An Analysis of the Recent IRS Chief Counsel Advice Asserting that Management Companies are Subject to Transportation Tax

On March 9, the IRS Office of Chief Counsel released a Chief Counsel Advice (CCA) which concluded that an aircraft owner who hired a management company to help operate and maintain the aircraft owed transportation tax on the amounts paid to the management company for management and pilot services. This advice is contrary to the official position of the IRS. Although the CCA does not represent the official opinion of the IRS, there has been a growing tendency for IRS auditors to question management company arrangements, and the CCA may exacerbate the problem. In the meantime, management companies and their customers should review their agreements to make sure that they are in compliance with current IRS and FAA requirements.

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