Tag: aviation tax attorney

Aviation Business News – A View From The 2012 FATA Conference

Aviation Business News
A report from the 2012 FATA Conference

For those looking to keep up on Florida’s aviation business news, one of the best events of the year was the 2012 Florida Aircraft Trades Association (FATA) annual conference.  This three day event included aviation business news, recent developments in aircraft sales tax laws, aviation industry outlooks and, of course, golf, dinner and drinks!

Of the many excellent presentations one of my favorites was the “manufacturers’ panel”.  Leaders from Gulfstream, Piper, Cessna, and Embraer talked a little about the state of the aircraft industry and recent sales data.

Dustin Cordier, Regional Vice President for Cessna Aircraft Company, was pleased that in addition to sales of new aircraft being up slightly from last year there is also a robust market in the used aircraft market.  Aircraft between 3 and 10 years old constituted a combined 80% of the near 1000 Cessna transactions that occurred in Q1 2012, with an emphasis on the North American market.

Steve Cass of Gulfstream reported that sales of their largest aircraft continue to improve.  Simon Caldecott of Vero Beach-based Piper Aircraft expressed “cautious optimism” about the remainder of 2012, encouraged by well-improved numbers from the last few years in Piper’s newer models.  Clint Clouatre of Embraer, the “new kid on the block” confirmed everyone’s recognition of the BRIC countries (Brazil, Russia, India and China) as major markets for general aviation aircraft going forward.

Special thanks to lobbyist Eric Prutsman, who worked tirelessly in Tallahassee to bring about positive changes for Florida’s aviation business, such as extending the state “maintenance and repair” aircraft sales tax exemption to aircraft of 2,000 GTOW and smaller, Association President Sandy Showalter for his excellent leadership and consummate skill as the Conference MC, and of course Paula Raeburn, without whom FATA would not be nearly as colorful, effective or fun!

If you’ve never stayed at the Four Seasons Palm Beach, I might add, I absolutely recommend it, and I would also like to thank whatever tech company was there with the same color badges for not throwing me out when I crashed your unbelievable buffet breakfast on the veranda.  Look, it was an accident!

Maine eliminates sales and use tax on aircraft

Effective July 1, Maine, traditionally among the more agressive states when it came to pursuing even temporary visitors for use tax, no longer charges sales or use tax on aircraft, their parts or services. The change resulted in several aviation businesses quickly announcing plans to expand their facilities. Notwithstanding the loss of tax revenues the change will have a net positive effect on the Maine economy: its location on the eastern seaboard made it easy for aircraft owners to do their buying in surrounding states, most of which do not charge sales or use tax on aircraft.

A Bad Idea In Connecticut

Connecticut Governor Dannel P. Malloy wants to close the state deficit by ending tax exemptions on repairs and services to aircraft, and by adding a yearly registration fee to planes stored in the state. This is problematic for general aviation, and for Connecticut for that matter, for several reasons. First, Connecticut exempts the purchase and storage of aircraft exceeding 6,000 pounds CTW from sales and use tax, and exempts repairs and the associated parts sales from the same. This has been a boon for Connecticut when it comes to New Yorkers, among others, looking for an economical place to store and service their aircraft, which, of course, can be moved elsewhere much more easily than a yoga studio. The Governor might also consider revisiting the geography of the Northeast. Larger aircraft owners, weighing the costs and benefits of storing their planes in other states, have other alternatives within the same geographical area. A slightly higher inconvenience may outweigh the dramatically increased costs of doing business in Connecticut. The Governor should look beyond the next fiscal year in evaluating what might be the long term impact on the state of eliminating these popular and useful exemptions.

Bonus Depreciation Extended

President Obama last week signed the Small Business Jobs Act of 2010 into law, extending two key aircraft-friendly tax provisions for another year.  This legislation extends the “bonus depreciation” provisions that have been in place for some time that allow the taxpayer to deduct up to 50% of the purchase price of the plane in that year.  This legislation will also modify the separate “expensing” provision that allows up to an additional $50,000.00 deduction.  What remains of the plane’s basis is then further depreciated under the accelerated, five year, MACRS recovery period.  Put together, these provisions allow an aircraft purchaser (including fractional interest purchasers) to deduct the majority of the purchase price of within the first two years.

The taxpayer must qualify for these benefits, and there are some limitations: 

  • These provisions apply only to noncommercial aircraft predominantly used in a trade or business.  Personal use is accounted for separately and should be undertaken with professional tax advice.
  • The expensing allowance, under the new law, phases out dollar for dollar for aircraft over $2M. 
  • Bonus depreciation is permitted only for new aircraft, whose “first use” is in the taxpayer’s hands.  Used or refurbished aircraft do not qualify.  Fractional interests are considered “first used” by the taxpayer at the time of his purchase.
  • You must enter a written binding contract for his purchase of the plane and place a non-refundable deposit with the seller by the end of this year.  You would have to begin using the aircraft by the end of next year.
  • Depreciation deductions are “recaptured” when the aircraft is sold.  This can be deferred for some time either by continued ownership or by exchanging the fractional interest for another at a later time.  The real tax savings is the time value of the money not paid in taxes during this period.

Ari Good, Esq.