If an executive uses a company aircraft for personal use, there are several governmental agencies to satisfy. Although there is one federal government, there are a multitude of federal agencies interested in such travel. Each federal agency has its own rules and regulations, in addition to different rules and regulations for states involved.

Research on the subject and advanced planning can save you valuable time and money.

The FAA generally prohibits an employee from paying the company for the flight except in limited circumstances. Options which would allow some partial payment include: a timeshare, chartering the aircraft from a third party, dry leasing or a flight which complies with the modified Schwab opinion issued by the FAA in 2010. Each option is very fact-specific and has different tax consequences to the executive and the company.

The IRS sees a personal flight aboard a corporate aircraft as an employee benefit, and therefore wants the executive to pay for the perk or have income imputed to the executive. The company’s tax deductions for the cost of the flight are also affected, and the IRS generally requires a portion of the company’s tax deductions be disallowed for entertainment use of the corporate aircraft. Some options, such as a timeshare, may require the company to collect and remit aviation federal excise tax.

The SEC considers a personal flight to be a benefit, as well as a related party transaction and requires disclosure. The company must report the Aggregate Incremental Cost.