Now that the United States is nearing its Election Day, aircraft owners and operators might seek to transport candidates for public office. Sponsoring a candidate’s flight raises competing compliance issues among federal and state campaign finance laws, aviation regulations, and federal tax laws. This article provides a primer regarding the overlap in regulations promulgated by the Federal Aviation Administration (FAA), Federal Election Commission (FEC), and the Internal Revenue Service (IRS) governing flights with candidates.1 It also offers some best-practices for owners and flight departments to consider when supporting candidates and causes of choice by contributing to elections with in-kind contributions of flight time.
Campaign finance laws involve two primary principles: Contributions from individuals to campaigns, and expenditures by those campaigns. Contributions can be in-kind, such as the donation of flight time. Contributions can also be capped at certain amounts, such as the current cap of $2,800 for donations to candidates for federal office. When an individual donates flight time, the value of which exceeds the $2,800 cap, the campaign must reimburse the operator for the value of the flight time in excess of the cap. The Federal Aviation Regulations (FARs) have an exemption allowing operators to be reimbursed. Any reimbursement will, however, trigger a federal excise tax on the value of that flight. Enforcement actions for violations can be brought by the FAA, IRS, or the FEC, or their state counterparts. Aircraft owners and operators who want to contribute flight time to candidates and causes of choice must understand a complex set of rules in order to comply with FARs, IRS rules, and campaign finance laws.
FAA Regulations — The First Exception: FAR 91.501.
In general, an owner or operator of an aircraft is prohibited from providing “air transportation service” unless that owner or operator has an Air Carrier Certificate issued by the FAA,2 and in certain circumstances a certificate of economic authority issued by the Department of Transportation (DOT).3 There are exceptions to that rule. One commonly used exception utilized by corporate aircraft operators is under FAR 91.501(b)(5), which allows for the transport of certain individuals, such as company officials and employees, so long as the transportation is within the scope of and incidental to the business of the company, and the company does not charge for the flight (although the company may accept reimbursement for certain operating costs).4 Another exception is available to operators who fly for their personal transportation, and bring guests along on those flights. Under FAR 91.501(b)(4), an operator is permitted to provide air transportation of “guests” provided that “no charge, assessment or fee is made for the transportation.”5 The operator under that scenario might be a fractional owner who seeks to transport a guest for the guest’s benefit.6 As long as the fractional owner does not impose a charge, the flight can occur.
Consider the following scenario: Barry Benign is an officer of Acme Corporation, and has a time sharing agreement7 to use the company aircraft. Barry’s friend, Annette Anodyne, is running for the US Senate. Barry wants to fly Ms. Anodyne and her staff to a fundraising dinner for the campaign. Barry uses the aircraft under his time sharing agreement. Ms. Anodyne and her campaign travelers are “guests” of Barry on the flight. Barry does not charge the Anodyne for Senate campaign anything for the flight.
Has Barry complied with the FARs? So far, yes. Barry has complied with FAR 91.501(b) by not charging the candidate or her staff. Under Barry’s time sharing agreement, Acme Corporation retains operational control — and as long as neither Barry nor Acme Corp. seek reimbursement, they can provide air transportation for Ms. Anodyne and her fellow campaign travelers without violating the FARs.
Unfortunately, Federal election laws pose another challenge.
Election Laws & FEC Regulations.
There are two pillars of campaign finance law: Contributions and expenditures. Contributions occur when someone gives “money or anything of value” to a campaign.8 Contributions can be an in-kind contribution, such as “commercial travel.”9 An expenditure, on the other hand, is a payment made by the campaign to influence an election.10 Paying for air travel is an example of an expenditure.11
Contributions can be limited.12 While contributions are deemed to be speech and thus are entitled to First Amendment protections, the Supreme Court has recognized that contributions can be limited to avoid the quid pro quo effect from large contributions. In the 2019-20 election cycle, individuals are prohibited from making contributions to a candidate or a campaign in excess of $2,800.13 An aircraft owner therefore cannot make an in-kind contribution of more than $2,800 worth of flight-time to a campaign.
From these core principles — contributions and expenditures — the FEC has enacted a series of regulations regarding air travel that can be summarized as follows:
- An aircraft owner who provides transportation to a “campaign traveler” (i.e., the candidate and his or her staff) is considered to be a “service provider” to the campaign, and is making a contribution to that campaign.
- Any contribution of air transportation by an aircraft owner is subject to the $2,800 cap on contributions to a campaign.
- If the campaign reimburses the aircraft owner for the full value of the flight, then the aircraft owner’s provision of air transportation is not a contribution; it is, however, an expenditure by that campaign.
- If the campaign reimburses the aircraft owner for part of the value of the flight, then the unreimbursed portion is a contribution, and is subject to the $2,800 cap on contributions to a campaign.
- Reimbursement is usually the pro rata share per campaign traveler of the normal and usual charter fare or rental charge for travel on a comparable aircraft of comparable size.
- Reimbursement must be made within seven days of the travel.
- For aircraft owned by the candidate or the candidate’s immediate family member, use of the aircraft by the candidate and immediate family (which is defined as “the father, mother, son, daughter, brother, sister, husband, wife, father-in-law, or mother-in-law of the candidate”) is not subject to a contribution limit; however the campaign must nonetheless reimburse the aircraft owner if the owner would normally charge the family member.
- The campaign must report to the FEC both the contribution of flight time and expenditures (reimbursements) for travel aboard private. 16
Back to our earlier scenario: A few days after our officer, Barry from Acme Corporation, flies Ms. Anodyne and her staff, the Anodyne for Senate campaign treasurer calls Barry and tells him that, under FEC regulations, the campaign needs to reimburse him for the normal and usual charter fare of the recent flight. Barry checks with Acme Corporation’s flight department. The normal and usual charter fare for the flight would have been $10,000.
If Barry or Acme Corporation accepts the $10,000 in reimbursement, won’t the payment be above and beyond that which is authorized for flights under FAR 91.501, in which one can receive cost reimbursement, but not the “normal and usual charter fare”? Won’t Acme Corporation be operating as essentially an Air Carrier, requiring an Air Carrier certificate?
The FARs provide a second exception for exactly this situation.
FAA Regulations — The Second Exception: FAR 91.321
Under FAR 91.321, “Carriage of Candidates in Elections,” the FARs allow an aircraft operator to receive payment for carrying a candidate without having to be an air carrier. There are three required elements to take advantage of the 91.321 exception: First, the operator’s primary business cannot be as an air carrier or commercial operator.17 Second, the carriage must comply with the operating rules of FAR part 91.18 Third, the aircraft operator must be “required” by either federal, state or local law “to receive payment for carrying the candidate.”19
If Acme Corporation invokes FAR 91.321, it can accept the $10,000 reimbursement from the Anodyne for Senate campaign without having an Air Carrier Certificate. Acme Corporation’s primary business is not as an air carrier. The flight was under FAR Part 91. And indeed, Acme Corporation was required by federal law to receive payment for carrying the Anodyne for Senate campaign travelers.
Federal Excise Tax Trigger
Acme Corporation now faces a new issue. It operated an aircraft and instead of being reimbursed its FAR 91.501 costs, it was also reimbursed the normal and usual charter fare. Under IRS tax rules, Acme Corp. engaged in “air transportation,” and the $10,000 charter fare will now be subject to a federal excise tax of 7.5% on the amount paid for the air transportation.
What if Barry says that he wants to contribute his annual maximum of $2,800 to the Anodyne for Senate campaign? Can he do so? Acme Corp. cannot receive anything less than $10,000, because corporations are prohibited from contributing to campaigns.20 However, if the Anodyne for Senate campaign pays $7,200 and Barry reimburses $2,800 to Acme Corporation, then Acme Corp. will be protected under FAR 91.321, and Barry and the Anodyne for Senate campaign will be in compliance with FEC regulations governing contributions and expenditures.
Best Practices and Concluding Thoughts
The above hypothetical illustrates some of the challenges with transporting candidates for public office. For those who are not accustomed to thinking about campaign contributions and expenditures, exceptions to the bar on providing air transportation, or the imposition of federal excise tax, flying candidates can be particularly problematic.
Campaigns and their donors often run afoul of these regulations. The FEC vigorously enforces in-kind contributions and expenditures of flight time. Every presidential campaign since 1992 has been subject to FEC scrutiny for improper aircraft use. Congressional races likewise face stringent scrutiny. For example, an FEC adjudication was resolved in July of 2015, when the campaign of Representative Chellie Pingree (D. ME) was fined for use of a Falcon 2000 EX turbojet. Rep. Pingree was running for reelection for her seat in Maine’s First Congressional District. The flight at issue was one in which she travelled aboard a Falcon 2000 EX turbojet owned by her husband, Donald Sussman. The problem was that, when the flight at issue occurred, Mr. Sussman was only engaged to be married to Ms. Pingree. The FEC noted that the definition of “immediate family member” does not include a fiancée. The flights were thus a violation of FEC regulations. Rep. Pingree’s campaign entered into a conciliation agreement whereby the campaign had to reimburse her husband $13,456.80 for the flights at issue. The campaign also paid a civil penalty to the FEC of $9,750.21
With the above cautionary tale in mind, we recommend the following:
First, corporate flight departments should have a policy in place regarding flights for campaign purposes. Corporate entities are prohibited from donating directly to candidates, and thus any use of corporate aircraft for campaign purposes presents significant problems. Corporate flight departments should remind authorized users of the FEC and FAA regulations governing flights with candidates, and be aware of the IRS federal excise tax issues.
Second, individuals who are operators of aircraft and who might choose to act as “service providers” should work closely with the campaign regarding accounting and disclosure.
Third, bear in mind that campaign finance laws are not only related to federal candidates. State and local elections are also bound by certain contribution and expenditure limits, depending on the state. The majority of states impose contribution limits.22Contributions to gubernatorial and other state-level elections face similar caps on in-kind contributions. Thus, one should be aware that a “candidate” can be for a federal, state or local office, and there are likely campaign finance laws that will apply to the activity.
Fourth, while this memo focuses on liability for owners and operators, the individual pilot may also face other dilemmas with seeking reimbursement. Imagine a scenario in which a private pilot who owns a twin-engine Beech Baron flies a candidate and two staff members to a campaign event. Due to the aircraft size, the exceptions under FAR 91.501 do not apply. The pilot nonetheless receives reimbursement as mandated by FAR 91.321. While the question has not been answered, there is a strong argument that in receiving compensation, the pilot will have exceeded the privileges of her Airman certificate as a private pilot. FAR 91.321 protects an operator from needing to be an air carrier when it receives compensation from a campaign. It does not, however, protect a private pilot from exceeding her privileges and accepting payment, in contravention of FAR 61.113.
Finally, if you feel compelled to contribute to a cause or a candidate by providing flight services so that a candidate can reach voters or donors, by all means, figure out a way to do so. Making an in-kind contribution to a worthy candidate is an act of political speech, and is entitled to First Amendment protections. Do it correctly by following the FEC and FAA regulations for exercising those rights, and the IRS regulations taxing air transportation; and be especially sure that the campaign reports the contribution and the expenditures.
This information is general in nature, please contact one of our experienced aviation attorneys directly to discuss your specific situation.
1 Note that this article does not necessarily relate to flights involving elected officials, but rather only candidates. Not all elected officials are candidates for public office — although in the case of incumbents engaged in campaign activity, they may be. Flights with elected officials implicate other restrictions that are beyond the scope of this memo. This memorandum centers only on flights with candidates, or with incumbents who are travelling as candidates, and not in their capacity as elected officials.
2 49 U.S.C. § 44705 (“The Administrator of the Federal Aviation Administration shall issue an air carrier operating certificate to a person desiring to operate as an air carrier when the Administrator finds, after investigation, that the person properly and adequately is equipped and able to operate safely under this part and regulations and standards prescribed under this part.”)
3 49 U.S.C. § 41101(a)(1) (“[A]n air carrier may provide air transportation only if the air carrier holds a certificate issued under this chapter authorizing the air transportation.”)
4 See 14 CFR § 91.501(b)(5); see also § 91.501(d)(1–10) (enumerating the charges that can be passed to the passenger on a flight under § 91.501(b)(5)).
5 14 CFR 91.501§ (b)(4).
6 14 CFR 91.501 (a) § (“This subpart prescribes operating rules, in addition to those prescribed in other subparts of this part, governing the operation of large airplanes of U.S. registry, turbojet-powered multiengine civil airplanes of
U.S. registry, and fractional ownership program aircraft of U.S. registry that are operating under subpart K of this part in operations not involving common carriage.”)
7 See 14 CFR § 91.501(c)(1). A “time sharing agreement” is defined as “an arrangement whereby a person leases his airplane with flight crew to another person, and no charge is made for the flights conducted under that arrangement other than those specified in paragraph (d) of this section [relating to reimbursement of direct operating costs].” Id.
8 52 U.S.C. § 30101(8)(A)(i).
9 11 CFR § 100.52(a), (d).
10 52 U.S.C. § 30101(9)(A)(i).
11 11 CFR § 100.111.
12 See Buckley v. Valeo, 424 U.S. 1, 23–26 (1976) (noting that, “although the [Federal Election Campaign Act]’s contribution and expenditure limitations both implicate fundamental First Amendment interests, its expenditure ceilings impose significantly more severe restrictions on protected freedoms of political expression and association than do its limitations on financial contributions,” and that, “To the extent that large contributions are given to secure a political quid pro quo from current and potential office holders, the integrity of our system of representative democracy is undermined,” and thus upholding limits on contributions).
13 52 U.S.C. § 30116(a). Note that the cap in the statute is $2,000, but is adjusted for inflation based on increases in the price index. Id. at § 30116(c). The FEC’s contribution limits for the 2019–2020 election cycle is $2,700. See Contribution Limits for 2019–2020 Federal Elections, available at: https://www.fec.gov/help-candidates-and-committees/candidate-taking-receipts/contribution-limits/ (last visited September 8, 2020).
14 See Buckley, 424 U.S. at 51 (1976) (holding that the independent expenditure limitation under the Federal Election Campaign Act of 1971 was unconstitutional); accord 11 CFR § 110.10 (“[C]andidates for Federal office may make unlimited expenditures from personal funds as defined in 11 CFR 100.33”).
15 However, the manner in which a campaign spends money can be limited. For example, in 2007, Congress amended the Federal Election Campaign Act of 1971 to prohibit any “candidate for election for Federal office” from making any “expenditure for a flight on an aircraft unless (A) the aircraft is operated by an air carrier or commercial operator certificated by the [FAA], or (B) the candidate . . . pays to the owner, lessee, or other person who provides the airplane the pro rata share of the fair market value of such flight.” 52 U.S.C. §§ 30101(3), 30114(c)(1)
16 See generally 11 CFR § 100.93.
17 14 CFR § 91.321(a)(1).
18 Id., § 91.321(a)(2).
19 Id., § 91.321(a)(3).
20 52 U.S.C. § 30118(a).
21 See In re Pingree, et al., FEC MUR 6394 (Jul. 15, 2015) https://www.fec.gov/files/legal/murs/6394/15044374304.pdf.
22 See “State Limits on Contributions to Candidates, 2019-2020 Election Cycle,” National Conference of State Legislatures, available at https://www.ncsl.org/Portals/1/Documents/Elections/Contribution-Limits-to-Candidates-2019-2020.pdf?ver=2019-10-02-132802-117 (last viewed September 8, 2020)