The business aviation industry is celebrating a “major victory” after US politicians included a provision to allow businesses to write off the cost of buying a business aircraft in one year in the tax reform bill.
The National Business Aviation Association, which has been lobbying senators and congressmen in recent weeks to make sure the sector was included in the new legislation, has welcomed the move and pledged to keep working to improve it.
It predicts that immediate 100% expensing on both old and new aircraft will lead to increased aircraft sales, and enable more companies to “access.. the competitive and other advantages of business aircraft use”.
The final version of the new US tax legislation was agreed by House and Senate conference negotiators at the end of last week, and will now be voted on by Congress this week before going to president Donald Trump for signing off.
The bill allows for immediate expensing of new and used equipment, including corporate jets, in a change to the current arrangement. Under existing legislation, businesses can depreciate aircraft over five years but the new law allows them to write off the expense of buying an aircraft within a year.
“Providing immediate expensing for new and used equipment, including business aircraft, was a priority for the NBAA and will help provide the tools necessary to grow our economy,” said NBAA president and CEO Ed Bolen.
However, the bill repeals “like-kind” exchanges for business property, which allows businesses to defer paying taxes on the sale of new equipment, including business aircraft, if they are buying newly-manufactured equipment to replace it. It also says immediate expensing will expire in 2022, and be phased out over the following four years.
Describing immediate expensing of new and used aircraft as “a major victory”, the NBAA said the “new language” on it would offset the abolition of like-kind exchanges, positioning the sector for growth. It also said it would “work hard with a broad coalition” to extend immediate expensing and reinstate like-kind exchanges.
Aviation transaction specialist Jeffrey Towers said that, as general counsel at TVPX, which provides 1031 exchanges and FAA owner trust services, he was “disappointed” that like-kind (or 1031) exchanges had been abolished, as they constituted a significant proportion of his company’s business.
On the other hand, the owner trust side of the business depended on the number of aircraft transactions it handles. “Everyone will agree that the 100% expensing provisions are likely to help the number of transactions to increase, because there’s an additional incentive now to make that aircraft purchase. So, on that side of things, this is a positive,” said Towers.
“It’s a positive for the aircraft market in general – it’s been a long recovery from the recession, and this will probably spur some additional interest in aircraft purchases. People may say it’s time to make a move, especially with the economy getting stronger over the last few years. I think we’ll see additional improvement in the aviation market as a result of it.”