Notwithstanding a couple of exceptions, to register an aircraft with the Federal Aviation Administration (the “FAA”) the aircraft must be owned by a citizen of the United States of America (the “US”). Congress has defined a citizen of the US as (1) an individual who is a citizen of the US; (2) a partnership each of whose partners is an individual who is a citizen of the US; or (3) a corporation or association organized under US or state law, of which the president and at least two-thirds of the board of directors and other managing officers are citizens of the US, and in which at least 75% of the voting interest is controlled by persons that are citizens of the US.
For many, the US citizenship requirement may not be an issue, while others find it an insurmountable one. For those in the latter group there is hope as alternative methods for meeting the US citizenship requirement do exist. While other options exist the most notable and popular alternative method of meeting the US citizenship requirement is the ownership trust, commonly referred to as a non-citizen trust (“NCT”).
The idea behind a NCT is simple; it works by transferring legal title of an aircraft to a US citizen trustee (“Owner Trustee”), often a professional trustee, to hold the aircraft in trust for the benefit of the non-citizen. The aircraft is then leased back to the non-citizen beneficiary so they can use, maintain, and otherwise possess the aircraft. The end result is an aircraft owned by a US citizen and operated by a non-citizen. The FAA has recognized the NCT arrangement as a legitimate method of meeting the US citizenship requirements for registration.
The NCT structure is subject to a high level of scrutiny by the FAA to make sure it meets all regulatory requirements of the relationship between trustee and beneficiary. Regardless of the high level of control that the non-citizen beneficiary has over the aircraft, ultimate control and responsibility is held by the Owner Trustee. As part of its scrutiny the FAA requires, among other things, that the Owner Trustee (a) confirm by affidavit that the terms of its relationship limits control by the non-citizen beneficiary to a certain percentage, and (b) submit all documents legally affecting the relationship established under the NCT including the lease that returns operational control to the non-citizen beneficiary. Not only does the FAA require these safeguards, they typically subject the trust documents to review and approval by Aeronautical Center Counsel for the FAA prior to acceptance for registration purposes.
Accordingly, the NCT is a frequently used and well accepted method for meeting the US citizenship requirement for the purpose of aircraft registrations. When properly executed and applied the NCT can provide a useful method for US registration of aircraft by non-citizens. If you find yourself needing an alternative method for obtaining US citizenship for aircraft registration purposes give us a call at (405) 252-8888 or contact us and we can almost always help.