Netjet 642M Tax bill for IRS!

[Webslinger]

Check this out....total BS! Obama just cant get enought $$ eh? Make of it what you will.
NetJets Sues IRS Over $642.7M Tax Bill
Four of NetJets’ subsidiaries–NetJets Aviation, NetJets International, NetJets Large Aircraft and Executive Jet Management (EJM)–are suing the U.S. government over a $642.7 million IRS tax bill for past federal excise taxes (aka “ticket tax”) and assessed penalties and interest. In the lawsuit, filed on Monday, NetJets said, “The ticket tax was not intended to apply to private aircraft owners and the fees they pay to maintain and operate their aircraft.” Further, it alleges that the IRS is also attempting to “improperly collect the tax from [the NetJets subsidiaries] based on secondary liability, despite having failed to give EJM or the NetJets entities any advance notice that the IRS intended to apply the tax with respect to many of the fees at issue in this case.” NetJets maintains that the so-called “ticket tax” is not applicable to both monthly management and hourly fees the company charges its customers, citing IRS precedent and lack of any previous “clear guidance” from the agency regarding the specific types of fees included in the tax. “Unfortunately, the IRS position...is that all fees paid by the owners to the fractional managers are subject to the tax, whether the owners fly on their own airplane or not,” Jonathan Levy, legal director of Naples, Fla.-based aviation tax consulting firm Advocate Consulting, told AIN. “This is a hot legal issue and we will be watching the NetJets case closely.” Both NetJets and the IRS declined to comment on “pending litigation matters.”

 

[CALRepublic]

Am I reading this right, NJA does't owe the IRS $642 mil, we're trying to recup some or all of that money from them?

looks like we've been getting screwed by the IRS since 2003.....

 

[CA1900]

You're a little late:

http://forums.flightinfo.com/showthread.php?t=145244

 

[CE750Driver]

Am I reading this right, NJA does't owe the IRS $642 mil, we're trying to recup some or all of that money from them?

looks like we've been getting screwed by the IRS since 2003.....

Wrong, the taxes have never been paid, since 2003. Now the IRS is knocking and NJA has filed a lawsuit not to pay them.

 

[cfd130]

Warren Buffett said he WANTED to pay more taxes-

 

[gunfyter]

Maybe he'll pay them for us....

 

[imacdog]

Is 642M more than his secretary pays?

 

[jtf]

I'll try on this thread since the other one got politically hijacked- does anyone know if any of the other fracs have been paying the tax or if they have also received a bill from Uncle Sam, or if this is a case of selective enforcement?

 

[gret]

This matter had been around a long time and deals with the fact that when an aircraft owner turns over control of the aircraft to a third party and pays costs, fees, etc to the third party, the amount paid is subject to the federal excise tax that all charter customers already pay. Forget about FAA Parts 91 and 135. The IRS doesn't follow them with their definitions and rules.

Management companies flying Part 91 trips for their owners have never collected this tax even though the owners pay them to provide air transportation similar to a charter flight. Don't shoot the messenger, I'm just passing on the theory and it is a convincing one based on the the current code and regulations thereunder.

You can read all of this on this site that contains the IRS audit guide for air transportation excise taxes. It is easy reading and you can go to the section on business aircraft and then follow the link to the long discussion about fractional ownership, management, and charter companies-

http://www.irs.gov/businesses/small/article/0,,id=186838,00.html#CH5ManagementCompanies
​

The "good news" is that if the tax is due, which it probably is, the company can file for a refund of the federal excise tax paid on jet A...as long as the statute of limitations hasn't expired.

To answer one of the aforementioned questions, NetJets and the other companies probably haven't collected the tax from the owners yet and will be stuck paying the bill if the IRS prevails.

To answer another question, other companies may or may not have been hit up on an IRS exam for this tax. The way the IRS works is they devote their resources where the real meat is and expect others to fall in line. NetJets is their target because they have the greatest exposure.

 

[gret]

Note that the refund of FET taxes on Jet A will not recover all of the "ticket tax", only a portion of it.