Although a timeshare flight is a non-commercial service under FAA Part 91, the FAA and IRS do not use the same definitions and the Federal Consumption Tax (FET) must be levied for time-sharing flights and transferred to the IRS. For aircraft owners and operators who have time-sharing agreements or other operations in accordance with Part 91 of the Federal Aviation Regulations (FAR), it may be time to review your compliance program. Under Part 91 of the Federal Aviation Regulations, Hinman was authorized to charge certain expenses for each flight under the time-sharing agreements, including fuel, oil, lubricants and other additives, as well as an additional 100% charge of the cost of fuel, oil, lubricants and other additives used for each flight. Hinman, however, charged 850 flights expenses in excess of those allowances and was therefore required to operate the flights in accordance with the rules applicable to commercial operation, the FAA said. NOTE: A so-called Dry Lease could be a wet lease in disguise. Indications that could indicate a disguised lease include, inter alia: (1) a provision of the rental agreement or a separate oral or written agreement, in which the lessor provides for or induces, directly or indirectly, the provision of at least one crew member; (2) supply of fuel by the lessor; or (3) performing maintenance functions. Where the lease is the subject of specific accommodation for costs other than those indicated in Sub-Parts D or F, the operation of the aircraft may be subject to Part 91K or Part 121, 125, 129 or 135, depending on the type or size of the aircraft. An example is the attempt to «timesharen» the aircraft without understanding all the FAR requirements and restrictions. Aviation is a highly regulated industry and it`s easy to get out of compliance between FAA and IRS rules, insurance requirements, liability issues, and state taxes.
Aircraft, including piston aircraft, small aeroplanes and all helicopters operating under the NBAA`s small aircraft exemption, may also use the reimbursement options permitted in Part 91, Subsection F, for example. B an exchange agreement. For more information, visit NBAA members on Small Aircraft Exemption Web Resource. The Federal Aviation Administration (FAA) recently proposed a $3.3 million civil penalty for The Hinman Co. (Portage, Michigan) for violating the FAR. The FAA claims that a subsidiary of the company, Hincojet, LLC, entered into a series of aircraft time-sharing agreements and conducted operations that were not compliant with FAR Part 91. In calculating amounts beyond what is permitted by Part 91, the FAA asserts that Hinman did indeed conduct these flights as commercial operations under FAR Part 135. Hinman was not authorized to conduct Part 135 transactions, nor were its pilots (who may face individual enforcement actions). The company will have the opportunity to formally respond to the FAA`s accusations before a final sanction is imposed.