Alvaro Pascotto

NBAA Tax Forum

February 6, 2003 • Anaheim, CA
Held in conjunction with the NBAA 14th Annual Schedulers & Dispatchers Conference and the NBAA Schedulers Professional Development Program (SPDP) Course

Seminar Description

This Forum is designed to provide an introduction to a variety of issues affecting aviation operations, including operations under Part 91 of the FAA regulations, obtaining reimbursement under Section 91.501 of the FAA regulations, rules pertaining to personal and non-business use of an aircraft, federal excise taxes, depreciation, FAA aircraft registration and related issues, and insurance trends. The Forum will conclude with a workshop focused on state and local sales, use and property taxes, with an emphasis on the tax laws of California and selected surrounding states. Finally, the speakers will make certain that there will be plenty of time for questions at the end of each presentation.

State Tax Workshop

This portion of the NBAA Tax Forum will include a general discussion of laws relating to state sales, use and property taxes, insofar as they relate to aviation operations and a more specific focus on the state sales and use taxes rules and laws of California, Arizona, Nevada, Washington and Oregon.

3:45 p.m.– 4:30 p.m.
An In-depth Analysis of California Sales, Use and Property Taxes

Alvaro Pascotto, Esq., Irell & Manella, Los Angeles CA

NBAA Develops Fractional Ownership Position

The NBAA Board of Directors has concluded that FAR Part 91 as written is appropriate for governance and oversight of the business aviation community, including fractional ownership, aircraft management, time sharing, joint ownership and interchange agreements. The Board developed its position in response to an informal request from the FAA for a statement concerning the Agency’s safety regulation of fractional ownership now and in the future. The formal NBAA Board position statement, including supporting documentation, was provided to the FAA on October 2.

The Association is confident that current regulations under Part 91 are extremely effective in promoting the highest standard of safety. Since the inception of FAR Part 91 Subpart D (subsequently Subpart F), business aviation has achieved an outstanding safety record. NBAA has played an important role in facilitating that excellent level of safety through the establishment of business aviation standards and adherence to a strong peer-oriented safety culture.

In addition, the Board will recommend safety standards under Part 91 relative to fractional ownership and will extend these elements of safety culture to the fractional owner community by preparing and providing the following:

NBAA Membership safety and operational requirements for fractional owner providers, developed in association with leaders in all aspects of business aviation. NBAA guidelines for exercising operational control by fractional owners, thereby elevating the awareness of fractional owners in matters of safety responsibilities, community best practices and efficient use of business aviation.

The Association proactively will involve fractional providers and owners with these programs, which will be instituted by January 1, 1999, so as to facilitate safe and efficient operations appropriately under Part 91 and consistent with FAA governance and oversight.

The NBAA Board developed this position through careful and extensive research and analysis, including informational sessions with representatives of the various practices involved (including the FAA), and special meetings of the NBAA Industry Affairs Committee. The Association also gained insight from the NBAA Membership on this issue through its Web site and publications.

A panel discussion on fractional ownership was held during the 51st Annual Meeting & Convention in order to provide the NBAA Members with information on how fractional ownership can be used within existing flight departments. Attorney Kent Jackson of Jackson & Murphy gave a broad overview of what fractional ownership is and how it differs from joint ownership, while attorney Jim Cooling of Cooling & Herbers presented some of the insurance/liability issues that may face fractional owners.

Panel members Alvaro Pascotto of Irell & Manella, Ken Kuhrt of United Technologies and David Maib of Dayton Hudson spoke of their “real-life” experiences with fractional ownership. They indicated that fractional ownership requires a great deal of coordination and follow-up and puts a burden on a flight department’s scheduler. Furthermore, they felt that an in-house flight department provides better service. However, overall, they concluded that fractional ownership is a good supplement to an existing corporate flight department. They also noted that fractional providers are very willing to accommodate flight department needs, but those departments also must be “hands-on” with the service if they expect things to run smoothly. In addition, though it is not the least expensive option, passengers generally are pleased with the service.