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.
Generally Accepted Accounting Principles
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.
At the NBAA Convention last month, credit for a recent increase in used aircraft sales was frequently given to the bonus depreciation benefit that is part of the Jobs and Growth Tax Relieve Reconciliation Act that went into effect this year. “It has already been a boost to used aircraft sales, and it is going to affect new aircraft sales,” said a sales executive at the convention.
President Bush planned to sign legislation that will increase from 30 percent to 50 percent the first-year depreciation allowance for capital goods, including aircraft. The provision, part of the Jobs and Growth Tax Act of 2003 passed by Congress late last month, “should be a big boost to general aviation,” said General Aviation Manufacturers Association president and CEO Ed Bolen. “This is a real financial incentive to buy airplanes now.”
A one-year extension of the accelerated bonus depreciation for general aviation aircraft purchases was included in S.1637, the Jumpstart Our Business Strength (Jobs) Act, which the Senate passed by an overwhelming 92-5 vote last month. The next step is for the House of Representatives to pass similar legislation.
Pushed by President Bush for legislation intended to stimulate the nation’s economy, Congress has taken action on two bills that may affect the purchase of new aircraft by boosting depreciation deductions. While the bills use the term “qualified property” as eligible for depreciation deductions, new aircraft could possibly fit that definition.
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Before bailing out last month for the usual summer vacation, the House and Senate took no action on the tax bill that would have extended the bonus depreciation benefits allowance. Extension of the bonus depreciation benefits for certain business aircraft buyers is part of a larger tax package to be decided, and that is being held up by battles over items unrelated to the bonus depreciation.
The Office and Professional Employee International Union says that the pilot strike it led at PHI had a significant effect on the company’s 2006 financial results. The company posted a net loss of $667,000 last year, compared with net earnings of more than $14.1 million the previous year. Over the same period, the company’s operating revenues increased from $363.6 million to $413.1 million.