However, a recent Supreme Court ruling now instructs federal courts to not defer to Treasury Regulations interpreting “ambiguous” statutes.  Unsurprisingly, many tax laws are ambiguous.  Business aircraft owners/operators have new tools to respond to aggressive tax enforcement, including the IRS’s new enhanced business aircraft audit programme.

Under the old rule, called ‘Chevron deference’, after the 1984 Supreme Court decision in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., federal courts were required to defer their own judgement to a federal agency’s reasonable interpretation of an ambiguous law passed by Congress. However, the Supreme Court has overruled Chevron by its decision in Loper Bright Enterprises v. Raimondo, where the Supreme Court held that federal courts are required to exercise their independent discretion in deciding whether a federal agency has acted within its statutory authority, and federal courts shall not defer to a federal agency’s interpretation of the law simply because a statute is ambiguous.  This opens the door to new pushback on overly broad aircraft tax regulations and the opportunity for taxpayers to improve the tax treatment of their aircraft.

 A common dispute between the IRS and business aircraft owners/operators is whether a business flight is for “entertainment” purposes.  The statute disallows tax deductions for aircraft related expenses when the aircraft is used to provide transportation to certain specified Individuals (eg, officers, directors and 10% owners) for entertainment  purposes.  However, the Treasury Regulations define the term “entertainment” and require that an “objective test” be used to determine whether an activity is entertainment.  Now, federal courts shall not defer to the Treasury Regulations’ definition of “entertainment” nor its requirement to use an “objective test” in determining whether an activity is “entertainment”.

Under another Treasury Regulation, individuals are imputed with fringe benefit income for their personal use of business aircraft, either at the relatively modest, and preferred, ‘SIFL’ rate or the aircraft’s hourly charter rate.  If a company does not report the fringe benefit income in a timely manner, the Treasury Regulations require that the hourly charter rate be used. Post-Chevron, however, a federal court would not be required to impose the higher charter rate on the taxpayer just because the Treasury Regulations say so.

Business aircraft owners/operators undergoing tax audits or in litigation have additional defences.  During a tax audit, the IRS Revenue Agent will no longer be able to stand behind a Treasury Regulation as the justification and final word on their tax assessment position.  For IRS tax assessments that are appealed to the IRS Office of Appeals, the appeals officer will have a more difficult, less IRS favourable, “hazards of litigation” analysis that will lead to more taxpayer settlements. For tax cases headed to court, taxpayers will try to litigate where the taxpayers think that the independent discretion of a particular court will be to the taxpayer’s advantage.

The recent Supreme Court decision to limit Chevron deference is a significant shift in how federal courts interpret ambiguous tax statutes affecting business aircraft owners and operators. With newfound judicial independence, taxpayers now have a stronger position to challenge IRS interpretations and regulations, particularly concerning deductions for aircraft-related expenses. This change not only enhances taxpayer rights during audits but also introduces greater potential for negotiated settlements, signaling a pivotal moment in the regulatory landscape for business aviation taxation.

Gary I. Horowitz is an aviation and tax attorney representing aircraft owners and operators in the purchase, sale, exchange, lease, management, finance, ownership and use of business and commercial aircraft. A founder, member of HCH Legal, he advises on and structures the acquisition and operation of aircraft for federal and state tax efficiency.

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ALSO READ: Bestfly becomes only FBO in Sub-Saharan Africa to provide fuel

September, covers the complete Chevron fleet of four Bombardier Dash-8 Q400 aircraft, and 10 Bell Helicopters, which serve its offshore operations at its oil-producing base in Malongo.

“We are very proud to be working with a highly-respected company such as Chevron/Cabinda Gulf Oil Company.”

Nuno Pereira, managing director of Bestfly said: “We are very proud to be working with a highly-respected company such as Chevron/Cabinda Gulf Oil Company. Our contract win is indicative of the high levels of service, safety and efficiency that we supply to our customers.”

The newly awarded three year contract will typically involve four flights a day served by the Bombardier Dash-8 Q400 with a helicopter shuttle service.

Bestfly has already noticed a significant increase in passenger numbers transiting through its Luanda Airport FBO and it is anticipated that the company will see passenger numbers increase by close to 40% compared with last year.

In April this year Bestfly was awarded ISBAO Stage 1 status marking the first time that an Angolan company has achieved the standard. Bestfly is now aiming to complement the ISBAO Stage 1 with the addition of the ISBAH certification.

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AgustaWestland AW609 Tiltrotor

AgustaWestland completed the first customer demonstration flight of the AW609 on 25 February.

The round-trip flight began at Angels Stadium in Anaheim, and continued off the coast of Southern California.

The flight lasted 25 minutes and gave Chevron AW139 pilot Patick Niven flight experience of the AW609 Tiltrotor in both helicopter and aircraft modes.

Patrick Niven said: “The avionics and controls of the AW609 resemble that of a traditional helicopter and therefore are familiar and easily mastered by helicopter pilots.”

“As a pilot supporting offshore oil and gas operations, it is clear to me that the AW609 is uniquely positioned to achieve both the necessary speed and distance to reach deepwater oil rigs,” added Niven.

“Today’s first customer demonstration flight of the AW609 is evidence of AgustaWestland’s intense commitment and progress towards FAA certification,” said Daniele Romiti, CEO. “We are excited to have captivated the interest of offshore oil and gas pilots and maintain that the AW609, when certified, will serve untapped missions and operations around the world.”

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