Six months after Congress introduced the Tax Cuts & Jobs Act of 2017, tax experts are still unravelling the impact for business aircraft operators. Dave Higdon suggests an early start to determining where your operation stands...
If you consider that the first viable airplane wasn't built until 1903, looking back on the advances of the past 115 years reveals a dizzying array of changes and advances. Flight needed only 66 years to advance from short hops amid a landscape of sandy, windswept dunes and salt air to landing the first astronauts on the Moon.
But there are plenty of other changes that occur: changes such as the recent tax reform law.
The US Congress passed the Tax Cuts and Jobs Act of 2017 back in December. Six months later, tax experts continue to unravel the impact and meaning of some of the changes within the bill.
Business Aircraft Depreciation Recapture & Other Twists
One of the changes sending operators to their tax experts concerns the type of depreciation a company should use, and how to correctly make the determination.
We can't begin to explain the varying nuances here, but operators should know that guidance is available from private sources – including the NBAA, courtesy of the work of John B. Hoover, tax attorney with Cooley, LLP.
The 21-page paper (link provided below) is available through the NBAA website and should be a companion that operators give to their own tax accountants to help them make their determination of the impact of the new tax law.
One thing not changed in this law is the 50% use test to help make a depreciation schedule determination. To be eligible to use accelerated or bonus depreciation on a business aircraft, § 280F of the Internal Revenue Code generally requires that the aircraft be used at least 50% of the time for business purposes.
Passing the 50% test is particularly important for taxpayers seeking to deduct 100% bonus depreciation under the Tax Cuts and Jobs Act of 2017.
Make a Start Now
While tax season is still six months away for this year's levies it's not too soon to start consulting with tax attorneys and accountants and determine where your operation stands regarding the 50% test.
As one aviation tax expert told AvBuyer, tax code changes occur almost every year, but the breadth and sweep of the Tax Cuts and Jobs Act of 2017 goes so far in changing how we're treated on April 15 that now would be a good time to start looking for possible impacts on your business.
And remember, the Internal Revenue Service (IRS) is still codifying the changes Congress mandated in the law, so don't be surprised if it hasn't yet rendered new guidance on every aspect of the law.
Nevertheless, we're off to a good start where depreciation recapture and bonus depreciation are in play. We just need to understand how the code impacts us and how to take advantage of its language.
Thankfully, one thing unaffected by this tax-law turmoil is flying itself. Though changed greatly in 115 years, the laws of physics and flight are more immune to Congress' action than our tax laws.
Access NBAA’s detailed analysis of § 280F Depreciation Recapture for Business Aircraft here: