1. Georgia Airports Association Spring Workshop February 25, 2015 Georgia Department of Transportation FAA Policy and Procedures Concerning the Use of Airport Revenue; Proceeds From Taxes on Aviation Fuel Presented By Steve Brian Aviation Program Manager

3. Background on Policy Amendment  Airport and Airway Improvement Act of 1982, (AAIA), establishes the Airport Improvement Program (AIP) for awarding Federal grants to airports in the US.  The Act requires airport sponsor accepting a grant give assurances that any revenues received by the airport will be used for the capital and operating expenses of the airport.  The purposes of the revenue use requirements are to prevent a “hidden tax” on air transportation, and to ensure that Federal airport grants are used to supplement funding for airport projects and are not simply used to substitute funds diverted to support local non- airport programs.

4. Background on Policy Amendment  In the years following the 1982, there were instances of new state taxes being imposed on the sale of aviation fuel at AIP-funded airports.  The application of the AAIA revenue use requirements to these new taxes was not entirely clear.  In response, Congress adopted an amendment to the AAIA (1987) to bring state and local taxes on aviation fuel within the scope of the airport revenue use requirements.  The amendment also provided that revenues from a state fuel tax could be used for state aviation programs in addition to the uses permitted for revenue received by the airport sponsor.

5. Summary of Policy Amendment  On December 8, 2014, the FAA released its final rule amending and clarifying its Aviation Revenue Use Policy.  The Amendment specifically addressing taxes on aviation fuel where FAAs policy addresses public law passed in 1987 requiring all taxes on aviation fuel to be expended on the airport.  The amendment requires local taxes levied on aviation fuel, regardless of the taxing authority, to be expended on the airport and allows state taxes assessed on aviation fuel to be spent on the state’s aviation program.  The law allows an exemption for all taxes enacted prior to 1987.

6. Application of Amendment in Georgia  Currently Georgia assesses a 4% state sales tax on AvGas and Jet Fuel.  3% of the 4% state sales tax was enacted prior to 1987 and is exempt from FAA’s policy.  Additionally, the state collects a one cent per gallon Motor Fuel Tax on AvGas.  Local taxes assessed on aviation fuel vary due to local laws, but generally include LOST, ELOST, SPLOST, HOST and TIA with the majority of these taxes enacted after 1987.  FAAs policy amendment requires states and airports to provide a statement of compliance or a plan to demonstrate compliance no later than December 8, 2015, and full compliance within three years.

7. Application of Amendment in Georgia  The Georgia Department of Revenue does not segregate state and local tax collections on aviation fuels. This inability to quantify the annual amount of tax collections on aviation fuels does not allow the state or its 98 local airport sponsors subject to the law to confirm compliance or develop a plan to do so.  Consequences for noncompliance with FAAs policy jeopardize the state and individual airports’ ability to receive federal funding and the Department’s ability to continue to participate in the FAAs State Block Grant Program.  The Block Grant Program provides as much as $50 million in federal funding annually for 89 general aviation airports.  Additionally, FAA may assess civil penalties for noncompliance.

8. Application of Amendment in Georgia  In order to determine compliance for the state and local airport sponsors it will be necessary for the Department of Revenue to implement modifications to its monthly sales and use tax reporting forms to allow tracking of the taxes collected on aviation fuels.  Once this information is collected and analyzed the state and local airport sponsors will be able to confirm compliance to FAA or determine any deficiencies and develop a compliance plan.

9. Summary of Comments Submitted  On November 21, 2013, FAA published their proposed amendment to its policy on Federal requirements for the use of proceeds from taxes on aviation fuel and requested public comment. (78 FR 69789, November 21, 2013).  FAA received 25 substantive comments on the proposals, from airport operators; industry and nonprofit associations representing airports, air carriers, business aviation and airport service businesses; an air carrier; State government agencies; and private citizens.  A majority of commenters supported the general purpose of the policy (and the underlying statutes): using airport revenue for airport purposes and using State and local aviation fuel tax revenue for airport purposes or State aviation programs.

10. Specific Comments Offered 1)The unfairness of holding airport operators responsible for the actions of State and local government taxing authorities, particularly non-sponsor governments. 2)The intent of policy amendment to require compliance by non- sponsor State and local governments. 3)Defining the portion of general sales taxes collected on aviation fuel as an ‘aviation fuel tax,’ and the administrative burden of identifying the aviation fuel component of general taxes. 4)Time allowed before full compliance with the policy amendment is required. 5)Clarifying that ‘‘noise mitigation’’ refers only to mitigation of aircraft noise.

11. Specific Comments Offered 6)How FAA will enforce the policy amendment with respect to jurisdictions that are not parties to an AIP grant agreement. 7)The proposal requires a federalism analysis under Executive Order 13132.  For taxes imposed by non-sponsor State and local governments, the airport sponsor will be expected to advise those entities of Federal requirements for use of aviation fuel tax revenues, and to take action reasonably within the sponsor’s power to tailor State and local taxation to conform to the requirements of policy amendment.  If a noncompliant tax is adopted by a non-sponsor State or local government, notwithstanding the airport sponsor’s advice and efforts, the FAA would not take enforcement action against the airport sponsor out of fairness to the sponsor who is not responsible for the noncompliance.

12. Georgia Comments on Policy Amendment  Franklin- Hart Airport Authority, Georgia, expressed concern that redirecting some local taxes on aviation fuel to the airport could lead those jurisdictions to reduce other, non-tax support for the airport. The comment suggested that for that reason the proposed policy could be a hardship for the airport, but did not assert that the proposed amendment was incorrect.  GDOT/GDOR commented on the burden of reporting fuel sales as separate from other items taxed under the same ordinance.  FAA response would permit a State a reasonable amount of time to bring itself into compliance through an ‘‘action plan,’’ which takes account of the State’s legislative schedule. We believe that the FAA’s acceptance that a State will require time to bring itself into compliance will afford the State sufficient time to develop a mechanism for administering taxes in accordance with this policy.

13. Actions Needed to Show Compliance Local Governments which Operate Airports:  Evaluate local taxing of aviation fuel based on the FAA Amended Policy  Determine if the local government taxing authority is providing funding to the level of the non-exempted tax collection  If not, work with and advise the local taxing authorities to educate them on this requirement  Develop a plan to be submitted by December 8, 2015 illustrating how this policy is being followed or with in the next tree years State Government:  Begin Collecting Data on Aviation Fuel Taxes which can be Used to Evaluate the Policy Amendment  Develop a Plan to Show the State is in compliance by December 8, 2015 or will be within three years

14. Questions? https://www.federalregister.gov/articles/2014/11/07/2014-26408/policy- and-procedures-concerning-the-use-of-airport-revenue-proceeds-from- taxes-on-aviation-fuel