On the heels of President Biden’s State of the Union Address and a recent IRS announcement of a new enforcement initiative, a group of Senate progressives asked Treasury and IRS leadership to attack improper tax write-offs for personal usage of corporate air travel at the source.
The senators’ March 10 letter specifically requests Treasury Secretary Janet Yellen and IRS Commissioner Danny Werfel use existing regulatory authority to close the so-called Standard Industry Fare Level (SIFL) loophole, an air travel expense calculation popular among corporate executives who claim tax benefits for personal trips.
The letter was cosigned by Senate Finance Committee Chair Ron Wyden (D-OR), Elizabeth Warren (D-MA), Sheldon Whitehouse (D-RI), Chris Van Hollen (D-MD), Edward Markey (D-MA), and Bernie Sanders (I-VT).
“Current law allows businesses to claim certain tax deductions for private jets,” it read. “Companies can write off depreciation costs if they purchase a private jet primarily for business purposes. They can also deduct the cost of travel — including the crew, fuel, and other operating costs — on a corporate jet, but again, only if the trip was made for business purposes.”
On February 21, the IRS identified Code Sec. 280F and two Treasury regs (Reg §1.274-10 and Reg §1.61-21) as specific areas a series of three to five dozen new audits will focus on for potential abuse. Biden in his final State of the Union speech of his term flagged the issue as an example of how “big corporations” avoid “paying their fair share” of taxes.
“CEOs shouldn’t be able to dodge taxes while using corporate jets for lavish vacations,” Warren told Checkpoint in a statement, adding that the President’s team “is making significant strides” in targeting “wealthy tax cheats,” a point of emphasis for the spending of the Inflation Reduction Act (PL 117-169) funds for the IRS.
According to the letter, the SIFL method for determining the value of a corporate jet flight is preferable to using the base price of a chartered flight for the same route because SIFL rates “are woefully undervalued” at 21 to 29 cents per mile compared with $13 to $29 per mile for charters.
“In other words, by using the SIFL method, wealthy taxpayers can undervalue their personal trips, in some cases by 100 times below market rates,” the lawmakers argued. “This is deeply unfair, and it means that taxpayers are effectively subsidizing the private travel of millionaires and billionaires.”
A possible remedy would be to tax corporate jet trips based on fair market value “or a more reasonable approximation of it,” i.e., repealing or revising the SIFL valuation method, the letter concludes, asking for a staff briefing by March 25, 2024.
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