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IRS to Audit Use of Private Jets

S.J. Steinhardt
Published Date:
Feb 22, 2024


The IR plans to begin dozens of audits of business aircraft involving personal use, the agency announced, as it steps up enforcement of tax laws as they pertain to high-income Americans.

Bolstered by Inflation Reduction Act funding, the audits will target aircraft usage by large corporations, large partnerships and high-income taxpayers, looking into whether the use of jets is being properly allocated between business and personal reasons for tax purposes.

“Business aircraft are often used for both business and personal reasons by officers, executives, other employees, shareholders and partners,” the IRS explained in its announcement. “In general, the tax code passed by Congress allows a business deduction for expenses of maintaining an asset, such as a corporate jet, if that asset is utilized for a business purpose. However, the use of a company aircraft must be allocated between business use and personal use. This is a complex area of tax law, and record-keeping can be challenging.”

The IRS will start with three to four dozen audits of large corporations and partnerships, and audits of high-income individuals likely will follow, said IRS Commissioner Daniel Werfel during a news conference on Feb. 21, The Wall Street Journal reported.

“These aircraft audits will help ensure that high-income groups aren’t flying under the radar,” said Werfel. “What we believe is happening is there’s not enough robust record-keeping going on, and there is systemic overstating of these business deductions.”

Werfel said that U.S. companies own more than 10,000 private planes, The Washington Post reported. “If a personal vacation trip was taken on that corporate jet, the company should avoid taking the business deduction,” Werfel said, the Post reported. “What we believe is happening is there’s not enough robust record-keeping going on, and there is systemic overstating of these business deductions, and that’s what we’re looking to tackle.”

Spending by large publicly traded companies on these personal flights increased significantly in recent years, a Wall Street Journal analysis of data from securities disclosures showed in January. Overall spending by large publicly traded U.S. companies reached $65 million in 2022, up by about 50 percent from 2019, and early figures suggest 2023 expenditures also rose.

The examination of corporate jet usage is part of the IRS Large Business and International division’s “campaign” program, the IRS said in its announcement. The agency is developing a database of corporate jet activity to help identify where it should audit, Werfel said in the news conference, Bloomberg reported.

One industry group objected to the IRS announcement.

"Today's announcement by the IRS amounts to nothing more than an audit in search of a problem, and an attempt to broadly paint with a negative brush the thousands of U.S. companies of all sizes that rely on business aircraft to effectively compete in a global marketplace," said National Business Aviation Association President and CEO Ed Bolen in a statement. "It is difficult to understand why the agency is suggesting that these companies—some of the most respected, well-managed businesses in the world—are not in compliance with applicable tax laws. For decades, studies have shown that companies utilizing business aircraft to successfully address some portion of their transportation challenges consistently outperform comparable companies without the asset." 

The National Business Aviation Association statement added that business aviation is critical to the economy and communities across the U.S., supporting 1.2 million jobs and contributing $250 billion to gross domestic product.

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