Private jet management could be shielded from taxes under Senate tax bill

Key Points
  • At issue is whether to tax maintenance and storage costs for private planes.
  • Some private jets are managed by outside companies that provide charter services for others.
Jupiter Images | Getty Images

Private-jet owners may benefit from a Republican tax bill before the Senate that proposes exempting excise taxes on the management fees of private planes.

Currently, a 7.5 percent tax is levied on each leg of commercial air travel. The bill would ensure that management costs of private planes, such as maintenance and storage, are not taxed.

The measure's roots stretch back five years when the Internal Revenue Service determined that while individuals may own private jets, the owner "relinquished possession" of the aircraft when handing it over to the management companies that provide crew and maintenance, and therefore the services are subject to tax.

The cost of doing business: Private jets for CEOs under scrutiny

Amid opposition from the aviation industry, the IRS suspended its attempts to collect the tax and sought further guidance.

In 2016, the Joint Committee on Taxation said the proposal would reduce federal fiscal year budget receipts by less than $500,000 from 2017 to 2026.

WATCH: Inside Embraer's Lineage 1000E business jet

Inside Embraer’s Lineage 1000E jet: built for business not celebrities