The end of the year is always tough for assessors when it comes to ensuring aircraft compliance. Sales transactions traditionally spike in Q4 for tax reasons. Sellers want to record their sale by year-end, and buyers want their purchase on the books come the first of the year. Throw in the phasing out of aircraft bonus depreciation, and you have the perfect storm. With so many aircraft changing hands, tax departments can’t possibly account for every instance of tax liability.
(But we can.)
What Is Aircraft Bonus Depreciation?
The 2017 Tax Cuts and Jobs Act allowed aircraft owners to immediately deduct 100% of their aircraft’s depreciation, provided the aircraft met the requirements.
Rather than wait each year for incremental depreciation, owners claimed it all upfront for aircraft bought and used between September 27, 2017, and January 1, 2027. That bonus depreciation started to phase out in 2022 and continues to reduce in rates through 2027. Depending on the aircraft, starting January 1, 2024, owners will only be able to leverage bonus depreciation at reduced 60–80% rates.
FAA Delays in Certification Causing Tax Revenue Losses
In addition to increased sales, we’re seeing delays in aircraft certification from the Federal Aviation Agency (FAA). With multiple aircraft changing owners in a short period of time, the FAA is simply overwhelmed. For example, even though an aircraft was bought and sold in December of 2023, the FAA may not record it until months later in May, June, or even August of 2024.
That’s a problem for compliance.
Most counties look for notification from the FAA as their trigger to issue a tax bill. Because those jurisdictions dictate tax liability on the lien date, or when the owner purchased the plane, the delayed FAA notification causes delayed noticing.
If someone purchases a $30 million plane, the tax revenue would be a significant loss.
To avoid this loss, someone needs to match the Bill of Sale with the application date, which will ensure years of liability are not lost to a simple recording delay. Confirming each date ensures the highest level of accuracy and compliance for all aircraft for each year. But it’s hard to do.
Tracking Aircraft Is Challenging
Current best practices are in need of new technologies and expert insight to increase their effectiveness. With nationwide staffing shortages and shrinking budgets, most offices struggle to find the time to focus on some of their most valuable (and challenging) taxable personal property.
We do.
We look at each individual aircraft.
Through proprietary technology, expert analysis and experience, we alert our clients when a new aircraft establishes a home base in their jurisdiction. This allows that location to ensure compliance at a whole new level of accuracy. The exact goal of every tax office in the USA. Tax the taxable items at the correct value. Nothing more. Nothing less.
Sound interesting to you? Let’s talk more.
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