Time Sharing Agreements

Time Sharing Agreements (TSA’s) provide an opportunity for an executive to reimburse his/her corporate employer for personal use of the corporate aircraft. When the executive is reimbursing the company, it bears no incremental cost for the personal flights and the company’s proxy disclosure for personal aircraft use will be reduced or eliminated.

TSA’s have many benefits, but they also create accounting complexities:

  • Reimbursements must stay within FAA billing limits
  • They usually need to be tracked outside the corporate accounting system
  • Incur 7.5% excise tax on US flights and a passenger tax on international flights
  • Require periodic settlements with the CEO
  • May require the CEO to maintain a deposit with the company for Sarbanes Oxley compliance

TSA’s are a useful tool for managing proxy disclosures, but will introduce hefty accounting efforts. To learn more, download “Accounting for Time Sharing Agreements and other Part 91 Reimbursements” for more information.

The Nichols Interpretation

The FAA began allowing another part 91 reimbursement method in 2010 via a letter to the NBAA which permits reimbursement from executives for pro rata operating costs. It’s known as the “Nichols Interpretation.” It allows for greater reimbursement levels than a time sharing agreement, but is much more restrictive with regard to how it can be used. As a result, time sharing agreements remain much more popular.