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Published on : Thursday, December 17, 2015
U.S. tax law permits corporations, even those that have discharged their debts and wiped out losses through Chapter 11 bankruptcy, to carry-forward net operating losses (NOL) to offset future earnings and thereby eliminate or reduce tax liability. Based on earlier years of unprofitable operations, U.S. major network carriers have used huge NOL carry-forwards to eliminate tax liability on the record profits that they have earned more recently.
Now that NOL carry-forwards are nearly exhausted, and record profits continue to roll in, news accounts indicate that Delta Air Lines will soon announce some form of tax avoidance plan such as the creation of an offshore holding company for its international operations and joint venture assets. The purpose would be to funnel income to countries with lower or no corporate taxes, thereby paying taxes to a foreign government, not the U.S. Treasury. Of course, Delta gladly accepts taxpayer monies from the U.S. Treasury that flow into the Airport and Airway Trust Fund – a direct government subsidy to airlines – to cover Federal Aviation Administration (FAA) shortfalls.
Delta will likely insist it is being forced to seek a foreign tax haven in part due to the “excessive and discriminatory” sin-tax burden U.S. government unfairly imposes on airlines. Indeed, according to a November 9, 2015 Airways News analysis: “…there are a series of aviation specific taxes and fees that combine to elevate the tax burden on US airlines to almost a “sin tax” like those faced by tobacco or gambling/casino companies. These range from taxes on jet fuel, to excise taxes on airline tickets (7.5%), to various fees imposed by the Department of Homeland Security (DHS) to help fund the Transportation Security Administration (TSA). What this all works out to is that an average to 20-25% of what passengers pay for a plane ticket is taxes or fees paid to the government, while airlines pay an effective tax rateof roughly 38%.”
Source:-U.S. Network Airlines