Based on U.S. government proposals this past month, business aviation now faces a five-fold fuel tax increase, new IRS audits and a longer aircraft depreciation schedule. Ed Bolen, NBAA’s president and CEO, speaks with Lee Ann Shay about industry advocacy underway in response and the outlook.
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Transcript
Lee Ann Shay:
Hello and welcome to the BCA Podcast. I'm Lee Ann Shay, Executive Editor of MRO and Business Aviation at Aviation Week. And today's topic: headwinds facing private aviation.
In the past month, the Internal Revenue Service in the US introduced new audits of business aviation. The government proposed a five-fold fuel tax increase on business aviation. And changed the depreciation schedule from five to seven years. Naturally, NBAA and other associations and their members are fighting back.
I'm here with NBAA President and CEO, Ed Bolen, to talk about these issues, the advocacy underway and the progress. Ed, welcome and thank you for joining me.
Ed Bolen:
Thank you, Lee Ann, I appreciate the opportunity to be with you.
Lee Ann Shay:
Thank you. So let's dive right into these issues. First up, tax increases for business aviation, including 'cracking down on corporate jet loopholes', and the jet fuel tax, what's your take?
Ed Bolen:
Well, obviously some statements have been made regarding business aviation which are not necessarily clear in their context. So for example, we've seen the IRS commissioner talk about the desire to have enhanced audits, both companies related who utilize business aviation. What he did not say was why exactly these audits were going to take place. These are companies, and certainly NBAA members focus intently on compliance, compliance with safety regulations, security regulations, tax regulations, and other types of regulations. So it is unclear. When the statement was made, we said it sounded like an audit in search of a problem. We still believe that that is the case.
Lee Ann Shay:
Okay. What about the depreciation changes, that two-year period, how much of an impact does that make on your members?
Ed Bolen:
Well, depreciation is a topic where most economists believe that shorter depreciation schedules stimulate the economy and create a stronger environment for commerce. And so what we've seen over the last several years is an effort being made by Congress to shorten depreciation schedules. So it does not really make sense that we have a proposal that would lengthen depreciation schedules for an industry that is so important to America's manufacturing base, its exports, and really every community around the country depends on business aviation for economic development.
Today, business aviation's depreciation schedule is at five years, which is the same as it is for trucks, buses, and other transportation equipment. So again, here we seem to have a proposal that's being made that is at odds with what the economic realities are and the efforts that have been made to make sure that we stimulate our economy and not allow it to move into a recession.
Lee Ann Shay:
Are other forms of transportation facing the same depreciation changes from five to seven years, you mentioned trucks and other things, is any other form being elongated?
Ed Bolen:
No. This proposal seems to single out business aviation., Which again, when you realize that business aviation creates over a million jobs in the United States, provides economic development to small towns and rural communities with little or no commercial airline service, helps companies be efficient and productive in a very intense global marketplace and does a lot of humanitarian flights, taking cancer patients to treatment, responding to natural disasters. This is an industry that deserves to be promoted not pilloried. So it doesn't make sense that they would single out business aviation for lengthening a depreciation schedule when the vast majority of economists suggest shortening depreciation schedules.
Lee Ann Shay:
Now, this is a little bit of a tangent, but isn't it true when pilots and flight departments fly humanitarian missions, fly cancer patients, doing a humanitarian flight, they can't write off that fuel charge, right?
Ed Bolen:
Those are volunteer flights. So these are companies that are stepping forward with their assets, their pilots, their aircraft, and certainly individuals in our industry as well, that are recognizing a need in our society and responding to it. It's not something that our industry talks about a lot. But it is the reality, when there is a crisis, we respond. And every day individuals are having a crisis, they need to get to trauma centers, they need to get to cancer treatment centers. And business aviation has always heeded that call and been at the front of the line.
Lee Ann Shay:
Absolutely. So I mean, again, that's something that is happening, maybe not is promoted as much, but definitely something we should highlight I think.
Ed Bolen:
Well, I think one of the things that we see is business aviation is often mis-characterized by a lot of people. When the reality is 85% of NBAA's members are small or mid-size companies. They're operating the vast majority of their flights to or from airports with little or no commercial airline service. A lot of times they're moving teams of people, and this gives them an ability to discuss proprietary information in route without fear of eavesdropping. It allows them to do three cities in one day instead of one city in three days. A lot of times they're moving parts that may be too big to go in an overhead bin or too fragile to go in a cargo hold. So this is really a special economic engine for our economy and a special link in our transportation system. And as I said before, this is a industry that deserves to be promoted not pilloried.
Lee Ann Shay:
Exactly. And at least what I've seen, business private aviation seems to be getting that fat tax, the millionaire/billionaire objective. So speaking of which, the IRS audits that came out the end of February, that seems like it could be really onerous to your members. Any advice?
Ed Bolen:
Well, NBAA always does a lot to make sure that people that utilize business aviation understand how to comply with all appropriate laws and regulations. So we spend a lot of time doing outreach, a lot safety regulations, security regulations, and certainly tax and SEC type of regulation. We work hard to make sure that in an environment where there's a lot of complexity about laws, regulations, interpretations, that people have the information they need.
And I think what we see is there's always a lot of interest and enthusiasm about understanding laws and regulations and complying with them. So when the IRS commissioner says, "We really want to enhance and look for people who are not paying their taxes," we don't see a real justification for that because everything that we know about the industry suggests that we are very much a compliance-driven industry.
Lee Ann Shay:
Absolutely. And listeners, NBAA does have some really good information on its website. And Kent Jackson, who writes the Point of Law for BCA, his next column is about these audits. So I would suggest that you check out both of those.
But we're going to end on a positive note. It's not all bad news. On March 25th, just a couple of days ago, NBAA received an extension to its small aircraft exemption through March of 2026. Ed, could you please tell us about that?
Ed Bolen:
Well, I think this underscores that so many business aircraft are small and they are utilized by small companies going into and out of communities with little or no airline service. This is a recognition of the unique type of transportation that is involved and the unique type of operations. And we're pleased that we are able to continue to work in a way that is consistent with safety and helps address some of the economic challenges related to it. So yes, it's a long-established program and one we are pleased to continue.
Lee Ann Shay:
Well, congratulations on that. And I guess for the private aviation community that wants to keep informed about changes maybe to some of these proposals for depreciation, tax, fuel, what do you suggest, any progress that's being made already?
Ed Bolen:
Well, Lee Ann, let me start by saying that one of the things that makes business aviation and all of general aviation so special is that our community is very engaged. And so you have seen that during these proposals coming forward there has been a strong response, not just from the business aviation associations, but also from labor unions and mayors, city council members. There are a lot of people that recognize this is an industry that means jobs and economic development. So we encourage people to be engaged, contacting their elected representatives, and making sure that there's a clear understanding of what business aviation is.
We've encouraged people to go to nbaa.org/advocacy. That's an opportunity to contact your member of Congress. And we would urge everybody involved in business aviation to do just that. This is a great American industry, and elected representatives need to know the huge number of people and the huge number of communities that are dependent on it for their vitality.
Lee Ann Shay:
That sounds good. And good point about local ... there's some information about New York advocacy as well, so think about local, state, and federal opportunities. So all good. Well, Ed, thank you so much for your time, really appreciate it.
Ed Bolen:
Okay, Lee Ann, it's great to talk with you. Is there anything else you want to touch on while we're here?
Lee Ann Shay:
I would love to, but we've unfortunately run out of time today. But listeners, don't miss the next episode by subscribing to us in your podcast app of choice. And one last request. If you're listening to the BCA Podcast in Apple Podcasts and would like to support us, please leave us a star rating or write a review. Thank you very much and have a wonderful day.
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