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Time to jet: IRS cracks down on business planes

The IRS has a new message: Jetting around in a corporate plane? They’re watching.

The agency announced it’s tapping a pot of funding from Democrats’ Inflation Reduction Act to launch new audits of large companies’ jet usage.

“What we believe is happening is there’s not enough effective, ruthless record keeping going on and there is systemic overstating of the business deductions,” IRS Commissioner Danny Werfel told reporters on a call, noting the record-keeping needed for getting it right on business jets is tricky. “That’s what we’re looking to tackle.”

Even though the pot of IRA tax enforcement funding is shrinking, the IRS is undeterred. It’s forging ahead with new efforts to crack down on wealthy people and big corporations who aren’t paying taxes they owe — and looking to prove its boosted budget is worthwhile.

The new jet audits are targeted at two areas where the IRS believes there’s a good chunk of taxpayer money to claw back. The basic premise is executives, shareholders and other high-profile employees of big corporations or partnerships may use business-owned planes for a mix of business and personal travel.

The IRS believes some companies are taking business deductions for the aircraft without thoroughly carving out personal use. Plus, the agency’s hunch is that some executives and other employees aren’t reporting the business-provided travel as income.

The new examinations will start this spring and consist of an initial wave of three to four dozen fresh audits, according to Werfel.

More than 10,000 corporate jets operate in the United States, and their high value means they can represent tens of millions of dollars in tax deductions per plane, Werfel said. He added that given those stakes, the crackdown could bring in a significant amount of revenue.

The agency, which is using analytics to inform its probe, could expand audits depending on what it finds in this initial wave.

Werfel added that the IRS will have more to say in the weeks to come about its enforcement push. The agency is hiring more staff and investing in better analytics and AI to target time and resources.

Plus, pressure for the Smith-Wyden tax deal: The National Association of Manufacturers has been pressing Congress to revive a bigger upfront deduction for companies’ research and development spending. And we’re expecting that to be a highlight today when CEO Jay Timmons gives his speech on the state of U.S. manufacturing.

Timmons is expected to say the 2017 GOP tax laws’ reforms were “rocket fuel” for the manufacturing industry, according to excerpts of his speech shared with us. Plus, he’ll call on lawmakers to restore three business tax breaks in the Smith-Wyden tax package, saying “our entire industry is waiting on the U.S. Senate” to pass the bill.

Meanwhile downtown: The Joint Center for Political and Economic Studies has a new president. “America’s Black Think Tank” will be led by Dedrick Asante-Muhammad, who previously worked for the National Community Reinvestment Coalition.

— Laura Weiss

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