machz990

For reference here is the first part of tax equalization program:

Tax Equalization

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The objective of tax equalization is to provide a mechanism whereby employees may be transferred internationally without incurring a financial loss due to income and social tax cost differences arising between the U.S. and the country of assignment ("Host Country"). The Program is designed to ensure that these employees incur a total tax burden on stay-at-home ("Hypothetical") income and net personal income consistent with that which would have arisen had they remained employed by the Company in the U.S. The tax equalization program is designed and intended to yield neither an economic benefit nor detriment to the employee on foreign assignment.

Tax equalization is accomplished through the collection of a Hypothetical federal, state and local income tax from the overseas employee (similar to withholding taxes on your US pay check). In consideration for the collection of the Hypothetical income tax, the Company pays, either directly or through reimbursement, the overseas employee's actual U.S. federal income, state and local income, foreign income and social tax obligations. U.S. social security tax ("FICA") will continue to be the obligation of the overseas employee and is withheld by the Company from paid compensation.

I attended the HUB meeting last night (late arrival) and ran the following scenario past two MEC reps. They agreed that your tax burden could be as follows:

Most FedEx pilots are homeowners and their biggest tax deductions are mortgage interest and property taxes. These deductions reduce your tax burden by a considerable amount and may allow you to be in a lower tax bracket. Now if you sell your home and move to an FDA your biggest tax deductions are gone and your tax equalization will be based on your current income with relatively few deductions. Also for many, if not most, this will elevate you into the AMT and it's separate tax tables. Plus once you are under the AMT some additional deductions will no longer apply. Therefore if you sell your home, move to an FDA your "equivalent" tax burden will be based on being a highly compensated renter with no deductions under the AMT and not as the homeowner you were in the previous year prior to moving to an FDA. This can amount to several thousand dollars of additional tax burden.

I have not seen this addressed anywhere. Again I am just throwing this out there for everyone to digest and see where they would be with the IRS if they no longer had the deductions associated with home ownership.

fdxmd11fo

If you rent out your place you have to claim the rent as income. That basically washes out the mortgage deduction

Popeye

DW also mentioned last night, the tax equalization deal is not so much a good deal for us to make a concession for, as much as it was a requirement imposed upon the company by France and China in order to facilitate have these FDAs at all. So why should I make a concession becaus of it? Whatever this costs FDX to provide Tax Equalization it is the cost of doing business, not something that I should feel I need to re-imburse the company. Buying fuel for the airplanes is a cost of doing business, perhaps I should be grateful I have fuel to destiantion and make a concession to the company for that?

Nice try to FDX, but I would prefer to take a reasoned approach to making these FDAs work without all the risks and unknowns being placed squarely on my back.

Vote NO.

iarapilot

Most FedEx pilots are homeowners and their biggest tax deductions are mortgage interest and property taxes. These deductions reduce your tax burden by a considerable amount and may allow you to be in a lower tax bracket. Now if you sell your home and move to an FDA your biggest tax deductions are gone and your tax equalization will be based on your current income with relatively few deductions. Also for many, if not most, this will elevate you into the AMT and it's separate tax tables. Plus once you are under the AMT some additional deductions will no longer apply. Therefore if you sell your home, move to an FDA your "equivalent" tax burden will be based on being a highly compensated renter with no deductions under the AMT and not as the homeowner you were in the previous year prior to moving to an FDA. This can amount to several thousand dollars of additional tax burden.


Just another example of a plan not well thought out. Should I pick curtain number 1, curtain number 2, or just keep what I have?

USNA84

I rent out three houses ... Tax benefit, added equity, and value down the road (3-5 years) is pretty substantial for a long term investor ...

MD11Fr8Dog

Wanna rent my place for what my mortgage is?

machz990

I can't believe this subject doesn't generate more discussion. Am I communicating this effectively? If you sell your home and move to an FDA your taxes and subsequent "equal tax burden" that the company says you will bear under the LOA will go up substantially for most.

Albief15

I agree. I also don't think it is the company's job to "make us whole" as if we owned a home back in the states.

What IS important is that each person take a cold hard look at whether or not the upgrade (if applicable) is worth the tradeoffs. You MAY actually have a lot more taxable income if you go overseas due to loss of real estate deductions, etc.

So--figure out what you tax basis will be.

Next--factor in or factor out auto costs. If you skip owning a vehicle in either domicile (which is an option since both have good transport) then you won't be paying auto payments and insurance, etc.

Kids in public school? Factor in tuition. (dead horse...)

You get the idea. This is the classic "your mileage may vary" type gig.

What I suspect most folks will find out is that if they look at the numbers, even making wide-body captain's pay may not create much "monetary" gains over staying in MEM and being an narrow-body captain. Ditto the S/O that goes to Paris to fly the 757 as an FO.

That doesn't mean some folks won't come out ahead, or that other folks won't bid it for the "adventure". However--honestly--I don't think anyone is going to be doing it for the money.

My concern is that as a lot of people take a long hard look at the numbers, we'll be short in some seats and we'll be inversing a fair number of folks. The union disagrees. The company has said "no problem--we'll limit that to 30 days" which is a start. It also means if conditions are as brutal as I think they could be (I'm thinking riding the bus to Canton 3 days a week!) or struggling against a strong euro in France, they will have to inverse MORE Of us to cover the vacancies as they move up the list every month. I expect a lot of frustration and anger between pilots as some guys go and some guys don't (due to vacation, Military leave, family circumstances, etc). Part of the reason I am so adamantly opposed to this LOA is the potential it creates for guys to b1tch, banter, and bicker about being sent away at the "worst possible" times for them personally. As a 6 year Air National Guard guy, I also know there is a perception some guys abuse mil leave. At the same time, we've got guys who have been in and out of combat the last 5 years and we've also had 2 fighter pilots killed on training missions in the last couple years. Although I no longer fly F-15s, I am very sympathetic to the guys trying to hold down two jobs and stay current in two jets. The last thing one of those guys who get about 5-6 days off total a month need is to take a bunch of grief from another pilot for "scamming" his way out of an STV. When we find ourselves attacking each other over something we shouldn't even have in our contract, we all end up losing.

If we just took a red pen through the STV, we'd be okay. Then we'd have to choice to bid or not bid, go or stay. That clause, however, brings everyone--empty nesters, new hires, mid level guys--into the mix.

machz990

Albie, Good points.

The reason I started this thread was because I hadn't heard or seen it discussed anywhere. I just wanted to make sure that people realize that their particular tax burden may be significantly higher if they sell a home and move to an FDA.

Laker

I don't see how you figure MORE folks will get inversed over time. The STV only applies to 18 months out of the first two years. The first vacancy bid will cover that whole time period. If this is as bad of a deal as you say, and no one bids it after that, the company can no longer use the STV option. Unless they say they are closing down the FDA in which case they would need fewer pilots. I know they could open a "new" FDA with new pilots, but do you really think the company's goal is to man these FDA's with STV's?

Think about this. When the company needed more pilots to go to Anchorage last time, they already had the ability to inverse people out of Memphis to fill those spots as Temporary Vacancies. They hired off the street instead (purple nuggets). The STV idea came from the union, not the company. The company has shown no propensity to use this particular option in the past. They may have to do it this time, but I think, based on past evidence, it is hard to argue they want to. Fred wants to fill those FDA spots with permanent FDA members. STV's are not as efficient. They cost more. They just cause more problems.

Are STV's a give back? You can make a strong argument that they are, but they are not unprecedented. What would be unprecedented would be the company using them in the wholesale manner that many seem to imagine happening. I know that you personally have said there are bigger problems than the STV's, but many seem stuck on this issue when it seems to me that a realistic viewing of past events shows that this issue may not be the "showstopper" some have made it out to be.

Just my 2 cents