Founder & Managing Member
Private aircraft are among the most valued executive benefits, offering convenience, security, and time efficiency. However, when public companies provide personal aircraft use to executives, the Securities and Exchange Commission (SEC) views this benefit as a reportable perquisite, subject to strict disclosure and valuation rules.
For high-net-worth executives and corporate boards in Florida and across other major markets such as Texas, New York, and California, improper reporting can lead to shareholder disputes, reputational damage, and regulatory penalties. At AVTax Advisors, PLLC, we help clients navigate the SEC’s evolving perquisite reporting requirements to maintain transparency and compliance.
What Is a Reportable Perquisite?
Under SEC Regulation S-K, Item 402, a perquisite or personal benefit is any item of value provided to an executive that is not integrally and directly related to the performance of their duties. Personal use of company aircraft—even if for convenience or security reasons—is considered a perquisite unless there is a compelling business justification.
If the total value of perquisites exceeds the $10,000 annual threshold for a named executive officer (NEO), each individual benefit must be disclosed in the company’s proxy statement and annual filing (Form 10-K).
Valuation Methods: How to Report Aircraft Use
The SEC requires that perquisites be reported at their aggregate incremental cost to the company, not the market value or charter equivalent of the flight. This method often results in a lower disclosed value than the actual benefit to the executive; however, it must reflect the actual costs incurred by the company.
Incremental cost may include:
- Fuel and oil
- Landing fees
- Crew travel expenses
- Catering and on-board services
- Maintenance directly associated with the flight
- Pro-rated hangar or storage costs (if specific to that flight)
Notably, fixed costs—such as depreciation, insurance, or pilot salaries—are generally excluded unless they increase due to the executive’s personal use of the assets.
Disclosure Obligations
Proper reporting requires careful coordination between the legal, finance, HR, and aviation departments. The company’s proxy and 10-K must include:
- Total Value of Perquisites provided to each NEO
- Breakdown of Individual Benefits if the total exceeds $10,000
- Narrative Explanation of aircraft usage, including any security-related justification (which must be supported by a third-party assessment, such as a board-approved security study)
- Footnotes in the Summary Compensation Table showing the methodology used
Failure to comply with these rules can result in SEC comment letters, proxy scrutiny, shareholder litigation, or reputational fallout.
Common Pitfalls and Misconceptions
Many companies—even well-established public issuers—make missteps in reporting executive aircraft use. At AVTax Advisors, PLLC, we regularly help clients avoid the following pitfalls:
- Using charter-equivalent value instead of actual incremental cost
- Omitting travel logs or using vague categories like “business” or “mixed use” without documentation
- Failing to report family members or guests flying without a business purpose
- Improperly justifying flights as security-related without a formal board-approved study
- Excluding international flights or repositioning legs from cost calculations
We also advise clients on mitigating disclosure risk, such as adopting written aircraft use policies, flight logging protocols, and board-level security justifications where appropriate.
SEC Compliance Checklist for Aircraft Use Reporting
To reduce the risk of SEC inquiries or shareholder concerns, public companies should implement a robust compliance process:
- Track all aircraft usage in detail, including passenger names, flight purpose, and destinations
- Categorize flights accurately as business, personal, or mixed
- Calculate incremental cost using verifiable data from flight departments or operators
- Document third-party security assessments if claiming security-related personal use
- Coordinate across departments to ensure accurate reporting in proxy and 10-K filings
- Review agreements with executives for consistency with use policies and reporting practices
Why It Matters: Legal and Financial Consequences
Inaccurate or incomplete disclosure of executive perquisites—especially those involving private aircraft—can trigger:
- SEC enforcement actions
- Restatements of financial filings
- Loss of shareholder trust
- Compensation clawbacks
- Reputational harm for both executives and boards
Given increased investor focus on executive pay and the use of corporate resources, companies must ensure their perquisite reporting is beyond reproach.
How AVTax Advisors, PLLC Can Help
Whether you’re a board member seeking compliance guidance or an executive wondering how your aircraft use is reported, AVTax Advisors, PLLC, offers tailored legal counsel that bridges aviation and regulatory compliance. Our Florida-based firm works with clients nationwide—including in New York, Texas, and California—to develop defensible reporting practices, calculate perquisite value, and align with SEC expectations.
We understand that high-net-worth executives value both privacy and efficiency; however, transparency is equally important when managing aircraft-related benefits. Our team ensures you meet your reporting obligations without compromising your operational goals.
Need help complying with SEC reporting rules for aircraft use? Contact AVTax Advisors, PLLC, today for legal guidance on executive travel disclosures and tax implications.