Following up on President Biden’s pledge to make corporate jet users “pay their share” and drawing ire from the business aviation community, the White House yesterday proposed a fivefold phased-in increase of the jet fuel tax for personal users and lengthening the depreciation terms for business aircraft. Included within the President’s Fiscal 12 months 2025 budget request, the proposal comes along with the White House directive for the IRS to step up audits of business aircraft users to ensure they’re properly classifying business and personal uses.
The Department of Transportation released an announcement saying the budget proposes to “crack down on a company jet funding loophole.” Taking a page from past arguments surrounding the business aviation contribution to the National Airspace System, the DOT noted that the system “has largely been disproportionately funded by industrial air passengers.”
In accordance with the agency, private jets account for 7 percent of operations handled by air traffic control but contribute just 0.6 percent of the taxes that make up the Airport and Airway Trust Fund. Plans would call for a phased-in fuel increase from the present 21.9 cents per gallon to $1.06 per gallon in fiscal yr 2029 on jet fuel utilized by non-commercial operators. In accordance with the DOT, “In the primary yr, the jet fuel tax would increase to 38.64 cents with a 16.84 cents per gallon increase in each subsequent yr until 2029.” This tax rate was believed to have been last raised in 1993; even adjusted for inflation, it could be 47 cents per gallon today.
Budget documents estimate that the increases would herald an extra $44 million in FY2025, scaling as much as greater than $300 million in additional income by FY2029. It’s unclear whether this tax increase encompasses all jet fuel utilized by non-commercial operators, no matter the share that’s derived from sustainable aviation fuel (SAF).
As well as, the budget would “eliminate a tax break that offers preferential treatment for writing off corporate jet purchases, in comparison with industrial aircraft.” This includes extending the depreciation length for business aircraft to seven years, matching that of airliners reasonably than the schedule of other business assets similar to automobiles. The proposal comes as Congress is considering extending bonus depreciation. The White House estimates that its proposal would generate additional income starting from $46 million in FY2025 to the height of $217 million in FY2028.
The tax hikes come because the Airport and Airways Trust Fund now covers a lot of the FAA’s budget with the federal general fund contributing just 3 percent of the FY2024 appropriations.
Attempts to vary the depreciation schedule and lift fuel taxes are usually not latest. Former President Obama proposed tackling the depreciation schedule in 2011. And, business aviation organizations have prior to now supported much more modest increases in fuel taxes as an alternative of a user fee system.
Nonetheless, the present proposals to go after the tax rate and depreciation schedule, coupled with the unleashing of audits and a slate of other potential corporate and wealth tax increases, have drawn outrage from business aviation organizations.
“The Biden administration’s sweeping plan would hurt business aviation and the roles and communities that depend upon it and make it harder for U.S. corporations to compete in a worldwide economy,” said NBAA president and CEO Bolen. “Among the many proposals that single out business aviation for onerous treatment is a five-fold fuel tax increase, regardless that current fuel taxes already cover the incremental cost imposed on the aviation system. We urge Congress to inform the president that his gambit won’t fly with the residents, corporations, and communities that depend on business aviation.”
National Air Transportation Association president and CEO Curt Castagna agreed. “Business aviation is within the crosshairs again at a time when it is required probably the most,” Castagna said. “The White House budget includes multiple provisions that mischaracterize the worth of and would adversely affect the business and general aviation sectors, jeopardizing the roles they supply and disregarding the critical services they support.”
Castagna said the administration as an alternative should prioritize fostering business growth. But he also pointed to the diversion of aviation tax funds into the Highway Trust Fund to stop fuel fraud efforts. “Unfortunately, the Biden Administration is proposing a tax increase it mistakenly believes will profit the national aviation system,” he said. “This will not be the case. For nearly twenty years now, Congress and the IRS have failed to deal with provisions within the tax code that allow for the HTF to erroneously keep billions of aviation tax dollars that were intended for the [aviation trust fund].”
General Aviation Manufacturers Association president and CEO Pete Bunce called the proposals disheartening and shortsighted. “[They] can set back our industry with consequences that harm our indispensable workforce, the exact same men and girls within the U.S. manufacturing sector that the Administration claims to emphatically support,” he said.
“The political soundbites of closing the so-called corporate jet loophole and drastically increasing the jet fuel tax, by nearly five times, does nothing greater than harm demand for state-of-the-art aircraft which are called ‘business jets’ or ‘corporate jets’ for a selected reason…Why would the Administration need to hurt staff who make these aircraft or those communities that profit from the roles and/or mobility these vehicles enable?”
Bunce noted efforts of the industry to advance sustainable technologies and SAF. “The health and livelihood of our industry relies on having an efficient, reliable, and conducive regulatory and business environment. These tax proposals go within the unsuitable direction.”