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What US tax bill means for general aviation

New and used immediate expensing in, like-kind exchanges out 

Editor's note: This story was updated Dec. 20 to reflect the tax bill's passage by the House and Senate.

Tax reform legislation passed by the House and Senate Dec. 20 includes several changes for aircraft owners and general aviation businesses.

File photo of President Donald Trump by Joshua Roberts, Reuters.

The bill, which is expected to be formally signed by President Donald Trump in early 2018, would lower five of the seven personal tax brackets, cut the corporate rate from 35 percent to 21 percent, and make a number of changes to business and personal deductions.

Most notable to AOPA members, the legislation does away with an important tax planning tool often used by those purchasing aircraft for business, the like-kind or Section 1031 exchange. The bill does, however, allow for immediate expensing of new and used capital investments, a welcome inclusion. The bill also clarifies that private aircraft management is not subject to airline ticket taxes.

“We think the inclusion of immediate expensing for used as well as new investments will effectively spur economic growth and create good jobs, especially in aviation and the aircraft industry,” said AOPA President and CEO Mark Baker.

Both the Senate and House passed similar tax reform legislation, but the bills were not exactly the same and thus then sent to a conference committee to work out the differences and create a bill that will pass both chambers.

The Senate and House bills both called for repealing like-kind exchanges, a tax provision that allows businesses to delay paying taxes on the sale of assets if the assets are exchanged for like-kind property that is held for use in a trade or business. The like-kind exchange provision proved valuable to many aircraft owners trading up to a different aircraft for business use.

While AOPA believes like-kind exchanges are an important tool that encourages investment, another tax provision, which will allow the immediate expensing of new and used aircraft, would further encourage overall business investment and potentially make purchasing an aircraft even more attractive.

Both the House and Senate included provisions allowing businesses to claim a deduction for the full value of a new asset the same year the acquisition occurs, rather than spreading the tax break over seven years. Only the House legislation also included the purchase of used assets.

According to AOPA, limiting the immediate tax break to only new assets and aircraft while simultaneously doing away with the benefit of like-kind exchanges, could actually hurt jobs and large segments of the aviation industry instead of generating the intended investment. But including immediate expensing of new and used assets gives potential investors in assets ranging from aircraft to fuel trucks more flexibility and access to more cash with the reduced tax burden when the transaction takes place.

AOPA, along with the Helicopter Association International, the National Air Transportation Association, and the National Business Aviation Association, co-signed a Dec. 12 letter to Senate Finance Committee Chairman Orrin Hatch (R-Utah) and House Ways and Means Committee Chairman Kevin Brady (R-Texas) supporting expensing for both new and used aircraft.

“Without like-kind exchanges as a planning tool, and no opportunity for immediate expensing, transactions involving used equipment will be much less attractive,” the letter warned. 

The final legislation approved by the conference committee includes immediate expensing for the purchase of new and used assets.

“A business aircraft is a good investment that gives companies and individuals flexibility and options,” Baker said. “AOPA's Legal Services team and the AOPA Finance team are here to help members make sure they get the most out of it.”

Following passage, the White House issued a statement from Trump saying, “I promised the American people a big, beautiful tax cut for Christmas. With final passage of this legislation, that is exactly what they are getting.”

Joe Kildea
Joe Kildea
AOPA Senior Director of Communications
Joe is a student pilot and his first solo flight was at AOPA’s home airport in Frederick, Maryland. Before joining AOPA in 2015, he worked for numerous political campaigns, news organizations, and the White House Press Office.
Topics: Advocacy, Capitol Hill, Taxes

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