[Congressional Record Volume 145, Number 104 (Wednesday, July 21, 1999)]
[Senate]
[Pages S8956-S8957]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. STEVENS:
  S. 1410. A bill to amend the Internal Revenue Code of 1986 with 
respect to the treatment of certain air trnasportation; to the 
Committee on Finance.


                   empty seat tax relief legislation

  Mr. STEVENS. Mr. President, I am introducing a bill to equate the tax 
treatment of persons occupying what would otherwise be empty seats on 
private aircraft with the treatment of airline employees flying on a 
space available basis on regularly scheduled flights. Right now, use of 
these empty seats is deemed taxable personal income to the employee. I 
refer to it as the ``empty-seat tax.'' Filling these empty seats--the 
way airlines do--can be likened to personnel taking offsets on freight 
flights, and empty seat passengers on auto, trucks, taxis or limousines 
that are being driven for business.
  Under current law, airline employees and retirees and their parents 
and children can fly tax-free on scheduled commercial flights for 
nonbusiness reasons. Military personnel and their families can hop 
military flights for nonbusiness reasons without the imposition of tax. 
Current and former employees of airborne freight or cargo haulers, 
together with their parents and children, can fly tax-free for 
nonbusiness reasons on seats that would have otherwise been empty.
  In addition, no tax is imposed on passengers accompanying employees 
traveling on business via auto or other nonaircraft transportation. For 
example, a trucker can take his wife on a haul without facing the 
imposition of a tax for the seat that she occupies. Yet tax is 
frequently imposed on employees or ``deemed'' employees flying for 
nonbusiness reasons when they occupy what would otherwise be unused 
seats on business flights of noncommercial aircraft. Employers who own 
or lease these aircraft are compelled by IRS regulations to consider 13 
separate factors or steps in determining the incidence and amount of 
tax to be imposed on their employees. My proposal seeks to deal with 
this inequity by treating all passengers the same way.

  Under this provision, the employer would have to demonstrate to the 
IRS on audit that the flight would have been made in the ordinary 
course of the employer's business whether or not the person was on the 
flight. The employer would also have to show that the presence of the 
person did not cause the employer to incur additional costs for the 
flight. Personal use of a plane, such as when an executive files with 
his or her family or guests to a vacation home, would remain fully 
taxable, just as under current law.
  In 1984, the Joint Committee on Taxation concluded that it was 
``unacceptable'' to continue ``conditions'' under which ``taxpayers in 
identical or comparable situations have been treated differently'' 
because of the ``inequities, confusion and administrative difficulties 
for business, employees and the internal revenue service resulting from 
this situation.'' The Joint Committee on Taxation was right then, and 
the comment continues to be accurate 15 years later.
  This is not just about creating equity for all passengers. It also 
goes to our ultimate goal of simplifying the Tax

[[Page S8957]]

Code for all Americans. Upon passage of this provision, a separate 
category of taxpayer will be eliminated and employees and employers 
will be able to better assess the tax implications of travel on 
aircraft.
  This is an especially important issue to large States with smaller 
populations because air travel comprises such a large part of our 
transportation systems. Instead of getting on a plane to travel across 
country, many people from rural areas get on a plane to travel within 
the State.
  This is also a health care issue. Many people in rural States like 
mine must take an empty seat on a company-owned airplane because they 
get sick and need medical treatment that can only be found in larger 
cities. In the contiguous States, someone can call an ambulance to take 
a car or bus to a larger metropolitan area to receive medical 
treatment. There are no buses from Barrow to Fairbanks or Cold Bay to 
Anchorage. The current Tax Code overlooks this fact of life and my 
provision will take this into account. We must begin to treat all 
passengers fairly, regardless of how they get to their final 
destination.
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