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US tax officials have launched a campaign to audit executives’ personal use of corporate jet flights as spending on aircraft perks for chief executives hits record levels.
The Internal Revenue Service said on Wednesday that it was preparing “dozens” of audits of large corporations, partnerships and high-income taxpayers to see if their use of jets had been properly designated for business or personal reasons.
The IRS said it had not given the issue close scrutiny for about 10 years because it had lacked the resources to do so, but that had changed after the Inflation Reduction Act of 2022 allocated $80bn to the agency over the next 10 years.
“Personal use of corporate jets and other aircraft by executives and others have tax implications, and it’s a complex area where IRS work has been stretched thin,” IRS commissioner Danny Werfel said in a statement. “These aircraft audits will help ensure high-income groups aren’t flying under the radar with their tax responsibilities.”
In the US, jet spending for business purposes can typically be deducted from taxes. But companies often fund executives’ private flights for personal reasons, and some companies require their CEOs to take private jets for all air travel as a safety precaution.
An executive’s use of a company jet for personal travel can be considered income to the individual and could affect a company’s ability to deduct the costs, the IRS said.
The Securities and Exchange Commission generally requires companies to report jet spending for executives’ personal use. Regulatory disclosures show jet spending for CEOs at S&P 500 companies increased to $41.3mn in 2022, up 22 per cent from the year before to reach its highest level in at least 10 years, according to data from ISS Corporate Solutions.
Meta, Facebook’s parent company, spent the most of any S&P 500 company for a chief executive’s personal air travel that year, reporting $2.3mn on private flights for Mark Zuckerberg. In all, four companies spent more than $1mn on private jet travel for their chief executives in 2022 — Meta, Lockheed Martin, Netflix and Las Vegas Sands — versus two in 2021.
Several companies expanded private jet privileges during the Covid-19 pandemic, arguing that the higher spending was justified to reduce the risk of their executives contracting the virus.
The IRS has used the cash it was allocated by the IRA to step up enforcement more broadly. In January, the agency said it had started auditing 76 of the largest partnerships in the US, including hedge funds, real estate investment partnerships, publicly traded partnerships and large law firms.
“The IRS continues to increase scrutiny on high-income taxpayers as we work to reverse the historic low audit rates and limited focus that the wealthiest individuals and organisations faced in the years that predated the Inflation Reduction Act,” Werfel said.
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