Flight Options wins unanimous Sixth Circuit reversal of $39 million "ticket tax" judgment

Client(s) Flight Options, LLC

Jones Day successfully represented fractional jet ownership company Flight Options, LLC ("Flight Options") before the U.S. Court of Appeals for the Sixth Circuit, obtaining a unanimous reversal of a $39 million excise-tax judgment. The case presented the question whether a tax on the "amount paid for" domestic "transportation by air" applied to fixed monthly fees that Flight Options charged in exchange for managing and maintaining its customers' aircraft.

In a published opinion authored by Chief Judge Sutton and joined by Judges Murphy and Clay, the Sixth Circuit agreed with Jones Day's statutory-interpretation arguments. The court held that the tax applies only to flight-by-flight usage charges, not to monthly management fees. The text, statutory context, the IRS's own regulations, and two canons of interpretation all supported this reading.

Judge Murphy, joined by Chief Judge Sutton, wrote a concurrence to highlight the role of the taxpayer canons. The deeply rooted pro-taxpayer canon required the court to resolve any ambiguity in the tax code in Flight Options' favor. And a third-party collector canon prohibited the IRS from imposing retroactive liability on Flight Options as a "deputy tax collector" because there was no "precise and not speculative" notice of an obligation to collect taxes on fixed fees.

Flight Options, LLC v. United States, No. 25-3582 (6th Cir.)