employer paying for flight school and flight expenses

[justinm001]

Hey all! Just joined this forum and starting private pilot lessons Thursday. I'll be training in a DA20 over at capital city aviation at KOSU.

I recently started a few small corporations and am looking to have my business pay for flight school and pay all flight expenses when using for business. I understand part 95 doesn't allow compensation and all those laws, just they're a bit vague.

I have an IT support company and plan on flying to neighboring states for business deal meetings, and business conferences. Also started a travel site finding small restaurants and festivals across the country. The second isn't much of a business as a hobby. I also obviously plan on flying a lot for personal reasons.

Any thoughts on expensing the whole training as well as reasonable equipment needed specifically for flight training?

Also if i plan on taking a couple employees to a conference is there any issue with the company still paying 100% of the flight?

 

[wallda]

I would suggest discussing this with your business lawyer and an aviation laywer.

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[bflynn]

Well to POA.

Short answer - yes, there are problems with what you propose. Take your flight lessons and you'll learn all about them.

 

[justinm001]

I plan on discussing in detail at end of year with accountant. I plan on expecting it to be allowed, and just focusing on flight lessons.

I was hoping for a "it should be ok but discuss with an attorney/accountant" answer

 

[JOhnH]

I plan on discussing in detail at end of year with accountant. I plan on expecting it to be allowed, and just focusing on flight lessons.

I was hoping for a "it should be ok but discuss with an attorney/accountant" answer

Be sure the attorney is up to speed with aviation laws. Once he gives you your parameters, THEN discuss with an accountant.

 

[Jim Logajan]

Several web sites discuss this issue; here's one on the AOPA site:

http://www.aopa.org/Pilot-Resources...siness-Justification-Flight-Training-Expenses

Cases they cite that appear to be relevant to your situation are:

Sartor v. Commissioner of Internal Revenue, T.C. Memo 1984-274.
Knudtson v. Commissioner of Internal Revenue, T.C. Memo 1980-455.
Aaronson v. Commissioner of Internal Revenue, T.C. Memo 1970-178.

 

[bflynn]

Justin, not wanting to be short, but you just don't understand the number of times things like this have been asked.

The answer is that you really can't do what you propose. A private pilot cannot receive compensation for flying and the FAA takes a very expansive view of what constitutes compensation. "You fly and I'll buy dinner", the dinner is compensation and not allowed.

If you'd like the legal recourse, give yourself a raise and pay for it all out of your own pocket. If you try to involve a business in any way, especially with carrying others with you, you're well into the black side of the rules. If you document the business involvement on tax forms then you'd be asking for multiple violations and fines.

 

[Henning]

Hey all! Just joined this forum and starting private pilot lessons Thursday. I'll be training in a DA20 over at capital city aviation at KOSU.

I recently started a few small corporations and am looking to have my business pay for flight school and pay all flight expenses when using for business. I understand part 95 doesn't allow compensation and all those laws, just they're a bit vague.

I have an IT support company and plan on flying to neighboring states for business deal meetings, and business conferences. Also started a travel site finding small restaurants and festivals across the country. The second isn't much of a business as a hobby. I also obviously plan on flying a lot for personal reasons.

Any thoughts on expensing the whole training as well as reasonable equipment needed specifically for flight training?

Also if i plan on taking a couple employees to a conference is there any issue with the company still paying 100% of the flight?

Talk to your accountant, this isn't an issue with the FAA, but there are IRS implications since you plan on a "personal use" component. I don't know the current rules, but you could previously write off some level of personal use aviation/hobby expenses, IIRC it was a $2000 line item I used. You could likely use that as the "personal expense" to make up what the business deduction won't allow.

Easier for you to do though is buy an SR-22 and have the plane in a holding company leased to your IT business, now you can write off all the plane. When you want to use it privately, you set a reasonable market value rate for the business to rent it to you for personal use flights, then report that as rental income. Then you can figure out what you can do with those expenses on your personal taxes. Talk to your accountant, but I figure a 50/50 spit business/private for the aircraft time for PP training shouldn't pop up any flags for audit. Once you have the PP, then you can safely write off any further training. Your CPA may even tell you to a your training if your business use exceeds XX%, like I said, I'm not up on the current rules, and they change annually, so ask them.

This is how everyone I know that has an airplane in business/personal use as it totally simplifies he accounting in a transparent manner that pleases the IRS.

Again, as far as the FAA is concerned, not an issue.

 

[N747JB]

Taking employees may be a workmans comp issue.
The biggest issue with YOUR company paying for you to learn to fly will be the IRS. I don't think the FAA gives a rats rear end how you pay for lessons as long as it's not someone else paying for it. But, I would probably pay out of pocket and work out a leaseback to the company on the plane once you get it.
The IRS isn't a big fan of company owned airplanes, especially if it appears to be personal use vs business travel.

 

[Jim Logajan]

The biggest issue with YOUR company paying for you to learn to fly will be the IRS.

The court cases cited in the document I linked to in post 6 indicate that training lessons for the OP would be tax deductible expenses. That isn't always the case, but should be the case for the OP's scenario.

I don't think the FAA gives a rats rear end how you pay for lessons as long as it's not someone else paying for it. But, I would probably pay out of pocket and work out a leaseback to the company on the plane once you get it.
The IRS isn't a big fan of company owned airplanes, especially if it appears to be personal use vs business travel.

One of the tax court cases was of a photographer who paid for the lessons out of his own pocket but was able to deduct the cost of private pilot lessons. The student pilot restrictions in 61.89 would seem to preclude business compensation of the lessons. On the other hand, once the private pilot certificate is in hand, the OP's business could pay for instrument training since 61.113 does allow compensation in connection with a business.

 

[Henning]

Taking employees may be a workmans comp issue.
The biggest issue with YOUR company paying for you to learn to fly will be the IRS. I don't think the FAA gives a rats rear end how you pay for lessons as long as it's not someone else paying for it. But, I would probably pay out of pocket and work out a leaseback to the company on the plane once you get it.
The IRS isn't a big fan of company owned airplanes, especially if it appears to be personal use vs business travel.

Yep, that's why the people I know who have been doing it a long time rent the plane to themselves for a reasonable market substantiated price. None of this 'splitting the bills' crap. Simple, transparent accounting.

 

[oregonboy109]

Welcome to POA! I'm also based out of OSU. It's a great airport and I'm sure you'll love the da-20, I see it taxi passed our club planes all the time. Say hi if you see an 18 year old by either the red or orange 172s on the east ramp.

Good luck! You'll love training regardless (hopefully) of whose paying.

Sam

 

[Stevel]

The company would be able to take the deduction for the training, but it would have to be considered as compensation to you, rather than some other form of business expense, and that would trigger payroll taxes and just shift the income-tax burden to you.

The FAA should be fine with that arrangement for the dual portion of the training, as you are not PIC for that. The solo part gets murky, depending on whether the FAA thinks of your company as something other than yourself, or not. It is still an area that I doubt they would pursue, as it is not much different from having daddy's credit card number on your account at the FBO, and they seem to be fine with that.

I'm not sure how the IRS and FAA would get along with each other on the post-Private Pilot training, as the IRS info that Henning offered regarding initial entry into the occupation vs. furthering your career within your occupation is still accurate (as far as I know). The personal deductibility may not kick in until after Commercial, as you career is IT Geek, not Dork-bar-wearing aviation professional. If you were to tell the IRS that flying was part of your career, then the FAA could argue that the "incidental to the business" exception has been proven not to be applicable.

On the other hand, they might just say that it is just semantics, and not care.

Talk to an AVIATION Attorney first, and then to your CPA.

 

[justinm001]

Wow thanks for all the info, definitely going to be reading up on this. I was surprised how unclear this is when initially googling so figured you all would know best.

I could always have my company purchase a plane and if used solely for business then would be able to expense all items related to flying, couldn't I? Even if I don't have a commercial rating?

I'd be very interested in how large corporations handle the expense of their CEO's jet and other items. Also how does renting a plane and flying yourself compare to using netjets or similar?

I'll be certain on figuring all this out closer to tax time with accountants and attorneys if needed. Currently we're a very small company so tax isn't much of an issue, but hopefully in the future it'll become more important.

 

[justinm001]

Welcome to POA! I'm also based out of OSU. It's a great airport and I'm sure you'll love the da-20, I see it taxi passed our club planes all the time. Say hi if you see an 18 year old by either the red or orange 172s on the east ramp.

Good luck! You'll love training regardless (hopefully) of whose paying.

Sam

Thanks! We fly regularly with my father who is also a private pilot. He's a member of the Columbus NW flyers and we're usually flying their Cherokee 6/300. Been waiting for a while to start training but haven't had the time until now so very excited. I was planning on going up for first lesson this morning but had to wait until Thursday. The DA20 got a new engine last week and its running hot so they wanted to get more hours on it before they took up students. Will definitely say hi if i see you out there.

 

[Henning]

Wow thanks for all the info, definitely going to be reading up on this. I was surprised how unclear this is when initially googling so figured you all would know best.

I could always have my company purchase a plane and if used solely for business then would be able to expense all items related to flying, couldn't I? Even if I don't have a commercial rating?

I'd be very interested in how large corporations handle the expense of their CEO's jet and other items. Also how does renting a plane and flying yourself compare to using netjets or similar?

I'll be certain on figuring all this out closer to tax time with accountants and attorneys if needed. Currently we're a very small company so tax isn't much of an issue, but hopefully in the future it'll become more important.

Correct, the IRS doesn't care if you have a commercial rating or not, they care if you are flying for business purposes. The commercial rating is needed when your job is flying, flying yourself in a business capacity other than transporting people or products is fine without a Commercial.

As for writing all the costs off by the business, yes, that is the simplest and best way to do it, but remember you have to keep the records of renting it to your private self for non business use and claim that income on your business taxes. That's the best way to stay "below the radar" with the IRS.

 

[ahkahn]

A good example is what I do. I own a regional multi-state business where I have owned warehouses, customers, and employees in several states. In order for my business to function more efficiently and properly, my business covered the training costs for my private, instrument, and the plane that I fly. The business only paid for the training up to the point of licenses (since it was required training), and after that, any personal flights we pay for out of pocket, and any business-related flights are paid for out of the business.

I am now planning to get my commercial and CFI licenses. Those ratings the business cannot foot the bill for because they in no way help the business function. That training will have to be out of personal pocket.

So, long story short, it's not just about having "business meetings" in a far away place, you need to have a clear justification for doing so. Multiple business sites, established customers (or even in the process of establishing customers), are reasonable business causes.

I would venture to say that if, in the course of audit, you have several trips to "vacation" spots, and you have no subsequent business results, you'd probably get hit. But, what do I know....

 

[ja_user]

The commercial could help your business, if you need that to haul and deliver business related stuff around..

 

[justinm001]

A good example is what I do. I own a regional multi-state business where I have owned warehouses, customers, and employees in several states. In order for my business to function more efficiently and properly, my business covered the training costs for my private, instrument, and the plane that I fly. The business only paid for the training up to the point of licenses (since it was required training), and after that, any personal flights we pay for out of pocket, and any business-related flights are paid for out of the business.

I am now planning to get my commercial and CFI licenses. Those ratings the business cannot foot the bill for because they in no way help the business function. That training will have to be out of personal pocket.

So, long story short, it's not just about having "business meetings" in a far away place, you need to have a clear justification for doing so. Multiple business sites, established customers (or even in the process of establishing customers), are reasonable business causes.

I would venture to say that if, in the course of audit, you have several trips to "vacation" spots, and you have no subsequent business results, you'd probably get hit. But, what do I know....

This is my plan exactly.

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