Industry Responds to New 'Loophole' Charge
February 6, 2013
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  • By Dan Namowitz

    The Obama Administration’s continuing attempts to raise taxes on business aircraft, reiterated in a White House press briefing, are short-sighted and threaten to suppress job creation in a fragile economy, AOPA said.

    The general aviation industry and its supporters in Congress spoke out strongly against new indications that the administration may seek a tax increase on business aircraft operators in the form of changed depreciation rules for aviation assets.

    “AOPA is very disappointed in the Obama Administration’s endless attempts to lengthen the depreciation schedule for business aircraft,” said AOPA President Craig Fuller. “At a time of widespread concern over job creation in this country, we feel it is short-sighted to put further financial burdens on an industry that contributes positively to our nation’s balance of trade, and one that supports highly skilled, good paying jobs.”

    Two other aviation-industry associations and a member of the House GA Caucus issued statements critical of the comments by presidential Press Secretary Jay Carney during a Feb. 5 media briefing. Tax reform, Carney said, should include closing “loopholes” that “give tax advantages to the wealthy.” He also suggested that ending “subsidies to corporate jet owners” should be among short-term steps to raise revenue.

    Carney’s comments—responding to a question about budget cuts under sequestration—rekindled concerns across the 1.2-million worker industry that were first raised in remarks by President Barack Obama in 2011. At that time, Obama characterized depreciation provisions as too generous, prompting AOPA to point out that his statement clashed with comments supportive of the transportation sector by other administration officials.

    Reality, not rhetoric

    Following Carney’s briefing, Ed Bolen, president and CEO of the National Business Aviation Association, called on policymakers to focus on “reality,” and avoid rhetoric that threatens to destabilize a $150 billion industry that was “devastated” during the recession.

    “Everyone agrees on the need to find meaningful ways to reduce the nation’s debt, and to do so without harming the nation’s economy,” he said in a statement. “As our country pursues this critical policy objective, it is important to ensure that the proposals we consider are based on reality rather than rhetoric. Unfortunately, in the course of the debate over the debt, the White House has recently focused on misleading statements related to depreciation schedules for business aircraft.”

    “The depreciation schedule for general aviation aircraft is not a ‘loophole.’ In fact, the depreciation schedule was established decades ago by the Treasury Department and adopted by Congress in 1986. The schedule works exactly as policymakers intended with no individual or company able to depreciate more for a general aviation aircraft than any other capital asset,” Bolen said.

    General Aviation Manufacturers Association President and CEO Pete Bunce said that depreciation schedules spur manufacturing and create jobs.

    “Once again, the Obama Administration is starting the drumbeat that we could end all the fiscal challenges our nation faces by changing the depreciation schedule for general aviation and business aircraft from five to seven years,” he said. “Their rhetoric is wrong and all it does is hurt general aviation companies and workers across this country.”

    Bolen noted the industry’s readiness to engage in a dialog on the issue, and he added, “Government officials, including the President fly some of the best equipped business jets on the planet and use these machines for the same purpose that businessmen and women use their aircraft—as an efficient time management and security tool.”

    House GA Caucus member Rep. Mike Pompeo (R-Kan.) issued a letter to colleagues reminding them that “no special provision exists” for general aviation under the 1986 tax legislation. If Congress intends to re-examine depreciation, it should not single out one industry, Pompeo wrote.