Nov. 26, 2014
The FAA has amended its airport revenue usage policy to emphasize that tax revenue from aviation fuel sales must go back into the aviation system.
The change, published as a “Final Policy Amendment” Nov. 7, and effective Dec. 8, reconfirms policy that has been followed for nearly three decades, but has faced periodic challenges because of perceived ambiguity in the regulations.
General policy mandating that airport revenue be put back into the aviation system was established in a 1987 update to airport grant approval requirements. In 1999, FAA released its “Policy and Procedure Concerning the Use of Airport Revenue,” further codifying how airport-generated funds must be used.
The general purpose of the 1987 update and the 1999 policy is to keep municipalities from placing so-called “hidden taxes” on air transportation. But efforts by several state governments looking to use aviation fuel tax revenue for non-aviation purposes convinced the FAA that more clarity was needed.
For example, in 2009, Nebraska considered adding aviation fuel to a list of products that carry a statewide sales tax linked to a general fund. In 2010, Hawaii sought to have aviation fuel included in a statewide tax on petroleum products, arguing that because its tax language did not mention aviation fuel specifically, it was not in violation of federal law.
In these cases and others, the FAA issued legal opinions clarifying that revenue from a tax on aviation fuel, regardless of how the tax language is worded or how the levy is applied, must be put back into the aviation system.
The latest amendment updates FAA’s 1999 policy to incorporate the agency’s interpretations and underscore that the policy and related law apply to local governments, such as cities and counties, as well as states. It also codifies the long-practiced policy of permitting revenue from state-imposed taxes to fund state-level aviation initiatives.
NBAA joined about two-dozen other groups in voicing general support for FAA’s effort.
“When states, counties, cities and other local jurisdictions tax aviation fuel, it is critical that the proceeds are used for the capital or operating costs of an airport, a local airport system or any other airport facility,” said Scott O’Brien, NBAA’s senior manager, finance and tax policy. “The amended Revenue Use Policy is helpful in clarifying the prohibition on taxes of any kind on aviation fuel, unless the revenues are used in a manner that is consistent with federal law and policy.”
International Business Aviation Council Ltd.