Perspectives Advocacy Can Be In Different Forms By Timothy Obitts A dvocacy is defined as “the act or support of a cause or a proposal.” A core mission of the National Air Transportation Association is to advocate on behalf of general aviation businesses. What this means in simple terms is that NATA serves as the voice of general aviation business on a host of issues, which it has done for more than 75 years. Advocacy can take many dif- ferent forms. For example, Bill Deere and his team educate legislators on Capitol Hill and federal regulators (FAA, TSA, CBP, IRS, DOT, etc.) on a day-to-day basis. Advocacy can also be in the form of support- ing a cause through legal action. Recently, an opportunity arose to help a member on an issue of grave legal consequence that affects aircraft management operators. Specifically, the issue was the IRS’ misapplica- tion of the Federal Excise Tax (FET) in I.R.C. 4261(a) (“ticket tax”) on aircraft management services. For over 50 years, the language in 4261(a) has not changed, apply- ing an excise tax to “transportation of any person.” However, starting in 2004, the IRS extended applica- tion of that excise tax to fixed cost Aviation Business Journal | 2nd Quarter 2017 management fees charged by frac- tional programs, even though the FAA recognizes them as noncommercial and regardless of whether a plane was even flown. In 2012, the IRS sought to impose the ticket tax on all payments made by aircraft owners to management service providers. As it stands now, the legal landscape on the issue is a jumble, at best. A more in depth discussion on the ticket tax issue can be found on page 11. As the advocate for aircraft man- agement companies, NATA has been working to rectify this FET issue both on Capitol Hill and with the IRS and Treasury. NATA is hopeful there will be a legislative fix that will put this misapplication of the ticket tax to bed once and for all. Though such legis- lative fixes are forward-looking, they often have a retroactive effect, in that a federal agency (IRS) will defer to the new legislative interpretation, in this instance the meaning of 4261(a). The disparate treatment of aircraft management companies by the IRS, the misinterpretation of the plain language of the ticket tax statute, and the potential retroactive harm the IRS’ interpretation may have on the industry, made the decision for NATA to support a member legal- ly–a no brainer. For these reasons, NATA recently filed a brief as amicus curiae (friend of court) in support of the Supreme Court of the United States reviewing and, hopefully, reversing the U.S. Court of Appeals for the Fifth Circuit’s ruling in favor of the IRS interpretation of the ticket tax. In NATA’s brief, which can be found on our website, we took the particular approach of providing the perspective of small aircraft man- agement companies, highlighting the inconsistent treatment by the IRS of aircraft management companies regarding the ticket tax, and stressing the negative economic affect such interpretation may have on 1,000+ companies if the Supreme Court fails to reverse the lower court’s decision. If you are an aircraft management company, I hope you take the time to read our brief, provide us with your input, and call if you have any questions or would just like to discuss this topic. After all, NATA is here to serve you and to be your voice. As this case unfolds, NATA will be sure to inform and advise its members. 9
