May 7, 2014 – Newsletter
There are people who dream and there are people who scream. There are people who cry and there are people who fly. The good news is that this is a choice!
Non-Citizens can register aircraft in the U.S.: This is strictly a blog in layman’s terms – if you are interested in creating a trust of any kind, you should consult an aviation attorney!
The Code of Federal Regulations – 14 CFR Parts 47 (Registration) and 49 (Recording) -provide guidelines for the transactions that the Civil Aviation Registry will accept, and dictate how to accomplish registration, recording of documents and other functions of the Registry – imports, exports, interests in engines, propellers and spare parts locations (for air carriers only), security agreements, leases, conditional sale contracts, releases and satisfactions, and Artisan’s or Materialman’s liens, and supplements, assignments and amendments to the foregoing, as well as detailed information about registering directly to non-citizen corporations (14 CFR 47.9), registering under Non-Citizen Owner Trusts (14 CFR 47.7) or registering under a Voting Trust (14 CFR 47.8).
Registering Directly to a Non-Citizen Corporation
(if the aircraft is to be based and used primarily in the United States)
If a non-citizen corporation is organized and existing under the laws of one of the United States or its territories or possessions, and owns an aircraft, and it is going to be based and operated in the United States at least 60% of the time, then that corporation can register as a “non-citizen corporation” and operate the aircraft without any kind of trust. The corporation provides to the FAA a report of its operations within the United States every six months. The FAA requires a copy of the certificate of incorporation, a certification that it is lawfully qualified to do business in one or more states; a certification that the aircraft will be based and primarily used in the United States; and the location where the records of the aircraft’s operation will be maintained. Except for submitting the certified copy of its certificate of incorporation, the other information is contained in the aircraft registration application.
(if a non-citizen owns an aircraft and it is not going to be based and primarily used in the United States
If a non-citizen corporation owns an aircraft and it is NOT going to be based and operated in the United States most of the time, then we have a couple of options from which to choose – while still keeping the aircraft registered on the U.S. Registry:
Non-Citizen Owner Trust (available to corporations and individuals) and a Voting Trust. (The Voting Trust option is available only, of course, to corporations organized and existing under the laws of one of the states, territories or possessions of the U.S. – not LLCs and not individuals).
The most noticeable difference in the two trusts is this: with a voting trust, the aircraft is registered to the corporation itself, and in a non-citizen owner trust, the aircraft is registered to the owner trustee.
To create a voting trust, the corporation must be organized and existing under the laws of one of the states, territories or possessions of the U.S., and at least 75% of the voting stock must be placed in the hands of a U.S. citizen voting trustee.
In addition to the voting trust agreement the FAA requires an affidavit by the voting trustee as to its complete independence from all parties to the trust (i.e. that it is not a past, present or prospective director, officer, employee, attorney, or agent of any party to the trust agreement; that it is not a present or prospective beneficiary, creditor, debtor, supplier or contractor to any party to the trust agreement; and that each voting trustee is not aware of any reason, situation or relationship under which any other party to the agreement might influence the exercise of the voting trustee’s totally independent judgment under the voting trust agreement), and that the voting trustee is a U.S. citizen.
Voting trust agreements must provide for the succession of a voting trustee in the event of death, disability, resignation, termination of citizenship or any other event leading to the replacement of any voting trustee.
Non-Citizen Owner Trusts
Great scrutiny has been focused by FAA Washington and the Aeronautical Center Counsel’s office in Oklahoma City on non-citizen owner trust agreements since September, 2013, when the FAA’s “policy clarification” was published in the Federal Register, requiring certain language in the trust agreement, and the filing of all documents affecting a relationship under the trust (usually the operating agreement -either as an attachment to the trust agreement or separately recorded in the FAA aircraft record). The “clarification” also requires the owner trustee to be aware who is operating the aircraft at all times, and be able to tell the FAA the particulars of that operation quickly, if asked.
In a non-citizen owner trust, the title to the aircraft is passed to the owner trustee. Usually there is an operating agreement, or operating lease agreement, between the owner trustee and the trustor which allows the trustor to operate the aircraft during the term of the trust.
The FAA requires that the owner trustee provide an affidavit addressing the citizenship of the beneficiaries of the trust, and to make the statement that there is no security interest incorporated within the trust, and that no non-citizens or resident aliens have more than 25% aggregate power to influence or limit the owner trustee from exercising its duties under the trust. The owner trustee’s affidavit contains language that every document affecting a relationship under the trust has been filed with FAA.
As of this writing, the Aeronautical Center Counsel’s office (“ACC”) in Oklahoma City is reviewing each and every trust instrument and its accompanying affidavit and operating agreement for compliance with the “policy clarification”. The ACC then provides a written opinion to the submitter as to whether the documentation meets the requirements. Those opinions are then filed with the Aircraft Registration Branch along with the evidence of ownership, registration application and trust documentation, as evidence that the trust documentation is approved. Not a single trust agreement is processed by the Civil Aviation Registry’s Aircraft Registration Branch without the ACC opinion!
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