BizAv Taxes: Two Steps Forward...

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Face facts: Taxes are both the bane and benefit of purchasing and operating a business aircraft, no matter its size. Whether levied at the federal, state or local levels -- or figured into the cost of operation through existing excise taxes -- taxes are as much a factor in a company's decision to operate its own aircraft as they are in deciding where to build a new factory. As a result, business aviation's bean counters are always watching for new ways to reduce costs of acquisition and operation while taking advantage of incentives designed to spur economic investment and retain manufacturing jobs. So it comes as no real surprise to see the industry getting up close and personal from time to time with those who decide tax policy. It's also no secret that one person's desire to use the government's power to tax in a manner that fosters desired behavior can be balanced by another's plan to tax activity deemed unworthy. Three recent developments highlight government's willingness to use taxation not only as a carrot, but also as a stick.

Our first example also happens to be one with the most potential impact on the industry, a favorable one in this instance: Both the U.S. House of Representatives and the Senate are working on economic-incentive legislation that would continue an existing tax break designed to encourage purchases of business aircraft. Both bills, H.R. 4520, passed by the House on June 17, and S. 1637, passed in the Senate on May 11, would extend for an additional 12 months the placed-in-service requirement for purchasers of general aviation aircraft wishing to qualify for 50-percent accelerated or bonus depreciation. Since both bills say substantially the same thing, industry anticipates the extension will be a part of any final measure emerging from a conference committee of House and Senate members. When that conference will have its first meeting, however, is not known. It's a safe bet, however, that the bills will be reconciled and a final version placed on the president's desk for signature well before Congress adjourns to go home and campaign this fall. That milestone is presently scheduled for Oct. 1. "We hope that negotiators from the House and Senate can quickly resolve any differences between their two versions of this bill, and send it to President Bush for his signature," said GAMA President and CEO Ed Bolen, to no one's great surprise.