With passage of H.R. 4520, the American Jobs Creation Act, by the United States House of Representatives, it appears likely that the current 50 percent bonus depreciation placed-in-service requirement will be extended to allow purchasers of general aviation aircraft to continue to take advantage of the 50 percent bonus depreciation through January 1, 2006. H.R. 4520 contains a provision extending, for an additional twelve months, the placed-in-service requirement for purchasers of general aviation aircraft wishing to qualify for 50 percent accelerated or bonus depreciation. The United States Senate passed S. 1637 in May, which included the same provision for extending the placed-in-service requirement for general aviation aircraft as the House bill.
The extension of the placed-in-service requirement is necessary because general aviation aircraft take longer to manufacture than other products. The lead-time necessary for purchase of a new aircraft can be up to six months or longer. As a result, potential purchasers would have already needed to order their aircraft in order for them to be able to meet the current placed in service deadline of January 1, 2005. In some situations, even those previously placed orders may not be completed and placed in service in time to meet the deadline. The current deadline effectively precludes a purchaser’s ability to take advantage of the 50 percent bonus depreciation for an aircraft for the last half of 2004. The extension will provide an additional year within which to purchase an aircraft and realize this tax benefit.
Assuming the conference of House and Senate members is able to resolve any differences between the two versions of the bill, it is anticipated that the provision extending the placed in service deadline will be included in the final bill that is ultimately sent to President Bush for signature. Let’s hope the conference committee does not get bogged down in politics and is able to reach an agreement. If the bills are not reconciled into a final bill, the extension provision for which so many aviation organizations have successfully lobbied will be lost.