Two provisions of the American Taxpayer Relief Act of 2012 may provide an incentive for business aircraft owners. Under the act, Congress modified the "bonus deprecation" and "expensing" provisions of the Internal Revenue Code.
The act extended the bonus depreciation rules of Section 168(k) to allow 50 percent depreciation in the first year that an owner places an aircraft (or other qualifying asset) in service. This "bonus" allowance is in addition to the regular deprecation allowance provided for in the code.
To qualify, the aircraft must be new, acquired under a written contract entered into before January 1, 2014, and placed in service prior to January 1, 2014 (or January 1, 2015 for certain aircraft). The law defines "certain aircraft" as:
- An aircraft that is not used in the trade or business of transporting people or property (other than for agricultural or firefighting purposes);
- At the time the contract to acquire the aircraft is entered into, the purchaser makes a deposit that is the lesser of 10 percent of the purchase price or $100,000; and
- The aircraft has an estimated production period of more than four months and a total cost of more than $200,000.
The Taxpayer Relief Act also extended the expensing provisions of Section 179. These extended provisions give aircraft owners the option to expense (and not depreciate over time) up to $500,000 of their capital expenditures in 2012 and 2013 (subject to an income phase-out). What This Means to You
By providing aircraft owners with the option to recover their capital expenditures over a shorter period, the after-tax economics of purchasing a new aircraft (or making major upgrades and overhauls to existing aircraft) are significant. If you are considering an upgrade to your aviation assets, the availability of these deprecation provisions should be factored into your decision.
If you have any questions concerning these changes to the Internal Revenue Code or other aviation related matters, please contact your Husch Blackwell attorney or one of the aviation attorneys listed below.
David Agee - 417.268.4066
Michael Cosby - 417.268.4110
Husch Blackwell LLP regularly publishes updates on industry trends and new developments in the law for our clients and friends. Please contact us if you would like to receive updates and newsletters or request a printed copy.
Husch Blackwell encourages you to reprint this material. Please include the statement, "Reprinted with permission from Husch Blackwell LLP, copyright 2013, www.huschblackwell.com" at the end of any reprints. Please also email info huschblackwell.com to tell us of your reprint.
This information is intended only to provide general information in summary form on legal and business topics of the day. The contents hereof do not constitute legal advice and should not be relied on as such. Specific legal advice should be sought in particular matters.