February 11, 2013
As Congress prepares to address the federal government’s financial challenges, many – from Senate Minority Leader Mitch McConnell (R-KY) and Rep. Mike Pompeo (R-4-KS), to the media – have weighed in on what a Feb. 4 editorial in The Washington Times called President Obama’s “corporate jet obsession.”
At issue is the Obama administration’s proposed change in the depreciation schedule for general aviation (GA) aircraft, which has been cast as “a tax on corporate jets” or a “tax loophole.”
Either way, McConnell said lengthening the GA aircraft depreciation schedule would not play a substantial role in solving the nation’s economic problems. If enacted, “it would take 10 years to raise enough money to replace one week’s worth of the sequester.”
The Washington Times editorial, citing the nonpartisan Joint Committee on Taxation, provided the details: the proposed GA depreciation change represents $3 billion over 10 years.
Read The Washington Times editorial.
“Now that Congress has acted on the tax issue, the president needs to lay out significant spending reforms – the other side of the ‘balance’ as he defines it. But every day spent talking about ‘corporate jets’ is a day wasted, and given that the president again missed the deadline to submit a budget this year, there’s not much time to spare,” McConnell said in a statement. “The clock is ticking. It’s time to get serious.”
Review McConnell’s full statement.
Review McConnell’s op-ed in Reuters.
In his latest “Get the Facts about General Aviation” letter to his colleagues, Pompeo also addressed the issue and provided a succinct explanation of the GA depreciation schedule, the proposed change and the consequences of changing it.
Discussing the subject with sound-bite simplicity and targeting business aircraft misleads and misrepresents the issue, said Pompeo. GA depreciation, he said, addresses non-commercial aircraft, which covers “crop dusters and single engine pistons, not just jets.” Emphasizing that “no special provision exists in the depreciation schedule for GA aircraft,” Pompeo explained that the real issue is extending the GA schedule two years, so it has the same seven-year timeframe as commercial aircraft.
Owners of non-commercial (general aviation) aircraft have depreciated them on a five-year schedule for more than a quarter century, he continued. This fixed schedule is set “under the general depreciation rules established in the Tax Reform Act of 1986 and under pre-existing asset class lives established by the IRS.” Many similar assets depreciate at different rates, Pompeo wrote, and the depreciation rules address the distinctions among these related assets.
“At the core, however, it would make little sense for an American Airlines’ Boeing 747 to have the same depreciation schedule as a farmer’s Air Tractor,” according to Pompeo.
Addressing the nation’s economic issues is vitally important, he concludes, but targeting the GA depreciation schedule would “harm the 1.2 million hard-working men and women who make a living building and servicing these aircraft,” he said. “If Congress wants to reconsider current depreciation rules, the way to do so would be to reexamine the rules across the board and not single out particular industries.”
International Business Aviation Council Ltd.