NEW TAX BILL AFFECTS BUSINESS AVIATION
February 3, 2018
On December 22, 2017, President Trump signed the Tax Cuts and Jobs Act which will have short and long-term effects on individuals and businesses. The Act also directly impacts the Business Aviation industry as follows:
- 100-Percent Expensing (Bonus Depreciation)
Allows for “100 percent expensing”, which will allow taxpayers to immediately write off the cost of aircraft acquired and placed in service between September 27, 2017 and January 1, 2023. For tax years after 2022, the law provides for a phase-out of bonus depreciation in increments of 20 percent each year for aircraft acquired and placed in service before January 1, 2027.
- Prohibition on Deduction of Employees’ Commuting Expenses
Prohibits employers from deducting the cost of providing transportation to employees to commute between the employee’s residence and place of employment, unless provided for the safety of the employee. It is unclear whether this new provision would allow the deduction of commuting expenses and, if so, whether such deductions will be limited. Further guidance from the IRS is expected and will be needed to determine the implications upon implementation.
- Transportation Excise Tax Does Not Apply to Owner Flights on Managed Aircraft
Amends Internal Revenue Code (IRC) § 4261 by adding a new subsection to clarify that owner flights on managed aircraft are not subject to the Federal Transportation Excise Tax (FET) ticket tax ($3.00 for domestic segments during 2002 or thereafter), but rather are subject to the non-commercial fuel tax. The FET exception applies to payments by the aircraft owner (or lessee) for aircraft management services related to maintenance, support or flights on the aircraft. The exception does not actually require that the owner be on the flight or that the flight be on the business of the owner, but only that the owner (or lessee) pay for the aircraft management services. The National Business Aviation Association (NBAA) notes that “the issue has been the subject of controversy for more than 60 years, and this amendment clarifies the law consistent with the understanding of most people in the industry.”
If you have any questions, please contact Evelyn Sahr (esahr@eckertseamans.com, 202-659-6622) or Drew Derco (dderco@eckertseamans.com, 202-659-6665).
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