Tax Bill Provides 100 Percent Expensing Option in 2017

 - December 21, 2017, 11:02 AM

A 100 percent expensing option will be available to owners of aircraft purchased after Sept. 27, 2017, under the comprehensive tax overhaul package that passed the House and Senate this week. The package, which awaits President Donald Trump’s signature, has been widely praised by both NBAA and NATA for the accelerated depreciation (100 percent expensing) measure and clarification on aircraft management fee taxation, among other provisions.

NBAA president and CEO Ed Bolen said the measures will lead to growth for the general aviation industry. “Provisions in the bill, such as immediate expensing, are key economic drivers for the general aviation industry, which supports 1.1 million jobs.”

NATA president Martin Hiller expressed appreciation that lawmakers recognized “the importance to aviation businesses nationwide of pro-investment tax policies, including full and immediate expensing and provisions that provide certainty as to the tax status of aircraft management services.”

Calling the tax changes “big news for the private aviation industry,” aircraft broker jetAVIVA outlined the prospective effect of the expensing provision in a Q&A session with its strategic tax-planning partner Daniel Cheung. “With marginal tax rate at about 40 percent, a taxpayer can realize $800,000 in income tax savings by purchasing a $2 million aircraft,” Cheung said in the Q&A.

Cheung reiterated that the measure applies to both new and used aircraft and noted, “By closing [a deal] and placing a business aircraft in service before the end of 2017, a taxpayer could immediately depreciate 100 percent of the cost of the aircraft on his or her 2017 income tax return.”

The full expensing option will be available through 2022. After that, the tax bill phases out the accelerated depreciation in increments of 20 percent each year until 2027.

NBAA further underscored the importance of the clarification that aircraft management fees are not subject to the 7.5 percent airline ticket tax. “For many years aircraft management companies were on the brink of closing their doors because of the improper and retroactive application of commercial airline ticket taxes,” said Scott O’Brien, NBAA's senior director of government affairs. “With tax reform, these small businesses now have certainty as to their obligations.”

While supportive of the bill, NBAA points out that not all provisions were positive, citing as a drawback the repeal of like-kind exchanges for business property. Under like-kind exchanges, businesses have had the option to defer taxes on sales of equipment if they were purchasing new equipment. The association said it plans to work with a broad coalition to seek reinstatement of this tax measure.