The General Aviation Manufacturers Association (GAMA) is facing opposition to its efforts to lobby congress for an extension of the 50% bonus-depreciation tax break included in the Jobs and Growth Tax Relief Reconciliation Act of 2003. The deadline for taking advantage of the bonus-depreciation requires that new equipment, including aircraft, be placed into service by January 1, 2005.
Congress is arguing that extending the deadline would result in a $12 billion dollar reduction in revenue over the next ten years. However, GAMA believes that the $12 billion dollar number is overstated and incorrectly calculated. In support of the extension, GAMA argues that, within the first three months after the bonus-depreciation was increased to 50%, general aviation saw a 43% increase in orders of new aircraft. When asked, most of the aircraft purchasers indicated that the bonus-depreciation was a deciding factor in the purchase.
Also, the aircraft-manufacturing industry has a significantly longer manufacturing cycle than most industries. On average, it takes anywhere from eight to fourteen months from order to completion. The effect of this manufacturing cycle is that an order must be placed well in advance of the January 1, 2005 deadline. GAMA argues that this results in aircraft purchasers losing out on the bonus depreciation well in advance of purchasers of other capital equipment.
As a fall back, in case congress does not extend the bonus-depreciation, Sen. Blanche Lincoln (D-Ark.) has an amendment drafted that would at least extend the “placed-in-service” deadline to beyond January 1, 2005. I hope they are successful one way or another. From personal experience I can definitelysay that the bonus-depreciation has been a very important consideration for my clients purchasing new aircraft. It has definitely had a positive effect on an industry that currently can use all the help it can get.
