Three changes to US tax law ‘could benefit business aviation’

Three recent changes to US tax law promise to benefit business aviation, Suzanne Meiners-Levy, managing partner, with Advocate Consulting Legal Group, told Corporate Jet Investor’s fifteenth Town Hall online meeting last week (August 5th).

The three changes concerned the interaction between this year’s CARES Act (Coronavirus Aid, Relief, and Economic Security Act) – a $2.2trn economic stimulus bill designed to mitigate the impact of Covid-19 – and the 2017 Tax Cuts and Jobs Act.

“The CARES Act, introduced this year, suspended the provisions from the 2017 guidance [from the Tax Cuts and Jobs Act] that had limitations in it and expanded some of the provisions. It’s the interaction between the 2017 law and CARES Act passed in the Spring of this year,” said Meiners-Levy.

Changes embodied in the CARES Act enable the carry back of net operating loss for bonus depreciation. “If you are planning on writing off your aircraft purchase this year – and suddenly profits are down and your business doesn’t look economically the way you thought it might but the past few years have been strong – you can use that depreciation against profits from prior years to receive a tax refund,” explained Meiners-Levy. “That’s an infusion of capital now, which many of our businesses can use.”

‘An infusion of capital now’

Using the provision was a good way to avoid the delay of the purchase, given that the future of tax incentives for private aviation in the US is unclear, ahead of the election on November 3rd. “The continued availability of bonus has an incredibly high value as a net operating loss carry back,” Meiners-Levy told the Town Hall’s 300-plus delegates.

The other two factors concern responses to the Tax Cuts and Jobs Act of 2017, which decrease the limitations on interest expenses. Last week the US tax authorities published more than 500 pages of regulations regarding the 2017 Act, which will take some time to study. “But, in addition to the interest expense limitation, there was further guidance on excess business loss limiting events,” said Meiners-Levy. “There were some excess business loss limitations in the Tax Cuts and Jobs Act and those have been suspended for this year as well.” So, businesses are not performing as well this year as in previous years, there’s an opportunity to seek relief “by taking significant deductions on the aircraft and apply it against either prior or future years”.

‘Taking significant deductions’

Although the Tax Cuts and Jobs Act was introduced at the end of 2017, business aviation was still lacking proper guidance about the interpretation of its provisions, said Meiners-Levy.

Meanwhile, during the Town Hall Meeting, Meiners-Levy also identified three top trends in the use of business aircraft since the global Covid-19 pandemic. Those  trends were: business aircraft carrying more passengers, the rise in new customers and growing interest in fractional schemes. You can watch the hour-long, free-access webinar here. Last week’s Town Hall was sponsored by Echo Aviation Leasing Corporation.

Next week’s Town Hall online meeting – dedicated to charter – takes place on Wednesday August 19th. Staged in association with the Air Charter Association, the Town Hall doors open at 3pm BST. Book your free place here.

Suzanne Meiners-Levy, managing partner, with Advocate Consulting Legal Group.