Outer Space Taxation – Expanding the power of IRS to tax beyond our planet.

Planning to go on one of the next flights to space?  You may find an extra charge on your bill to the IRS.

In a press release issued on July 20, 2021 by U.S. Rep Earl Blumenauer (D-OR), a senior member of the Ways and Means Committee, he announced plans for a new space tax.  Already the U.S. tax code taxes U.S. taxpayers on worldwide income.  Now under the proposed Securing Protections Against Carbon Emissions (SPACE) Tax Act, a new excise tax would be imposed on commercial space flights carrying human passengers for purposes other than scientific research (so called “space tourism trips”).

“Space exploration isn’t a tax-free holiday for the wealthy. Just as normal Americans pay taxes when they buy airline tickets, billionaires who fly into space to produce nothing of scientific value should do the same, and then some,” said Blumenauer. “I’m not opposed to this type of space innovation. However, things that are done purely for tourism or entertainment, and that don’t have a scientific purpose, should in turn support the public good.”

While proponents of suborbital space flights point to transatlantic flights as having similar carbon footprints, these flights carry significantly more passengers and travel much farther. The result is space launches accounting for an estimated 60-times greater emissions than transatlantic flights on a per-passenger basis, enough to drive a car around the earth and more than twice the carbon budget recommended in the Paris Climate Agreement.

Researchers are also actively exploring the impact of space launches on accelerating the depletion of stratospheric ozone, which is orders of magnitude greater for rocket engines using alumina-producing solid rocket fuel or black soot-producing kerosene.

Blumenauer envisions the SPACE Tax Act to include a per-passenger tax on the price of a commercial flight to space, like that for commercial aviation.  That’s right in case you have not noticed the IRS imposes an excise tax on traditional airline trips and excise taxes are nothing new to IRS.

You will find excise taxes in many goods and services that are sold including fuel, tires, cigarettes and so much more.  They typically are not separately stated like when you see sales taxes on your receipt so that is why excise taxes are typically referred to as a “hidden tax”.

Getting back to the proposed excise tax on space flights, it would also include a two-tiered excise tax for each launch into space. The first tier would apply to suborbital flights exceeding 50 miles above the Earth’s surface but not exceeding 80 miles above the Earth’s surface. The second tier, which would levy a significantly higher excise tax, would apply for orbital flights exceeding 80 miles above the Earth’s surface.

Exemptions would be made available for NASA spaceflights for scientific research purposes. In the case of flights where some passengers are working on behalf of NASA for scientific research purposes and others are not, the launch excise tax shall be the pro rata share of the non-NASA researchers.

Given that Virgin Galactic’s most recently stated ticket price was $250,000, whatever excise tax rate that could ultimately be imposed would make a nice “line item” payment to the IRS.  According to a table of U.S. Government-Imposed Taxes On Air Transportation published by the organization Airlines For America, domestic passenger air travel excluding flight segments is subject to an excise tax rate of 7.5% in 2021.

What Should You Do?

Tax planning is not just for the ultra-wealthy who can afford space flight.  You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income.  Additionally, if you are involved in the cannabis industry, check out Cannabis Tax Attorney.  Also, if you are involved in crypto currency, check out what a Bitcoin tax attorney can do for you.