GAO-16-746R, Airport and Airway Trust Fund

441 G St. N.W.

Washington, DC 20548

August 8, 2016

The Honorable John Thune 

Chairman

The Honorable Bill Nelson

Ranking Member

Committee on Commerce, Science, and Transportation

United States Senate

The Honorable Bill Shuster

Chairman

The Honorable Peter DeFazio

Ranking Member

Committee on Transportation and Infrastructure

House of Representatives

Airport and Airway Trust Fund: Less Than Half of Noncommercial Jet Fuel Tax Receipts 

Are Transferred 

Ensuring excise tax compliance on highway motor fuel has been an ongoing concern for federal 

agencies for decades. While several legislative changes were enacted in the 1980s and 

1990s to reduce incentives to evade motor fuel taxes, in 2002, the Internal Revenue Service 

(IRS) testified that increases in federal and state excise tax rates had increased incentives for 

tax evasion. In testimony, the IRS identified several examples of fuel fraud, including the misuse 

of tax exemptions to evade excise taxes on diesel fuel, the transfer of motor fuel across state or 

local boundaries, the smuggling of motor fuel into the United States, and illegally blending motor 

fuel with other substances to reduce the effective excise tax rate.1 Similarly, in 2003, the 

Secretary of Transportation called fuel fraud “a serious and growing problem that requires an 

equally serious Federal response.”2 At that time, the Department of Transportation’s Inspector 

General testified that the Federal Highway Administration (FHWA) estimated that motor fuel tax 

evasion activities reduced excise tax receipts, which serve as a funding mechanism for and are 

deposited into the Highway Trust Fund, by at least $1 billion annually.3

Among the various types of fuel tax fraud, federal officials raised concerns about the diversion 

of jet fuel to diesel truck use because jet fuel taxes were lower than those for diesel. At the time, 

the two fuels were largely substitutable, but the federal excise tax for diesel fuel ($0.244 per 

gallon) was greater than the federal excise tax for jet fuel used in commercial aviation ($0.044 

 1

Joseph Brimacombe, Deputy Director of Compliance, Small Business and Self Operating Divisions, IRS. Schemes, 

Scams, and Cons: Fuel Tax Fraud, testimony before the S. Comm. on Finance, 107th Cong. 64-76 (2002).

2

Secretary of Transportation Norman Y. Mineta. SAFETEA: Reauthorization of Surface Transportation Programs, 

testimony before the S. Subcomm. on Transportation and Infrastructure, Comm. on Environment and Public Works, 

108th Cong. 27-33 (2003).

3

Ken Mead, Inspector General, Department of Transportation, Office, Management of Cost Drivers 

on Federal-aid Highway Projects, testimony before the U.S. House of Representatives, Subcomm. on Transportation, 

Treasury and Independent Agencies, Comm. on Appropriations, 108th Congress (2003). 
Page 2 GAO-16-746R, Airport and Airway Trust Fund

per gallon) or noncommercial aviation ($0.219 per gallon).4 In testimony, the Federal Highway 

Administrator cited a 2001 KPMG Consulting, Inc. (KPMG) study that reported that more gallons 

of jet fuel were being produced than consumed by the aviation industry.5 The KPMG study 

estimated that over a 10-year period, this gap would result in approximately 39 billion gallons of 

jet fuel diverted to nonaviation use and approximately $8.3 billion in revenue loss to the 

Highway Trust Fund if truck operators were purchasing fuel that had been taxed at the 

noncommercial jet fuel tax rate.6 The study noted that a scheme in the mid-1990s, in which six 

defendants pled guilty to illegally blending jet fuel with diesel fuel and selling the mixture at 

service stations and truck stops in Southern California, was illustrative of the opportunities for 

nonaviation jet fuel diversion. 

Congress enacted a number of reforms that became effective in fiscal years 2005 and 2006 to 

counter potential fuel tax fraud involving jet fuel diversion. 

• Beginning in fiscal year 2005, the jet fuel tax was moved from the point of sale and 

applied when jet fuel is either (1) removed from the terminal rack or (2) removed directly 

from a terminal into the fuel tank of an aircraft.7 At the same time, by designating certain 

airport fuel terminals as secured, Congress limited the number of terminals where jet fuel 

used in commercial aviation was initially taxed at a rate of $0.044 per gallon when 

purchased; all other jet fuel used in commercial aviation was subject to an initial tax rate 

of $0.219 per gallon. In doing so, Congress established a process to maintain the pre2005 effective tax rate of $0.044 per gallon on jet fuel used in commercial aviation. This 

process permitted either the registered ultimate purchaser or the ultimate vendor of such 

jet fuel (but not both) to claim a $0.175 per gallon refund.8

• In addition, as part of the Safe, Accountable, Flexible, Efficient Transportation Equity 

Act: A Legacy for Users (SAFETEA-LU), Congress equalized tax rates for jet fuel and 

diesel fuel purchased at the terminal rack at $0.244 per gallon beginning in fiscal year 

2006, and directed that initial tax receipts for sales of jet fuel taxed at $0.244 per gallon 

be deposited into the Highway Trust Fund.9 Congress also established a process that 

maintained the pre-fiscal year 2006 effective tax rate of $0.219 per gallon on jet fuel 

used in noncommercial aviation, whereby companies selling this fuel could register with 

the IRS as “ultimate vendors” of jet fuel, and claim a $0.025 per gallon credit or refund 

for each sale.10 Once a credit or refund is provided to the ultimate vendor, the Treasury 

 4

The IRS defines noncommercial aviation as any use of aircraft other than in a business of transporting persons or 

property for compensation or hire by air. It also includes any use of an aircraft for a business use that is properly 

allocable to any transportation exempt from taxes. 26 C.F.R. § 48.4041-8(j). For the purposes of this report, 

noncommercial aviation refers to taxable noncommercial aviation activities.

5

FHWA Administrator Mary E. Peters. Schemes, Scams, and Cons: Fuel Tax Fraud, testimony before the S. Comm.

on Finance, 107th Cong. 78-87 (2002).

6

KPMG Consulting, Inc., Motor Fuel Leakage Analysis, (Washington, D.C.: Dec. 17, 2001). 

7

Pub.L.No. 108-357, §853, 118 Stat. 1418, 1609(2004). The terminal rack refers to the mechanism used to dispense 

fuel products from the terminal into tank trucks or rail cars.

8

Pub.L.No. 108-357, §853, 118 Stat. 1418, 1609(2004).

9

Pub.L.No. 109-59 § 11161(c), 119 Stat. 1144, 1969(2005). For each gallon of jet fuel sold for domestic use, $.001 is 

transferred to the Leaking Underground Storage Tank Fund. 26 U.S.C. § 4081(a)(2)(B).

10Pub.L.No. 109-59 § 11161(c), 119 Stat. 1144, 1969(2005). Congress also established a similar process to maintain 

the pre-2005 effective tax rate of $0.044 per gallon on jet fuel used in commercial aviation and purchased from the 
Page 3 GAO-16-746R, Airport and Airway Trust Fund

Department (Treasury) is required to transfer the remainder of the tax receipts from the 

sale from the Highway Trust Fund to the Airport and Airway Trust Fund. In cases where 

the vendor does not apply for a credit or refund or no credit or refund is provided to a 

vendor for the sale of jet fuel used in noncommercial aviation, the jet fuel tax receipts 

from the sale are not transferred from the Highway Trust Fund to the Airport and Airway 

Trust Fund. As a result, the Federal Aviation Administration (FAA) and aviation industry 

stakeholders have raised questions as to whether the Airport and Airway Trust Fund is 

receiving all taxes paid for sales of jet fuel used in noncommercial aviation.

The Fixing America’s Surface Transportation (FAST) Act includes a provision that we conduct a 

study of the tax system for jet fuel used in noncommercial aviation and report within 180 days of 

enactment.11 This report discusses: (1) what is known about ultimate vendors of jet fuel used in 

noncommercial aviation, (2) the extent to which the Airport and Airway Trust Fund has been 

credited for sales of jet fuel used for noncommercial aviation, and (3) the extent to which jet fuel 

has been diverted for nonaviation purposes. On June 1 and 2, 2016 we provided your staff with 

a preliminary briefing on the results of our review to meet the mandated reporting requirement in 

the FAST Act.12 This report formally transmits the final briefing slides, which were updated on 

July 15, 2016 (see enc. I). 

To determine what is known about ultimate vendors, we analyzed IRS data on ultimate vendors, 

credits and refunds from fiscal years 2006–2015; and analyzed data on jet fuel vendors from the 

Aircraft Owners and Pilots Association (AOPA) for 2015. We also interviewed 17 industry 

stakeholders, which included national aviation organizations and a non-generalizable sample of 

4 vendors of jet fuel used in noncommercial aviation. The jet fuel vendors were selected based 

on size, whether the vendor was registered as an ultimate vendor of jet fuel, and whether the 

vendor had applied for a credit or refund on the sale of noncommercial jet fuel in the last 2 

years. These interviews provided a sampling of views on topics related to our review and are 

not generalizable to all jet fuel vendors. To determine what is known about the extent to which 

the Airport and Airway Trust Fund has been credited for sales of jet fuel used in noncommercial 

aviation, we analyzed IRS data on transportation trust fund transfers from fiscal years 2000 –

2015; the most recent IRS data on fuel taxes from fiscal years 2006–2015 and FAA data on jet

fuel consumption from fiscal years 2006–2015. To determine what is known about jet fuel used 

for nonaviation purposes, we reviewed relevant federal statutes and regulations, analyzed the 

most recent ARGUS International, Inc.

13 data on jet fuel prices and Energy Information 

Administration’s (EIA) data on diesel fuel prices from 2002–2015. We also interviewed Treasury, 

FAA, FHWA, and IRS officials and industry stakeholders. To assess the reliability of the data 

used for these research questions, we reviewed prior GAO reports, IRS, FAA, and EIA 

documents, and interviewed officials from these agencies, as well as staff from AOPA and 

ARGUS International, Inc. We determined that the data were sufficiently reliable for the 

purposes of addressing our research questions. Additional information on our scope and 

methodology may be found in enclosure II. 

 terminal rack and taxed at $0.244 per gallon. This process permitted either the registered ultimate purchaser or the 

ultimate vendor of such jet fuel (but not both) to claim a $0.20 per gallon refund. 

11Pub. L. No. 114-94, §42001, 129 Stat. 1312, 1762 (2015).

12The FAST Act was enacted on December 4, 2015, and the required reporting date is June 4, 2016. 

13ARGUS International, Inc. is an aviation services company that provides data and research services.
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We conducted this performance audit from January 2016 to August 2016 in accordance with 

generally accepted government auditing standards. Those standards require that we plan and 

perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that the evidence obtained 

provides a reasonable basis for our findings and conclusions based on our audit objectives.

In summary:

• The total number of potentially registerable ultimate vendors of jet fuel used in 

noncommercial aviation is unclear, but is likely greater than the number that have 

registered based on industry information. In addition, of those that have registered, some 

vendors of jet fuel used in noncommercial aviation are not participating in the ultimate 

vendor credit and refund processes. For example, based on our analysis, in fiscal year 

2015, only a quarter of all registered ultimate vendors filed a credit or refund claim for jet 

fuel used in noncommercial aviation, and over half of all registered ultimate vendors did 

not file any claim for jet fuel sales. Stakeholders we spoke to provided varying views on 

the registration and refund process, including: (1) that the ultimate vendor registration 

process is challenging; (2) that the small size of the credit or refund for jet fuel sold for 

noncommercial aviation purposes ($0.025 per gallon) may limit the incentive to file a 

claim for some vendors; and (3) that documentation required to claim a credit or refund 

may be difficult to obtain.

• We estimate that since fiscal year 2006, between $1 billion and $2 billion, or more than 

half of tax receipts for sales of noncommercial jet fuel, have not been transferred into the 

Airport and Airway Trust Fund from the Highway Trust Fund, based on analysis of FAA 

and IRS data. While noncommercial jet fuel consumption has been relatively constant 

from fiscal years 2000 through 2015, the number of jet fuel gallons taxed at the effective 

rate of $0.219 per gallon (the noncommercial rate) decreased significantly following the 

implementation of the tax changes in 2006. These trends suggest that more than half of 

jet fuel used in noncommercial aviation was taxed at an effective rate of $0.244 per 

gallon and as a result, between $1 billion and $2 billion in noncommercial jet fuel tax 

receipts have not been transferred to the Airport and Airway Trust Fund because no 

credit or refund that would trigger a transfer has been claimed by vendors for these 

sales. In addition, because many vendors were paying the $0.244 tax without claiming a 

credit or refund, we further estimate that the total amount of unclaimed credits or refunds 

may range from $120 million to $230 million since fiscal year 2006, which represents 

what vendors have effectively overpaid in fuel taxes. However, while vendor registration 

is required to obtain a credit or refund, filing for these credits or refunds is voluntary. 

• Reported instances of jet fuel diversion for nonaviation purposes are rare and economic 

and technological disincentives may further discourage such activity. IRS officials stated 

that some instances of jet fuel diversion and fraud occurred prior to the enactment of 

SAFETEA-LU; however, because the agency is not required to retain tax records for 

more than 7 years, IRS could not provide documentation of such occurrences prior to 

the passage of SAFETEA-LU. Following the implementation of SAFETEA-LU, IRS 

officials stated that jet fuel diversion virtually ceased. Department of Transportation 

officials stated that they were not aware of any jet fuel diversion taking place while a 

majority of the industry stakeholders we spoke to stated that jet fuel diversion was 

nonexistent. In addition, on average, between 2002 and 2015, the average retail price of 

jet fuel was $2.00 per gallon higher than the average retail price of highway diesel. 

Further, efforts to avoid paying the federal excise tax on motor fuel or jet fuel can result 
Page 5 GAO-16-746R, Airport and Airway Trust Fund

in financial penalties or jail, additionally disincentivizing jet fuel diversion. Finally, engine 

technology improvements and fuel composition changes since 2007 limit incentives for 

jet fuel diversion.

Agency Comments

We provided the Departments of Transportation and Treasury, and IRS with a draft of this report 

for review and comment. The Departments of Transportation and Treasury, and IRS provided 

technical comments, which we incorporated as appropriate. 

__________

We are sending copies of this report to the appropriate congressional committees and to the 

Secretaries of Transportation and Treasury and the Commissioner of the IRS. This report will 

also be available at no charge on the GAO website at http://www.gao.gov. 

Should you or your staff have questions concerning this report, please contact me at (202) 512-

2834 or dillinghamg@gao.gov. Contact points for our Offices of Congressional Relations and 

Public Affairs may be found on the last page of this report. Key contributors to this report were 

Paul Aussendorf, Assistant Director; Amy Abramowitz, Melissa Bodeau, Amy Bowser, Russ 

Burnett, David Hooper, Jessica Lucas Judy, Joshua Ormond, Alexandra Rouse, and Matt Voit. 

Gerald L. Dillingham, Ph.D.

Director

Physical Infrastructure Issues

Enclosures – 2
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Enclosure I
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GAO-16-746R, Airport and Airway Trust Fund

Enclosure II: Objectives, Scope, and Methodology

The research questions of this report were to examine what is known about (1) ultimate vendors 

of jet fuel used in noncommercial aviation, (2) the extent to which the Airport and Airway Trust 

Fund has been credited for sales of jet fuel used for noncommercial aviation, and (3) the extent 

to which jet fuel has been diverted for nonaviation purposes.1 In general, we reviewed relevant 

statutes, regulations and prior GAO and Inspector General reports, analyzed data and 

interviewed federal officials from the Department of Treasury, the Department of Transportation, 

and the Internal Revenue Service (IRS); and interviewed 17 industry stakeholders, including 

national aviation organizations, such as the National Air Transportation Association and the 

National Business Aviation Association, and jet fuel vendors.

Ultimate Vendors of Jet Fuel Used in Noncommercial Aviation

To determine what is known about ultimate vendors of jet fuel used in noncommercial aviation, 

we analyzed IRS data on ultimate vendors, and claims for credits and refunds from fiscal years 

2006–2015. We analyzed IRS data from the Compliance Database Warehouse (CDW)2 and 

Issue Based Management Information System (IBMIS)3 on the number of registered ultimate 

vendors of jet fuel used in aviation filing various jet fuel tax claims, such as claims for credits 

and refunds for commercial, nontaxable, and noncommercial aviation activity. IRS uses data 

from the CDW to support research, analyses and tax studies and uses data from IBMIS to assist 

audit and examination activities. We also analyzed IRS data from the IBMIS on the total number 

of ultimate vendors registered with the IRS and the number of registered ultimate vendors that 

filed at least one claim for credits or refunds in noncommercial aviation in fiscal year 2015 to 

determine the percentage of ultimate vendors filing claims for jet fuel used in noncommercial 

aviation. To assess the overall quality of the data, we reviewed documentation associated with 

the CDW and IBMIS databases, and interviewed IRS officials about the completeness and 

accuracy of the data, the process of data entry and data extraction, and data analysis 

procedures. We found the data sufficiently reliable for our purposes. We did not seek individual 

vendor names because this is proprietary taxpayer information.

Additionally, we analyzed IRS certification data from the Airport and Airway Trust Fund 

certification letters on actual tax receipts credited to the Airport and Airway Trust Fund for sales 

of noncommercial jet fuel from fiscal years 2006–2015 to determine the number of gallons 

claimed for credits and refunds for jet fuel used in noncommercial aviation. To determine the 

amount in dollars of those credits and refunds, we multiplied the number of gallons by the claim 

rate of $0.025 per gallon. To assess the overall reliability of the data, we reviewed 

documentation associated with IRS certification data from Airport and Airway Trust Fund 

certification letters, and interviewed IRS officials about the completeness and accuracy of the 

 1

The IRS defines noncommercial aviation as any use of aircraft other than in a business of transporting persons or 

property for compensation or hire by air. It also includes any use of an aircraft for a business use that is properly 

allocable to any transportation exempt from taxes. 26 C.F.R. § 48.4041-8(j). For the purposes of this report, 

noncommercial aviation refers to taxable noncommercial aviation activities, unless otherwise indicated. 

2

Data from the CDW came from the following IRS databases: Business Master File, Business Return Transaction 

File, and Individual Return Transaction File.

3

Data from the IBMIS came from the IRS’s Excise 637 database.
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data, the process of data entry and data extraction, and data analysis procedures. We found the 

data sufficiently reliable for our purposes.

To assess the number of potential ultimate vendors of jet fuel used in noncommercial aviation, 

we analyzed Aircraft Owners and Pilots Association’s (AOPA) data on the number of fixed-base 

operators (FBO) that provided jet fuel at airports in the United States for 2016. We could not 

determine how many of these vendors sell jet fuel to noncommercial operators, or if there are 

additional jet fuel vendors that sell jet fuel to noncommercial operators that were not part of 

AOPA’s data. To assess the overall reliability of the data, we interviewed AOPA staff; we found 

the data sufficiently reliable for our purposes.

In addition, we reviewed applicable statutes and regulations regarding ultimate vendor and 

claim requirements, such as eligibility requirements, claim paperwork, and time estimates for 

recordkeeping and submitting IRS forms, and interviewed IRS officials to obtain information on 

the ultimate vendor registration and refund process. We also interviewed a non-generalizable 

sample of four vendors of jet fuel used in noncommercial aviation. To identify potential interview 

candidates for jet fuel vendors, we analyzed AOPA FBO data. We divided the data into two 

groups: companies that were identified as operating more than three FBOs and companies that 

were identified as operating three or less FBOs. We randomly selected 10 companies in each 

group, and contacted a representative from each company to screen candidates for our in-depth 

interviews. From this candidate data, we selected three FBOs to interview; FBOs were selected 

to reflect variation in (1) size, (2) whether vendors were registered as an ultimate vendor of jet 

fuel, and (3) whether they had applied for a credit or refund for the sale on noncommercial jet 

fuel in either 2014 or 2015. Because we were unable to identify an FBO from our candidate pool 

that was registered as an ultimate vendor and did not receive a credit or refund for sales of 

noncommercial jet fuel in the last 2 years, we contacted National Air Transportation Association 

to help us identify an additional FBO to fit our final criteria. These interviews provided a 

sampling of views on topics related to our review and are not generalizable to all jet fuel 

vendors.

Credits to the Airport and Airway Trust Fund for Sales of Noncommercial Jet Fuel

We analyzed IRS data on jet fuel gallons taxed and sold for noncommercial use from fiscal 

years 2000–2015 to understand how noncommercial jet fuel consumption and tax receipts had 

changed following the enactment of the Safe, Accountable, Flexible, Efficient Transportation 

Equity Act: A Legacy for Users (SAFETEA-LU) (see table 2). We assumed that data on sales of 

jet fuel as reported to the IRS are an appropriate approximation of jet fuel consumption; 

however, we were unable to determine the extent to which instances of fraudulent diversion of 

jet fuel affected this approximation. We estimated jet fuel gallons consumed and taxed from 

fiscal years 2000–2005 and fiscal years 2006–2015 using different data sources, as a result of 

changes in how data on noncommercial jet fuel sales, credits, and refunds were reported 

beginning in fiscal year 2006 as part of IRS’s implementation of the tax changes in SAFETEALU. For the fiscal year 2000–2005 period, we used data from the IRS Airport and Airway Trust 

Fund certification letters, which detail the amount of jet fuel tax receipts collected by IRS and 

deposited into the Airport and Airway Trust Fund and which IRS officials consider the official 

record of jet fuel tax receipts.4 Prior to the implementation of SAFETEA-LU in fiscal year 2006, 

 4

Since 1998, our prior reports have reviewed the process IRS uses to develop the data for the Airport and Airway 

Trust Fund certification letters. We are required annually to assist the Department of Transportation’s Office of 

Inspector General in ascertaining whether the net excise tax revenue distributed to the Airport and Airway Trust Fund 

and the Highway Trust Fund is supported by the underlying records. See, for example, GAO, Independent Auditor’s 

Report on Applying Agreed-Upon Procedures: Fiscal Year 2015 Excise Tax Distributions to the Airport and Airway 

Trust Fund and the Highway Trust, GAO-16-109R (Washington, D.C.: Nov. 5, 2015).
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all noncommercial jet fuel tax receipts collected by the IRS were deposited into the Airport and 

Airway Trust Fund. Beginning in fiscal year 2006, when certain sales of jet fuel used in 

noncommercial aviation were deposited initially in the Highway Trust Fund as part of 

implementation of the SAFETEA-LU changes, the Airport and Airway Trust Fund certification 

letters began to not reflect all noncommercial jet fuel sales. Accordingly, for this period, we used 

IRS data from the CDW, which contains data from fiscal year 2006–2015 on noncommercial jet 

fuel sales, credits, and refunds, to estimate noncommercial jet fuel gallons consumed and 

taxed.

Table 2. Internal Revenue Service’s Excise Tax Numbers and Credit Reference Numbers (CRN) 

Used in Noncommercial Jet Fuel Tax Analyses

Data element Explanation

No. 35 Sales of kerosene and jet fuel taxed at $0.244 per gallon 

No. 69 Sales of jet fuel taxed at $0.219 per gallon 

No. 95 Aggregated credits and refunds for sales of jet fuel for CRN 355, CRN 369, and 

CRN 377 from IRS Form 8849 and IRS Form 4136

CRN 346 Credits and refunds for sales of kerosene and jet fuel taxed at $0.244 per gallon 

and used for nontaxable purposes 

CRN 347 Credits and refunds for sales of kerosene taxed at $0.244 per gallon and used in 

certain intercity and local buses 

CRN 355 Credits and refunds for sales of jet fuel taxed at $0.219 and used in commercial 

aviation 

CRN 369 Credits and refunds for sales of kerosene and jet fuel taxed at $0.219 per gallon 

and used for nontaxable purposes 

CRN 377 Credits and refunds for sales of jet fuel taxed at $0.044 per gallon and used for 

nontaxable commercial purposes

CRN 414 Credits and refunds for sales of kerosene taxed at $0.244 per gallon and exported 

CRN 417 Credits and refunds for sales of jet fuel taxed at $0.244 and used in commercial 

aviation 

CRN 418 Credits and refunds for sales of jet fuel taxed at $0.244 per gallon and used in 

taxable noncommercial aviation 

GAO analysis of Internal Revenue Service information. | GAO-16-746R

Specifically:

1. To estimate the consumption of jet fuel used in noncommercial aviation in fiscal years 

2000–2005, we used data from the IRS Airport and Airway Trust Fund certification 

letters to the Department of Treasury to calculate the difference between the number of 

gallons of kerosene and jet fuel taxed at $0.219 per gallon reported to IRS (No. 69) and 

the number of gallons of kerosene and jet fuel taxed at that rate and subsequently 

claimed for credits and refunds for nontaxable or commercial purposes (No. 95). We 

obtained the amount of tax receipts for No. 69 and converted to gallons by dividing the 

dollar amount by the noncommercial tax receipt rate of $0.218 per gallon.5 We obtained 

the amount of credits and refunds reported in IRS certification data for No. 95 and 

converted to gallons by dividing the dollar amount by the claim rate of $0.175 per gallon 

 5

Pub.L.No. 109-59, § 11161(c) 119 Stat. 1144, 1969(2005). For each gallon of jet fuel sold for domestic use, $.001 is 

transferred to the Leaking Underground Storage Tank Fund. 26 U.S.C. § 4081(a)(2)(B).
Page 36 GAO-16-746R, Airport and Airway Trust Fund

for jet fuel used in taxable commercial activities.6 We then subtracted the number of 

gallons claimed for credits and refunds from the number of gallons taxed and sold, to 

estimate the number of gallons of jet fuel consumed for noncommercial use in fiscal 

years 2000–2005. 

2. To estimate the consumption of jet fuel used in noncommercial aviation for fiscal years 

2006–2015, we analyzed IRS data from the CDW on gallons that were initially taxed at 

$0.244 (No. 35) and subtracted the number of gallons of kerosene and jet fuel initially 

taxed at that rate and subsequently claimed for credits and refunds for nontaxable or 

commercial purposes (CRNs 346, 347,414, and 417).7

 

3. To corroborate the estimate of the consumption of jet fuel used in noncommercial 

aviation for fiscal years 2006–2015, we also calculated the amount of tax receipts that 

could have been deposited into the Airport and Airway Trust Fund for sales of 

noncommercial jet fuel using Federal Aviation Administration’s (FAA) data from the 

annual General Aviation and Part 135 Survey (GA Survey), and the FAA Aerospace 

Forecast, and IRS data from CDW. We obtained FAA data on the number of jet fuel 

gallons reported to have been consumed for noncommercial aviation from the GA 

Survey and the FAA Aerospace Forecast8 and converted the data to fiscal year from 

calendar year by summing two figures: (1) 0.25 multiplied by the previous calendar 

year’s consumption data and (2) 0.75 multiplied by the current calendar year’s 

consumption data. We subtracted IRS data on the number of gallons of kerosene and jet 

fuel that were claimed for credits and refunds for nontaxable purposes from the FAA jet 

fuel consumption estimate (CRNs 346 and 369). We found that this estimation generally 

aligned with our estimate of the consumption of jet fuel used in noncommercial aviation 

for fiscal years 2006–2015 using IRS data from the CDW.

4. To estimate the number of gallons of jet fuel jet fuel used in noncommercial aviation 

taxed at the effective rate of $0.219 per gallon in fiscal years 2000–2005, we used the 

same approach as outlined in step 1. To estimate the number of such gallons of jet fuel 

for fiscal years 2006–2015, we estimated the amount of jet fuel taxed at the effective 

rate of $0.219 per gallon by analyzing IRS data from the CDW on gallons that were 

 6

For 2000–2005 IRS No. 95 contains aggregated information on credits and refunds processed at three different 

claim rates: $0.219 per gallon for kerosene and jet fuel taxed at $0.219 per gallon and used in nontaxable aviation 

(CRN 369), $0.175 per gallon for jet fuel taxed at $0.219 per gallon and used in taxable commercial aviation activities 

(CRN 355), and $0.044 per gallon for jet fuel taxed at $0.044 per gallon and used in nontaxable commercial aviation 

activities (CRN 377). Within the data for IRS No. 95, we could not determine the proportion of credits and refunds that 

were issued across the three claim rates. Given that sales of jet fuel used in taxable commercial aviation activities 

comprise the largest portion of total jet fuel sales according to IRS data, we assumed that all of the credits and 

refunds in IRS No. 95 were attributable to taxable commercial aviation activities. 

7

We also analyzed data on gallons of jet fuel that were taxed at $0.219. However, from fiscal year 2006–2015, the 

number of gallons initially taxed at $0.219 and claimed for credits and refunds in nontaxable or commercial purposes 

exceeded the number of gallons initially taxed at $0.219. Therefore, we assume that the number of noncommercial 

gallons of jet fuel taxed at $0.219 per gallon is minimal. 

8

Data obtained from the GA Survey came from Tables 5.1 “General Aviation and Air Taxi Total Fuel Consumed and 

Average Fuel Consumption Rate by Aircraft Type”, and data obtained from the FAA Aerospace Forecast came from 

Table 23 “Total Jet Fuel and Aviation Gasoline Fuel Consumption.”
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initially taxed at $0.244 and had $0.025 per gallon credits or refunds for noncommercial 

aviation use applied against them (CRN 418).9

5. To determine the amount of tax receipts that could potentially be deposited into the 

Airport and Airway Trust Fund for sales of jet fuel used in noncommercial aviation in 

fiscal years 2006–2015, we multiplied the estimates for noncommercial jet fuel 

consumption (steps 2 and 3) by the tax rate of $0.218 per gallon.10 We compared the 

resulting amounts to the actual tax receipts that were credited to the Airport and Airway 

Trust Fund from the IRS Airport and Airway Trust Fund certification letters. 

6. To estimate the potential amount of credits and refunds that could have been provided to 

jet fuel vendors for all sales of jet fuel used in noncommercial aviation and initially taxed 

at $0.244 per gallon, we multiplied the estimates for noncommercial jet fuel consumption 

(steps 2 and 3) by the claim rate of $0.025 per gallon. 

7. To determine the amount of credits and refunds that were claimed by jet fuel vendors for 

sales of noncommercial jet fuel from 2006–2015, we divided the amount of tax receipts 

that were credited to the Airport and Airway Trust Fund from the IRS Airport and Airway 

Trust Fund certification letters for sales of jet fuel used in noncommercial aviation by the 

tax rate of $0.218 per gallon.11 We multiplied the resulting gallons by the claim rate of 

$0.025 per gallon and compared the number to our estimates of the amount of credits 

and refunds that could have been provided for sales of jet fuel used in noncommercial 

aviation (from step 6). 

Because much of IRS’s data on noncommercial jet fuel taxation we obtained is collected and 

aggregated with tax data relating to jet fuel used for other aviation purposes (e.g., commercial or 

nontaxable uses) or combined with tax data on kerosene, we made the following assumptions 

as part of our analysis:

• The number of gallons of both kerosene and jet fuel taxed at $0.244 per gallon included 

in the data for No. 35, used for nontaxable or commercial purposes, and left unclaimed 

for credits or refunds is minimal. Compared to the value of a credit or refund for jet fuel 

used in noncommercial aviation (CRN 418), the dollar amount of the credits and refunds 

available for nontaxable (CRN 346) or commercial (CRN 417) uses is approximately 99 

percent and 82 percent, respectively, of the amount of tax initially paid. As a result, a 

strong economic incentive exists for companies to make claims for sales of jet fuel taxed 

at $0.244 and used for nontaxable and commercial uses, and thus the number of these 

gallons that are unclaimed for credits or refunds is likely minimal.

• Similarly, the number of gallons of both kerosene and jet fuel taxed at $0.219 per gallon 

included in the data for No. 69 and left unclaimed for credits or refunds for either 

nontaxable or commercial uses is minimal. The dollar amount of the credits and refunds 

available for nontaxable (CRN 369) or commercial (CRN 355) uses is approximately 99 

 9

As noted previously, we assumed that the number of noncommercial gallons of jet fuel taxed at $0.219 per gallon is 

minimal. 

10As noted previously, for each gallon of jet fuel sold for domestic use, $.001 is transferred to the Leaking 

Underground Storage Tank Fund.

11As noted previously, for each gallon of jet fuel sold for domestic use, $.001 is transferred to the Leaking 

Underground Storage Tank Fund.
Page 38 GAO-16-746R, Airport and Airway Trust Fund

percent and 80 percent, respectively, of the amount of tax initially paid. As a result, a 

strong economic incentive exists for companies to make claims for sales of jet fuel taxed 

at $0.219 and used for nontaxable and commercial uses, and thus the number of these 

gallons that are unclaimed for credits or refunds is likely minimal.

• In addition, the number of gallons of kerosene used for taxable purposes and taxed at 

$0.244 per gallon included in the data for No. 35 is minimal and has a negligible effect 

on our analysis. According to Energy Information Administration (EIA) data from the 

Petroleum and Other Liquids database from 2000–2015, the percentage of kerosenebased products supplied in the United States (net of exports and imports) that are 

kerosene is approximately 1 percent, while the percentage of kerosene-based products 

that are jet fuel is approximately 99 percent. 

To assess the overall reliability of IRS data for these specific analyses, we reviewed 

documentation associated with the IRS database, CDW, and the IRS Airport and Airway Trust 

Fund certification letters, and interviewed IRS officials about the completeness and accuracy of 

the data, the process of data entry and data extraction, and data analysis procedures. As part of 

our assessment of the reliability of the CDW data, we noted and IRS officials confirmed that 

there were some anomalies in the jet fuel tax data extracted from CDW for fiscal years 2006 

and 2007. These anomalies resulted in data that suggested reduced noncommercial jet fuel 

credit and refund claims activity compared to other years in our analyses. Specifically, for the 

fiscal year 2006 data, IRS attributed these anomalies, which were also reflected in the Airport 

and Airway Trust Fund certification letters, to the transition resulting from implementing changes 

in SAFETEA-LU and delayed claims for credits and refunds. For fiscal years 2006 and 2007, 

IRS officials stated that the CDW data may not fully reflect all of the credits and refunds filed for 

sales of jet fuel because CDW contains only partial data on jet fuel tax credits and refunds for 

those 2 years. Given the anomalies in the CDW data in fiscal year 2006 and 2007, we 

corroborated estimates from 2006 through 2015 with an analysis of jet fuel consumption and 

taxation based on FAA’s GA Survey and FAA’s Aerospace Forecast data, as noted above, and 

found our estimates generally aligned. Our assessment of the reliability of these multiple data 

sources revealed limitations, which we note in this report. Recognizing these limitations, we 

determined that the data were sufficiently reliable for the specific purpose of estimating broad 

trends in noncommercial jet fuel consumption and taxation in fiscal years 2000–2015.

We also assessed the reliability of the data in the Airport and Airway Trust Fund certification 

letters. Based on interviews with IRS officials and our prior reports reviewing the certification of 

Airport and Airway Trust fund tax receipts, we determined that these data were sufficiently 

reliable for our purposes.

To assess the reliability of the EIA data, we reviewed documentation associated with EIA’s 

Petroleum and Other Liquids database, and interviewed EIA officials about the quality of the 

data, the process of data entry and data extraction, and data analysis procedures. We found the 

data sufficiently reliable for our purposes. To assess the reliability of the FAA data, we reviewed 

documentation associated with the GA Survey and FAA’s Aerospace Forecast and interviewed 

agency officials regarding the survey methodology. Agency officials identified changes in the GA 

Survey’s methodology from 2005 through 2013 that limit the comparability of the data across 

years, including changes to the survey’s design, sample size and composition, and the process 

for determining fuel consumption. Additionally, we previously reported that the GA Survey has 
Page 39 GAO-16-746R, Airport and Airway Trust Fund

suffered from methodological and conceptual limitations.12 Due to these limitations, the FAA 

data are used only to corroborate our other analysis and to develop a range of estimates, and 

we found the data to be sufficiently reliable for these purposes.

Jet Fuel Diversion

To determine what is known about jet fuel used for nonaviation purposes, we reviewed relevant 

federal statutes and regulations, including statutes outlining the financial and judicial penalties 

associated with avoiding paying federal excise taxes and Environmental Protection Agency 

regulations for emission standards for diesel engines, and sulfur requirements for diesel fuel 

and jet fuel. We also analyzed the most recent ARGUS International, Inc. (ARGUS) data on jet 

fuel prices and EIA data on diesel fuel prices from 2002–2015, and interviewed DOT and IRS 

officials and industry stakeholders.13 To assess the reliability of ARGUS data, we interviewed 

ARGUS staff about the various data elements and data sources. We determined that the data 

were sufficiently reliable for our purposes. To assess the reliability of EIA data, we reviewed 

documentation associated with the collection of diesel price data from 2002–2015 and 

interviewed EIA officials about the completeness and accuracy of the data, various data 

elements, and data analysis procedures. We determined that the data were sufficiently reliable 

for our purposes.

We conducted this performance audit from January 2016 to August 2016 in accordance with 

generally accepted government auditing standards. Those standards require that we plan and 

perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that the evidence obtained 

provides a reasonable basis for our findings and conclusions based on our audit objectives.

(100562)

 12Our prior work has highlighted limitations within the GA Survey data. See GAO, General Aviation Safety: Additional 

FAA Efforts Could Help Identify and Mitigate Safety Risks, GAO-13-36 (Washington, D.C.: Oct. 4, 2012). 

13ARGUS International, Inc. is an aviation services company that provides data and research services. The data on 

retail price of jet fuel were based on a survey of retail prices across the United States; it was conducted by ARGUS 

and published in Business and Commercial Aviation magazine.
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