Alaska Delegation Seeks to Fix Excise Tax Issue for Air Taxis

Washington, D.C. – Alaska’s Congressional Delegation is working to clarify the excise tax structure for small air taxi operators in Alaska. U.S. Sen. Mark Begich filed a bill yesterday, co-sponsored by Sen. Lisa Murkowski, to help the operators with an inconsistent application of excise taxes by the Internal Revenue Service (IRS). Rep. Don Young is drafting companion legislation in the House.

Several small Alaska air carriers, who have been battling the IRS over the taxes, in some cases for years, have come to the delegation members asking for help with the issue.

Begich sent a letter to Treasury Secretary Timothy Geithner last month describing the problem and requesting intervention.  Alaska Congressional delegation staff recently met with officials from the IRS to discuss the issue.

“After discussions with the Department of Treasury and the IRS, I think everyone involved will benefit from language clarifying this particular section of the tax code,” Begich said.  “This bill would make the tax structure clearer for both air taxi operators and IRS auditors by making the tax code more consistent with the FAA’s definition of charter and on-demand operations. It’s about fairness for small businesses trying to comply with a complex and unclear tax system.”

“Alaskans know that a ‘one size fits all’ policy doesn’t fit Alaska’s unique needs,” said Murkowski.  “I brought the Internal Revenue Service into the office last week to get resolution on this issue, because commercial aviation is a vital economic engine within the state. Our air carriers deserve tax clarity and reasonable accommodation for the uniqueness of their charter and air taxi businesses. Increasing taxes – or applying new ones – isn’t going to help these small businesses grow. We want to make sure Alaska’s skies are open for business.”

“Alaskans and Alaskan small businesses should not be penalized for a confusing tax code,” said Rep. Young. “While simple in nature, this legislative fix will clarify an unclear and often times inconsistent tax regulation relating to small air taxis. I look forward to working with both Senator Begich and Senator Murkowski in getting this fix signed into law.”

The bill clarifies the exemption for charter and on demand flights.  Current law contains an exemption for small aircraft operating on “non-established lines,” but ambiguous tax regulations and inconsistent applicability of this exemption have caused confusion within the aviation community as to when this exemption applies.  The bill would clarify that non-scheduled charter flights to or from areas not connected by paved roads qualify for the non-established lines exemption.

The bill would also specify that the current exemption for sightseeing flights is not negated by intermittent stops to view an attraction, as is common practice for many Alaska flightseeing trips.