The US3 v ME3 airline battle is adding a new angle of attack. Efforts to restrict flights from the ME3 carriers into the United States through adjustments to the Open Skies treaties haven’t seen any tangible progress. So now the airlines are turning to Congress to help their cause.
Taxing the ME3
The current budget bill includes an new clause changing the tax exempt status of some airlines from corporate taxes within the United States. It was proposed by Sen. Johnny Isakson of Georgia (Hi, Delta!) and is structured to target a very small number of airlines, including the ME3.
In general airlines do not pay taxes for the short stops they make in foreign countries. Calculating the tax liability in those cases is a pain and the idea that reciprocal treatment keeps those countries from imposing similar taxes on US-based airlines flying in. Isakson’s proposal tweaks the rules so that airlines from countries where the US does not have an explicit tax treaty AND where US carriers don’t operate would now be subject to those taxes. And this list from the IRS suggests that neither Qatar nor UAE have those treaties in place. Saudi Arabia is also potentially affected while Morocco and Turkey have the treaties so should not be affected.
The actual revenue from this tax is likely to be de minimus relative to the real impact of the tax. The goal is to make it onerous for these companies to do business in the United States.
BizAv gets a boost
Also in the not-too-surprising list of exemptions being added to the bill is a big win for private jet owners.
UN-REAL. Check out what they added to the Senate bill the other night, at the same time that they made all the tax cuts for families expire.
A new tax break for private jets.
— Seth Hanlon (@SethHanlon) November 16, 2017
This proposal exempts all sorts of expenses around owning and operating private jets from the Excise Tax that otherwise covers aviation. And it is pretty much everything around the costs of those operations that gets exempted. Hiring and training of crew, flight planning, weather forecasting, storage, maintenance and fuel costs are all on the list.
Update: WSJ says this is just codifying existing practice. Still not sure I like that.
What a great time to be exceedingly wealthy or a corporation.
Thanks RF for sharing the news
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