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A bill to provide tax relief, including an extension of the 100% bonus depreciation credit often used by businesses to help with the expense of buying an aircraft, is moving forward in Congress with bipartisan support.
Sponsored by Sen. Ron Wyden (D-Oregon), chair of the Senate Finance Committee, and Rep. Jason Smith (R-Missouri), chair of the House Ways and Means Committee, the $78-billion Tax Relief for American Families and Workers Act would also expand the child tax credit, build more low-income housing and provide businesses tax relief for research and development projects, among other provisions.
Its cost would mostly be offset by more than $70 billion in projected savings by ending the COVID-era Employee Retention Tax Credit by the end of January as opposed to April 2025.
The House Ways and Means Committee advanced the tax bill on Friday by a 40-3 bipartisan vote. The nonpartisan advocacy group, the Tax Foundation, rates the bill as revenue-neutral.
The 100% bonus depreciation provision would remove $87.1 billion in tax revenue from the federal government's balance books for 2024 and 2025, according to an analysis of the bill from the Tax Foundation, which makes up around one-third of the cost of the bill over those first two years.
However, the scoring includes the revenue restored after the provision ends in 2025, which would bring in $80.3 billion over the following eight years.
Congress first introduced bonus depreciation for items including preowned aircraft in 2017. Previously, it only applied to purchases of new items.RELATED STORIES: Changes coming to aircraft bonus depreciation tax The biggest mistakes buyers make when buying a private jetBonus depreciation allows businesses to claim 100% of the depreciation of purchased equipment, including aircraft, in the year you take possession of it. Historically, those deductions would have to depreciate the amount over time the equipment is owned.
While supporters of the bill say it will provide common-sense relief to low-income Americans and small businesses alike, the Tax Foundation provided a more cautious perspective in its assessment.
Such provisions "are consistent with sound tax policy principles, simplifying the treatment of business costs and removing the tax penalties for business investment," its analysis states. "But economic gains are only to be had if companies can expect expensing to be available permanently, as companies make investment decisions on long time horizons and the economy adjusts to prices and incentives that can be expected to exist in the long run. The temporary extensions ... through 2025 may shift investment plans forward ... but leave long-run incentives unchanged."