Senators Urge IRS to Close Corporate Jet Tax ‘Loophole’

Six Democrats in the Senate are urging the Treasury Department and IRS to tighten restrictions on how corporate jet owners deduct certain travel costs.

The letter dated March 10 comes amid a recent IRS campaign to boost audits of corporate jets, part of the agency’s renewed focus on tax avoidance by big corporations and among the ultra-wealthy.

The lawmakers praised that effort, and called on the agencies to use their regulatory authority to close what they called loopholes in the standard industry fare level, an accounting method they say allows taxpayers to skirt taxes.

Currently, taxpayers are allowed to write off depreciation costs if they purchase a private jet primarily for business purposes, and to deduct the cost of travel. This includes the cost of the crew, fuel, and other operating costs, as long as the trip was made for business purposes.

But, the letter said, some corporate executives and wealthy taxpayers have used these deductions for personal travel, leveraging squads of lawyers and accountants to muddy the distinction between business and personal travel with schemes including opening offices next to vacation homes or neglecting to report non-business passengers.

Sens. Elizabeth Warren (D-Mass.), Ron Wyden (D-Ore.), Bernie Sanders (I-Vt.), Sheldon Whitehouse (D-R.I.), Chris Van Hollen (D-Md.), and Ed Markey (D-Mass.) signed the letter urging the IRS to revise or repeal the standard industry fare level valuation method.

Corporate jets also got some attention in the Biden administration’s recent budget proposal—with plans for Treasury to tighten depreciation rules and increase the private jet fuel tax rate.