U.S. Senate Considers Legislation To Extend Bonus Depreciation

A couple of encouraging notes for individual and corporate aircraft owners. First, out-of-state pilots with new airplanes wanting to fly to the state of Florida will be relieved to hear that Florida governor Charlie Crist (pictured, right) has signed a bill which will allow out-of-state non-Florida resident aircraft owners to visit Florida without fear of being assessed a use tax.

Florida tax law had stated that an aircraft entering Florida within the first six months of purchase will be presumed to be purchased for use in Florida and may be subject to Florida use tax. The provision did not affect Florida residents and other individuals that have economic and business ties to the state of Florida.

This new law is a major victory for aircraft owners around the country because Florida is a popular destination both for personal and business use aircraft. Orlando and other cities in Florida are major tourist attractions and many pilots visit Florida annually for tradeshows like Sun N Fun in Lakeland in April, or Simcom for recurring training. The new legislation went into effect on July 1, 2010 and it allows non-resident aircraft owners to visit Florida without the risk of incurring a Florida use tax assessment.

Under the new law, within 6 months of purchasing an aircraft, out-of-state owners will now be able to visit Florida with that aircraft for less than a total of 21 days for any purpose. Aircraft purchased within the previous 6 months will be able to visit Florida for an unlimited amount of time for the exclusive purpose of flight training, repairs, alterations, refitting, or modification purposes.

Aviation Tax Consultants says that taking delivery of an aircraft in Florida continues to be an area of concern for many aircraft owners. Florida does have a “fly-away” exemption which allows nonresidents to purchase an aircraft in Florida without being subject to Florida sales tax – provided that some detailed documentation is submitted to the Florida Department of Revenue within the prescribed time frame to claim this exemption.

A little known fact about the fly-away exemption is that only aircraft purchased from a registered Florida aircraft dealer will qualify for the exemption. Therefore, if you purchase an aircraft from a Florida resident and you take delivery of the aircraft in Florida, this transaction will be subject to Florida sales tax, regardless of how soon you remove the plane from Florida after closing. Despite the enactment of the new Florida legislation exempting non-Florida residents from Florida sales and use tax, there are many scenarios where a lack of proper planning would result in a surprise tax bill from the State of Florida.

At the federal level, On Monday June 21, 2010, Senate Finance Chairman Max Baucus (D-Mont.) and ranking member Chuck Grassley (R-Iowa) introduced a bi-partisan legislation that will extend 50% bonus depreciation for 2010.

Bonus Depreciation Extension to Create Jobs Act (S.3513) will allow qualified taxpayers to deduct 50% of the cost of a new business aircraft purchased in 2010. There is bi-partisan support of the bill in the Senate. The current language of the bill will extend bonus depreciation  retroactive to January 1, 2010 and it is scheduled to expire on December 31, 2010.

While there is no consensus as to whether this bill will be passed by both Houses of Congress and enacted into law, Aviation Tax Consultants says it may be wise to begin planning for the purchase of a new business aircraft if you can benefit from the generous bonus depreciation in 2010. With the tightening of credit and the reduced production by most manufacturers, you may begin the purchase process so that you are in position to complete the purchase before the end of the tax year if bonus depreciation returns.

FMI: http://www.myflorida.com, http://finance.senate.gov