Seeking to end the “corporate jet loophole,” Sen. Kirsten Gillibrand (D-N.Y.) is calling for an extension of the business aircraft depreciation schedules and using the resulting revenue to fund air traffic controller salaries.
Gillibrand is introducing legislation to fully fund’s operations and pay for it with a change in depreciation schedules.
Picking up on a theme forwarded by the White House, which has said the change in depreciation schedules could help end sequestration and preserve teachers’ jobs and the Head Start program, Gillibrand says, “Instead of protecting tax breaks for wealthy corporate jet owners who don’t need them, we should be keeping commercial air travel fully operational for middle class families and small businesses. These wasteful tax breaks are blowing a hole in our budget, adding to uncertainty and slowing economic growth.”
She notes airliners are depreciated over seven years, but says it’s a loophole that business aircraft are depreciated over five years. The proposed change in recovery period would save an estimated $2.702 billion over 10 years, she says.
“Closing this loophole is just common sense, and will save us billions of dollars that we can invest right now to keep control towers up and running, keep flights on time, and keep our economy on the move,” she says, saying the legislation could end controller furloughs and preserve the contract tower program.
In addition to the White House, the depreciation change is strongly supported by other key Democrats, including Majority Leader Harry Reid (D-Nev.), who said earlier this year that it was part of the loopholes that he hoped to address. Bob Herbert, a key aide to Reid, told the National Air Transportation Association Aviation Business & Legislative Conference on April 23 that the leadership was pushing to close loopholes this year, but he was not more specific. Hebert also said Reid was contemplating a measure to put off sequestration altogether for five more months.
The Gillibrand measure drew strong opposition from National Business Aviation Association President and CEO Ed Bolen, who says “Proposals like this one appear to put politically charged rhetoric ahead of serious policies for addressing the nation’s deficit, including the challenges posed by sequestration.”
Bolen disputes the characterization of the schedule as a “loophole,” saying “such policies were recommended by the IRS decades ago, made into law by Congress in the 1980s, and apply to everything from computers, to cars, to aircraft. The idea behind such policies is to encourage American businesses to continually upgrade the products they use so they can remain competitive, especially in today’s highly competitive global marketplace.”
He says instead of changing taxes on business aircraft, Congress should give FAA reprogramming authority. “Until it can be determined whether reprogramming of funds can be done to keep controllers on the job and towers open, it seems unwise to push a path of political expediency at a time when the business aviation community continues to struggle in a very difficult economic environment,” Bolen says.
The General Aviation Manufacturers Association, meanwhile, agreed. “We are extremely disappointed that Senator Gillibrand is proposing legislation that will hurt hard-working, middle-class workers in the general aviation industry, and detract from the difficult but necessary task of resolving the impact of the sequester on the aviation system,” says Mary Lynn J. Rynkiewicz, director of communications.
Business aviation advocates and certain lawmakers have argued that a change in depreciation schedules would serve as a disincentive to purchasing new aircraft, which in turn could cost jobs. They also point to political rhetoric against the use of business aircraft as a contributor to the industry’s economic woes.
Scott Donnelly, chairman and CEO ofparent , cited the political environment on an analyst call last week when announcing that Cessna was slowing light jet production and laying off workers. Potential customers “read all the political nonsense, this corporate jet loophole, which, by the way, they mean depreciation ... I’m not sure why that’s a loophole, since it’s actually in the tax code and always has been,” he said.