The recent modifications to the tax code under the Tax Cuts and Jobs Act (TCJA) represent the most significant modifications in more than three decades, according to the experts at the Advocate Consulting Legal Group (Booth 3272). While the bill was introduced as an effort to simplify the tax code, it has presented many complex questions and uncertainties, along with tax opportunities for businesses to invest in general aviation aircraft.
One of the more substantial pieces of the legislation involves allowing 100 percent bonus depreciation for qualifying new and preowned aircraft, those placed in service after Sept. 27, 2017. While bonus depreciation in the past was limited to factory-new aircraft, it was expanded under the TCJA, and Section 179 expensing was enhanced to allow additional first-year write-offs for equipment and parts placed into service, according to the Florida-based aviation tax specialists, who add that the changes could provide great incentive for businesses to add or upgrade the aircraft in their fleet.
Another factor to be considered is the elimination of the 1031 like-kind exchange for tangible personal property, which had been used by some to allow businesses to replace existing aircraft with newer models to avoid depreciation recapture from the sale. Yet the company, whose stated goal is to provide its customers with Aviation TLC (for tax, legal and compliance) assistance, said the bonus depreciation enhancements and Section 179 can offset that loss.
The reduction in corporate tax rates also has the potential to change the business structuring and planning landscape, particularly in regard to business aviation. It can dictate where the aircraft is placed within the structure, what type of ownership and operational entities are involved, and how expenses are allocated. Advocate Consulting said companies should seek knowledgeable advisors from the start to ensure that the proper structure is created and applied.
With all of the changes involved, the company cautions that it is now more crucial than ever to maintain proper records and compliance habits, since in an IRS case, the burden falls on the taxpayer to produce records that show they meet specifications. Such information would include the amount of the expense, the dates of the departure and return and number of days spent on business during the trip, the destination, and the business reason for travel or nature of the business benefit derived or expected.
Advocate Consulting, which has offices in Tampa and Naples, Florida, has a team of more than 25 attorneys, CPAs, and paralegals to help its clients navigate regulations from the FAA and DoT, federal and state tax issues, liability concerns and aircraft economic issues.