A 21-day sales tax exemption provision for out-of-state residents bringing newly purchased aircraft into Florida failed to pass the Florida Legislature last month. The bill passed the state’s House in late April, but the Senate refused to hear the bill based upon language that “allegedly created a negative revenue impact on the state budget.”
Taxation in the United States
The 2010 budget proposal for the FAA released earlier this month by the White House makes it obvious that President Obama wants a fundamental change in funding in FY 2011 by dramatically reducing General Fund support for aviation in America. The Administration proposal for 2011 envisions $9.6 billion coming from user fees–up more than $2 billion from the initial estimate earlier this year. That figure rises to $11 billion by 2014.
The Government Accountability Office (GAO) warned last month that the excise taxes that feed the Airport and Airway Trust Fund have been lower than previously forecast, while estimates of future revenues have declined because of a drop in passenger traffic, fares and fuel consumption. Meanwhile, the uncommitted balance in the trust fund has been decreasing since Fiscal Year 2001.
In addition to the costs of acquisition, prospective buyers must consider the costs–especially insurance and taxes–they will incur once they own the aircraft. To that end, aircraft management contracts with well thought-out insurance provisions should be integral to the aircraft acquisition process, said Bill Kingsley, an account executive with the Addison, Texas-based brokerage AirSure.
A line in President Obama’s 134-page budget for Fiscal Year 2010 has put general aviation lobbyists on high alert. Page 129 contains a notation that “the budget proposes repealing some aviation excise taxes and replacing these taxes with direct user charges.” NBAA said it is “very troubled” by the budget outline because it appears to leave the door open to consideration of aviation user fees for funding the FAA.
The governor of Missouri has signed a bill eliminating sales tax on aircraft repair parts, aligning the state with neighboring states having similar laws. Before passing the law, Missouri exempted aircraft used to carry people and property, but now the tax exemption applies to all materials, replacement parts and equipment used for modification, repair, replacement and maintenance of aircraft, powerplants and accessories from Jan.
A new federal tax-cut law contains an increase in the bonus depreciation percentage from 30 percent to 50 percent in the first-year allowance for the purchase of capital goods, including new aircraft. The rate will be available for any new aircraft–regardless of value if used under Part 91–acquired after May 5, 2003, and before Jan. 1, 2005. The aircraft must be placed in service before Jan. 1, 2006.
Business aircraft owners who want to move up have the option to engage in a “like-kind exchange” that could save thousands of dollars in capital gains taxes, according to Tonya Fritts, vice president and relationship manager for North Carolina-based Wachovia Exchange Services (Booth No. 3769).
Business aviation operations in Arizona stand to benefit from new legislation that returns certain aviation tax revenues to the state’s airport improvement programs. Arizona governor Jane Dee Hull signed SB1251 into law on May 2, authorizing the deposit of 100 percent of flight property tax revenues into the state aviation fund starting in fiscal year 2004.
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.