[Federal Register Volume 75, Number 130 (Thursday, July 8, 2010)]
[Proposed Rules]
[Pages 39196-39197]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-16385]
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DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 91
[Docket No. FAA-2010-0667]
Proposed Legal Interpretation
AGENCY: Federal Aviation Administration (FAA)
ACTION: Proposed interpretation.
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SUMMARY: The FAA is considering revising its broad prohibition on pro
rata reimbursement for the cost of owning, operating and maintaining a
company aircraft when used for routine personal travel by senior
company officials and employees under certain conditions.
DATES: Comments must be received on or before August 9, 2010.
ADDRESSES: You may send comments identified by Docket Number FAA-2010-
0667 using any of the following methods:
Federal eRulemaking Portal: Go to http://www.regulations.gov and follow the online instructions for sending your
comments electronically.
Mail: Send comments to Docket Operations, M-30; U.S.
Department of Transportation, 1200 New Jersey Avenue, SE., Room W12-
140, West Building Ground Floor, Washington, DC 20590-0001.
Hand Delivery or Courier: Bring comments to Docket
Operations in Room W12-140 of the West Building Ground Floor at 1200
New Jersey Avenue, SE., Washington, DC, between 9 a.m. and 5 p.m.,
Monday through Friday, except Federal holidays.
Fax: Fax comments to Docket Operations at 202-493-2251.
FOR FURTHER INFORMATION CONTACT: Rebecca B. MacPherson, Assistant Chief
Counsel, Regulations Division, Office of the Chief Counsel, Federal
Aviation Administration, 800 Independence Avenue, SW., Washington, DC
20591; telephone: 202 267-3073.
SUPPLEMENTARY INFORMATION:
The Federal Aviation Administration (FAA) generally prohibits
aircraft operators from seeking reimbursement for the costs associated
with flights conducted under part 91 of Title 14 of the Code of Federal
Regulations (CFR). Certain exceptions to this general prohibition may
be found in 14 CFR 91.501. One of the exceptions, located in Sec.
91.501(b)(5), provides for limited reimbursement for the ``carriage of
officials, employees, guests, and property of a company on an airplane
operated by that company, or the parent or a subsidiary of the parent,
when the carriage is within the scope of, and incidental to, the
business of the company (other than transportation by air) and no
charge, assessment or fee is made for the carriage in excess of the
cost of owning, operating, and maintaining the airplane, * * *. ''
In 1993, the FAA's Office of the Chief Counsel issued a legal
interpretation of this provision that addressed officials and employees
of a company using the company aircraft for personal travel.
Interpretation 1993-17, August 2, 1993. This letter is commonly
referred to as the ``Schwab Interpretation.'' In the Schwab
Interpretation, the FAA noted that the personal travel was not within
the scope of the company's business and so did not meet the two-part
test set forth in Sec. 91.501(b)(5), i.e., that it be within the scope
of and incidental to the company's business.
On March 1, 2010, the National Business Aviation Association (NBAA)
requested the FAA consider revising the long-standing Schwab
Interpretation to address highly placed officers and employees of a
company who could be recalled at any moment, or whose travel plans
could be altered immediately prior to the individual going on personal
travel. The FAA is considering narrowing the broad prohibition provided
in the Schwab Interpretation; the agency is publishing this notice to
seek comment on its revised interpretation.
In the Schwab Interpretation, the FAA rejected the argument that a
need to communicate with a senior company official justified an
assertion that the personal travel was within the company's business.
Instead, the FAA noted that ``[i]t may very well be that the Company
wants to maintain prompt communications with Mr. Schwab when he is on
pleasure trips. That desire, however, does not alter the fact that he
[[Page 39197]]
is traveling for pleasure. As stated, the Agency's interpretations have
held that such carriage is not within the scope of, and incidental to,
the company's business. The ability of the Company to communicate with
him is in no way dependent upon charging him for carriage for such
purposes.'' The NBAA made similar arguments in its recent request that
company officials have the ability to conduct meaningful, real-time
work aboard company aircraft, and so personal travel can be within the
scope of the company's business even though it is incidental to that
business. The FAA rejects this argument as sufficient to merit a change
in agency interpretation of Sec. 91.501(b)(5). If anything, the
advances in communication technology weaken any argument that the use
of company aircraft is necessary for personal travel. The advent of
laptop computers and handheld PDAs has led to greater communication
than ever before.
The FAA finds more compelling the argument that certain, highly-
placed officials and employees may be unable to reliably schedule
personal travel due to the nature of their employment.
Recalling an individual from a vacation because of an emergency is
clearly within the scope of a company's business. To the extent that
using company aircraft is the most efficient way to transport the
individual in an emergency situation, the FAA would not object to
company aircraft being used; although there could be some question as
to whether the transport was still incidental to the company's
business, such that both prongs of Sec. 91.501(b)(5) apply.
However, the FAA believes there is merit to the position that even
the first leg of the trip could, under limited circumstances, be within
the scope of a company's business, even though there were no emergency
circumstances at play. The FAA recognizes that fairly routine personal
travel, such as a summer vacation or weekend ski trip, could be
cancelled up to the last moment because of compelling business
concerns. As such, the company may determine that it is more efficient
to provide the company aircraft than to reimburse the individual for
the cost of cancelled commercial airfare. In addition, the company may
be able to accommodate the individual's altered plans by providing the
company aircraft as soon as possible after the compelling business
concern has been resolved. As such, while the personal travel is not
within the scope of the company's business, indeed it is clearly
incidental to that business, the need to modify the travel on very
short notice may well be. Likewise, to the extent that the return trip
is not compelled by emergency circumstances, the ability of a company
to alter an individual's travel plans on very short notice may render a
particular flight both within the scope of and incidental to the
company's business. Thus, the FAA has tentatively determined that a
company could be reimbursed for the pro rata cost of owning, operating,
and maintaining the aircraft when used for routine personal travel by
an individual whose position merits such a high level of company
interference into his or her personal travel plans.
The FAA notes that not all personal travel would meet these
conditions. As noted above, truly emergency circumstances would likely
obviate a company's ability to demonstrate that a particular flight is
incidental to the company's business. By the same token, there are
certain types of personal travel that are unlikely to be altered or
cancelled, even for compelling business reasons. For example, absent an
emergency, it is highly unlikely that a senior officer or employee
would be expected to miss a significant event, such as a wedding or
funeral of a close family member. It is also unlikely that the
individual would be expected to cancel or reschedule necessary surgery
or other medical treatment.
In order to prevent companies from abusing the proposed change in
the Schwab Interpretation, the FAA believes that a company wishing to
take advantage of the interpretation should maintain and regularly
update a list of individuals whose position within the company require
him or her to routinely change travel plans within a very short period
of time. The company should be prepared to share this list with the FAA
if requested. The FAA recognizes that the Securities Exchange
Commission and Internal Revenue Service employ the concept of
``specified individuals'' in the context of certain reporting
requirements and taxation issues. These individuals generally include
officers, directors, and more than 10 percent owners of a company. The
FAA does not believe that all officers of a company are likely to be
subject to the level of company control discussed above, nor are all
directors. Rather than issue a blanket description of which individuals
may be covered by the proposed revision, the FAA believes it is
appropriate for the company's board, or equivalent governing body, to
list which company individuals are so situated. In addition, the
company would need to keep records indicating that a determination has
been made by the company that the flight in question was of a routine
personal nature.
Issued in Washingon, DC, on June 30, 2010.
Rebecca B. MacPherson,
Assistant Chief Counsel for Regulations.
[FR Doc. 2010-16385 Filed 7-7-10; 8:45 am]
BILLING CODE 4910-13-P