Part III · Structures · No. 04

Part 91 vs. Part 135

The FAA's two governing regimes for private aircraft operations carry materially different tax consequences. The owner who can fly when and how she wants — Part 91 — pays no 7.5% transportation excise but operates a non-commercial aircraft. The commercial operator — Part 135 — collects the excise but accepts on-demand commercial requirements.

What the structure is

14 C.F.R. Part 91 governs general aviation operations not held out for compensation. Owner-flown aircraft, business aircraft flown by employee pilots for the owner's transportation, and similar non-commercial flights operate under Part 91.

14 C.F.R. Part 135 governs on-demand commercial operations — the aircraft is held out for hire to the public, the operator holds an Air Carrier Certificate, and the operation meets the heightened safety, training, maintenance, and dispatch requirements.

The choice between the two regimes — and the structural arrangements that move flights from one to the other — has substantial federal tax consequences.

The tax problem it addresses

The principal tax differences:

• 7.5% transportation excise (§4261). Applies to commercial passenger transportation (Part 135 charter); does not apply to non-commercial Part 91 operations. The excise is collected from the charter customer; for a $20,000 charter, $1,500 of excise applies.
• Fuel excise. Part 91 operations pay higher per-gallon jet-fuel excise; Part 135 commercial operations pay a lower rate (the "commercial use" reduction).
• Depreciation recovery period. Part 91 non-commercial business-use aircraft: 5-year MACRS. Part 135 commercial aircraft: 7-year MACRS.
• §4043 fractional-fuel surtax. Specific to fractional aircraft programs.
• Eligibility for management-company arrangements. Management companies often provide both operational support for Part 91 owner flights and charter capability under Part 135. The line between fee-for-service management (no excise) and held-out commercial operation (excise) has been the subject of significant guidance.

Mechanics

An owner-flown private aircraft under Part 91:

• Owner makes flight decisions, controls passenger list, pays operating costs directly.
• No 7.5% excise on flights for the owner or hosted passengers.
• §280F substantiation required for business-use deduction.
• §274 entertainment-use disallowance applies to entertainment flights.
• Higher fuel excise rate.

A managed Part 91 aircraft:

• Owner contracts with a management company for crew, maintenance, dispatch.
• Flights remain Part 91 if owner retains "operational control" — the FAA's term of art under 14 C.F.R. §1.1.
• Management fees are not transportation cost; no 7.5% excise on the management arrangement.
• IRS has challenged certain management arrangements where the substance is held-out commercial transportation. Notice 2012-77 and subsequent guidance.

A Part 135 charter aircraft:

• Operator holds Air Carrier Certificate.
• Aircraft held out for hire to the public.
• 7.5% excise on each charter passenger transportation transaction.
• Operator's compliance with Part 135 training, maintenance, manuals, dispatch requirements.
• 7-year MACRS for the aircraft.

The applicable statutes and authorities

• 14 C.F.R. Parts 91, 135 (FAA operational rules).
• 14 C.F.R. §1.1 (definition of "operational control").
• 26 U.S.C. §4261 (transportation excise).
• 26 U.S.C. §4041 (fuel excise on sales for use); §4081 (manufacturer excise).
• 26 U.S.C. §4043 (fractional-fuel surtax).
• 26 U.S.C. §168, §280F, §274.
• IRS Notice 2012-77 (fractional aircraft program management).
• Various IRS Chief Counsel Advice and private rulings on the line between Part 91 and Part 135 for excise purposes.

Substance and audit risk

The IRS has scrutinized aircraft management-company arrangements through Section 4261 excise audits, asserting that certain "fee-for-service" management arrangements are in substance held-out commercial transportation subject to the 7.5% excise. The 2024 IRS audit campaign on personal use of business aircraft has reinforced enforcement attention. See aircraft personal-use audits.

Documentation is critical:

• Logbooks showing flight purpose, persons aboard, time-in-service.
• Operational-control statements consistent with the asserted Part 91 status.
• Management agreements that conform to the FAA and IRS frameworks for Part 91 fee-for-service operations.
• Charter agreements that document the charter relationship for Part 135 flights.

Cost and complexity

Part 91 operation: pilot certification, maintenance, hangar, insurance. Mid-six-figures annual cost for a light business jet, scaling with size.

Part 135 operation: substantially higher. Air Carrier Certificate compliance, FAA-approved manuals, drug-and-alcohol program, dispatch procedures, expanded crew training, maintenance to Part 135 standards. Most owners outsource Part 135 operation to a third-party charter management company rather than holding their own Air Carrier Certificate.

Common combinations

• Part 91 owner with charter availability through a management company. Hybrid arrangement: owner uses aircraft under Part 91 with operational control; management company charters aircraft to third parties under Part 135 when owner not using. Excise applies to charter operations only.
• Time-share dry lease. Two related entities share aircraft cost through a dry lease. The dry-lease structure preserves Part 91 character for the operations.
• Fractional ownership. NetJets-style program; flights operate under Part 91 fractional rules; §4043 fractional-fuel surtax applies.
• Foreign-registered aircraft. Operated under foreign registration (Isle of Man, San Marino, Aruba) with U.S. operational considerations.

Recent developments

The IRS in 2024 announced an expanded compliance campaign targeting personal use of business aircraft, including transportation-excise issues on management-company arrangements. The campaign focuses on §274 disallowance and §4261 collection.

Bonus depreciation phase-down (from 100% to 20% for 2026 placed-in-service) has changed acquisition economics for both Part 91 business-use and Part 135 charter aircraft.

Reviewed May 2026