For business aviation, the latest $787 billion economic stimulus bill–H.R.1, the “American Recovery and Reinvestment Act”–giveth with one hand and taketh away with the other.
Sparta, N.J.-based business aviation consultancy Brian Foley Associates today said it believes the recovery of the business jet market will be sooner than previous estimates, despite “being nowhere near the bottom” of the current market cycle. “It’s hard to think recovery in this environment, but there’s reason to believe that we may come out of this a little sooner than widely expected,” noted company president Brian Foley.
Under a provision of President Bush’s economic stimulus package, purchasers of new aircraft can take a first-year depreciation deduction of 30 percent for the taxable year in which it is placed in service. H.R.3090, “The Job Creation and Worker Assistance Bill of 2002,” included a 30-percent bonus depreciation provision on the value of certain capital assets for 36 months.
President Bush signed an economic stimulus plan on February 13 that extends bonus depreciation for new aircraft purchased and placed in service through next year. The legislation makes it possible for purchasers who plan to use their aircraft primarily for trade or business purposes, and thereby qualify for MACRS accelerated depreciation, to write off 50 percent of the purchase price during the first year of ownership.
The $168 billion economic stimulus plan President Bush signed yesterday includes a provision that alters section 168(k) of the Internal Revenue Code to allow buyers of factory-new aircraft to take the bonus depreciation for aircraft that will be used more than 50 percent of the time for business purposes and are placed in service this year and, in many cases, next year. Minimum value of aircraft that fall into section 168(k) is $200,000.
Both houses of Congress passed a bill that extends until December 31 next year the “placed-in-service” deadline for business aircraft purchased on or before December 31 this year to qualify for a 50-percent bonus depreciation allowance. It became law when President Bush signed the bill on October 22.
The House of Representatives approved the American Jobs Creation Act of 2004 (H.R.4520) on June 17, paving the way for a one-year extension of the time allotted to place into service business aircraft purchased under the accelerated-depreciation tax bonus.
Although the accelerated-depreciation bonus has been credited with a pickup in orders for new business jets, the General Aviation Manufacturers Association is encountering rough going in the Senate over its efforts to get the tax break extended.
The General Aviation Manufacturers Association has launched a campaign to extend the accelerated-depreciation schedule on new capital equipment–including business aircraft–which it calls a “defining factor” in $2 billion in jet sales. GAMA also wants to increase the period of time between the aircraft purchase date and when it has to be placed in service to qualify for the added tax incentive.
Edelstenne also said Falcon deliveries will reachbetween 50 and 55 this year. Although he said economic conditions have improved “measurably” since last year, this figure is short of the 63 Falcons delivered last year. He cited two reasons for the lower delivery projection. “The first was that we received orders for just 40 Falcons in 2003,” although the company delivered 49 that year.