Wednesday, May 4, 2016

Stuart Smith named as Partner at Paramount Law Group, PLLC

On April 1, 2016 Stuart Smith joined James Waldon and Brent Nourse as a partner at Paramount Law Group, PLLC.  Stuart originally joined Paramount January 1, 2015.  "Stuart has been a great addition to our practice" said Managing Partner, Jim Waldon.  "Stuart's years as an aviation attorney has complimented our aviation law practice very well"

 Stuart W. Smith specializes in aviation law with an emphasis on air crash litigation, insurance coverage issues and administrative law.  Stuart defends airlines, pilots, aircraft owners, mechanics, repair stations, aerial applicators and Part 135 operators from claims arising from aircraft accidents, environmental claims and FAA enforcement actions.  Before he became a lawyer, Stuart worked as a financial consultant for a well-known international investment firm where he developed an offshore facility for international investors to trade in the U.S. securities markets.  Stuart is an adjunct professor of law at Lewis and Clark Law School in Portland, Oregon where he teaches Aviation Law.  Stuart is an instrument rated private pilot with over 1500 hours. 

"I am excited about what we are doing at Paramount" said Stuart, "we are establishing ourselves as a national boutique aviation law firm.  I am glad I can contribute."

Paramount Law Group is a national aviation law firm located in Seattle, Washington and Portland, Oregon.  Paramount was founded six years ago.  The attorneys at Paramount focus on litigation, aircraft transactions and regulatory matters.  For more information please contact Jim Waldon at 206.612.7938 or at

Tuesday, March 15, 2016

New “Tax Avoidance” Rules Significantly Affect Aircraft Owners

On April 2, 2015 the Washington Department of Revenue issued its final “tax avoidance” rules explaining the implications of RCW 82.32.655, a statute enacted in 2010. Collectively, the rules (WAC 458-20-280, WAC 458-20-28001, WAC 458-20-28002, and WAC 458-20-28003) address whether, in the Department of Revenue’s view, a transaction or arrangement is designed to unfairly avoid taxes contrary to RCW 82.32.655.
Many Washington aircraft owners over the years have acquired aircraft in a stand-alone company, typically a limited liability company formed for the specific purpose of owning the aircraft, which then leased the aircraft to another party, typically the owner of the limited liability company, to use for business or personal flights.   This leasing structure for aircraft ownership was often necessary to comply with the Federal Aviation Regulations and additionally permitted aircraft owners to avail themselves of a “sale-for-resale” exemption to either sales tax due on the purchase price of an aircraft at the time of its acquisition in Washington or use tax due upon the aircraft’s first use in the state.  Instead, the aircraft owner was permitted to collect from the lessee sales tax on fair market value lease payments throughout the lease term, which were then remitted to the State.
In the midst of a 2010 budget deficit the Washington State Legislature passed a tax bill targeting, among other things, certain “sale-for-resale” aircraft lease arrangements constituting “unfair tax avoidance.”  “Unfair tax avoidance” was deemed to include any transaction or arrangement by which a taxpayer vested legal title or ownership of tangible personal property in another entity controlled by the taxpayer in order to avoid Washington sales or use tax.
Implications of New Rules:  
As construed by the Department of Revenue in the new rules, the 2010 statute potentially exposes aircraft owners to up to 9.5% sales or use tax on the purchase price of their aircraft together with “tax avoidance” penalties of 35% of the unpaid tax, plus any other generally applicable penalties and interest, for engaging in unfair tax avoidance.
Not all sale-for-resale leasing structures will be deemed invalid under the Department of Revenue’s new rules.  Significantly, the rules include a “safe harbor” in WAC 458-20-28003(2)(i) applicable when “substantially all use” (95%) of the aircraft is under a lease (i) for a reasonable rental value, (ii) by a substantive operating business, (iii) for bona fide business purposes.
Even if otherwise applicable, the tax avoidance penalty may be waived by the Department of Revenue if the taxpayer discloses its participation in an affected arrangement or transaction to the Department in writing before the Department provides notice of an investigation or audit or otherwise discovers the taxpayer’s participation.
The new rules take effect May 3, 2015 and will be applied retroactively by the Department of Revenue through 2011, potentially ensnaring aircraft owners who entered into structures they legitimately believed were valid at the time.
While Washington is among the first states to target aircraft sale-for-resale exemptions, other states seeking to meet spending goals will likely be looking at sales and use tax exemptions applicable to aircraft as a potential revenue-generating source.  
Chris is an aviation attorney at Paramount Law Group, PLLC in Seattle, Washington.  His practice focuses on aviation transactional matters.  Chris can be reached at or at 206.979.0516

Tuesday, March 10, 2015

Paramount Law Group, PLLC expands to Portland, Oregon

“This year we are happy to announce that we have opened a new office in Porland, Oregon” said Brent Nourse, partner at Paramount Law Group, PLLC. “We are focusing on our national aviation law practice”, said Brent, “and this expansion allows us to better serve our Oregon clients”.  
In addition to Portland, Paramount has offices in Seattle and San Francisco. Their aviation law practice includes transactional law, regulatory law and aviation related litigation.  The Portland office will be managed by Paramount’s newest attorney, Stuart Smith.  For more information please contact Stuart at

Thursday, May 30, 2013

Part 91 vs. Part 135. Which Makes the Most Sense for Business Aircraft Operators?

Part 91 vs. Part 135.  Which Makes the Most Sense for Business Aircraft Operators?

Generally speaking, the provisions of 14 CFR Part 91 (“Part 91”) are less stringent, and offer numerous benefits, when compared to operating under 14 CFR Part 135 (“Part 135”).  There are, however numerous areas that should be reviewed when making this decision

Operating for Compensation or Hire.  One benefit of operating under Part 135 is the ability to be compensated for aircraft operations.  Under Part 91 you cannot operate for compensation or hire.  So if the aircraft is to be used by others under Part 91, those using the aircraft could only reimburse the operator of the aircraft for the actual cost to operate that flight.   If the FAA determines that you have operated for compensation or hire (and therefore unauthorized Part 135 flights) the owner of the aircraft, and the aircraft’s pilots, are subject to monetary penalties and certificate actions. 
The solutions here are to ensure the aircraft leases are properly drafted and that the appropriate amount, if any, is charged to anyone using the aircraft.

Wet lease vs. dry lease.  The FAA has determined that operations conducted under a wet lease are Part 135 flights and cannot be conducted without a Part 135 certificate (there are a few exceptions such as operating under a timeshare or interchange agreement).  The FAA defines wet lease as “a lease in which the lessor provides both the aircraft and the crew….”  In order to operate under Part 91 then, an operator generally must ensure they are operating under a dry lease.  This can be done by ensuring the pilots are provided by an entity other than the lessor and is often done by using a flight services agreement.  

Operational Control.  A major area of focus by the FAA is operational control.  The entity responsible for the safety and regulatory compliance of a particular flight has operational control.  Under Part 135 this issue is easily resolved as the Part 135 certificate holder is deemed to have operational control. 
Under Part 91 the issue of operational control faces more scrutiny by the FAA.  If the owner of the aircraft leases the aircraft to one or more lessees the operational control issue can be resolved through language in the aircraft leases.  I highly recommend that operators have their leases reviewed by an experienced aviation attorney.    

Flight restrictions.  Under Part 91 an operator is not subject to numerous Part 135 requirements that restrict landing at certain airports and runways.  In addition, Part 91 operators are not subject to Part 135 crew rest regulations.

Taxes.  Under Part 135 operators are required to pay Federal Excise Tax (FET).  Under Part 91, generally the taxes paid would be limited to use tax as required by the Washington Department of Revenue.  This issue is ever changing and I recommend you speak to a tax adviser when determining payment of taxes.

Depreciation.  Another benefit of changing to Part 91 is that the aircraft can be depreciated in 5 years rather than 7.  Again, this issue should be discussed with a tax adviser.    

May 30, 2013, James M. Waldon, Managing Partner, Paramount Law Group, PLLC.  Jim has been practicing aviation law for fifteen years.  He can be reached at 206.612.7938, and at