While the CARES Act payroll and loan provisions in the U.S. have received considerable attention within the industry, less highlighted measures surrounding tax treatment stand to help with business aircraft sales, according to the International Aircraft Dealers Association (IADA).
IADA pointed to the CARES Act reinstatement and extension of net operating loss (NOL) carryback, enabling companies to carry back the current-year NOL up to five years ago. Under the NOL carryback measure, some buyers might be able to purchase an aircraft in 2020, take an income loss through 100 percent bonus depreciation, and receive a refund on taxes paid for income for years dating back to 2015.
"We appreciate that Congress and the Administration stepped up to the recognition that tax implications for companies incurring losses in 2020 can be an important part of the overall economic recovery, including preowned aircraft, going forward," said IADA executive director Wayne Starling. "Now with more advantageous NOL provisions under the CARES Act, we are better positioned to assist companies that may be suffering this year from the economic shutdown, but would still like to acquire another aircraft in 2020."
The NOL carryback had expired in 2017, but the CARES Act renewed it only through 2020, Daniel Cheung, of Aviation Tax Consultants, said during a recent IADA webinar. However, the CARES Act also applies the carryback loss to 2018 and 2019, which could apply to some companies that may have purchased aircraft in those years, he added.
Suzanne Meiners-Levy, of Advocate Consulting Legal Group, told webinar attendees that the ability to carryback five years could be particularly beneficial since the corporate tax rate was still 35 percent five years ago. The 2017 Tax Cuts and Jobs Act changed that to 21 percent.