The "Entertainment Flight" Regulations

Effective October 22, 2004, Congress amended the travel and entertainment ("T&E") rules primarily to prevent aircraft owners from deducting "excess costs" on entertainment flights.  Excess costs are the costs attributable to the entertainment flight in excess of the amount imputed into income.

In June 2007, the IRS issued temporary regulations interpreting the "entertainment flights".  While not perfect, they are a marked improvement over the rules contained in  Notice 2005-45, which required employers to use the "occupied seat hour/mile" method for all flights during the year.  The temporary regulations allow an employer to compute costs on a "flight by flight" basis.  The regulations also allow aircraft owners to compute the depreciation subject to disallowance by reference to the straight-line method.

* This change does not affect the SIFL rules.
* Not every non-business flight is an "entertainment flight".  A commuting flight is not an entertainment flight.

Attached is an Aircraft Flight Log to keep track of occupied seat hours, an Aircraft Flight Information schedule to capture data for disallowance and SIFL computations, and a Sample Computation.