Most dry-lease problems aren't tax problems. They're §91.23 problems. The truth-in-leasing rule has been on the books for forty years, and it's the single regulation operators most commonly muddle when they're trying to be helpful by lending out an airplane.
Here's the rule in language the FAA actually used, then what it means when you're the one running the operation.
What §91.23 actually requires
For any lease of a U.S. civil aircraft of more than 12,500 lbs maximum certificated takeoff weight (and any time-share, interchange, or lease covering a large or turbojet aircraft), the parties must:
- Put the lease in writing
- Mail a signed copy to the FAA Aircraft Registration Branch in Oklahoma City within 24 hours of execution
- Notify the FSDO at least 48 hours before the first flight under the lease
- Carry a true copy of the lease in the aircraft when operating under it
- Include a written truth-in-leasing clause that names the operator and identifies who has operational control
What "operational control" actually means
This is where most operators trip. The FAA defines operational control in §1.1: the exercise of authority over initiating, conducting, or terminating a flight. On a real dry lease, the lessee has operational control. Not the lessor. Not the management company. The lessee.
That's why a "dry lease" structured with the lessor providing the crew is — by FAA definition — a wet lease, and a wet lease that isn't being run under Part 135 is a regulatory problem.
If the same entity is providing both the aircraft and the pilot, that's not a dry lease. Call it whatever you want on paper; the FAA reads operational control through who's making the go/no-go call.
The structure that holds up
Standard dry lease pattern
- Lessee provides the pilot — independently sourced, not the lessor's pilot
- Hourly dry rate, Hobbs-based
- Block prepayment, non-divisible, wire-only
- Maintenance cost pass-through to lessee
- Insurance verification before key handover, lessee named insured or additional insured per policy
- Truth-in-leasing clause embedded in the lease body
What we'll publish in the full version
This is the launch stub. The full piece will include:
- The exact §91.23 truth-in-leasing language we use
- A walk-through of the N818SE / Brave Davis dry lease structure
- How to handle MX cost pass-through on big-iron leases without turning it into a wet-lease problem
- The FSDO 48-hour notification — what it actually looks like and who to send it to