The Advisors' Blog

– Broc Romanek, CompensationStandards.com

Here’s something that I kept putting off blogging about until someone else wrote about it – but no one ever has. In our “Airplane Use” Practice Area, I have posted final guidance that the FAA issued on December 30th about its reconsideration of the “Schwab” interpretation regarding executives not being allowed to reimburse for corporate aircraft use under certain circumstances (here’s my blog about the FAA’s proposal).

Here’s one member’s reaction to this guidance:

It is a another example of bureaucrats standing in the way of common sense and sound policy. If an executive wants to pay for personal use of corporate aircraft, there is no reason the FAA should stand in the way.

Based on my reading of the policy, the FAA would allow CEO to fully reimburse XYZ for the personal use of corporate aircraft, but only if it is possible he could be called back on company business or forced to cancel his trip ( i.e., a normal vacation). On the other hand, if he is going to a wedding or funeral, FAA has declared it would not be reasonable to assume the company would – or could – force him to alter his plans. Thus, if he uses the plane for a wedding, he could only reimburse a limited amount of the expense under FAA guidelines ( i.e., fuel and landing fees), whereas he could pay all the incremental costs associated with a normal vacation.

If his wife or kids used the plane when CEO was not present, you could read the guidelines to limit the reimbursement to the limited FAA guideline level. If the company wants to establish a written policy that makes reimbursement of personal use of corporate aircraft mandatory, the policy will have to include a caveat that any reimbursement must comply with FAA restrictions.