Standard Industry Fare Level formula or SIFL

Internal Revenue Code Section 61(a)(1) provides that, except as otherwise provided in subtitle A of the Internal Revenue Code of 1986, gross income includes compensation for services, including fees, commissions, fringe benefits, and similar items. Examples of fringe benefits include: an employer-provided automobile, a flight on an employer-provided aircraft, an employer-provided free or discounted commercial airline flight, an employer-provided vacation, an employer-provided discount on property or services, an employer-provided membership in a country club or other social club, and an employer-provided ticket to an entertainment or sporting event. Hence, if an employer permits an officer, employee or other service provider to use the employer's aircraft for a personal flight (and the flight crew, including pilots, is provided), the value of that flight must be included in the individual's gross income for the applicable tax year.

If the true fair market value of a personal flight on an employer provided aircraft was imputed as income to an employee, such amount could be significant, particularly when higher end corporate jets are involved. As a general rule, the amount of income imputed is equal to the cost to charter a comparable flight. Treas. Reg. § 1.61-21(b)(6). However, the IRS' regulations provide for an alternative approach for determining the amount of income that must be imputed which generally results in a lower amount of income being imputed (unless the individual is a senior executive and travels with a number of family members or other guests). The regulations permit income to be imputed using the non-commercial flight valuation or SIFL rules. Treas. Reg. § 1.61-21(g). The U.S. Department of Transportation publishes SIFL rates for each six-month period (January 1 - June 30 and July 1 - December 31). These rates are used to determine the imputed tax value of non-business or personal travel aboard employer-provided aircraft under Internal Revenue Service Regulation Section 1.61-21(g). The SIFL amount is determined on a per-flight, per-person basis and generally reported to the responsible employee on IRS Form W-2 each taxable year. The value of a flight determined under the SIFL formula involves multiplying the SIFL cents-per-mile rates applicable for the 6 month period during which the flight was taken by the appropriate aircraft multiple provided in Treasury Regulation Section 1.61-21(g)(7) and miles (statute not nautical) traveled and then adding the applicable terminal charge. If you need the statute miles between 2 airports, this can be calculated using our distance calculator.

The proscribed Aircraft Multiples are set forth in the table below:

For this purpose, a "control employee" of a non-government employer is any employee - (A) Who is a Board- or shareholder-appointed, confirmed, or elected officer of the employer, limited to the lesser of - (1) One percent of all employees (increased to the next highest integer, if not an integer) or (2) Ten employees; (B) Who is among the top one percent most highly-paid employees of the employer (increased to the next highest integer, if not an integer) limited to a maximum of 50; (C) Who owns a five-percent or greater equity, capital, or profits interest in the employer; or (D) Who is a director of the employer. Any employee who is a family member of a control employee is also a control employee. For more details on the definition of a control person, see Treasury Regulation Section 1.61-21(g).

An example is helpful. Assume that an employee (the is a control employee) flew from New York to Miami for a vacation on the employer's G500 in the first six months of 2022. Assume it is a 2 hour flight and the average hourly charter rate for a comparable jet is $9,000 per hour. In that case, using normal rules, the employee would be imputed $18,000 in income each way (2 hours x $9,000 per hour) or $36,000 round trip. Under the SIFL rules, the imputed amount would be only $744.61 per person each way (1,300 miles each way x lowest applicable SIFL rates plus a terminal charge of $29.45) or $1,489.22 round trip. In this situation, use of the SIFL rules to impute income results in a dramatically lower income imputation to the executive than using the market charter rate. You can confirm those numbers in the SIFL Calculator provided below or run the SIFL calculations on your own flights.

Each flight leg where a passenger boards and deplanes must be separately determined under the SIFL rules, although intermediate stops to refuel, for weather issues or other emergencies are ignored. Treas. Reg. § 1.61-21(g)(3). In the case of a mixed purpose flight that was undertaken primarily for business, but included one or personal personal detours or segments, compute the extra distance by the personal flights as a stand alone personal flight for SIFL purposes. In the case of a mixed use trip that was primarily undertaken for personal reasons, but included one or more business segments or detours, treat as a single personal trip.

There is a special rule that is applicable if at least 50% of the seats on a flight are occupied by business passengers. In that case, there is no SIFL charge for employees (but not directors or independent contractors) and their spouses and children. Treas. Reg. § 1.61-21(g)(12). In the case of other passengers traveling for personal purposes, SIFL income is still imputed, but using the non-control multiple.Treas. Reg. § 1.61-21(g)(12)(B)(1). Also, note that persons under age two are not counted for SIFL purposes. Treas. Reg. § 1.61-21(g)(1).

These rules can be used on domestic and interational flights on aircraft, including planes and helicoptors.Treas. Reg. § 1.61-21(g)(2).