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Tax Bill Provides 100 Percent Expensing Option in 2017

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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


North American Bizav Flying Continues Ascent

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Business aviation flight activity in North America continued its upward trajectory last month, climbing 4.1 percent year-over-year, according to TrakPak data released yesterday by Argus International. This marks the fifth consecutive rise for the month of October, going from about 240,000 flights in October 2012 to more than 270,000 last month. Argus is predicting 3.2 percent growth this month.

Once again, last month's results were spearheaded by gains in Part 135 charter activity, which increased 7.9 percent from a year ago. Part 91 private and 91K fractional flying rose 2 percent and 2.2 percent, respectively.

For the first time this year, midsize jet activity surpassed that of other aircraft categories, taking the top spot last month with a 6.9 percent year-over-year increase. This was followed by large-cabin jets, up 5.6 percent; turboprops, up 2.9 percent; and light jets, up 1.6 percent.

In individual categories, Part 135 midsize and large-cabin jets saw double-digit gains, soaring 11.1 percent and 11.7 percent, respectively. Large-cabin fractional jet flying had the only notable loss in October, falling 7.4 percent from a year ago.

Argus’s TraqPak data provides “flight-number-specific aircraft arrival and departure information on all IFR flights in the U.S., Canada and the Caribbean.”

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October Bizav Flying in Europe Soars 8%

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Business aircraft activity in Europe climbed 8 percent year-over-year last month, thanks largely to a 13-percent boost in business jet charter flights, according to data published today by WingX Advance. Year-to-date, segment flying is up 4 percent, or 28,000 more flights, versus the same period in 2016.

“Strong year-over-year growth, the largest so far this year, points to a sustained growth in charter demand,” said WingX managing director Richard Koe. “The market appears to be responding to a better outlook for the economy and, within the industry, competitive pricing, aggressive marketing and more productive underlying operating and brokerage models.”

Western Europe showed a “robust increase” in flight activity in October, especially in France, Spain and Italy, WingX said. It noted small declines in activity from Russia, Norway, and Turkey, but strong gains from other smaller markets such as Sweden, Austria and Greece. Germany has seen the most growth, WingX said, with year-to-date flights up by 3.9 percent, meaning an additional 415 flights per month.

Business aviation flights from southern Europe rose 10 percent last month, and have a 12-month growth trend of 7 percent. Arrivals into Europe from Russia were down 2 percent, but there was slight growth in flights to Middle East and a 9-percent bounce in flights from Europe to North America.

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