Aircraft dry leases are popular in the world of private aviation. They are used successfully for many purposes, including as a way to maximize the use of a business jet by multiple related entities or as a way for aircraft owners to offset the ownership costs of an underutilized aircraft. Generally however, dry lease arrangements are not well understood by business aircraft owners.
Most aircraft owners are aware of dry leases and that the Federal Aviation Association (the “FAA”) regulates aircraft leasing arrangements. Many owners have heard stories of FAA and IRS fines due to aircraft dry leasing run amok. As a result, when aircraft owners consider dry leasing their aircraft they often ask: “How many is too many dry leases?”
Unmanned Aircraft Systems (“UAS”), more commonly known as “drones,” are quickly becoming a permanent fixture in the National Airspace System (“NAS”) and as such have been getting a lot of press recently, a majority of it for all the wrong reasons. A glance at recent headlines highlights the growing popularity, and associated problems, of the explosive profusion of relatively cheap, and yet very powerful and sophisticated, consumer-grade drones. More and more, these highly sophisticated aircraft are finding their way into the hands of operators who, whether intentionally or not, have endangered the safety of manned aircraft and the public at large. For example, in the first half of 2015 alone, U.S. pilots have reported seeing unmanned aircraft more than 650 times, according to the FAA, which represents a dramatic increase over the 238 sightings reported in all of 2014. In addition, several pilots have reported seeing drones at altitudes up to 10,000 ft., well above the levels normally associated with “drone” activity.
Few things are as wonderful as flying in your own private aircraft- the efficiency and comfort of travel are a fantastic boost to productivity and personal satisfaction. Buying your own aircraft is almost as thrilling, and when the acquisition process goes well you are, quite literally, flying high! On the flip side, few things are as needlessly expensive, frustrating, or disheartening as an airplane acquisition gone bad.
While there is no guarantee that even the best planned aircraft acquisition will go off without a hitch, having a well drafted, professionally prepared Airplane Purchase Agreement can ensure that you are protected, if things start to fall apart.
Expenses directly related to the business use of aircraft are tax deductible and can add up to big savings for a company. However, the expenses related to personal and entertainment use of business aircraft cannot be taken as business deductions. To claim the aircraft expenses business expenses, a company must be able to substantiate – to the IRS’s satisfaction – that the expenses were indeed incurred during a business use of the aircraft. Proper flight use substantiation is not defined by the IRS. However, past IRS audit reports show that the details of each flight of a business aircraft should be documented.
Until recently, commercial operators of Unmanned Aerial Systems, more commonly called “drones,” have been forced to go through a time-consuming exemption process in order to gain the necessary FAA Section 333 Exemption before operating their drones commercially.
In response to public and industry pressure for more flexibility, the FAA has started easing the restrictions on commercial drone operators, and it has never been easier to operate a drone commercially in US airspace.
On February 15, the FAA released their long-awaited Notice of Proposed Rulemaking (“NPRM”) for the non-recreational use of Unmanned Aircraft Systems (“UAS”), often referred to as Unmanned Aerial Vehicles (“UAV”) or simply “drones”. The proposed rules, more flexible than many aviation industry analysts previously feared, will open the door for many routine non-recreational uses of UAS, and represents a largely positive step forward for the integration of this new class of aircraft into the National Airspace System.
Originally enacted in 2008 as a temporary measure to help bolster the flagging U.S. economy, bonus depreciation allows a business to deduct 50% of the cost of qualifying property in addition to the normally available depreciation allowance. The bonus depreciation provision applies to qualifying property, including aircraft, bought and placed into service before a certain date, typically the end of the calendar year. Originally set to expire at the end of 2008, bonus depreciation has been reinstated several times as part of year-end “tax extender” bills along with certain other tax incentives. Bonus depreciation was allowed to expire at the end of 2013 due to the government shutdown, and many feared that meant the final death-knell for this popular tax incentive.
One of the hottest topics on the minds of many within the aviation industry, and particularly on-demand charter flight operators and those wishing to use their services, is the concept of “self-aggregation charters.” In reality, self-aggregation charters have been happening for years: an extended family might decide to charter a plane for their annual ski trip or a group of sports fans might decide to charter a jet to the big game, and then they “split the bill” between the individual passengers.
Owning, operating, buying, and selling aircraft are highly regulated activities. The biggest risk for most people attempting aviation-related transactions is that they don’t know what they don’t know. In other words, unless you frequently deal with aviation matters, you are going to miss something. Such oversights and missteps can be very costly. Yet costly blunders can be avoided when you consult the right attorneys who specialize in aviation transactions.
There are those that have and those that will. You just landed long and fast on a shorter-than-usual runway. You got on the brakes a little hard and you were concerned about hot brakes. Sure enough, about twenty minutes after you parked, your left main tire blew due to the heat and caused damage to the gear door. Everyone was fine, but do you need to report this event?
The NTSB regulation CFR 830 requires that the operator of an aircraft provide notification of any “accident” and certain “incidents” to the NTSB immediately. An accident is where (1) a person on board suffers serious injury or loss of life or (2) where the aircraft suffers substantial damage. The form for reporting, Form 6120.1 “Pilot/Operator Aircraft Accident/Incident Report”, can be found here: http://www.ntsb.gov/report.html.