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NATA Fuel Tax Member Hot Button Resource Page Last Updated September 25, 2007 HOUSE AND SENATE BILLS REPEAL FUEL FRAUD PROVISION Both the U.S. House of Representatives Committee on Ways and Means and the Seanate Committee on Finance have approved tax changes to the financing structure of the Airport and Airway Trust fund that increase the tax on general aviation jet fuel while also repealing the “fuel fraud” provision enacted as part of the 2005 Highway Bill. Both pieces of legislation would raise the total tax on general aviation jet fuel to 36 cents per gallon, while the House bill would also increase the tax on aviation gasoline to 24.2 cents per gallon. Both taxes include a .1 cent per gallon contribution to the leaking underground storage tank trust fund. The taxes in both bills would run through September 30, 2011. The tax increase in both bills would also mean an elimination of the “fuel fraud” provision currently place as a result of the 2005 Highway Bill. Aviation fuel retailers will no longer have to register as “ultimate registered vendors” with the Internal Revenue Service for the purposes of receiving refunds from the IRS on fuel sold. All aviation jet fuel will be tax initially at the 36 cents per gallon rate, and be immediately credited to the Airport and Airway Trust Fund. The House of Representatives approved its version of the FAA reauthorization bill, H.R. 2881, on September 20, by a vote of 267-151. The Senate Finance Committee approved the tax title of the Senate version of the FAA bill the following day. The full Senate must still debate the legislation before the two bills can be reconciled in a House-Senate conference committee. There is no current timetable for consideration of the FAA reauthorization bill in the Senate. NATA Continues Push To Fix Fuel Fraud Provision
NATA has participated in meetings with Committee on Finance staff regarding the fuel fraud provisions and possible changes to current law. Committee staff pledged to work with the industry in creating solutions that ease fuel fraud concerns without placing an undue burden on the aviation industry. The Committee on Finance has tentatively scheduled a hearing for mid-July to discuss changes to the tax code affecting the aviation industry. Following the hearing, the committee will consider legislation to extend or alter the current tax structure. Following passage of this legislation, the bill will be combined with S. 1300, already passed by the Senate Committee on Commerce, Science and Transportation in May, and the combined bill will be debated on the Senate floor. FAA Reauthorization Update With Congress in the process of reauthorizing the Federal Aviation Administration, other aviation programs, and all aviation fuel and excise taxes, the "fuel fraud" issue remains at the top of NATA’s legislative agenda during this debate. NATA, along with other aviation organizations and fuel providers, is working with Congressional officials to address concerns with this provision as it currently stands, as well as any problems that could arise as a result of changes to the current aviation fuel tax structure. Please continue to check both this site as well as NATA’s FAA Reauthorization Center for updates on the reauthorization bill. New Survey Confirms Problems Associated with Fuel Tax Change The Aviation Management Consulting Group, on behalf of the National Air Transportation Association (NATA), conducted a survey of aviation fuel providers affected by the new policies regarding the collection of aviation fuel taxes. The changes were mandated by last summer’s Highway Bill (SAFETEA-LU, P.L. 109-59). The survey results demonstrate many of the difficulties faced by fuel sellers under the new policies that were put in place on October 1, 2005. The fuel providers surveyed represented a diverse sample of the industry with a range of businesses that sell from 60 gallons of jet fuel per month to 9 million gallons. On average, the survey respondents sell approximately 270,000 gallons of jet fuel per month. Of the survey respondents, 76 percent have applied to the Internal Revenue Service (IRS) for designation as an Ultimate Registered Vendor (URV), which would allow them to collect the rebates on the extra 2.5-cents-per-gallon tax applied to aviation jet fuel (Jet A). Of those who have applied, one third has yet to receive approval for URV status. Of those who have been approved, over half had to wait two to six months for approval from the IRS. Click here to read NATA's Legislative Report on the survey Click here to read NATA's Press Release regarding the survey New Flow Chart Available NATA has published a flow chart demonstrating the difficulties associated with the new fuel fuel tax collection policies. Click here to download the fuel tax flow chart
Legislative Update: On April 27 , Senator Conrad Burns (R-MT), Chairman of the U.S. Senate Committee on Commerce, Science, and Transportation Committee’s Subcommittee on Aviation, introduced legislation that would temporarily suspend the changes in the collection of aviation fuel taxes that went into effect on October 1, 2005. The legislation, S. 2666, the “Aviation Fuel Tax Simplification Act,” would revert to the system for collecting aviation fuel taxes that was originally in place prior to October 1, 2005. Under the legislation, the collection of aviation fuel taxes would be suspended until October 1, 2007, when all aviation taxes expire. Burns introduced the legislation in hopes of providing additional time for officials in Congress, the President’s Administration and the transportation industry to discuss the fuel fraud issue and what procedures can be established that would solve the problem without placing an undue burden on the industry. NATA is encouraging all members to contact their U.S. Senators and urge them to support and co-sponsor S. 2666. ***Click here to read NATA's latest Action Call*** NATA has also drafted a form letter for you to download, customize and send to your U.S. Senators regarding S. 2666. ***Click here to download NATA's latest form letter***
Guidance - How To Comply New Updated Guidance for Obtaining Fuel Refunds is Available! Click here for details. (Revised April 6, 2006) Special Guidance for Military/Government Aircraft Fuel Taxes
Letters A number of influential Members of Congress and government officials have weighed in on the fuel tax issue, sending letters to the Department of the Treasury regarding the impact this change is having on aviation businesses. Letter from Congressman Leonard Boswell (D-IA), June 2006
Letter from Congressman Robin Hayes (R-NC) NATA/NBAA letter to then-Treasury Secretary John Snow Background Information Check out Fuel Fraud 101: NATA's PowerPoint Presentation on the new changes Comments on Fuel Fraud Tax Changes Summary The recently enacted Highway Bill contains a change in the collection of fuel taxes for business and general aviation operators that will have a significant financial impact on the aviation industry and could lead to a de facto tax increase. Before enactment of the Highway Bill, jet fuel intended for noncommercial use was taxed at a rate of 21.9 cents per gallon (CPG). While the tax on aviation jet fuel remains at 21.9 CPG, the Highway Bill mandates that all taxes on aviation jet fuel will be collected at the same rate as the tax for highway diesel fuel, 24.4 CPG, except under very controlled circumstances. The operator or “ultimate registered vendor” would then have to file claims with the Internal Revenue Service (IRS) to be reimbursed for the 2.5 CPG difference in the amount of taxes paid and the amount actually owed. The change was made amid concerns that highway truck drivers were buying aviation jet fuel and then mixing the fuel with another substance to make it operable in highway trucks, thus avoiding the higher taxes. Despite the fact that there is no documented evidence of widespread fuel fraud of this nature, the change has been implemented and stands to increase Highway Trust Fund revenues by hundreds of millions of dollars at the expense of the Airport and Airway Trust Fund. The change in the fuel tax collection poses problems for aviation operators, fuel providers and the aviation industry as a whole. When the fuel is initially purchased at 24.4 CPG, it is deposited into the Highway Trust Fund. Only when an operator applies to the IRS for the 2.5 cents refund does the 21.9 cents transfer from the Highway Trust Fund into the Airport and Airway Trust Fund. In the event that an operator or fuel provider does not apply for the refund, the aviation trust fund receives no revenue from the sale of the aviation jet fuel. The revenue generated for the Highway Trust Fund is not “new” revenue: it is simply taking money from the Airport and Airway Trust Fund to justify the high costs of the Highway Bill. The change took effect on October 1, 2005, with no guidance from the IRS on how aviation fuel operators should apply the new policy. With little direction from the IRS on who is eligible or which businesses along the fuel supply chain should apply for the refund, there is great concern in the aviation industry that fuel providers may pass the increased tax along to aircraft operators, failing to file for any refund. In this situation, the Airport and Airway Trust Fund receives no revenue, and purchasers of aircraft fuel have been given a de facto tax increase. This onerous and convoluted process for taxing aviation jet fuel presents an enormous administrative and paperwork challenge for aviation businesses throughout the country, the overwhelming majority of which have never been engaged in any sort of fuel fraud. Member Feedback NATA is asking its members to inform us of any difficulties you are encountering with the IRS in complying with the new policy. Please submit any examples of problems to Lindsey McFarren, NATA's Manager of Research and Special Projects.
Staff Contacts: Manager, Legislative Affairs Manager, Research and Special Projects |
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