The Senate version of the major tax reform bill working its way through Congress includes a provision that could impact air travel to the United States.
According to an update from the Business Travel Coalition, a version of the bill includes a provision that would end a tax exemption for certain international airlines that fly into the United States. The proposal would require certain airlines to pay U.S. corporate tax under two conditions: if the country where the foreign airline is headquartered doesn’t have a tax treaty with the U.S., and if major U.S. airlines make fewer than two weekly trips to that foreign country.
Tax lawyers and lobbyists cited by the BTC said the provision could impact Gulf airlines, including Etihad, Emirates and Qatar Airways, who major U.S. airlines allege have been unfairly subsidized by Qatar and the United Arab Emirates. Sen. Johnny Isakson of Georgia, who represents the state where Delta is headquartered, introduced the amendment.
Experts cited by the BTC said they didn’t expect the additional taxes to be too substantial, although the compliance costs involved in understanding U.S. corporate tax law and filing the correct paperwork could prove to be a nuisance.
The provision follows a previous report that portions of the tax bill could affect the cruise industry. Earlier this week Robin Farley, an analyst with UBS Investment Research, noted that a proposed tax could work out to an effective tax rate of approximately 2 percent, based on days in U.S. waters spent by major cruise companies like Carnival Corporation, Royal Caribbean Cruises Ltd. and Norwegian Cruise Line Holdings.