The SIFL Rules

Where a company aircraft is used for personal transportation of an employee, the employee is generally taxed on the value of the use of the aircraft. Under the general rule, the employee is taxed on the charter value of the transportation. As an alternative, the IRS rules allow the use of the SIFL method.

Under the SIFL method, the value of the use is computed by reference to the SIFL (Standard Industry Fare Level) Rates. These rates are published every 6 months by the IRS. The SIFL value is adjusted by the Aircraft Multiple, which varies depending on the maximum certified gross take-off weight of the aircraft and upon whether the employee is a "control employee" or not. The adjusted value is then increased by a Terminal Charge, which is also published by the IRS every 6 months. Below is an example of a SIFL computation for a 750 mile flight by a control employee in a light business jet:

                                    SIFL Rate      Value 
        First 500 Statute Miles     X 18.91   =  $ 94.55
        Next 250 Statute Miles      X 14.42   =    36.05
        Subtotal                               =  $130.60
        Aircraft Multiple           X   300%   =  $391.80
        Terminal Charge             + $34.57   =  $426.37

Helpful rules may apply where over 50% of the seating capacity is filled with business travelers, where the trip is partly for business purposes or where a spouse is accompanying the employee on company business. Also, the mileage is computed by taking the shortest distance between the two points, not the distance actually traveled. These distances can be computed using a free online service such as the Great Circle Mapper. The SIFL rules are contained in IRS Reg. 1.61-21(g). The payroll tax rules are discussed in the excerpt from IRS Publication 15-A.