As most NBAA attendees will attest, the safe and legal operation of an aircraft is a complex task. With a seemingly endless list of agencies to answer to, it is all too easy for something to fall through the cracks. Aviation law specialist Advocate Consulting Legal Group (Booth No. C9314) assists its clients in developing and implementing entity structures and contractual arrangements to maximize tax savings, while complying with FAA, DOT and state regulatory requirements.
As the Naples, Fla.-based firm notes, it does not compete with a customer’s current advisors, but complements them in the development of an aircraft plan and in helping with its integration. “Our typical client is a small business that has other tax and accounting needs pertaining to their business. They’ve got payroll, they have inventory, we don’t take care of any of that,” said Jonathan Levy, the firm’s legal director. “We’re [work with] just aircraft, so we complement their existing advisors because aircraft is a complicated enough field that a specialist is called for.”
Advocate Consulting, which has been in existence for 15 years, currently has approximately 1,600 clients and a staff of eight aviation attorneys and eight accountants who specialize in aviation taxes. “When a business acquires an aircraft, I think it should expect that it’s going to be hauling itself into an entire web of rules that apply to that aircraft, and we’re the specialist that can help them solve those problems,” Levy said.
Currently one of the biggest issues facing Advocate Consulting clients is the new aircraft personal-use rules that were released by the Treasury department last year. “The new rules require additional information about each passenger to be retained, whereas the old rules allowed information about just the aircraft flight,” Levy told AIN. “We’ve developed online software that walks people through the process of keeping all the records that they need to keep and will perform the calculations that tell them the tax consequences of their aircraft usage.”
Another looming issue could come at the end of the year when bonus depreciation tax incentives on business aircraft purchases are set to expire. “We have seen a series of years where they were supposed to expire and then they got extended, but it’s always a nail-biter,” said Levy. “With congress these days you never know what is going to come out at the end of the year.”
Given the current budget debates, Levy believes that this could be the year when the program finally comes to an end. “It would mean that [before the end of 2013] is the best time to purchase a plane that they are going to use any time in the near future,” he noted. “There’s no reason to think that 2014 is going to as favorable a purchasing environment as 2013, from a tax perspective.”
Under the current 179 expensing election rules, a qualified business aircraft owner could have a deduction of up to half a million dollars off the top of the purchase price of the new or used aircraft. “That $500,000 is slated to go down to $25,000 next year, so the laws on the books right now are going to cut that expensing allowance by 95 percent,” he said.
Also in jeopardy is a special bonus depreciation incentive for buyers of qualified new aircraft, which allows 50 percent of the purchase price to be taken as a deduction in the first year, with the remainder depreciated according to the ordinary schedule. “We know that’s good this year, but we don’t know whether that will be around next year. We don’t have much reason to think it will,” said Levy. “It’s a good reason to put your plane in service in 2013.”