Good…embarrassing…or just plain out of touch?

[gret]

While catching “Around the Horn” this afternoon, AIN Alerts came thru the email with its Thursday edition. One of the topics reported was the NBAA wrote letters to Congress asking for bonus depreciation on private a/c-

NBAA has joined other organizations in urging Congressional leaders to continue stimulating business capital expenditures by extending the accelerated, or “bonus,” depreciation that is set to expire at the end of this year. In a letter sent to both houses of Congress yesterday, the groups said, “It is imperative that we continue the 50-percent bonus depreciation…for 2013 and beyond. This will provide some certainty to U.S. businesses to allow them to continue to make capital investments, which in turn will create more jobs and help ward off a possible recession in 2013.”
​

The NBAA and NATA are industry advocates and their job is representing the industry. They have defended personal use of aircraft by business executives, written letters to the President dissing him for comments made about corporate jets and use of Air Force One, attempted to justify the auto executives flying large cabin aircraft to their testimony in front of Congress asking for a bailout, and just about everything else that the general public sees as what is wrong with the “fat cats” flying around in private jets.

Personally, I believe they do a very poor job in picking their battles and this is one of them. Why even use up what little credibility they have when the country is trying to raise tax rates on the wealthy? The fact is that most owners don’t utilize their depreciation deductions because they are limited by the mount of personal use compared to business use….which is significant in most cases. It is simply a timing difference as instead of taking 50% of the depreciation in year one, the excess is taken over 7 or less years depending on whether they fly Part 91 or 135.

Do they really think the President, Democrats, or even Republicans are going to bat for them...or even take them seriously?

Does almost nothing for the fractional industry...minimal benefit for large corporations...and makes us industry proponents look like fools.

 

[Praetorian]

Insightful post. I'm pleasantly surprised.

 

[taxi1wire]

It is not about saving the wealthy tax money. It is about jobs!
Without the depreciation credit planes are not sold, jobs are lost and our whole industry suffers. NBAA is looking out for everyone, the owners, manufacturers and the users. What value would our fleet have without OEM's behind them?

 

[gret]

It is not about saving the wealthy tax money. It is about jobs!
Without the depreciation credit planes are not sold, jobs are lost and our whole industry suffers. NBAA is looking out for everyone, the owners, manufacturers and the users. What value would our fleet have without OEM's behind them?

Your view is correct and has worked before...but simply doesn't work anymore with private aircraft as the rules have changed drastically for deductions.

As mentioned, most of the depreciation deductions aren't even utilized because the aircraft isn't used predominately for business purposes. The deductions are lost so there isn’t a tax benefit. One can argue the percentage of personal use versus business use and the fact is that it is impossible to gather all the data nationwide. However, consider the busiest travel days for the fractionals...Thanksgiving, late December, and winter break in February…hard to argue that these are business trips.

In addition, there have been special tax rules in place for the past couple of years that allowed a purchaser to take 100% of the depreciation in the first year. Didn’t work based on the abysmal number of a/c that were delivered by the manufacturers. Deliveries by US manufacturers declined from 929 units in 2008 to 277 in 2011.

Cessna went from 456 to 183
Gulfstream from 68 to 21
Hawker from 160 to 30

Furthermore, the percentage of a/c delivered to US buyers declined from 83% to 57% of the market during the same period. It is only these a/c that would have been available for deductions for US tax purposes.

Tax incentives aren’t working in generating sales and won't if they can't be used. This is why the NBAA's asking for something that can't be utilized, except by a select few, doesn't seem prudent. Where were they with FET issues? $1 million was paid by NetJets for lobbying the FET law change earlier this year and the tax court case they are involved with where assessments are approaching $1 billion.

Not a pretty picture how you want to paint it.

 

[gret]

This report by the US International Trade Commissions...

"Business Jet Aircraft Industry: Structure and Factors Affecting Competitiveness"

http://www.usitc.gov/publications/332/pub4314.pdf

...is fascinating reading (250 pages) for those without a life, need to fall asleep, or really want to become ill about the status of our industry.

It appears we're in the soup and will be until we reach the next economic bubble.

 

[G4dude]

This report by the US International Trade Commissions...

"Business Jet Aircraft Industry: Structure and Factors Affecting Competitiveness"

http://www.usitc.gov/publications/332/pub4314.pdf

...is fascinating reading (250 pages) for those without a life, need to fall asleep, or really want to become ill about the status of our industry.

It appears we're in the soup and will be until we reach the next economic bubble.

The subject, with tax and writeoff ramifications, is not my area, but anything that lowers cost to purchasers, especially during sluggish economic times, is a good idea. Thanks for this informative thread. I wish the NBAA would prevail, but the issue will probably be a loser. We have UGLY times ahead, economically.

 

[Sparse]

Just remember what happened during Jimmy Carter's term on taxing luxury items. It decimated the yacht and boat building industry. Thousands of jobs lost. The aircraft manufacturing business is very fragile now. Anything reducing incentive on purchases will kill jobs. We need real tax reform not just a piece-mill approach, rather than going after segments that the majority of Americans, don't know or care about, except those working in them. To the factory workers in Kansas, Georgia, and now Florida, to the line guys all over the country, and all of those who support this industry in between, this is a huge deal.

They don't seem to be singling out luxury car manufacturers. The last time I checked, if you can afford a Tesla, you can probably afford to ride on a private jet yet Tesla gets huge subsidies from the taxpayers, which gives purchasers an incentive through a lower overall cost, which in essence accomplishes the same thing as accelerated depreciation.

I am rambling but I hope you get my point. The only way out of the problems we have is comprehensive tax and entitlement reform. None of us can have everything we want. There is enough pain to spread around.

 

[gutshotdraw]

Just remember what happened during Jimmy Carter's term on taxing luxury items. It decimated the yacht and boat building industry. Thousands of jobs lost. The aircraft manufacturing business is very fragile now. Anything reducing incentive on purchases will kill jobs. We need real tax reform not just a piece-mill approach, rather than going after segments that the majority of Americans, don't know or care about, except those working in them. To the factory workers in Kansas, Georgia, and now Florida, to the line guys all over the country, and all of those who support this industry in between, this is a huge deal.

They don't seem to be singling out luxury car manufacturers. The last time I checked, if you can afford a Tesla, you can probably afford to ride on a private jet yet Tesla gets huge subsidies from the taxpayers, which gives purchasers an incentive through a lower overall cost, which in essence accomplishes the same thing as accelerated depreciation.

I am rambling but I hope you get my point. The only way out of the problems we have is comprehensive tax and entitlement reform. None of us can have everything we want. There is enough pain to spread around.

Actually, that was Bubba Clinton that had the bright idea of a "luxury tax" and decimated the boat-building industry in the US. But your point is well taken.

 

[G4dude]

Just remember what happened during Jimmy Carter's term on taxing luxury items. It decimated the yacht and boat building industry. Thousands of jobs lost. The aircraft manufacturing business is very fragile now. Anything reducing incentive on purchases will kill jobs. We need real tax reform not just a piece-mill approach, rather than going after segments that the majority of Americans, don't know or care about, except those working in them. To the factory workers in Kansas, Georgia, and now Florida, to the line guys all over the country, and all of those who support this industry in between, this is a huge deal.

They don't seem to be singling out luxury car manufacturers. The last time I checked, if you can afford a Tesla, you can probably afford to ride on a private jet yet Tesla gets huge subsidies from the taxpayers, which gives purchasers an incentive through a lower overall cost, which in essence accomplishes the same thing as accelerated depreciation.

I am rambling but I hope you get my point. The only way out of the problems we have is comprehensive tax and entitlement reform. None of us can have everything we want. There is enough pain to spread around.

And the people who stoutly maintained the yacht industry would not be affected at all because the RICH have enough money anyway were absolutely wrong. They never admitted they were wrong, and are still in Congress right now trying to raise taxes on the rich and increase regulations on producers, using the same arguments. And ignoring the massive government debt that will pretty soon crash the bond market and trash people's pensions.

 

[G4dude]

Actually, that was Bubba Clinton that had the bright idea of a "luxury tax" and decimated the boat-building industry in the US. But your point is well taken.

Yep. It's sad to say, but I miss Bubba, given what we have in the White House now. Whoda thunk?