## 1111



# 1111 

# LOS 

# ALAMOS COUNTY Public Works Department

1000 Central Avenue , Suite 160 • Los Alamos

. NM 8 7 544 Phone (505) 662.a150 Website: www.losalamosnm.us



### November 16, 2015
Demesia Padilla, Cabinet Secretary New Mexico Taxation & 

### Revenue Department P.O

. Box 630 Santa Fe, NM 87504-0630 COUNTY COUNCIL Kristin Henderson

Council Chair David lzraelevitz

**Counc~** Vice-Chair
Councilors James A. Chrobocinsk i Steven Girrens Susan O ' Leary Rick Reiss Pete Sheehey COUNTY MANAGER Harry Burgess



### Re: Federal Aviation Administration Policy Regarding Use of Aviation Fuel Tax Revenue and Deadline to Submit Action Plan by December 8, 2015.

Dear Secreta ry Padilla:

I am the Deputy County Manager and Chief Financial Officer ofthe Incorporated County of Los Alamos, which operates the Los Alamos Airport. I am writing to alert you to federal compliance restrictions on the use of State and local tax revenues derived from the sale of aviation fuel, and a deadline for State officials to submit an action plan to address compliance by December 8, 2015.


### Federal Revenue Use Policy

As an airport sponsor/operator that has accepted federal grant assistance, the County is bound by multiple federal policies, procedures, and legal requirements, including federal assurances made by the County to the Federal Aviation Administration ("FAA") when accepting federal grants. Federal law on the subject of the use of airport revenue is embodied in the Policy and Procedures Concerning the Use of Airport Revenue (the "Revenue Use Policy"), first promulgated by the FAA 

### in February, 1999, at 64 Fed. Reg. 7696. Under federal law, airport revenues generally may only be used for airport-related purposes.
These airport revenue use requirements apply to proceeds from certain State and local govenunent taxes on aviation fuel, as well as to revenues received directly by an airport operator. A recent "Policy Amendment, " issued by the FAA on November 7, 2014, is published at 79 Fed. Reg. 66282, and specifically concerns the use of the proceeds from any State or local tax on aviation fuel. The Policy Amendment requires that the County inform you of its provisions , and take reasonable actions within the power ofthe County to influence the State to confonn to those requirements. I have included a copy of the Policy Amendment with this letter for your review.
The Policy Amendment confirms that State and local taxes on aviation fuel, whether part ofa general sales tax or otherwise, and whether imposed by an airport operator or by State or local taxing authorities, are subject to the federal restrictions on the uses of airport revenue. See 79 Fed. Reg. at 66287. Generally speaking, this means that proceeds from taxes on aviation fuel must be used for the capital or operating expenses of the airport where the fuel is sold , of the local airport system, or of other facilities owned or operated by the airport and directly and substantially related to air transp01tation. 64 Fed. Reg

. at 7718. In addition, State taxes on aviation fuel may be used to support State aviation programs. 79 Fed. Reg. at 66287. These restrictions do not apply to "grand fathered" taxes in effect on or before December 30, 1987.

### State Aviation Fuel Taxes and Compliance

In order to comply with the Policy Amendment, the State must identify all New Mexico state and local taxes o n aviation fuel, determine whether grandfathering exists, and if not, whether use of the tax revenue complies with the Policy Amendment.

We have been advised that the sale of aviation gasoline, aviation jet fuel and other aviation fuel in 

### the State o f New Mexico is subject to taxation under New Mexico law, which includes the fo llowing
• An excise tax of .17 cents a gallon is assessed on gasoline that is used in aircraft propelled by engines other than turbo-prop orjet-type engines, pursuant to NMSA 1978 

### § 7-13-3.

• A gross receipts tax of5.125% is assessed on the sale of jet fuel, pursuant to NMSA 1978, § 7-9- 4.

The grandfathering provision found in the Policy Amendment would apply to the use ofthe State sales tax onjet fuel if the above o r any other applicable taxe s were 

### in effect on December 30, 1987, and have not changed in character or use in any substantial way since that date. However, if the above o r any other applicable aviation fuel t axes were imposed after December 31, 1987 , tax revenues derived therefrom would be subject to the Revenue Use Policy and the Policy Amendment.

If the grandfathering provision does not apply, the State must identify the extent to which rev enues derived from the applicable taxes are set aside properly for local airport purposes and State aviation programs in com pliance with the Policy Amendment. Please n ote that the FAA recently clarified that the tax revenue u s e requirements
are met when the state appropriates money for local airport purposes o r State aviation programs from its general fund in an amount equal to or exceeding the local and State aviation fuel tax proceeds collected. 

### See, "Que stions fo r the FAA from NASAO Members February 25,2015 and July 15, 2015", attached.


### Deadline to Submit Act ion Plan

We urge the State to take whatever action is necessary to address these compliance issues, ensure compliance with federal requirements, and appropriatel y advise the FAA. The FAA has concluded that there is a need for all affected entities to have sufficient time to come into compliance with the Policy Amendment which became effective in December 20 14

. The FAA further understands that changes to bring State and local taxes into compliance may require S tate legis lation. In this regard, the FAA requires that State officials submit by December 8, 2015, an action plan to initiate the process to amend any n o n-compli ant State laws on use of aviation fuel tax revenues
. 

### See, 79 FR 66286, Response to Comment 4

. 

### Penalties for Non Compliance

The FAA's Policy Amendment empowers the U.S. Secretary ofTransportation to impose a civil penalt y, or seek other sanctions, such as an injunction, on State and local governments that fail to comply with these requirements. 79 Fed. Reg. 66288. Failure to submit an action plan may also delay or preclude federal grant funding

.
If you have questions or require further information, please contact Mr. Randall S. Fiertz, Dire ctor, Office of Airport Compl ia nce and Management Analys is, Federal Aviation Administration, 800 Independence Avenue, SW, Washington, DC 20591.
Respectfully,

Steven Lynne Deputy County Manager/ChiefFinancial Officer

### encl: Policy Amendment Questions for the FAA from NASAO Mem bers

cc: Dan Moran, Grants Administrator, Aviation Division 

### Randall Fiert;. , 

# r 1\1\ 

### w/encl. w/encl.

### 6 6 2 8 2 Fed eral Register 

### I Vol. 79, 

### No

. 216 

### I Friday, November 7, 

### 2014 

### I Rules and R egulations

dated April17, 2012 , except airp lanes on which modification status "32-64" is marked on the identification plato : Within 20,000 flight hours or 10 years after September 24, 201J. (the effective date of AD 2013-16-Q8), whi c hovor occurs first, install a new jam nul having part number 49606-5, in accordan ce w ith Part B of the Accompli shment Instru ctions of Bombardier Service Bulletin 670BA-32-Q31, Revis ion C. dated Aprilt7, 2012; and Goodrich Service Bulletin 4960Q32

- 64 R3. dated December 15. 2011. (j ) Re taine d Credit for Previous Actions With Chan ge to Paragraph (j)(l)(iii) ofTh is AD

(1) This paragraph restates the credit provided by paragraph (j)(1) of AD 2013-16- 08. Amendment 39-17546 (78 FR 51055, August 20, 2013). with a change to the service information citation in p aragraph (j)(t)(iii) of this AD. This paragraph provides credit for the actions required by paragraphs (g) and (i) of this AD, if those actions were performed before September 24, 2013 (the effective date of AD 201 3- 16-o8). using the service information specified in paragraph (j)(l)(i), (1 )( 1)(ii), or (j)(1)(iil) of this AD , which is not incorporated by reference in this AD

.

(i) Bombardier Service Bulletin 670BA-32

- 031, dated March 14 ,2011.

(ii) Bombardier Service Bulleti n 670BA

32-Q31. Revision A, dated june 9, 2011.

**(i ii~**  Bombardier Service Bulletin 670BA

32-031, Revision B. dated July 29, 2011.

(2) This paragraph restates the credit provided by paragraph (j)(2) of AD 2013-16- 08, Amendment 39

- 17546 (78 FR 51055, August 20, 2013), with no changes. This paragraph provides credit for the actions requir ed by paragrap h (h) of this AD, if those actions wore performed before September 24, 20 13 (tho effective date ofAD 2013-16-08). using the service information specified in paragraph (j)(2)(i) or (j)(2)(ii) of this AD. whi ch is not incorporated by reference in this AD.

(i ) Bombardier Service Bulletin 670BA-32- 033, dated March 1 4.2011.

(ii) Bombardier Service Bulletin 670BA

32-033, Re vision A, dated J uly 29, 2011. (k ) R etained Parts Installation L imitations With C hange to Par agr aph (k)(2) of T hi s AD

(1 ) This paragraph restates the pa rts inst a llation limita tion specif ied in paragraph (k)(l) of AD 2013-16-oS, Amendment 39- 1754& (78 FR 51055, August 20, 2013), with no changes. As of September 24 , 2013 (the effective date of AD 2013

- 16-Q8), no person may install on any airplane an MLG retrac t ion actuator assembly having any part number and serial number identified in paragraph 1.A., Effectivity, of Bombardier Service Bulletin 670BA

- 32-Q31 , Revision C. dated April17, 2012, unless that retraction actuator assemb ly has been inspected as specified in paragraph (g) of this AD, and all appli cable corrective actions (i.e., replacement of the retract actuator) specified in paragraph (g) of this AD have been done. Repeat the inspection specified in paragraph (g) of this AD thereafter at the intervals specified in paragraph (g) of this AD.

(2) This paragraph rostatos the parts installation li mitation specified in paragraph (k)(2) o£ AD 2013

- 16-o8. Amendment 39- 17546 (78 FR 51055, August 20, 2013), with a revised part name. As of the effective date of this AD. no person may install on any airplane an MLG dressed shock strut having any port number and serial number identlriud in paragraph t.A

.. Effectivity, of Bombardier Service Bulleti n 670BA

- 32

- 033, Revision B, dated June 26, 2012, unless that retraction actuator assembly has been inspected and all applicable corrective actions have been done, in accordance with the Acc omplishment Ins tructions of Bombardier Service Bulletin 670BA-32

- 033, Revision B. dated June 26, 2012. (I) Oth er FAA AD Pr ovis ions The following provisions also apply to this .AD:

( 1 ) Alternative Methods ofCompliance (AMOCs): The Manager, New York Aircra ft Certification Office (ACO), ANE-170

. FAA, has the authority to approve AMOCs for this AD. if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your princ ipal inspector or local Flight Standards District Office, as appropriate. II sending information directly to the ACO, send it to ATTN: Program Manager. Continuing Operational Safety

. FAA

. New York ACO, 1600 Stewart A venue, Suite 410, Westbury , NY 11590; telepho ne 516-228

- 7300; fox 516

- 794-5531. Before using any a p proved AMOC , notify your appropriate principal inspector, or lacking a principal inspector. the manager of the local flight standards district office/ certificate holding district office. The AMOC approval letter must specifically reference this AD.

(2) Con tacting the 1\llanufoc turer: for any requirement in this AD to obtllin corrective actions from a manufacturer, the action must be accomplished using a method approved by the Manager, New York ACO, ANE

- 170, Engine and Propeller Directorate, FAA; or Transport Canada Civil Aviation (TCCA); o
. r Bombardier's TCCA Design Approval Organization (DAD). If approved by the DAO. the approval must include the DADauthoriz ed signature. ( m) Related Information

(1) R efer to Mandatory Continuing Airworthiness I nformation (MCAI) Canadian Airworthiness Directive CF-2011 -36R1. dated October 3, 2012, for related information. You may examine the MCAI in the AD docket on the Internet at http:// IVIVw.regulations.gov/ #!documentDetail;D=FAA-201'1 -0483

-0002.

(2) Service information i dentified in this AD that is not incorporated by reference is available at the addresses specified in paragraphs (n)(4), (n)(S), and (n)(6) of this AD. (n) Mater ial Inc orp orated by R ef

erence (1) Tho Director of the Fedoro l Register approved the incorporation by reference (ffiR) of the service information listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.

(2) You must use this service information as applicab le to do the actions required by th

i s AD, uuless th is A D specil1cs othe rwise. (3) The following service information was approved for IBR o n September 24, 2013 (78 FR 51055, August 20, 2013).

(i) Bombardier Service Bulletin 670BA

- 32

- 031, Revision C. dated April17, 2012.

(ii) Bomb< •rdier Service Bul letin 670BA32-033, Revision B. dated june 26, 201 2

.

(iii) Goodrich Service Bulletin 4900Q-32- 46 R2 , dated November 11 , 2011.

(iv) Goodrich Service Bulletin 4960Q-32

- 63 Rl , dated May 17,2011

.

(v) Goodrich Service Bulletin 4960Q-32-64 R3, dated December 15, 201 1.

(4) For Bombardier service information identified in this AD. contact Bombardier. Inc., 400 Cote.Vertu Road West, Dorval. Quebec H4S 1Y9. Canada: telephone 514- 855-5000; fax 514-855

- 7401 ; email thd. crj@ aero.bombardier.com; Internet http:// www.bombardier.com.

(5) For Goodrich service information identified in this AD , contact Goodrich Corporation, Landing Gear, 1400 South Service Road, West Oakville L6L 5Y7, Ontario, Canada: telephone 905-825-1568; emailjean.breed ®goodr ich.com; Internet http://www.goodrich.com/TechPubs

.

(6) You may view this service information at the FAA, Transport Airplane Directorate, 1601 Lind Avenue SW., Renton. WA. For information on the availability of this material at the FAA, call 425-227 -122 1.

(7) You may view this service information that is incorporated by reference at the National Archives and R ecords Administration (NAR.A). For information on the availability of this material at NARA, call 202-741-6030, or go to: http://WIVIv.archives.gov/federol-register/cfrlibrlocotions.html.

Issued in Renton, Wash ington , on October 28, 2014. J effrey E

. Duven, Manager, Transport Airplane Directorate, Aircraft Certification Service. (f'R Doc. 2014

- 26437 Filed 11-6-14; 6 :45am) BILLI NG CODE 491 0 -1 :}-P

DEPARTM E NT O F TRANSPORTATION Federal Aviatio n Adm i n istr atio n
1 4 C F R Chapter I [Dock et N o
. FAA-20 13-0 988) Po licy a n d Proce dures Con ce rn i 1 ng the U s e o f A irpo rt Re venue; P roceeds From Taxes on Av i ation Fu el AGE NCY: 

### Federal Aviation Administration (FAA). DOT. AC

TION: 

### Final P olicy Amendment. SUM M A R

Y: 

### This action adopts an amendment to tho FAA Policy and Procedures Concerning the Use of Airport Revenue published in the Fed er al Register at 64 FR 7696 on February 16, 1999 ("Revenue Us e Policy"). This action confirms FAA's long-standing policy on Federal requirements for the use of proceeds

### Federal Regi ster/Val. 79 , No. 215/Friday , November 7, 2014/Rules and Regulations 66283

from taxes on aviation fuel. Under Federal law, airport operators that have accepted Federal assistance generally may use airport revenues only for airport

-related purposes. Local taxes on aviation fuel are subject to airport revenue use requirements
. State taxes on aviation fuel (imposed by either an airport sponsor or a non-sponsor) are subject to use either for 

### a Sta te aviation program or for airport-related purposes. The statutory revenue use requirements apply to certain State and local government taxes on aviation fuel, as well 

### as to revenues received directly by
an airport operator. This document formally adopts, through an amendment to the Revenue Use Policy, FAA's interpretation of the Federal requirements for use of revenue derived from taxes on aviation fuel. D

ATES : This document is effective December 8, 2014. F OR F URTHER INFORMA T IO N C ONTACT: Randall S

. Fiertz, Director, Off ice of Airport Compliance and Management Analysis, Federal Aviation Admi nistration, 800 Independence Avenue SW., Washington, DC 20591, telephone (202) 267-3085; facsimi le (202) 267

- 5257. SUPPLEMENTARY I NFORMATION: Availability of Documents

You can get an electronic copy of this Policy and all other doc u ments in docket FAA 2013-0988 using the Internet by: (1) Searching the Federal eRulemaking portal at 

### http:// www.regulations.gov/searcb; (2) Visiting FAA's Regulations and Policies Web page at 

### http:lhvww.faa.govlregulations_ policies/policy _guidance/; or (3) Accessing the Government Pr inting Office's Web page at 

### http:// www.gpoaccess.gov/index.html.

You can also get a copy by sending a request to the Federal Aviation Administration, Office of Airport Compliance and M anagement Analysis , 800 Independence Avenue SW., Washington, DC 20591, or by calling (202) 267

- 3085. Please make sure to identify the docket number, notice numb er, or amendment number of this proceeding.



### Authority for the Policy Amendment. This Policy Amend ment is published under the authority described in Subtitle VII, part 8, chapter 471, section 47122, and the Federal Aviation Administration Authorization Act of 1994, § 112(a) , Public Law 103-305, 49 U.S.C. 47107(1)(1) (Aug

. 23, 1994). Backgrou nd

On November 21, 2013, FAA published a proposed amendment to its pol icy on Feder al requirements for the use of proceeds from taxes on aviation fuel. (78 FR 69789, November 21, 2013). This action finalizes the amendment of FAA's Revenue Use Policy. Under Federal law, airport operators that have accepted Federa l assistance generally may use airport revenues on ly for airport-related purposes
. The revenue use requirements apply to the proceeds from certain State and local government taxes on aviation fuel, as well a s to revenues received directly by an airport operator. This document formally a dopts FAA's interpretation of the Federal requirements for use of revenues derived from taxes on aviation fuel. Briefly, an airport operator or State government submitting an application under the Airport Improvement Program mus t provide assurance that revenues from State and local government taxes on aviation fuel will be used for certain aviation-related purposes. These purposes include airport capital and operating costs, and State aviation programs
. The policy amendment applies prospectively to use of proceeds from both new taxes and to existing taxes that do not qualify for grandfathering from revenue use requirements. For existing taxes that do not qualify for grandfathering (which
are State or local taxes on aviation fuel in effect on December 30, 1987), the FAA will a llow for an up to three-year tr ansition period from the effective dat

· e of this document.

The FAA invited public comment on th e policy interpretation q uestion, in part due to the interests of sellers and consumers of aviation fuel, and of State and local government taxing authorities on limits on the use of proceeds fmm tax es touching aviation fue l. The notice also solicited comments about whether there are other reasonable interpretations of the statute as it relates to local taxes that were not enumerated i n the published notice of proposed clarification that should have been considered by the FAA.

The comment period for the n ot ice of proposed clarification closed on January 21, 2014. The FAA extended the comment period for thirty days until March 3, 2014 (79 FR 5318, January 31

. , 2014 ) in order to provide the public add itional time t o submit comments on the proposed Policy amendment. Executive Order 13132 (Fed er alism)

Executive Order 13132 establishes certain principles and criteria that app ly to regulations, legislative comments, and other policy statements that have a substan t i al direct effect on S tates, or on the relationship between the national govemment and the States or on the r esponsibilities among the various levels of government. Because States have flexibility in designing general sales taxes subject to the limited restriction on the use of aviation fuel tax proceeds, State decisions will ultimately influence, regulate, and con t rol implementation of taxes, including those touching aviation fuel.

While this final policy amendment does not impose substantial direct requirement costs on State and local governments, this amendment may have Federalism implications due to effects on the use of the proceeds fo r taxes assessed on aviation fuel. FAA believes that the Federalism implications (if any) are substantially mitigated because the plain language of the statute at issue, 49 U

.S

.C. 47133, and the detailed legislative history, reflect strong Congressional intent that aviation fuel taxes be used f or airpor t purposes and State aviation programs.

In compliance with the requirement of E xecutive Order 13132 that agencies examine closely any policies that may have Federalism implications or limit the policy making discretion of the States, FAA engaged in efforts to consult with and work cooperatively with States, local governments, and political subdivisions, including participating in conference calls with representatives from the National Governors Association, US Conference of Mayors, National Conference of State Legislatures, National League of Cities, and National Association of State Aviation Officials

. In addition, FAA reached out to certain states on an individual basis and interested trade groups includ ing Ai r lines for America; American Association of Airport E

xecutives; and Airports Council International-North America. Furthermore, we published the proposed amendment for notice and comment, and received comments from Kentucky, Iowa, and Georgia. This notice responds to these comment s.

Through consultation, meetings and teleconferences as part of a robust public engagement process, FAA has balanced the States' interests in meeting its taxing obligations, and Congress' intent to ensure that taxes on aviation fuel are expended for airport purposes. By doing so , the FAA has complied with the requirements of Executive Order 13132

. Comments Received on the Proposed Policy Amendment

The FAA received 25 substantive
comments on the proposals, from a ir port operators ; industry and nonprofit associations representing airports, a ir carriers, business aviation

### 66284 Federal Register 

### I Vol. 79, No. 216 

### I Friday , November 7, 2014 

### I Rules and Regu latio ns

and airport service businesses; an air carrier; State government agencies; and private citizens. This summary of comments reflects the major issues
rai sed and does not restate each comment received. The FAA cons idered all comments recei ved even if not specifically identified and re sponded to in this notice.

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 a.irport purposes or State aviation programs. Commenters repre senting airlines and airport users all supported the FAA's proposed amendment of the Revenue Use Policy regarding 49 U.S.C. §47107(b) and §47133. An air carrier expressed the position that there is no amb igui ty in the 1987 amendment to section 47107, and maintained that there are no other possible correct interpretations of these statutes

.

The comments requesting a change in the proposed policy tended to focus on several issues :

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§ 47133 to require compli ance 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 §47133 is required.

5

. Clarifying that "noise mitigation" refers only to mitigation of a ircraft noise.

6

. How FAA will enforce §4 7133 with respect to jurisdictions that are not parties to an AlP grant agreement.

7

. The proposal requires a federalism analysis under Executive Order 13132.

8

. Suggestions for editorial changes to the proposed policy langu age.

1. 

### Comment: Airport operators should not be 

### held responsible for State and local taxes 

### outside of the airport operator's control.

The majority of commenters, including all of the airport and government commenters, argued that proposed new paragraph IV.D.2 would unfairly hold airport operators responsible for the imposition of taxes over which they had no conlrol. Airport opera tors are typically local governments, e ither cities or counties,
or public airport authorities

. These local entities contend that they h ave no control over State and local taxes, and therefore have no ability to eliminate a Stale or local tax that is not in compliance with Federa l requirements for use of airport revenue
. These commenters state that in many cases, an air por t operator does not have cont rol
over local taxes, i 

## r the airport is located in a different jurisdiction than the operating government entity. They no t e that port authorities and airport authorities may not have any taxing power, and therefore have no ability to control even local taxes on the airport.

Beyond the complaint that this provision is unfair, the Airport Council International-North America (ACI-NA) raised additional objections to paragraph IV.D.2. First, 49 U.S

. C

. 47107 (b) requires an airport sponsor to provide an assurance that the airport will remain in compliance with revenue u se requirements. However, no local airport sponsor could actually provide th at assurance because the airport sponsor has no abil ity to prevent a noncomplying Stale tax. Airport sponsors would find it impossible to provide assurance that other government agencies would comply with the revenue use statutes for the life of an AIP grant. F urther, sponsors should not be required to agree to a condition that would subject the airport to sanctions with no ability to correct the noncomplying condition. Second, A CI

- NA argues that holding airport sponsors responsible for State taxes is a federalism issue, as "an attempt to change the relationships" between Federal, and State and local governments. ACI-NA commented that the proposal does not comply with Executive Order 13132 on federalism, because the agency did not conduct a federalism analysis on the impacts on State taxing authority and the relationship between State and local governments and airport sponsors. The American Association of Airport Executives (AAAE) also suggested that the proposal may be in violation of the reser vati on of State powers in the U

. S

. Constitution, and urged FAA to conduct 

### a federalism analysis of this proposal because of the impact on State and local government relations.



### Response : Upon entering into an AIP grant agreement, an a irport sponsor does in fact provide assurances that local taxes on aviation fuel will be in compliance with §§47107(b) and 47133,
as required by Congress. The grant assurances provided by airport sponsors i nclude Grant Assurance 25, which provides, in relevant part: "All revenues generated by the a ir port and any local taxes on aviation fue l established after D ecember 30,1987, will be expended by it for the capital or operating cos ts of the airport; the local airport system; or other facilities which are owned and operated by the owner or operator of the airport and which are directly and substantially related to the actua l air transportation of passengers or property

. . .."Moreover, airport sponsors often can have influence on the taxation of aviation activities in their States and localities, and the FAA expects airport sponsors to use the influence they have to shape State and non-sponsor local taxation to conform to these Federal laws.

However, the FAA agrees with the majority of commenters that it would be unfair to penalize airport sponsors for taxes imposed by another entity. Thus, the FAA is revising paragraph IV.D.2 to acknowledge the differences in taxes that are and are not controlled by the airport sponsor, for purposes of grant compliance

. For taxes within the airport sponsor's direct control, the airport sponsor must comply with the revenue use requirements of§§ 47107(b) and 47133. Further, in instances of unlawful revenue diversion where the sponsor is in contro l of the taxes, an airport sponsor can also be subject to administrative action in which the Secretary may withhold amount from funds that would otherwise be made available to the sponsor, including funds that would otherwise be made available to a Stale, municipality, or political subdivision thereof (includ ing any multimodal transportation agency or transit authority of which the sponsor is a member entity) as part of an apportionment or grant made available pursuant to Title 49. (See 49 U.S.C. 47107(n)(3).]

For taxes imposed by non-sponsor State and local governments, the airpor t 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 §§ 4 7107(b ) and 47133. 

### Ifa noncompliant tax is adopted by a nonsponsor State or local government, notwithstanding the airport sponsor's advice and efforts, the FAA woul d not take enforcement action against the airport sponsor out of fairness to the sponsor who is not responsible for the noncompliance. However, the FAA will pursue enforcement ac ti on pursuant to 49 U.S.C. 46301 or 47111 (f) against a non-sponsor State or local government that violates the Revenue Use Policy or the limitations in 49 U

.S.C

. 47133. This is similar to the approach that the FAA has taken to compliance with the obligation in grant assurance No. 21 toFederal Register 

### I Vol. 79, No

. 216 

### I Friday, November 7, 2

.014 

### I Rules and Regulations 

### 66 2 8 5

maintain compatible l and use around the a irport.

Accordingly, as revised, paragraph IV

.D

. 2 wi ll stat e that assurance 25 wi ll be considered an enforceable commitment with respect to taxes on aviation fuel imposed by the airport operator or owner itself ; for taxes imposed by non-sponsor Sta te and local jurisdictions, an a irport sponsor w ill be expected to inform taxing authorities of Federal requirements and take reasonable action within the sponsor's power to influence State and local tax laws to conform to those requirements

.

The comments on federalism and federalism analysis are discussed separately under Comment 7. With respect to the comment that the proposal raises issues regard ing the 10th Amendment of the U.S. Constitution, the FAA appropriately presumes the
cons t itutionality of the statutes implemented by this policy.

2. 

### Comment: FAA should not enforce compliance by State and loca l governments that are not airport sponsors.

T he Georgia Department of Law, on behaH of the G eorgia Department of Transportation and the Georgia Department of Revenue (GDOT/GDOR). filed comments objecting to several elements of the proposed policy

. GDOT/ GDOR commented that applying sanctions for violation of§§ 47107 and 47133 to entities that are not a irport sponsors is "unprecedented and illogical." (The FAA notes that sanctions would apply to non
-sponsors under §47133 and §47111(£), whereas § 47107 is binding only on parties that have s igned a grant agreement with FAA.) GDOT/GDOR bases its argument primarily on the observation that most FAA policy statements on revenue use and revenue diversion refer to airport sponsors, and do not mention non
sponsor entities.



### Response: It is true that FAA published policy on revenue use refers to airport sponsors, but that fact alone does not deal with the breadth of § 47133, which imposes a federal statutory obligation on certa i n nonsponsors
. Also, contrary to COOT/ GDOR's comments, the FAA has not been silent on this issue. In the few circumstances involving the issue of a non-sponsor imposing a tax on aviation fuel, the FAA has communicated a consistent message that compliance wi t h§ 47133 is required. Tho FAA letters to non
-sponsors describing th i s obligation are cited in the n otice of proposed policy at 78 FR 69790-69691

. Copies of FAA ' s letters are posted in Docket No. FAA-2013

- 0988. The Federal Regi ster Notice also explained why FAA believed that there were "compelling reasons" for its past interpretations that support the adoption of an amendment to the Revenue Use Policy

. 78 FRat 69792.

CDOT/GDOR argue that imposing sanctions (and therefore compliance) on non-sponsor governments is both unfair and contrary to the logical enforcement of the former Airport and Airway Improvement Act of 1982 (AAIA). as amended and recodified, 49 U

.S.C

. 47101, et se
. However, as noted, §47133 imposes an obligation on entities that
are not airport sponsors
. First. the l anguage of§ 47133 (a) imposes a limitation on the use of local taxes on aviation fuel, regardless of whether the tax is imposed by a sponsor or nonspon sor
. Second, §47133 (c ) limits the use of State-imposed taxes on aviation fuel to State aviation programs. Uses of t ax revenues beyond these permissible uses are a violation of Section 47133. Therefore, the obligation to enforce compliance w ith the statute, using availab le sanctions for noncompliance, i s not only logical but is required as part of the FAA's statutory responsibility for**~mplementation** of the AAIA.

GDOT/GDOR's posits that there should be no sanction on a non
-sponsor government for violation of§ 47133. But that would be contrary to the language of§ 47133 which makes no distinction between sponsor or non-sponsor entities for purposes of the limitation on the use of aviation tax revenues. Moreover, FAA's civil penalty enforcement authority in 49 U.S.C. § 46301 specifically authorizes the imposition of civil penalties for a violation of§ 4713 3 and does not exclude non-sponsors from its coverage. GOOT/GDOR's inter pretation wo u ld effectively mean that non
-sponsor governments are allowed to disregard the requirements of §47133 and render the statutory requirement virtually meaningless.

Importantly, Congress did not limit FAA's enforcement authority in 49 U.S.C. § 47111 (f) to just airport sponsors, but rather permitted judicial enforcement to restrain "any violation" of chapter 471

- that includes the requ i remen ts of§ 47133-by 

### anyperson for a viol ation. "Any viol ation" encompasses violations by non
-sponsors as well as airport sponsors
. This expansive authority is based on the plain language of section, 47111(0. and supported by a review of the legislative history and prior versions of the law under consideration. These prior
vers ions limited enforcement to the airport sponsor. See 140 Cong

. Rec

. 87139

- 02, 1994 WL 27189 (noting that under the bill, "such court shall have jurisdiction to enforce obedience thereto by a writ of injunction or other process, mandatory or otherwise, restrain ing such 

### airport sponsor from further violation of such section or assurance and requiring their obedience thet·eto.") However, Congress ultimately expanded this authority by exp licit ly stating in section 47111 (f) that "such court shall have jurisdiction to enforce obedience thereto by a writ of injunction or other process, mandatory or otherwise, restraining 

### anyperson from further vio lation." (emphasis added)

Given that the FAA interprets section 4 7 111 and 47133 to obligate nonsponsor State and local governments to use proceeds from aviation fuel taxes for certain purposes, the FAA does not agree that the same sanctions that apply to other aviation statutes would not apply to § 47133. Congress expressly provided for such sanctions by including§ 47133 in the statutory provisions that can be enforced by civil penalty in 49 U.S

.C. 46301. In addition as noted, compliance with§ 47133 by non-sponsor State and local govemments may be enforced by applicatio n to the U. S. district court for judicial enforcement under 49 U.S.C. 47111(f)

.

3. 

### Comment: Defining the taxes on aviationfuel collected as part of a general sales tax is not supported by legislation and would be an administrative burden to State and local governments.

The American Association of Airport Executives (AAAE) commented that applying the revenue use requirements to generally applicable taxes, such as sales taxes and taxes on all fuel products, is not supported by the legislative history and incorrectly interprets §§ 4 7107(b) and 47133

. Both AAAE and GDOT/GDOR commen ted that it would be difficult and costly for State and local governments and taxpayers to segregate revenues collected on aviation fuel from the rest of a general tax collection. The FranklinHart Airport Authority, Georgia, expressed concern that redirecting some local taxes on aviation fuel to the airport
coul d 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 d id not assert that the proposed amendment was incorrect. One individual commen ted that an airport receives the
same general benefit as other taxpayers, and that general taxes on aviation f u el sa les should be retained by State and local governments to pay for these general community services.



### Response: AAAE and one individual
were the only commenters that

### 66286 Federal Register/Val. 79, No. 216/Friday, November 7, 2014/Rules and Regulations
specifically objected to the proposed amendment that general taxes collected on avi ation fuel sales are ''tuxes on aviation fuel." The FAA's rationale for clarifying that. general sales taxes also collected on aviation fuels co nstitute "taxes on aviation fuel" is based on the p lain reading of the statute. The Airport and Airway Safety and Capacity Expansion Act of 1987, Pub

. Law No. 100

- 223, amended the airport grant revenue assurance provision to include, with in the scope of revenue retention, "any" taxes on aviation fue l. The 1994 recodification, which removed the word "any" from the statutory text as recodified in 49 U

.S.C. 47107(b), did not make any substantive changes in the law. 

### See Public Law 103

- 272, 108 Stat. 1378:

Certain general and permanent laws of the U

nited States, related to transportation, are revised. codified, an d enacted by subsections (c)-(e) of this section without substantive change as subtitles ll. III, and V-X of title 49. United States Code, "Transportation". Those law s may be cited as "49 U.S.C. " Section l.(a)

A d ditionally, determining that the statute did not include general taxes would permit States to tax aviation fuel as "general" taxes without limit, and would be inconsistent with t he purposes of the revenue use statutes. The FAA continues to believe that applying the requirements of §§47107(b) and 47133 to the portion of general taxes collected on aviation fuel sales, in addition to aviation-specific fuel taxes, is the most reasonable interpretation of those statutes, and most consistent with the congressional intent of the legislation on use of aviation fuel tax r evenues
. AAAE. which does not represent local governments but whose membership, representing airports and organizations that support the airport industry, has an interest in this issue, and GDOT/GDOR commented on the burden of reporting fuel sales as sep arate from other items taxe d under the same ordinance.

As explained more fully below, the FAA would permit a State a reasonable amount of time to bring itself into compliance through an "action plan," whi ch takes account of the S tate's legislative schedule , if necessary. And while we appreciate that there cou ld be
some additional work required to track the amount of "general" tax revenue attributable to aviation fu e l, the FAA is charged with implementing §4 7133, which does not carve out an exception for r evenue generated through a general tax. We believe that the FAA's acceptance that a State will require lime to bring itself into compliance will afford the State sufficient time to develop a mechanism for administering taxes in accordance with this policy.

With respect to the comment that .aviation fuel tax revenues should suppo rt general government services, the FAA notes, first, that general sales taxes of all other products and services
a t an airport other than aviation fuel sales do go to support State and local general programs. Also, where nonsponsor State and local governments provide services directly to the airport, those jurisdictions can charg e for those services and be reimbursed from airport funds.

4. 

### Comment: The FAA should clarify the time line allowedforjurisdictions imposing taxes that affect aviationfuel to come into complian ce with the policy. GDOTIGDOR requested a more definitive lime for Georgia state agencies and local jurisdictions to comply with the announced policy, and specifically requested that the FAA provide at leas t 180 days from the final policy effective date. GDOT/GDOR based this request on the time required to set up tracking systems for aviation fuel sales, and to amend State laws that mandate use of tax proceeds in a manner inconsistent with the FAA policy. Airlines for America and the Air Line Pilots Association filed joint comments urging that FAA limit any grace period before compliance is required to 60 days, and that if jurisdictions require more time, they can stop collecting the taxes untiL the tax law is brought into compliance

.



### Response: The notice of proposed policy amendment stated that FAA would allow a reasonable time for noncomp lying tax laws to be brought into comp li ance with federal law. By this notice FAA is announcing a formal amendment to its Revenue Use Policy; the policy underlying this amendment may not have been fo llowed previously by affected State and local government non
-sponsors
- despite the existence of DOT/FAA's legal opinions on this subject. The amendment we adopt today is a final decision and amends FAA's Policy and Procedure Concerning the Use of Airport Revenue as set forth below

. The amendment binds the F AA and the Secretary of Transportation, as well as airport sponsors and non-airport sponsors (including a State, a political subdivision of a State, and a political authority of at least 2 States) covered by this Policy.

Therefor e, after considering on this matter, the comments we have received and the potential difficulties with requiring immediate compliance, FAA has concluded that there is a need for all af f e cted entities to have sufficient time to come into compliance with the final pol icy announced today

. GDOT/ GDOR itself requested additional tim e to come into compliance with the policy. While comments were limited to agencies of the State of Georgia and a few local jurisdictions in Georgia, the FAA understands that other States may have laws that require, or at leas t a ll ow, proceeds of general taxes on aviation fuel to be used for purposes other than airports or State aviation programs.

The FAA further understands that changes to bring Stale and locallaxes into compliance may require State legislation. The Georgia legislature meets each year from Janu ary through March. Accordingly , in Georgia, the State and local taxes at issue could not practically be amended until early 2015. A legislative season from J anuary to March or April is common to m any other States as well. On this basis, the FAA believes that State and local officials s h ould prepare an action plan to initiate the process to amend any non-compliant State laws and local ordinances as necessary to conform to federal law on use of aviation fuel tax revenues. The action plan should detail the process necessary to develop reporting requirements and tracking systems for discrete information on aviation fue l tax revenues. The p l an may include a reasonable transition period, not to exceed three years, during which the FAA would agree, in an exercise of its prosecutorial discretion, not to enforce the revenue use requirement against a non-sponsor State or local government. State and local govemments should submit an action plan to the FAA within a year of the effective date of this n ot ice
.

Initiation of an action plan would provide State and local governments sufficient lime to plan for res tru cturing of general revenues to adapt to the dedication of aviation fuel tax rev enue to airports and State aviation programs within a reasonable transition per iod, not to exceed three years from the effective date of this notice. Demonstration of an action plan detailing (1) a comm itment to under take t he legislative process; and (2) the timeframe for action within the three year period, will demonstrate voluntary compliance with federal obligations.

5. 

### Comment: The policy should make clear that "noise mitigation" refers only to mitigation of aircraft noise. The National Association of State Aviation Officials commented that the reference to off-airport noise mitigation,
as an acceptable use of aviation fuel tax proceeds, should be revised to clarify that this refers only to noise related to aircraft operation

.

### Federal Register/Vol. 79, No

. 216/Friday, November 7, 2014/Rules and Regu lations 

### 66287
Response : The definition of "noise mitigation" was not the subject of the p ropose d amendment. While the phrase "noise mitigation" in Section 47133
commonly ref ers t.o aircraft nois e, we decline here to reach whether the statute precludes considera ti on of other
sources of nois e for mitigation purposes. In addition, we note that the statute provides for use of airport revenues on and o ff airport for noise mitigation purposes
.

6. 

### Comment: FAA should clarify how it will require non-airport sponsors to comply with the policy

. The Iowa Public Airports Association reque sted clarification on how parties that have not entered into a grant agreement with the FAA would be required to comply with the federal req uirements for use of aviation fuel tax revenues.



### Response: The preamble of the notice of p roposed policy noted th a t there are tw o means of enforcing compliance w ith § 47133 by non
-sponsor State and local governments: civil penalties, under 49 U.S.C. 46301(a). and appl ic ation to the U.S

. district court for judic ial en forcement under 49 U.S.C. 4 7111(f). While not an issue in Iowa, States that have entered into block grant agreements with the FAA under 49 U.S.C. 47128 could also be subject to action for breach of that agreement. The FAA agrees that the agency's enforcement process should be d escribed in the policy statement its elf. Accordingly, new language has been added to Section IX.E., 

### Sanctionsfor Noncompliance, for this purpose.

7. 

### Comment: The proposa l ajfects the relationship betweenfederal, State and local governments, and therefor e requires afederalism analysis under Executive Order 13132

.

ACI-NA and AAAE commented that the proposal does not comply with Executive Order 13132 on federalism, because the proposed policy is not required by statute, and because the agency did not conduct a f ederalism analysis on the impacts on State taxing authority and the relationship between State and local governments and airport sponsors
.



### Response: First, to the ext e nt the comment referred to paragrap h IV.D.2 of the proposed policy, holding airport sponsors res ponsible for taxation beyond their control, that issue is resolved by the changes to p a ragraph IV.D.2 in the fina l policy.

Second. the FAA does not agree that th e proposed policy is not required by statut e. In the notice of proposed policy, the FAA analyzed each of the key terms of t h e statute with ref e r

ence to the legislative intent of the revenue us e legislation, to the meaning of the statute as a whole, and to the consistent use of terminology throughout the AAIA. Several commenters not only supported the FAA amendment, but commented that no other interpretation of the statute was reasonably possible. Even if
a n alternative interpretation of certain terms were theoretically permissible, a policy interpreting the statute in a manner that substantially unde rmined the legislative purpose of the statute is not a viable option for the agency. Accordingly, the FAA believes that 

### the policy as adopted correctly implements the r evenue use legislation adopted by Congress. The policy is, therefore, required by statute for purposes of the executive order. Becaus e this policy simply implements the explicit mandate set forth in section 4713 3, the r equ irements of Executive Order 13132
a nd DOT's Guidance on Federalism (July 21, 1988). are not trigge red.

Thus, although a federalism analysis of this policy i s not required by Executive Order 13132, the FAA did engage in efforts to consult with and work cooperatively with States, local governments, political subdivisions, and interested trade groups. Through consultation, meetings and teleconferences as part of a robust public engagement process, FAA has balanced the States' interes ts in meeting its taxing obligations, and Congress' intent to ensure that taxes on aviation fuel are expended for airport purposes or for State aviation programs consistent with the mandate set forth in 49 U.S.C. 47133.

In addition to that engagement process, the FAA also publi shed the policy amendment for notice and comment in the Federal Reg ister, soliciting comment from State and local governments, as well as other interested parties. The only cost information submitted by any commenter was received fr om the Franklin

- Hart Airport Authority, which expressed concern that redirecting some local taxes on aviation fuel to t he airport could lead those jurisdictions to reduce other, nontax support for the airport. However, the anticipated cost would r es ult no t from the agency's policy itself, but from the expected actions of local governments in reducing voluntary support for the
a irport.

For the above reasons, the FAA finds that further analysis of the adopted policy for fed eralism issues is not required by Executive Order 13132.

8. 

### Comment: Thefinal policy should include certain g rammatical and style changes. Response : Delta Airlines and Airlines For America recommended certain ed its for grammar and clarity:

Paragraph II.B

. 2: Clarify the phrase "on or off the airport."

Paragraph JV.D.1: Clarify that only State aviation fuel taxes may be used for State aviation programs
.

Paragraph IV.D.4.b: Clarify that §§47107(b) and 47133 apply to taxes on the use of aviation fu el.

In each case the proposed edits more accurately describe the requirements of §§ 47107(b) and 47133 as stated in prior FAA policy, and do not make any substantive change in the policy proposed in the notice. Accordingly, the FAA has made the requested edits in the final policy. Final 

### Policy

For the reaso ns set out above, the FAA amends the Policy and Procedure Concerning the Use of Airport Revenue, published in the Federal Register at 64 FR 7696 on February 16, 1999, as follows:

1. Section II, Definitions, paragraph B .2 , is revised to read:

State or local taxes on aviation fuel (except taxes in effect on December 30. 1987) are considered subject to the revenue- use r equirements in 49 U.S.C

. 47107 (b) and 47133. However, revenues from a State tax on aviation fuel may be used to support a Slate aviation program, and airport revenues may be used on or off the airport for a noise mitigation purpose.

2. In Section IV, Statutory R

equireme nts for the Use of Airport Revenue, renumber paragraphs D and E as paragraphs E and F, and add a new paragraph D to read as follows:

D. Use of Proceeds from Taxes on Aviation Fuel.

1. Federal law limits use of the proceeds from a State or local government tax on aviation fuel to the purposes permitted in those sections, as described in IV

.A

. of this Policy. Proceeds from a tax on aviation fuel may be used for any purpose for which other airport revenues may be used, and proceeds from a State tax may als

. o be used for a State aviation program.

2

. Airport sponsors that are subject to an AlP grant agreement have agreed, as a condition of receiving a grant, that the proceeds fTom a State or local government tax on aviation fuel will be used only for the purposes listed in paragraph 1. This assurance is considered an enforceable commitment with respect to taxes on aviation fuel impos ed by the a irport operator. For taxes on aviation fuel imposed by non
sponsor State government and otlne r local jurisdictions, airport sponsors are

### 66288 Federa l Register /Val. 79, No. 216/Friday, November 7, 2014/Rules and Regulations expected to inform taxing authorities of F ederal requirements for use of aviation fuel lax revenues and to take reasonable action wi thin their power to influence State and local tax laws to conform to those requirements.

3. The Federal limits on use of aviation fuoltax proceeds apply at an airport that is the subject of Federal assis tance (as defined in Section U.b.2 of this Policy), whether or not the airport is cu rrently subject to the terms of an AlP grant agroomont. and regardless of the State or local jurisdiction imposing the tax.

4. The limits on uso of aviation fuel tax revenues established by section 47107(b) and section 4713 3:

a
. Apply to any tax impos ed on aviation fuel by either a State government or a local government taxing authority whether or not acting as a sponsor or airport owner or operator;

b. Apply to any tax on aviation fuel. whether the tax is imposed only on aviation fuel or is imposed on other products as w ell as aviation fuel. However, the limits on use of revenues app ly only to the amounts of tax collected specifically for the salo, use, purchase or storage of aviation fuel. and not to tho amounts co llected for transactions involving products other than aviation fuel under the same general tax law:

c. apply to taxes on all aviation fuel dispensed at an airport, regardless of where the taxes on the sale of fuel at tho airport are collected; and

d. apply to a new assessment or imposition of a tax on aviation fuel, even if the tax cou ld have been imposed earlier under a s tatute enacted before December 30, 1987.

3. In Section IX, Monitoring and Compliance, add a new paragraph h. to E.1 to r ead as follows:

h. For a non- sponsor State or local government that fails to comply with requirements for u se of proceeds from a tax on aviati on fuel. the Secretary may assess a civil penalty as described in E.l.g, or apply to a U.S. district court for a compliance ardor. In addition, for a State government that participates in the S l ate Block Grant Program under 49 U.S.C

. 47128, the FAA may have additi onal sanctions for violation of the State's commitments in its application fo r participation in the program.

Issued in Washington, DC, on November 3, 2014. Randall S. fiertz, Director, Office of Airport Compliance ond Management Analysis. (FR Doc. 20 1 4-2R401l Pllod 11-6-14: H :45 umJ BILLING, COD E 4910-13-P DEPARTMENT OF COMMERCE Bureau of Industry and Security
15 CFR Part 744 (Docket No. 141029906-4906-01) RIN 0694-AG31 Venezuela: Implementation of Certain Military End Uses and End Users License Requirements Under 

### the Export Administration Regulations
AGENCY: Bureau of Industry and Security, Commerce. ACTION: Final rule.
SUMMARY: In response to the Venezuelan mil itary's violent repression of tho Venezuelan people, the Bur eau of Industry and Security (BJS) amends the Exp ort Administratio n Regulation s (EAR) in this final rule to impose license requirements on the export, reexport, or transfer (in

-country) of certa in items to or within V enezuela when intended fo1· a military end use or end user. This change complements an existing U.S. a rm s embargo against Venezuela for its failure to cooperate in areas of count er

terrorism. DATES: 

### Effective date: This rule is effective November 7, 2014 FOR FURTHER INFORMATION CONTACT: Foreign Polley Division, OHice of Nonprolif erati on and Treaty Compliance, Bureau of Industry and Security, Phone: (202) 482-4252. SUPPLEMENTARY INFORMATION: Background

Starting in February 2014, the Venezuelan military was instrumental in implementing a violent crackdown on anti-government protests. The government's repression included direct violence against protesters, detentions of protesters and political leaders, and acts of intimidation, resulting in numerou s deaths and injuries. On July 30, 2014, the Department of State impos ed visa restrictions against Venezuelan government officials. including members of the Venezuelan military , who participated or were complicil in human rights violations and undermine d democratic processes.

The actions and policies of the Venezuelan military undermine democratic processes and institutions and thereby cons titute an unusual and extraordinary threat to the national securit y and foreign policy of the United States.

In response to abuses committed by the Venezuelan military on the Venezuelan people, the U.S. Government is imposing "military end use" and "military end user" license requiremunts on Venezuela. Military E nd Use and End User Restrictions

It is generally the policy of the United States Government to facilitate U.S. exports for civilian end uses, while preventing exports that would enhance the military capability of certain destinations and thereby threaten the national securit y and foreign policy of the United States and its allies

. In furtherance of this policy. the Bureau o f Industry and Security (BIS) established a license requirement for certain itoms intended for "military end uses" in a final rule publ ished June 19, 2007 (72 FR 33646). Specifically, that final rule established a control , based on knowledge of a "military end use," on exports and reexports of certain items on the Commerce Control List (CCL) that otherwise would not require a license to a specified destination

. The "military end use" control initially applied to certain items expor ted, reexported or transferred (in country) to the People's Republic of China. Subsequently, BJS applied "mi litary end use" and "military end user" controls to Russia in a final rule published September 17, 2014 (79 FR 55608). 

### Imposition of Military Restrictions on Venezuela

To implement the U.S. Government's response to the abuses by the Venezuelan military, in this rule, BIS amends § 744

.21 of the EAR to apply "mili tary ond usc" and "military end user" license requirements to Venezuela. Specifically, BTS amends § 744.21 by adding "or Venezuela" after

" Russia ," wherever that name appears, including in the heading of the section. Items subject to these license requirements are those listed in Supplement No. 2 to Part 744.

This final rule also adds a paragraph (h) to address the effects of these n ew license r equirements on transuctions under contract prior to the effective date of this rule. Saving Clause

Shipments of items removed from eligibility for export or reexport under a license exception or without a license (i.e

. , undor the designator "NLR" ) as a result of this regulatory action that were on dock for loading

. on light er, laden aboard an exporting carrier, or en route aboard a carrier to a port of expor t , on November 7, 2014, pursuant to actual orders for export or reexport to a foreign destination, may proceed to that destination under the previously applicable license exception or withou t

### Aviation Fuel Tax Revenue Issue 

## Questions for the FAA from NASAO Members February 25, 2015 and Updated July 15, 2015

Recently, the FAA provided an additiona l response to questions from Michigan and Georgia. We've added those responses below to the earlier responses rece ived from the FAA

. 

## FAA's Answer to Question from Michael Trout, Executive Administrator for the Michigan Department of Transportation (MDOT)-Office of Aeronautics

Question: Have you determined whether the use of "offsets" or "amounts equa l to" the tax collected on aviation fuel is acceptable for t he purpose of complian ce with the Revenue Use Policy. As the portion of our sa les tax in question i s constitutionally dedicated to other purposes (educationL we are contemplating as part of an action plan a methodology to accurately record the amount being collected and then a mechanism to allocate that amount from other state sources to state aviation programs. Any Insight would be very helpful.


### Response:
Yes, we have concluded that offsets are permitted. Aviation fuel tax statutory requirements are met by a State appropriating money for airport purposes from its general fund in an amount equal to or exceeding the aviationfuel taxproceeds collected, and remitting such funds into the State aviation program fund, or to the applicable airport revenue account.

We want topoint out your question raises another issue since you reference that a portion of the aviation fuel sales tax being constitutionally dedicated to otherpurposes. The FAA's Policy and Procedures Concerning the Use of Airport Revenues {64 Fed. Reg

. 7696, February 16, 1999} provides for taxes on aviationfuel in effect on December 30, 1987 to be "grandfathered". We do not have sufficient data concerning the constitutionally dedicated portion of the taxes and cannot comment further on the grandfathering of the aviationfuel taxes. Guidance regarding the process to determine whether a tax is eligible for grandfathered status is posted at regulotions.gov, Docket FAA-2013-0988.

In proceeding with a permitted offset, the State and local governments interested in making an offset need to confirm that such actions are lawful and consistent with applicable State and local laws, and advise FAA accordingly. Additionally, the action plan should confirm that requirements are in place to

ensure the appropriations are implemented and enforceable by state or local agencies; the State will also need to account for and remit to the State aviation fund or to a local airport entity the dollar amount of the revenues generated from the state or local aviation fuel tax , as applicable. The State
must have appropriate controls in place to ensure tax revenues are promptly remitted to the appropriate airport revenue accounts andState aviation program accounts

.
Aviation Fuel Tax Grandfather ing Action Plans

The FAA Policy and Procedures Concerning the Use of Airport Revenue; Proceeds From Taxes on Aviation Fuel, (79 Fed. Reg. 66282, November 7, 2014) {Amendment) provides thatproceeds from

1

### taxes on the sales of aviationfuel (imposed by either an airport sponsor or a non-sponsor) are required to be used for airport-related purposes except for taxes that qualify for grandfatheringfrom
revenue use requirements. State taxes on aviationfuel may also be used for a state aviation program.

Taxes on aviationfuel that qualify for grandfathering are state or local taxes on aviationfuel in effect
on December 30, 1987. Any amendments of the grandfathered tax statutes that make substantive changes after December 30, 1987, do not qualify for continued grandfathered status

. FAA will need to receivejustificationfrom state and local taxing authorities to make a determination of the grandfathered status of existing state and local taxes in effect on December 30, 1987.

The guidance provided on the following scenarios should assist airport sponsors and nont!lsponsors to determine an appropriate course of action and/or development of an action planfor aviation fuel taxes that may ormay not qualifyfor grandfathered status: {1) State and/or local tax statute in effect on December 30, 1987, and has been amended forward requiring that funds be used for airport orstate aviation purposes
- no grandfathering issue; statement from entity confirming use of taxes in compliance with the Jaw.
(2) State and/or local tax statute in effect on December 30, 1987, or thereafter, exempts aviationfuel tax -no grandfathering issue; statement from entity confirming the use of taxes in compliance with the law.
(3) State and/or local tax statute in effect on December 30, 1987, without any changes since enactment; proceeds used for other than airport purposes; and no current grandfathering determination -submit action plan providing written justification why tax on aviationfuel qualifies for grandfathered status, with the following:

a. True and correct copies of original legislation and/or tax code and summary explanation of Jaw reflecting tax was in e ffect on December 30, 1987, and unchanged;

b. Document identifying thepurpose and applicability of the tax, the use of proceeds, and any administrative costs charged for the collection and allocation of theproceeds of the aviationfuel tax;

c. 

### Document must identify the tax rate or rates, credits, or exemptions; and

d. Document detailing commitment to advise of any subsequent amendments that could affect grandfathered status.

(4) State and/or local tax statute in effect on December 30, 1987, ond amended in subsequent periods, proceeds used for other than airportpurposes, and no current grandfathering determination

- submit action plan providing writtenjustification why tax on aviationfuel qualifies for grandfathered status for portion of tax in effect on December 30, 1987, with the following:

a. True and correct copies of original legislation and/or tax code and summary explanation of law reflecting tax was in effect on December 30, 1987, and the amendments;

2

### b. Document identifying the effective date of the aviationfuel tax, thepurpose and applicability of the tax , the use of theproceeds, and any administrative costs charged for the collection and allocation of theproceeds of the aviationfuel taxes;

c. Document identifying the tax rate or rates, credits, or exemptions; and

d. Document detailing commitment to advise of any subsequent amendments that could affect grandfathered status.

(5) State and/or law tax statute not in effect on December 30, 1987, and not eligiblefor grandfathered status- submit action plan to 

### correct non-compliant law with the following:

a
. True and correct copies of the legislation and/or tax code, and summaries of the legislation creating the tax on aviationfuel;

b. Document identifying the effective date of the aviationfuel tax, thepurpose and applicability of the tax, the use of theproceeds, and any administrative costs charged for the collection and allocation of theproceeds of the aviationfuel taxes;

c. Summaries of any amendments and/or recodifications of the tax code;

d. Document identifying the tax rate or rates, credits, or exemptions; and

e. Detail the commitment to undertake the legislative process, including theprocess necessary to develop accounting, tracking, and reporting mechanisms toprovidefor discrete information on aviationfuel tax revenues, and disclosure of a reasonable transition period (not to exceed three years) to implement the necessary processes to become compliant with theAmendment.



## In developing an action plan, GDOT and GDOR submitted the following questions to the FAA for clarification regarding the New Policy:

1. 

### If the AAIA [Airport and Airway Im provement Act of 1982 (49 U

. S.C. 

### § 47101, et seq.)] requires that the proceeds from a particular tax on av iation fuel imposed by a local taxing jurisdiction (e.g., a county or a municipality) be used by that jurisdiction for airport improvement or aviation-related purposes {hereinafter "airport purposes"), may that requirement be satisfie d by the State's appropriation of monies for airport pu r poses from its general fund?



## Yes. The AAIA requires the proceeds from local aviationfuel taxes imposed by a particular jurisdiction be used by that jurisdictionfor the capital or operating costs of (a) the airport; (b) the local airport system; or (c) other local facilities owned or operated by the airport owner or operator and directly and substantially related to the air transportation of passengers or property. Additionally, in accordance with 49 U

.S. C.§ 

## 47133, a State tax on aviationfuel may be used to support a State aviation program, and airport revenue may be used on or off the airport for a noise mitigation purpose.

3

## We have concluded that these aviationfuel tax statutory requirements may be satisfied by the State's appropriation of monies for airport purposes from its general funds. We are labeling this type of action as an offset, and arepermitting offsets when the State appropriates money for airportpurposes from its general fund in an amount equal to or exceeding the aviationfuel tax proceeds collected, and then remits such funds into the applicable airport revenue account. The same is truefor a State aviation fuel tax; the State could appropriate monies from its general fund and deposit an amount equal to or exceeding the State aviation fuel taxproceeds into the State aviation programfund.

State and local governments interested in making an offset would need to confirm that such actions are lawful and consistent with applicable State and lo

· callaws, and advise FAA accordingly. Additionally, appropriate enforceable administrative or legislative initiatives would need to be in place, as well as accounting, tracking, and reporting systems, to ensure airport revenue accounts and State aviation program accounts receive on a continuing basis during each fiscal year an amount equal to the full amounts collected for aviation fuel taxes.

2. If the answer to Question No

. 1 is "yes," would the State's appropriation for that purpose have to be reflected in a specific line item in the State's annual budget?


## Yes, the State's appropriationfrom its general fund for airport purposes would have to be reflected in a specific line item in the State's annual budget. A specific line item for airport purposes in a State's annual budget appropriation is a component of the required accounting, tracking, and reporting mechanisms that is required to be explained in the action plan to
ensure airport revenue accounts receive on a timely basis an amount equal to or exceeding the amounts collected as aviation fuel taxes. The action plan should confirm that requirements are in place to ensure the appropriations are implemented and enforceable by state or local agencies as applicable. See Question No. 4for information regarding appropriated funds, payment, and reconciliation requirements.

3. I f the answer to Question No. 1 is "yes," and the local taxing jurisdictions do not use any of those tax proceeds for airport purposes, must the State's appropriation at least be equal to the total amount of tax on aviation fue l derived by all local jurisdictions in the State in order to comply with the AAIA's requirements? For example, if local sales taxes on aviat ion fuel state

- wide total $100 million (none of which is used by the local taxing ju ri sdictions for airport purposes), would the State's appropriation for airport purposes have to be at least $100 million?



## We understand the question to ask whether the State is required to appropriate andpay an amount equal to the aviation fuel taxproceeds levied and collected within a local jurisdiction when such proceeds are not used for airport purposes. Yes, the amount of the State's annual appropriationfor airport purposes must be at least equal to or exceed the total amount of aviation fuel taxes derived by all local jurisdictions in the State.

4

### 4. If the answers to Questions No. 1 and 3 are both "yes," 

### may the State's appropriation for airport purposes for its upcoming fiscal year (July 1- July 30) be based on the local tax collected on aviation fuel for the most recently completed fiscal year?



## As noted above, the answers to Questions No. 1 and 3 are "'yes." The answer to Question No. 4 is yes. The State'spayment of collected aviationfuel taxes to airport sponsors may come from appropriated funds in one fiscal year based on the local

. aviation fuel taxes collected during the immediateprior fiscal year, provided the payments made are reconciled with amounts collected in accordance with Generally AcceptedAccounting Standards (GAAP) and such payments are made on a timely andprompt basis within defined reportingperiods. The State's action plan should detail the process for collection, timely reconciliation andprompt payment of appropriated funds within defined reporting periods.

5. If the answers to Questions No.1 and 3 are both "yes," would the funds appropriated by the State for airport purposes have to be used or distributed in a way that matched up with each local jurisdiction's tax collections on aviat ion fuel, or could the appropriated funds be used or distributed
more generally? For example, if all local taxes on aviation fuel equaled $100 million statewide, but only $1 million was attributable to a particular jurisdiction, would $1 million ofthe State's appropriated funds have to be distributed or used in that particular jurisdiction for airport purposes? Or would it suffice that $100 million in appropriated funds are used state

-wide for airport purposes, regardless of how much a local jurisdiction has received in taxes on aviation fuel and where the appropriated funds are used?



## As noted above, the answers to Questions No. 1 and 3 are "yes." State appropriated fundsfor airport purposes have to be used or distributed to match each local jurisdiction's tax collections on aviation fuel. Thus, the $1 million of appropriated funds attributable to a particular jurisdictionfor airportpurposes must be used in that localjurisdictionfor permissible airportprojects orprograms
. It does not suffice that $100 million in appropriated funds is used state-wide for airportpurposes.



## The following are the original questions from the states and the FAA's response:

/. First, it is clear that 1987 is the grandfather point. For clarity, a tax in place before then and unchanged is grandfathered, but what 

# ifthere is a tax in place before 1987 which has been amended either to change the rate, or to add or subtract what is covered (for example when Virginia changed its sales tax laws 25 years or so ago to exclude certain foods and medicines). Does that change the grandfathered status?

o 

## It could since it depends on • Exempted aviationfuel, then added back in

-not exempted
• Rate changed from 4% to 6%, then only the 4% revenue is "grandfathered"- the overage must be used for airportpurposes • What if tax "sunsets" but was then extended? Depends on if gap.

5

## • Amendments to the legislation may or may not result in exempt status. FAA will need to review the enabling and amendment language.

o 

## Grandfather cutoff date for existing aviation fuel taxes is December 30, 1987. FAA will need to receive documentationfiled with the action plans to determine the grandfather status of aviation fuel taxes. Amendments to legislation may or may not result in negating the grandfathered status depending on the amendment Itself. FAA will need to review the legislation
or amendments to aviation fuel taxes in order to confirm compliance with the federal requirements.

If. 

## What will be the enforcement mechanismfor states and localities that do not come into compliance? Willfunds be withheld? Other?

o I(

## state or locality is an airport sponsor: treat as normal revenue diversion (finding of non-compliance, civilpenalties, withholding of transportation grants, filing with U.S. district court to seek enforcement of order).
o 

## If state or locality is NOTan airport sponsor: impose civil penalties AND apply to U.S. district court for a cease and desist order.

Ill. How will Block Grant states be impacted? Are there some additional penalties possible for block grant states?

o 

## Ifblock grant state is levying a tax on aviation fuel contrary to the revenue use requirements and the FAAs Revenue Use Policy, it could be a breach of contract between FAA and Block Grant State.
o 

## Sponsors and non-sponsors would be treated same whether under a block gran t or not.

IV. One state has a general state sales tax onjet fuel. The state statutory provisions dedicatingjet fuel sales taxes to aviation in the state passed in 1993. However, there
were certain constitutional provisions in place in the state before 1987 that dedicate a portion of any general sales taxes to three otherpurposes (education, conservation, parks and soils). A legal interpretation was given in that state that said because the constitutional provisions dedicating general sales taxes to those otherpurposes were in effect before 1987, they are grandfathered in and the state should be in compliance with the FAA's policy. Does the FAA agree with that interpretation?



## o In general, FAA would agree, but we would want to make sure that i. The general sales tax subject to the constitutionalprovision was in place before December 30, 1987, and unchanged thereafter.

6

## ii. In general, if the revenue diversion was lawful, FAA 

## would not be concerned with how the funds are spent

- if tax was in place before December 30, 1987.

V. Ifa state has a tax that is subject to the FAA's policy and the revenue from that tax is constitutionally earmarked for non-aviation purposes:

1. May the state come into compliance with the FAA policy by exempting aviation fuel from that tax?

o 

## Simply, yes. Ifaviationfuel is exempt from any state or local tax, there would be

no issue. 

## o This would be the easiest solution as far as FAA 

## is concerned.

2. Assuming the answer to the first question is yes, how long will the state have to implement such an exemption without incurring penalties or sanctions (assuming that until the exemption kicks in, the revenue will continue to be distributed according to the constitutional earmark)?

o 

## The state will have one year (from December 8, 2014) to include the exemption of taxes on aviation fuel in the action plan.


## o Exemption to be implemented within a reasonable transition period, not to exceed three years (no later than December 8, 2017}.

3. Will the FAA be providingformal notification to states on whether they are potentially
not in compliance?

o 

## Not unless the FAA receives a complaint or notification.
o 

## Too manypossible state/municipality combinations for FAA to provide direct notification.

4. Ifso, when will that occur?



## o Not applicable

- won't occur.

VI. Is the FAA policy limited to aviationfuel sales tax revenuefrom all NPIAS airports or only federally obligated NPIAS airports?

o 

## The issue is whether the aviation fuel is being taxed. The limits on use of aviation fuel tax revenues apply to any tax imposed on aviation fuel by either a State government or a local government taxing authority whether or not acting as a sponsor or airport owner or operator.

7

### o 

## NPIAS does not come into consideration within the guidelines of the amendment

. The restrictions on use of aviationfuel taxproceeds apply regardless of whether or not the airport is currently subject to the terms of an AlP grant agreement.

VII. Ifonly federally obligated airports: For the purpose ofthe FAA policy, does accepting a plannir]g grant only (no construction grants) result in an airport fa fling under this new policy?

o 

## For this purpose, an airport receiving a planning grant is deemed as having "received federal assistance" and therefore, this policy applies. (See clarification in the 2014 amendment to the grant assurances at 79 Fed. Reg. 18733, April 3, 2014.}


## o A sponsor undertaking afederallyfundedplanning project is subject to the
revenue use requirements.

VIII. Offse ts. Can tax on aviationfuel revenue be coflected and used for non-airport/state aviation system purposes and then be off

- set by equal or higher expenditures from the state/municipality on state aviation programs/airports?

o 

## Under review by FAA.

8