The US Federal Aviation Administration is taking a fresh look at rules that prohibit corporate operators from being reimbursed for the full cost of a private trip on their aircraft.
A petition submitted by the National Business Aviation Association in March, published in an FAA "proposed interpretation" notice in the Federal Register on 8 July, requests that the agency allow corporations to be able to pay the full operations and maintenance costs for Part 91 general aviation personal trips taken by their "highly placed officers" and company employees "who could be recalled at any moment, or whose travel plans could be altered immediately prior to the individual going on personal travel".
Part 91 rules, which cover GA activities, historically have required pilots or operators to either pay for a flight themselves or split costs with passengers in an effort to separate GA from more stringent for-hire commercial operations (Part 135). An exception is made however when a trip is "within the scope of, and incidental to, the business of the company".
The FAA in 1993 provided more clarity to the exception, issuing a legal interpretation known as the Schwab Interpretation that dictated the "personal travel" was not to be included in the exception.
As a consequence of Schwab, executives today using corporate aircraft for personal travel and who want to pay for that flight have to do it as a taxable fringe benefit on their income, which results in money being paid to the US government rather than a direct reimbursement for the cost of the flight back to the company and the shareholders.
"Whoever wrote [the interpretation] did not understand the role the certain key executives play in the company," says Mike Nichols, NBAA vice-president, operations, education and economics. "They did not understand how regular it is that personal travel may be interrupted, including leaving the family to go back to the office or to another business location for an individual who is responsible to the employer 24/7."
The NBAA is asking the FAA to reconsider the personal travel payback aspects of Schwab Interpretation "to address highly placed officers and employees of a company who could be recalled at any moment, or whose travel plans could be altered immediately prior to the individual going on personal travel," says the notice. The agency says it is "considering narrowing the broad prohibition" in the interpretation.
NBAA's argument for the change, which has been in the works for several years, in part is that personal travel can be within the scope of a company's business even though it is incidental to the business as company officials can "conduct meaningful, real-time work aboard company aircraft".
The FAA rejects parts of the argument, however, saying, "if anything, the advances in communication technology weaken any argument that the use of company aircraft is necessary for personal travel. The advent of laptop computers and handheld PDAs has led to greater communication than ever before."
The agency does however find merit in the argument that "highly placed officials and employees may be unable to reliably schedule personal travel due to the nature of their employment", which may make reimbursement acceptable for certain portions of a trip.
To prevent abuse of a modified interpretation, the FAA is asking that company's "maintain and regularly update a list of individuals whose position within the company require him or her to routinely change travel plans within a very short period of time", a request the NBAA accepts.
The agency is asking for industry comments on the NBAA's request until 9 August.
Source: Flight International
