We know all too well how much tax departments have on their plate. From staffing shortages and increased workloads to rapidly rising appeal rates, aircraft are only a blip on the radar. (Get it?) The sheer number of aircraft makes it difficult — the ways in which aircraft try to avoid detection efforts makes it near impossible.
We hear it from our clients every day:
"Unable to verify flights — they are blocked from public tracking!"
"Not reported on hangar lists. No information for billing”."
"Registration still pending."
We get it.
We’re pilots ourselves, which is how we know the ways aircraft get away with it. In this article, we’re sharing that information with you. Here are 10 tricky ways aircraft owners can make your jobs harder.
Register out of state
Not every state taxes aircraft, so owners often choose to register in those states. When an aircraft is actually flying to and from districts who do tax aircraft, however, they’re responsible for paying those taxes. Click here for a specific, real-life example.
Purchase a registration sticker out of state to claim they meet that state’s tax obligation
This is a variation of registering out of state to avoid taxes. In this case, they’re paying the small, one-time registration fee hoping it will mitigate their true tax responsibility. Unfortunately for them, when an aircraft flies to and from multiple locations, they’re responsible for any tax liability that may be incurred in accordance with that community’s taxation rules.
Blocked tail numbers
By blocking the aircraft’s public flight tracking data, an aircraft becomes untrackable in systems like FlightAware. Intended as an FAA security measure, aircraft can misuse it for tax evasion.
Fly under a different call sign
In addition to blocking the tail numbers, aircraft can change their call sign. This makes it nearly impossible for tax departments to see that a flight occurred. (Not for us, though.)
An aircraft can fly to one city, change their call sign and operate under a different identifier. This makes assigning the flights to the correct aircraft a huge challenge. The most difficult part of this process is identifying that a call sign was used in the first place. A task that’s best left to the professionals.Claim personal use only
Some states don’t tax personal-use aircraft, so naturally some owners claim their aircraft is only used for personal use. This is where advanced technology, manual research and analysis become crucial. We can see, for instance, exactly where an aircraft flies and match that against commercial locations. Click here for a recent example from Texas.
Personal registration hiding a 135 operator
A slight variation of the personal use claim, this happens when someone registers their aircraft to an individual in a state that does not tax personal use. In this instance, however, the individual might lease their aircraft to a commercial charter company to recoup some operating expenses. The county sees the aircraft as registered to an individual. It’s only when we dig deeper do we find out the truth. Click here for that Texas example again.
Deceptive hangar receipts
We see a lot of confusion when it comes to how hangar payments determine situs of a plane. In short, they don’t.
Ultimately, aircraft owners are using hangar receipts to mask their true location. We’ve found examples of aircraft that pay a monthly hangar lease in a state like Delaware, yet the aircraft hasn’t been to that hangar in years.
When an aircraft has blocked their tail number and presents an out-of-state hangar receipt, it’s nearly impossible for assessors to know the truth.Incomplete hangar lists
In addition to deceptive hangar receipts, incomplete hangar lists present a problem. We’ve heard clients say things like:
“Not on hangar lists, requested more information. Not enough information to assess."
"This aircraft isn't on my hangar list. They are not based here."
"Not reported on hangar lists; I tried Googling it and couldn't find anything."
Hangar lists are notoriously inaccurate, so unless someone is looking at each individual aircraft, they’ll get missed.
Paperwork, paperwork, paperwork
Often, aircraft owners will present landing fees, fuel receipts and registration fees as proof of residency or situs. There’s too much paperwork for assessors to sift through on top of their other responsibilities.
An owner recently purchased a second out-of-state home in Florida, while the aircraft remained at the business location in our client's jurisdiction. The owner thought that a few fuel receipts from Florida, some landing fees and a new address would change the fact that the aircraft was operating 315 days a year in our client's jurisdiction.
It didn’t. Situs remained unchanged on that particular aircraft.FAA delays
Depending on the time of year and influx of registrations, the FAA can get behind. WAY behind. When a tax assessor looks at an FAA report, they’ll see a certification that may be months old. We see this a lot in the last quarter of the year. When an aircraft is worth tens of millions of dollars, a few weeks delay in recording and reporting could cost communities dearly. Click here to read about the perfect storm: end-of-year aircraft taxation.
Clearly, there are many ways aircraft get around paying their fair share of taxes.
Before hiring Specialized Tax Recovery, many of our clients were literally Googling for answers. A fruitless and frustrating experience. They have better ways to spend their time, and so do you.