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US tax agency targets executives' personal use of corporate jets – Financial Times

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As spending on airline perks for chief executives reaches record levels, US tax authorities have launched a campaign to audit executives’ personal use of corporate jets.

Internal Revenue Service said on wednesday It said it was preparing “dozens” of audits of large corporations, partnerships and high-income taxpayers to check whether jet use was properly designated for business or personal reasons. Ta.

The IRS said it hadn’t closely scrutinized the issue for about a decade because it didn’t have the resources, but that changed with the Inflation Control Act of 2022 allocating $80 billion to the IRS over the next 10 years. Ta.

“Personal use of corporate jets and other aircraft by business executives and others has tax implications, and this is a complex area where the IRS is stretched thin,” IRS Commissioner Danny Wuerfel said in a statement. ” he said. “These aircraft audits help ensure that high-income individuals are not acting in disregard of their tax obligations.”

In the United States, jet spending for business purposes is generally tax deductible. But companies often fund private flights for executives for personal reasons, and some companies require CEOs to fly on private jets for all air travel as a security measure.

According to the IRS, if an executive uses a company jet for personal travel, it is considered personal income, which can affect a company’s ability to deduct expenses.

The Securities and Exchange Commission typically requires companies to report executives’ private jet spending. According to data from ISS Corporate Solutions, regulatory disclosures show S&P 500 CEO spending on jets will rise 22% year over year to $41.3 million in 2022, the highest level in at least a decade. Reached.

That same year, Facebook’s parent company Meta reported spending more on personal air travel for its CEO than any S&P 500 company, spending $2.3 million on a private ticket for Mark Zuckerberg. In 2022, four companies – Meta, Lockheed Martin, Netflix and Las Vegas Sands – spent more than $1 million on private jet trips for their CEOs, compared to two in 2021.

Some companies argued that the increased spending was justified to expand private jet privileges during the coronavirus pandemic and reduce the risk of executives contracting the virus.

The IRS used the cash allocated from the IRA to step up broader enforcement efforts. In January, the agency announced it had begun auditing 76 of the nation’s largest partnerships, including hedge funds, real estate investment partnerships, publicly traded partnerships, and large law firms.

“In an effort to reverse the historically low audit rates and limited focus faced by the wealthiest individuals and organizations in the years prior to the Inflation Control Act, the IRS continues to increase its oversight of high-income taxpayers. “There are,” Werfel said.

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