Bonus Depreciation

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NBAA Among 500 Industry Groups Making Push for Extending Tax Provisions

Nov. 20, 2014

With the 2014 midterm elections over, Congress is likely to address only a few priorities before the new year. In a joint letter this week, NBAA and more than 500 other industry groups urged Congress to make extending several expired or expiring tax provisions – including accelerated depreciation – a top priority.

Accelerated or “bonus” depreciation has been passed many times by Congress, and allows businesses to immediately deduct 50 percent of the cost of an investment. Businesses are not entitled to more depreciation; they simply are allowed to recover investment costs more quickly. Accelerated depreciation expired at the end of 2013, but over the last year NBAA and a broad coalition of industry groups have supported efforts in Congress to renew it retroactively as one of 57 tax “extenders.”

“Failure to extend these provisions is a tax increase,” states the Nov. 18 letter, which was sent to all members of the Senate and House of Representatives. “Acting promptly on this matter in the lame duck session will provide important predictability necessary for economic growth.”

Earlier this year, the Senate Finance Committee and the full House of Representatives passed different tax-extender packages. The packages stalled because the House’s version would make many provisions permanent, while the Senate’s version of the legislation only renews them for two years.

As a result of the midterm elections, negotiations have reopened on the tax extenders.

“The expired provisions should be renewed as soon as possible this year to enable implementation in time for the normal tax-filing season,” the industry letter reminds Congress. According to the IRS, the two chambers need to come to an agreement before December.

“Both the House and the Senate have passed some version of legislation retroactively extending bonus depreciation, so it has clear support,” said Scott O’Brien, NBAA senior manager for tax policy, “Now, the lame-duck session creates the opportunity to reach consensus, and the IRS deadline creates the urgency.”

While accelerated depreciation was part of the economic stimulus enacted in 2008, it’s history and importance is not limited to short-term stimulus.

“When a company buys an asset like a business aircraft, it realizes that cost in the first year,” said O’Brien. “Accelerated depreciation allows companies to immediately recover 50 percent of the cost of an investment in the year it’s made. That boosts investment in the long-term, unleashing more potential growth for the aircraft industry and, in fact, all companies investing in business assets.”

View a full copy of the letter sent to the Senate. (PDF)

An exact copy of this letter was also sent to the House of Representatives.