Incumbents Are Always Running Article

	1888 Articles Home \| Legal Articles	Legal RSS
Incumbents Are Always Running

Many operators don’t realize that carriage of incumbents in federal office, well away from election time, is also subject to the rules governing carriage of political candidates.

Author: Alvaro Pascotto

Article Tools:

Many operators don’t realize that carriage of incumbents in federal office, well away from election time, is also subject to the rules governing carriage of political candidates.

“Here’s a reminder. Incumbents are always running for re-election,” said Garofalo.

Craig Weller took the podium. “I’m here to lead you out of the morass of Part 91, and seek the economic sense of Part 135,” began the Washington, D.C. attorney. Weller also warned of the growing regulatory lust by the DOT.

“Beyond FAA certification under Part 119, and operational requirements under Part 121 or 135, you have to get economic authority to operate from the DOT. They’re the ‘other regulator’ lurking out there. File the two-page Form 298.”

Weller advocated Part 135 for its freedom from regulatory restriction on passengers or payment, in contrast with Part 91.501 (Subpart F), adding that beyond marketing flexibility, no artificial restrictions on advertising or solicitation of business and pricing flexibility, Part 135 gives operational flexibility to carry a passenger from an unrelated entity, carry personnel from brother/sister companies or be flown for personal use with reimbursement by the executive.

“Under Part 91, you can’t put an ad in the paper and call yourself Time-Shares-R-Us,” but under Part 135, “Knock yourself out. And charge what you like.
“Under 91.501 reimbursement is pretty limited and you might need to use time share,” continued Weller. The disadvantages of Part 135? “You’re subject to the federal passenger excise tax–the ticket tax–of $3.10 per segment and 7.5 percent excise tax.” Then, there’s the paper.

“Some of these operations and maintenance manuals must be approved page by page by an FAA inspector.” Also, there is some operational disadvantage. “You can’t dispatch at a weight at which you can’t land within 60 percent of the destination runway. This is only a dispatch rule: once you take off, you can be safe.”

Most Part 91 operators worry about Big Brother being a bigger bother under 135.

“Part 135 surveillance is just a fact of life,” said Weller. “In the past, a lot of people looked at this as helpful, with experienced inspectors who can give good tips. Now you have less experienced inspectors, and they can be a hindrance. The Detroit FSDO might disallow something that the Dulles FSDO might OK.”

Ed Kammerer, with Edwards & Angell, is a frequent speaker at NBAA forums, but returned with advanced versions of familiar bullets on bonus depreciation.

“Under bonus depreciation you get the same amount of depreciation in the end, but with a dramatic difference, up to 60 percent, in the first year. So you need to ask yourself, do I really need this much depreciation in the first year or do I want to spread that out?” Kammerer spoke with regulators early in May, and concluded, “Congress intended bonus depreciation to be a benefit, and regulators are going to interpret it that way.”

With regard to reconditioned and rebuilt property, Kammerer said to look to the past–the old investment tax credit.

“If you can show that the property is 80-percent new content, OK, but an engine overhaul is probably not going to get you there.”

The key to most tax benefit is using the aircraft predominantly in the U.S.

“Look at every day of the year and ask, ‘Where did that aircraft spend 12 hours and one minute or more? That becomes a U.S. day or a foreign day. For example, 182 days with at least 12 hours within the U.S. makes it a U.S. airplane, but 183 days with at least 12 hours outside makes it a foreign aircraft.” Enforcement is forgiving, however, said Kammerer.

“One company had an elaborate plan to maximize U.S. time, but stuff happens with delays or weather. The IRS still allowed the depreciation because it understood the intent of the regulation to be liberally applied.”

Several speakers drew on the court experience of Sutherland Lumber, which centered on personal use of business aircraft. In that precedent, more than 80 percent of use was personal, with income imputed to the employees at the standard industry fare level or SIFL, “which is lower than actual [cost] as everyone knows,” said Kammerer. Sutherland was allowed to deduct full aircraft operating costs, and tax benefits from deductions far outweigh any income tax due by employees.

About Author

Alvaro Pascotto is a well known lawyer and author who writes articles on international financing and investment, entertainment, intellectual property, business aircraft transactions, tax planning, and private equity and wealth management. For further details please visit the site http://www.alvaropascotto.com .

Article Source: http://www.1888articles.com