Flight Department Chargeback: Cost Allocation and Part 91 Limits

A flight department chargeback bills the cost of the company aircraft back to the business units or affiliated companies that used it, usually by flight hour, by trip, or as a fixed share of the year’s budget plus usage. Under Part 91, a company may charge its own divisions, its parent, its subsidiaries and its parent’s other subsidiaries, but only for business travel and no more than “the cost of owning, operating, and maintaining the airplane” (14 CFR 91.501(b)(5)). Federal excise tax is a separate question with its own test for which companies count as related.

All dollar figures below are illustrative and round on purpose so the arithmetic is easy to follow. They aren’t market data or costs for any aircraft type.

Why flight departments charge back their costs

A flight department that sits as one line in corporate overhead is easy to question and hard to defend. When the cost follows the people who flew, each business unit budgets for its own travel, can compare it against airline or charter, and sees a busier year in its own numbers instead of the department’s.

That needs a trustworthy cost per trip. Our guide to what a trip really costs builds one from variable, fixed and per-trip costs.

Who can a Part 91 flight department charge?

Part 91, Subpart F covers large airplanes, turbojet-powered multiengine airplanes and fractional program aircraft “in operations not involving common carriage” (91.501(a)). Paragraph (b) of 91.501 lists the operations those airplanes may conduct under Part 91 instead of Parts 121, 129, 135 or 137. Paragraph (b)(5) is the one that covers corporate flight departments:

“Carriage of officials, employees, guests, and property of a company on an airplane operated by that company, or the parent or a subsidiary of the company or a subsidiary of the parent, when the carriage is within the scope of, and incidental to, the business of the company (other than transportation by air) and no charge, assessment or fee is made for the carriage in excess of the cost of owning, operating, and maintaining the airplane, except that no charge of any kind may be made for the carriage of a guest of a company, when the carriage is not within the scope of, and incidental to, the business of that company”

Read it as a set of conditions, all of which have to hold:

1. Who operates. The airplane is operated by the company, its parent, a subsidiary, or a subsidiary of the parent. A sister company under the same parent qualifies.
2. Why they fly. The carriage is “within the scope of, and incidental to, the business of the company.” The company’s business can’t be transportation by air.
3. How much. The charge can’t exceed “the cost of owning, operating, and maintaining the airplane.”
4. Guests on non-business trips. If a guest’s carriage isn’t within the scope of the company’s business, “no charge of any kind” may be made for it.

The ceiling in (b)(5) is the full cost of the airplane: ownership, operation and maintenance. A (b)(5) chargeback may include a share of crew salaries, hangar, insurance, maintenance reserves and the cost of owning the aircraft, but no profit. A rate set at cost plus a margin, or an “administration fee” that pushes total charges above cost, goes past the limit.

What if the aircraft isn’t covered by 91.501?

A single-engine turboprop or a piston twin of 12,500 pounds or less isn’t in Subpart F’s list (a large airplane is one of “more than 12,500 pounds, maximum certificated takeoff weight,” 14 CFR 1.1), so the (b)(5) exception doesn’t come from 91.501 for those aircraft. Part 119 applies to operations of smaller airplanes “when noncommon carriage is involved, except as provided in § 91.501(b) of this chapter, or in private carriage for compensation or hire” (14 CFR 119.1(a)(3)). If your department flies an aircraft outside Subpart F and charges for it, take that question to aviation counsel before setting up the chargeback.

Flight department cost allocation methods

Three methods cover most chargeback programs. They differ in who carries the cost of having the aircraft ready.

Whichever method you use, the year’s charges added together should come to no more than the year’s cost of owning, operating and maintaining the airplane. Keep the records to show it.

A worked example

A parent company operates one turbojet and charges three subsidiaries. Every figure is illustrative.

The subsidiaries flew 200, 120 and 80 hours, a total of 400.

By flight hour. The fully allocated rate is $4,000,000 ÷ 400 = $10,000 per hour.

Fixed share plus usage. The subsidiaries agreed at the start of the year to carry the fixed budget 40%, 40% and 20%, and to pay $4,000 for each hour flown.

Both methods recover the full $4,000,000 and no more. Subsidiary B pays $240,000 more under the fixed share because it committed to 40% of the aircraft and used 30%.

An hourly rate set from planned hours drifts when the plan is wrong: plan too many hours and the department under-recovers; plan too few and charges can exceed cost. A year-end true-up to actual cost keeps the total at the ceiling or under it.

By trip. A trip for Subsidiary C flies 6.0 hours, including 1.0 hour positioning with nobody aboard. Its variable cost is 6.0 × $4,000 = $24,000, and its landing, handling, parking, catering and crew travel come to $3,000. Charging direct costs only, C pays $27,000. Adding a fixed share at $2,400,000 ÷ 400 = $6,000 per hour brings it to $27,000 + $36,000 = $63,000. If the department charges only direct costs per trip, the $2,400,000 of fixed cost stays in corporate overhead, which is a choice to make on purpose.

Positioning legs, empty legs and mixed trips

Some allocation questions the method doesn’t settle by itself:

• Positioning. A leg flown empty to pick up passengers, or to return home, exists because of the trip. Charge it to that trip at the same rate as the flown legs.
• Shared trips. When two units fly on the same leg, split it by passenger count, by an agreed share, or by who requested the trip. Write the rule down.
• Maintenance and training flights. These belong to the aircraft, not to any unit. Most departments put them in the fixed budget.
• Guests on non-business trips. Under (b)(5) “no charge of any kind” may be made for that carriage, so it can’t be charged back under (b)(5).

Record each leg’s purpose and the unit it was flown for at the time of the trip, not from memory at quarter end. A consistent trip sheet helps.

Time sharing, interchange and joint ownership

Section 91.501(b)(6) adds “the carriage of company officials, employees, and guests of the company on an airplane operated under a time sharing, interchange, or joint ownership agreement as defined in paragraph (c) of this section.” They matter when the aircraft carries people from outside the operator’s corporate family, and each has its own charging rule.

What a time sharing agreement may charge

Paragraph (d) lists what may be charged “as expenses of a specific flight” for time sharing, and also for demonstration flights under (b)(3) and carriage of property under (b)(7):

1. Fuel, oil, lubricants, and other additives.
2. Travel expenses of the crew, including food, lodging, and ground transportation.
3. Hangar and tie-down costs away from the aircraft’s base of operation.
4. Insurance obtained for the specific flight.
5. Landing fees, airport taxes, and similar assessments.
6. Customs, foreign permit, and similar fees directly related to the flight.
7. In flight food and beverages.
8. Passenger ground transportation.
9. Flight planning and weather contract services.
10. “An additional charge equal to 100 percent of the expenses listed in paragraph (d)(1) of this section.”

Item 10 is where the familiar “twice the fuel cost” comes from: the fuel and other (d)(1) items, plus 100 percent of them again. It applies to time sharing and the other operations that point to paragraph (d). It doesn’t apply to a (b)(5) company chargeback, which is limited by full cost instead.

Using the same 6.0-hour trip as a time sharing flight, with illustrative fuel of 250 gallons per hour at $6.00:

The same trip at full cost came to $63,000. Maintenance reserves, engine programs, crew salaries and the base hangar aren’t on the (d) list.

For a large civil aircraft, a time sharing agreement is a lease, and 14 CFR 91.23 requires a written lease with a truth-in-leasing clause, a copy mailed to the FAA within 24 hours of execution, a copy carried in the aircraft, and notice to the responsible Flight Standards office at least 48 hours before takeoff on the first flight under it.

When a chargeback becomes compensation that needs a certificate

Part 119 applies to anyone operating “as an air carrier or commercial operator, or both, in air commerce” (119.1(a)(1)), and for smaller airplanes to noncommon carriage “except as provided in § 91.501(b)” (119.1(a)(3)). The 91.501(b) list is what lets a flight department charge without an operating certificate. Those operations are conducted “instead of those in parts 121, 129, 135, and 137” (91.501(b)). Step outside the list and the charges start to look like carriage for compensation, which the certificated parts govern.

These are the patterns that move a chargeback outside (b)(5):

• A rate that recovers more than the cost of owning, operating and maintaining the airplane, including a markup or margin.
• Charging a company that isn’t the operator, its parent, a subsidiary or a subsidiary of the parent, without a time sharing, interchange or joint ownership agreement under (b)(6).
• Charging for a guest whose trip isn’t within the scope of the company’s business.
• Carriage that isn’t incidental to the company’s business, or a company whose business is transportation by air.

For how certificated operations differ, see our comparison of Part 91, Part 135 and Part 91K. Questions about a specific structure go to aviation counsel.

Federal excise tax on chargebacks

The FAA rules decide whether you may charge. The IRS rules decide whether the charge is taxed, and the two don’t line up. NBAA’s federal excise tax page advises that “tax experts encourage operators to conduct an FET analysis any time money is moved to pay for aircraft operations” (NBAA, federal excise taxes).

The tax on transportation of persons by air has two parts, according to IRS Publication 510 (December 2025 revision):

• A percentage tax: “A tax of 7.5% applies to amounts paid for taxable transportation of persons by air.” Amounts paid include “movement of aircraft in deadhead service,” so positioning legs are part of the amount.
• A domestic-segment tax, a flat amount per segment, where “a segment is a single takeoff and a single landing.” For 2026, Publication 510 says it “is increased to $5.30.”

Two exemptions in Publication 510 bear on flight departments:

• Affiliated corporations. “The taxes don’t apply to payments received by one member of an affiliated group of corporations from another member for services furnished in connection with the use of an aircraft.” The aircraft “must be owned or leased by a member of the affiliated group and can’t be available for hire by a nonmember,” judged “on a flight-by-flight basis,” and an affiliated group means corporations “connected with a common parent corporation through 80% or more of stock ownership.”
• Small aircraft. The taxes don’t apply to an aircraft with a maximum certificated takeoff weight of 6,000 pounds or less unless it’s operated on an established line, but “the taxes apply if the aircraft is jet-powered, regardless of its maximum certificated takeoff weight or whether or not it’s operated on an established line.”

Section 91.501(b)(5) speaks of a parent and subsidiaries without a percentage. The IRS exemption needs 80% ownership through a common parent. A company that holds 60% of a subsidiary may be able to charge it under the FAA rule while the IRS exemption doesn’t cover the payment. Publication 510 also says “the person paying for taxable transportation is liable for the tax,” so the business unit paying the chargeback has a stake in getting this right. Whether a given chargeback is taxable transportation is a question for your tax advisor, who will want per-trip costs with each leg’s purpose and paying company recorded.

A chargeback checklist

1. Confirm which rule each flight falls under: (b)(5) company carriage, a (b)(6) agreement, or neither.
2. List every company you charge and its ownership link to the operator, with the percentage.
3. Write down one allocation method and the rules for positioning, shared trips and maintenance flights, and get each paying unit to agree.
4. Approve trip expenses before they enter the chargeback, so a duplicate receipt never gets billed.
5. Invoice each unit monthly or quarterly, and true up to actual cost at year end.
6. Review FET treatment with a tax advisor for every paying company outside an 80% affiliated group.

Chargebacks in Avion Desk

Avion Desk keeps expenses with their receipts and categories, and an expense counts only after it’s approved; if an approved expense is edited, it must be approved again. Each trip shows what it cost, rolled up, so the figure you charge back comes from the trip’s own costs. You can issue printable invoices, credit notes for corrections, and record payments against them. See the accounting features and pricing. To try it, start a free trial and enter last month’s trips with their expenses to see what each one cost, or request a demo.

Frequently asked questions

Can a Part 91 flight department charge business units for flights?

Yes, under 91.501(b)(5), for business carriage of the company’s officials, employees, guests and property, on an airplane operated by the company, its parent, a subsidiary or a subsidiary of the parent, as long as the charge doesn’t exceed “the cost of owning, operating, and maintaining the airplane” (91.501(b)(5)).

Does the twice-the-fuel limit apply to company chargebacks?

No. The additional charge equal to 100 percent of fuel and related costs is in 91.501(d)(10), which applies to time sharing, demonstration flights and carriage of property under (c)(1), (b)(3) and (b)(7). A (b)(5) company chargeback is limited by the full cost of the airplane instead.

Is a chargeback to a subsidiary subject to federal excise tax?

It can be. IRS Publication 510 exempts payments between members of an affiliated group (80% or more stock ownership through a common parent) when the aircraft isn’t available for hire by nonmembers, judged flight by flight (IRS Publication 510). Outside that, ask your tax advisor.

This article explains the rules in plain language and isn’t legal or tax advice; the regulation text and the IRS’s guidance govern.

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