Chief Counsel Memorandum No. 201210026 was released on March 9,
2012. The Memorandum appears to broaden the applicability of
Federal Excise Tax (FET) to arrangements where an FAR Part 91
operator retains a manager for its aircraft and/or retains an FAR
Part 135 Air Carrier to place the aircraft on the Air Carrier
Certificate for aircraft charter.
The Memorandum focuses on the factors involving
"possession, command and control of the aircraft" and
describes three scenarios involving an owner hiring a management
company for Part 91 operations, an owner hiring a management
company for Part 91 operations and allowing additional related
entities that are not members of the affiliated group to use the
aircraft and an owner allowing the management company to operate
the aircraft for charter services when the owner is not using the
The Memorandum specifically indicates control of pilots as a
factor in determining possession, command and control, along with
The IRS concluded in each situation that FET was applicable as
the manager/charter air carrier had possession, command and control
of the aircraft and is providing taxable transportation to the
owner. The amount subject to FET would include management fees.
The Memorandum is fact-specific. It is recommended that FAR Part
91 Management Agreements and/or Air Carrier Charter Management
Agreements be reviewed in light of the position being taken by the
IRS in the Memorandum.
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