Dec. 4, 2015

Bonus depreciation is one of more than 50 tax provisions that officially expired at the end of 2014, but which Congress is currently debating to renew retroactively, and possibly extend into the future. Congress is expected to act on these “tax extenders” before it adjourns for the year.

“NBAA has consistently and repeatedly urged Congress to extend bonus depreciation so businesses have the certainty to invest in new assets,” said Scott O’Brien, NBAA senior manager for tax policy. “Last year, along with a coalition of industry groups, we successfully advocated extending bonus depreciation for 2014 and we’ve been calling on members of Congress to extend it again.”

Review: “NBAA Joins Effort to Renew Tax Incentive for Business Aviation Purchases.”

The key tax writing committees in both the House and Senate have approved extensions of bonus depreciation. The Senate Finance Committee, chaired by Sen. Orrin Hatch (R-UT), voted to extend bonus depreciation through Dec. 31, 2016. The House Ways and Means Committee – at the time led by current Speaker of the House Paul Ryan (R-1-WI) – voted to make bonus depreciation permanent.

A complete tax extenders package has not yet passed either chamber.

“First, the House and Senate negotiators need to cut a deal on which tax provisions to extend, and for how long,” said Gary Gasper, who co-leads Ernst & Young’s Washington council practice. “Then, procedurally, they’re most likely to attach it to an omnibus appropriations bill or other conference bill that Congress needs to pass before the end of the year.

The tax extender package, and an omnibus appropriations bill, are expected to pass by Dec. 18, Congress’s last scheduled day in session for 2015. What’s in the final deal depends on negotiations between congressional leadership, committee leaders and the White House.

“The provisions can be thought of in terms of three buckets,” said Gasper. “There are big ticket items that many members want to make permanent, such as the research and development tax credit for businesses, and some family tax credits. Then there are some small ticket items that will either be phased out or renewed. And finally, there are provisions that are more controversial, such as the wind energy tax credit.”

Currently, bonus depreciation has broad congressional support, but negotiators are debating whether it should be made permanent or extended on a short term basis. Previously, the White House has argued that bonus depreciation was a temporary measure to stimulate the economy and should not be made a permanent part of the tax code.

“Business aircraft manufacturing creates more than a million jobs in America, but it has yet to fully recover,” said O’Brien. “Bonus depreciation is a proven incentive to encourage businesses to invest, including in the purchase of new aircraft. Stimulating investment is the best way to unleash economic growth and NBAA is continuing to advocate for extending bonus depreciation or making it permanent.”