March 12, 2024

Warren, Senators Applaud IRS for Cracking Down on Tax Dodging by Executives Using Corporate Jets for Personal Travel, Urge IRS and Treasury to Follow Up with Rulemaking

“The Treasury Department and the IRS have clear authority to revisit these income inclusion regulations to more accurately reflect the benefit that executives receive when they use corporate jets for personal travel.  We urge you to require that executives who use corporate jets pay tax based on fair market value or a more reasonable approximation of it.” 

Text of Letter (PDF)

Washington, D.C. – Senator Elizabeth Warren (D-Mass.), Edward Markey (D-Mass.), Bernard Sanders (I-Vt.), Ron Wyden (D-Ore.), Sheldon Whitehouse (D-R.I.), and Chris Van Hollen (D-Md.) sent a letter to the Department of Treasury (Treasury) and the Internal Revenue Service (IRS), applauding the recent announcement that the IRS is increasing audits of corporate jet usage and urging both the IRS and Treasury to build on that action by using their rulemaking authority to close a loophole that allows corporate executives to undervalue, and minimize taxes paid, when they use corporate jets for personal travel.

Last month, the IRS announced steps to use IRA funding to launch dozens of audits related to the personal use of corporate jets. Current law allows businesses to claim deductions on the purchase, operating costs (crew, fuel, etc.), and travel associated with a private jet, as long as it is primarily for business purposes. This tax treatment is already generous, and President Biden recently proposed ending tax breaks for private jets. But some ultra-wealthy executives and corporate taxpayers have gone a step further and used dubious accounting to claim these business tax breaks while jetting off for personal travel. The IRS is now using funding from the Inflation Reduction Act to ramp up audits related to the personal use of corporate jets.

The senators applauded the IRS announcement, while also urging the IRS and Treasury to pursue further action, using their existing rulemaking authority, by revising or repealing the Standard Industry Fare Level (SIFL) valuation method, which permits outlandish accounting when it comes to valuing the personal use of corporate jets by executives and their guests. To calculate the value of the trip, taxpayers can either (1) base the price on what a chartered flight would cost along the same route, or (2) use the SIFL method, which adds up the miles of the trip and multiplies the total by a per-mile rate. The current SIFL rates currently woefully undervalue personal trips, in some cases by 100 times below market rates. 

For example, if an executive uses the company jet for a trip from Houston to Honolulu, the fair market value could be $156,000 or more. But using the SIFL mileage rate, the executive would only include income of roughly $7,111, meaning the executive would pay approximately $55,089 less in taxes for the trip by relying on the SIFL method, even before considering payroll or state tax consequences. 

“As the agency moves forward with these audits, we urge you also to pursue rulemaking to properly close the SIFL loophole that allows ultra-wealthy taxpayers to avoid tax on personal trips,” the lawmakers write.  The Senators are also requesting a staff-level briefing by March 25, 2024. 

Senator Warren has led the fight to make giant corporations and the wealthy pay their fair share in taxes and strengthen the IRS’s ability to go after tax cheats: 

  • In November 2023, at a hearing of the Senate Finance Committee, Senator Warren called out efforts by lobbyists for giant corporations trying to extend three of the biggest corporate giveaways in the Trump tax cuts: bonus depreciation, R&D expensing, and looser limits on net interest deduction. Senator Warren called for Congress to stop rubber-stamping tax breaks like these for giant corporations and the ultra-wealthy and to end these Trump tax giveaways. 

  • In October 2023, Senator Warren sent a letter to Microsoft, raising concern over reports that the company may owe nearly $29 billion in taxes due to its tax evasion schemes. 

  • In October 2023, Senators Warren, Angus King (I-Maine), Richard Blumenthal (D-Conn.), Sanders, Whitehouse, Brian Schatz (D-Hawaii), and Gary Peters (D-Mich.) sent a letter to Secretary of the Treasury Janet Yellen and Internal Revenue Service (IRS) Commissioner Daniel Werfel, urging their agencies to swiftly implement their recently proposed tax reporting requirements for crypto brokers after the agencies’ two-year delay in proposing the rule.

  • In August 2023, Senators Warren, Bob Casey (D-Pa.),Blumenthal, and Sanders sent a letter to the Department of the Treasury and the Internal Revenue Service (IRS), urging them to quickly propose and implement strong rules that close loopholes exploited by crypto tax evaders.

  • In March 2023, Senators Warren, Van Hollen, Sanders, and Whitehouse sent a letter to Treasury Secretary Janet Yellen, urging her to use the full extent of the Treasury Department’s regulatory authority to crack down on the ultra-wealthy’s use of trusts to dodge paying their fair share in taxes.

  • In February 2023, at a hearing of the Senate Finance Committee, Senator Warren questioned Daniel Werfel, President Biden’s nominee to be Commissioner of the IRS about Republicans’ decades-long plan to rig our tax system and make it easier for billionaires and giant corporations to cheat their taxes, including by slashing IRS funding so it lacks the resources to take on wealthy tax cheats.

  • In September 2021, Senator Warren published a report revealing how massive corporations and America’s wealthiest households are using extraordinary loopholes and increasingly complex schemes to avoid paying their fair share in taxes.

  • In August 2021, Senators Warren, Whitehouse, and Sanders sent a letter to then-IRS Commissioner Charles P. Rettig regarding the importance of providing the resources the IRS needs to go after wealthy tax cheats and provide faster and better service to the majority of Americans who are paying their fair share

  • In July 2021, Senators Warren, Whitehouse, members of the Senate Committee on Finance, sent a letter to Finance Committee Chair Ron Wyden (D-Ore.) calling for an investigation into last month’s deeply troubling ProPublica report describing how the nation’s wealthiest individuals are using a series of legal tax loopholes to avoid paying their fair share of income taxes.

  • In May 2021, Senator Warren introduced Restoring the IRS Act of 2021, which would provide the IRS with the resources it needs to go after wealthy tax cheats and close the tax gap.

  • In March 2021, Senator Warren and Representatives Pramila Jayapal (D-Wash.) and Brendan Boyle (D-Pa.) introduced the Ultra-Millionaire Tax Act, legislation that includes robust anti-evasion and avoidance measures and would level the playing field and narrow the racial wealth gap by asking the wealthiest 100,000 households in America, or the top 0.05%, to pay their fair share.

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