other fractional shares or for an entire aircraft but the IRS approach is that transportation excise tax applies since the program organizer has ‘possession and control,’” said Dowdall, reiterating a common forum theme.

After a partial withdrawal, the IRS is under pressure to get tough, said Mary Hevener, of law firm Baker & McKenzie. Hevener had litigated the pivotal Sutherland Lumber case for about $100,000.

“For those of you not familiar with litigation, that’s really cheap,” she said.

High-flying stock schemes collapsed on their own after the tech boom, though the IRS had not even been auditing. “We’ve had only two audits in the last six years for all of my Fortune 500 clients on compensation issues. Now, in the wake of Enron, the IRS felt like the weak sister in these hearings when it was questioned as to why it wasn’t fulfilling its watchdog obligations. And lots of press coverage is raising questions about the use of business aircraft by executives. Now one of my clients, with a four-person tax department, has 23 IRS agents on its tail.”

“This level of audit is now in test with 24 companies,” noted Hevener, listing eight points of IRS attention. “They’re looking at the 20 highest-paid executives at each company, the same ones most likely to fly on the corporate aircraft.”

The IRS attack centers on fringe benefits, which include the personal use of corporate aircraft, and executive compensation subject to the cap of $1 million in deductibility via Code 162(m). The new thrust could upset the deductibility precedents from the Sutherland case, which allowed full cost of aircraft operation to be deducted, not just SIFL rates. Hevener predicts challenges, given lingering questions as to whether flights are treated as a business expense or as income.

Tim Tammany, of Cigna Corp., tackled the complex arena of the federal excise tax (FET) on fuel and transport, imposed on some Part 91 and most Part 135 ops. In response to a call by attendees for an all-day forum on the topic, Mike Nichols of NBAA promised to pursue a two-hour addition to this year’s annual meeting workshop schedule to focus on the excise tax, in which participants might complete a mock Form 720. Tammany praised the NBAA guidance on FET available in full via its Web site, which is even cited by the IRS in its own guidelines.

Alvaro Pascotto, counsel with Morrison & Foerster of Los Angeles, measured the hazards of personal use, whether the purely tax or public relations aspects. “The use of an aircraft by an executive in a public company has many implications in today’s regulatory environment,” said Pascotto, noting that Sarbanes-Oxley (the Public Company Accounting Reform and Investor Protection Act of 2002), which addresses financial disclosure and transparency as well as ethical conflict, has become the beacon for today’s accountant.

“The IRS requires that owners and executives either pay for personal use or be taxed as having received a fringe benefit.” Pascotto said that valuation of a non-commercial flight docks in a safe harbor, “if accurately and consistently applied using the SIFL for all employees. Otherwise, fringe-benefit valuation of personal flights is made using charter rates–that is, the fair market value.” The IRS recognizes only those two valuation methods.

Pascotto cited multiple legal precedents allowing a flight to be accounted as business. In each case the company proved that the aircraft was a time saver; enabled a number of meetings in one day; saved money by eliminating delays; and enhanced customer service. The legal victories are virtually a testimonial to NBAA’s Travel$ense software, which can help quantify these factors.

Pascotto crafted a sample manifest and recommended its completion regardless of the passenger load, though if at least 50 percent of the passenger seating capacity (excluding the jump seat) is occupied with business passengers, there is no taxable income charge for employees, their spouses and dependent children.

“If the personal use is treated as taxable business compensation, that’s deductible,” though he emphasized that the de minimis threshold for business use must remain at least 25 percent of the year for active conduct of the taxpayer’s trade, not in connection with entertainment. Pascotto, like others, underlined the Sutherland Lumber precedent.

“The IRS will no longer litigate in cases in which a taxpayer demonstrates that it has properly included in compensation and wages the value of an employee vacation flight in accordance with Treasury Regulation 1.61-21(g),” he concluded, though with a proviso. “But stay tuned to this issue.”

Pascotto wrapped his presentation, and captured the day’s tone, with a quote from Warren Buffett about financial disclosure. “Well, it seems to me that, in terms of getting better disclosure, there are four possible choices,” said Buffett. “One is the law. Second, the media. The third would be the owners. And the fourth would be conscience. I think the media can be very helpful and have been very helpful.”

For more details, visit http:// web.nbaa.org/public/ops/taxes/ for links to all forum topics, or call Mike Nichols at (202) 783-9254. The next NBAA tax committee event will be the 13th Annual Tax Conference in Las Vegas on October 10 and 11.

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March 15, 2004

Federal Tax Issues Surrounding Aircraft Ownership and Operations

NBAA Federal Aviation Tax Forum:
Federal Tax Issues Surrounding Aircraft Ownership and Operations
May 7, 2004 • Arlington, VA

Federal Tax Regulatory Update
Alvaro Pascotto, Esq., Morrison & Foerster, Los Angeles, CA

This session will review federal tax legislation items of interest to aircraft owners as well as new IRS administrative and court decisions.

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January 06, 2004

Catering to the Jet Set

"Catering to the Jet Set," California Lawyer, 1/2004, Alvaro Pascotto is quoted, subscription required

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December 31, 2003

NBAA Fractional Ownership & Part 135 Seminar

Operational Control of Business Aircraft in the New Environment
January 20, 2004 • Van Nuys, CA

Seminar Description

The FAA has changed the landscape of business aviation ownership and operations. Changes affect charter operators, fractional aircraft owners and program operators. How will these changes affect you? Are you ready?

In addition to answering these questions, this one-day NBAA Fractional Ownership & Part 135 Seminar will allow ample opportunities for you to interact with the country's leading experts on fractional and charter operations – the individuals who wrote the new fractional rule. Through this Seminar, you will understand your increased responsibility and the impacts to your operations in light of the recently published changes to the Federal Aviation Regulations (FARs), including the new Part 91, Subpart K – Fractional Ownership Operations and revisions to Part 135.

This Seminar will review in detail the new rule and revisions to the FARs, ownership and operator roles and responsibilities, tax implications and finance options, international operations, and aircraft registration considerations.

Presenters

This seminar will be presented by the industry’s leading aviation regulatory experts, most of whom served on the Fractional Ownership Aviation Rulemaking Committee (FOARC). Speakers will include:

  • Gary Arber, Esq., Arber, Lannik & Badolato, LLP, Brookline, MA
  • Douglas Carr, Director, Government Affairs, NBAA, Washington, DC
  • Mark A. Dombroff, Esq., Dombroff & Gilmore, New York, NY
  • Gary Garofalo, Esq., Garofalo Goerlich Hainbach, PC, Washington, DC
  • Eileen Gleimer, Esq., Crowell & Mooring, Washington, DC
  • Aaron Goehrlich, Esq., Garofalo Goerlich Hainbach, PC, Washington, DC
  • Kent Jackson, Esq., Jackson & Wade, Overland Park, KS
  • Dayton Lehman, Jr., Esq., Deputy Assistant General Counsel, US Department of Transportation, Washington, DC
  • Alvaro Pascotto, Esq., Morrison & Forrester, Los Angeles, CA
  • Katherine Perfetti, National Resource Specialist, Federal Aviation Administration, Washington, DC
  • Brint Smith, ARM, Senior Vice President and Global Aviation Practice Leader, Marsh Private Client Services, Seattle, Washington

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December 05, 2003

NBAA Fractional Ownership & Part 135 Seminar

This event will take place at the Marriott Westchester
Operational Control of Business Aircraft in the New Environment
December 5, 2003 • White Plains, NY

Seminar Description

The FAA has changed the landscape of business aviation ownership and operations. Changes affect charter operators, fractional aircraft owners and program operators. How will these changes affect you? Are you ready?

In addition to answering these questions, this one-day NBAA Fractional Ownership & Part 135 Seminar will allow ample opportunities for you to interact with the country's leading experts on fractional and charter operations – the individuals who wrote the new fractional rule. Through this Seminar, you will understand your increased responsibility and the impacts to your operations in light of the recently published changes to the Federal Aviation Regulations (FARs), including the new Part 91, Subpart K – Fractional Ownership Operations and revisions to Part 135.

This Seminar will review in detail the new rule and revisions to the FARs, ownership and operator roles and responsibilities, tax implications and finance options, international operations, and aircraft registration considerations.

Presenters

The NBAA Fractional Ownership & Part 135 Seminar will be presented by the industry's leading FAA regulatory experts, most of whom served on the Fractional Ownership Aviation Rulemaking Committee (FOARC). Scheduled presenters are listed below. (Note: Not all speakers will participate in every scheduled Seminar.)

  • Gary Arber, Esq., Arber, Lannik & Badolato, LLP, Brookline, MA
  • Douglas Carr, Director, Government Affairs, NBAA
  • Phil Crowther, Esq., Law Offices of Phil Crowther, Wichita, KS
  • Gary Garofalo, Esq., Garofalo Goerlich Hainbach, PC, Washington, DC
  • Eileen Gleimer, Esq., Crowell & Mooring, Washington, DC
  • Aaron Goehrlich, Esq., Garofalo Goerlich Hainbach, PC, Washington, DC
  • Kent Jackson, Esq., Jackson & Wade, Overland Park, KS
  • Ed Kammerer, Esq., Edwards & Angell, LLP, Providence, RI
  • Dennis Keith, President, Jet Solutions, LLC
  • Dayton Lehman, Jr., Esq., Deputy Assistant General Counsel, U.S. Department of Transportation, Washington, DC
  • Cliff Maine, Esq., CPA, Miller, Johnson, Snell and Cummiskey, Grand Rapids, MI
  • Alvaro Pascotto, Esq., Morrison & Foerster, Los Angeles, CA
  • Katherine Perfetti, National Resource Specialist, FAA, Washington, DC
  • Frank L. Polk, Esq., McAfee & Taft, PC, Oklahoma City, OK
  • David Thompson Norton, Esq., Akin Gump Strauss Hauer & Feld, LLP, Dallas, TX
  • Craig Weller, Esq., Galland, Kharasch, Greenberg, Fellman & Swirsky, PC, Washington, DC
  • Jed Wolcott, CPA, Wolcott & Associates, P.A., Ft. Lauderdale, FL

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June 22, 2003

THE MOST COMMON CALIFORNIA USE-TAX EXEMPTIONS FOR AIRCRAFT

Read an article by Alvaro Pascotto, Irell & Manella, LLP that summarizes the most common California use-tax exemptions applicable to aircraft and related issues.

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June 12, 2003

NBAA Tax Forum

June 12-13, 2003 • Marriott Westchester • Tarrytown, NY

Seminar Description

The NBAA Tax Forum is designed to provide an introduction to a variety of issues affecting aviation operations, including operations under Part 91 of the FAA regulations, reimbursement under Section 91.501 of the FAA regulations, rules pertaining to personal and non-business use of an aircraft, Federal excise taxes, depreciation and insurance trends. The Forum also includes a workshop on state and local sales, use and property taxes with an emphasis on the tax laws of New York and selected surrounding states, and a workshop on international tax and operations issues. There will be plenty of time for questions at the end of each presentation.


Common Challenges of Operating Abroad


3:00 p.m.–3:45 p.m.

This segment will focus on common challenges of operating abroad with emphasis on European Union operations, including Customs, value-added tax (VAT) and cabotage issues.
Alvaro Pascotto, Esq., Morrison & Foerster LLP, Los Angeles, CA

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March 28, 2003

NBAA Business Aviation Forum & Static Display

General Information

Don’t miss the next NBAA Business Aviation Forum & Static Display, coming to the Southern California area on March 28, 2003 at Long Beach Airport.

The NBAA Business Aviation Forum & Static Display is a day-long learning and networking experience designed to meet the needs of regional business aviation operators and vendors across the United States. The most recent Forum, held at Fort Worth's Meacham International Airport on November 14 featured 27 aircraft on static display, 52 indoor exhibitors, and over 1,500 attendees. This event complements NBAA’s efforts to communicate with Members locally and enables business aviation vendors and operators to interact at the local level.

California Aviation Tax Issues

Moderator: Nel Sanders-Stubbs Panel: Rob Zeitinger, Alvaro Pascotto, Irell & Manella; California Aviation Tax Issues

For More Information

For more information about exhibiting, contact NBAA’s Benjamin Jones at (202) 783-9266 or bjones@nbaa.org, or Joe Ponte at (202) 783-9452 or jponte@nbaa.org.

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