U,S. Department 

of Transportation 

Federal Aviation 

Administration 

.NOV f 7 2016 

Willie Oswalt, Mayor 

City of Lake City 

5455 Jonesboro Rd. 

Lake City, Georgia 30260 

Office of the Chief Counsel 

Re: Clayton County Entities' Amended Action Plan 

Dear Mayor Oswalt: 

800 Independence Ave., S.W. 

Washington, D.C. 20591 

The Administrator asked me to respond to your September 13, 2016letter, submitting an 

amendment to the Clayton County Entities' 1 December 8, 2015 Action Plan? 

As you know, the FAA's November 7, 2014, "Policy Amendment" required state and 

local governments to submit by December 8, 2015, an Action Plan detailing how, and by 

when, they would come into compliance with federal law requiring revenue raised from 

all aviation fuel taxes - excise and general alike - be dedicated to support the operation 

and development of airports, air transportation of goods and passengers or a state aviation 

program.

3 

The Clayton County Entities' December 8, 2015 Action Plan, which is a part of the 

Aviation Fuel Tax Docket, described the Entities' proposal to comply with the Policy 

Amendment, the impact on their local jurisdictions, and impediments to intended 

compliance. 

The Clayton County Entities' September 13, 2016 amended Action Plan, which also has 

been made a part of the Aviation Fuel Tax Docket, provides the Entities' position that the 

Policy Amendment does not apply to them since they are not grant recipients and have no 

1 The September 13, 2016letter was submitted on behalf of the following local governmental 

entities of the State of Georgia: Clayton County Georgia Govermnent, Clayton County Georgia 

Public Schools, and the Cites afForest Park, Riverdale, Lovejoy, Morrow, Lake City, Jonesboro, and 

College Park (collectively referred to as "Clayton County Entities"). 

2 Your amended Action Plan has been posted to the FAA Aviation Fuel Tax Docket No. 2013-0988-

198 (October 4, 2016). 

3 79 Fed. Reg. 66282, the "2014 Policy Amendment" clarified application of the Agency's 1996 

Revenue Use Policy. (Policy and Procedures Concerning the Use of Airport Revenue, 64 Fed. Reg. 

7696, (February 16, 1999)). 
ability to spend revenues from their tax on aviation fuel for the purposes specified in 

federal law. 

The basis for the Clayton County Entities' amended Action Plan is their contention that 

federal law permits them to levy a general sales tax on the sale of aviation fuel and divert 

such revenue to fund a variety of local governmental services, including public education 

and infrastructure, in lieu of funding aviation-related projects or programs. 

Specifically, the Entities contend they are (or should be) exempt from generally 

applicable federal law because they neither received federal airport improvement grants 

nor are they responsible for the operation of Hartsfield-Jackson Atlanta International 

Airport and, hence, are unable to spend aviation fuel tax revenue for aviation-related 

purposes.4 

In the event the FAA disagrees with their contention as to permissible uses of aviation 

fuel tax revenue, the Clayton County Entities alternatively propose the FAA sanction 

using the value of lost property taxes, due to their inability under Georgia state law to tax 

the airport's real property located in Clayton County, as an "offset" for their 

impermissible diversion of aviation fuel tax revenue for non-aviation-related purposes. 5 

This letter responds to each contention. 

Diversion of Aviation Fuel Tax Revenue For Non-Aviation Purposes 

The FAA disagrees with your contention that the federal prohibition on the diversion of 

aviation fuel tax revenue for non-aviation purposes only applies to state or local 

governments who received federal airport improvement grants or are an airport sponsor. 

We believe federal law prohibits all state and local governments from diverting aviation 

fuel tax revenues for any non-aviation related purpose. 

The Clayton County Entities' contention to the contrary relies on the text of a version of 

current law that originated in the House of Representatives in 1996. It is true that the 

House bill applied to only airport sponsors ("certificate holders"). However, as the 

Entities acknowledge, the House language did not become law as it was amended in 

conference to include the Senate's broader language. The Senate's broader language is 

the final language of Public Law 104-264 § 804, which provides: 

"(a) Prohibition. Local taxes on aviation fuel (except taxes in effect on 

December 30, 1987) or the revenues generated by an airport that is the 

4 Notwithstanding that contention, the FAA notes that publicly available records reflect Clayton 

County, as an owner of a federally obligated airport, was subject to prohibitions on revenue 

diversion at least through 2012 when the County sold the airport to a neighboring county. 

5 Letter from Irene Elizabeth Howie, Esq., to Eduardo Angeles, the FAA's Associate Administrator 

for Airports, September 15,2016. 

2 
subject ofF ederal assistance may not be expended for any purpose other 

than the capital or operating costs of ( l) the airport; (2) the local airport 

system; or "(3) any other local facility that is owned or operated by the 

person or entity that owns or operates the airport that is directly and 

substantially related to the air transportation of passengers or property." 

(Emphasis added). 

By its express terms, this provision of current law clearly is not limited to jurisdictions 

that either receive federal financial assistance or operate the airport.6 Additionally, Public 

Law 104-264 § 802(b) expressly provides as one of its purposes: 

"The purpose of this title is to ensure that airport users are not burdened with 

hidden taxation for unrelated municipal services and activities, by ... (4) 

clarifying limitations on revenue diversion that are permitted under chapter 

471 of title 49, United States Code; and (5) establishing clear penalties and 

enforcement mechanisms for identifying and prosecuting airport revenue 

diversion." (Emphasis added). 

Clearly, the Clayton Counties Entities' use of revenue from a general sales tax on aviation 

fuel to support a variety of public services, including public education and infrastructure, 

is the use of the tax to fund "unrelated municipal services and activities ... " contrary to the 

express purpose of the federal ban on the diversion of aviation fuel tax revenue. 7 

By following the clear, unambiguous intent of Congress, the FAA is not expressing a 

view as to the desirability of State or local goverrnnents levying a general sales tax on 

aviation fuel. 8 That is a matter for state and local governments. Rather, the FAA simply 

is enforcing Congress' mandate requiring aviation fuel tax revenues be used solely for 

aviation-related purposes.

9 Neither the federal statutory prohibition on diverting aviation 

6 Congress knows how to establish a process to waive provisions when appropriate. For example, 

the House bill contained a provision granting the FAA authority to issue waivers to airports not 

receiving grant assistance under Chapter 471, during the preceding 10-year period. That provision 

also was eliminated in Conference. 

7 As the Clayton County Entities acknowledge, the FAA's 2013 Proposed Policy Clarification 

specifically referenced non-sponsor state and local governments and stated the FAA did not 

distinguish between types of taxes. [78 Fed. Reg. 69791 and 69793]. 

8 The FAA specifically solicited comments on other reasonable interpretations regarding the 

permissible use of state and local taxes because we understood there could be alternate views as to 

the interpretation of the statute. The Agency also was aware that its proposed interpretation would 

have substantial practical consequences both for state and local government agencies and for 

industry consumers of aviation fuel. [78 Fed. Reg. 69791). The FAA conducted outreach with 

Congressional Committee staff, state and local organizations, and industry organizations and 

solicited feedback from taxing authorities. 

3 

9 The Agency recognizes guidance prior to the 2014 Policy Amendment may have lacked clarity and 

precision. However, the 2014 Policy Amendment provided all State and local governments: (i) clear 
fuel tax revenues nor the FAA's enforcement of the same in any way prohibits or restricts 

State or local governments from levying a general sales tax on the sale of aviation fuel. 10 

Guidance as to Permissible Offsets 

Your September 15, 2016 letter to Associate Administrator Angeles notes the HartsfieldJackson Atlanta International Airport is owned by the City of Atlanta, which is located in 

DeKalb and Fulton Counties, even though 3,146 of the Airport's 4,700 acres are located 

in Clayton County. In addition, I reviewed Clayton County's Comprehensive Annual 

Financial Reports. The 2017 Budget Document notes the Hartsfield-Jackson Atlanta 

International Airport is an economic engine contributing thousands of jobs, significant tax 

revenue, and international trade resources to the County. II Indeed, the Report notes the 

real and personal property taxes by three air carriers- Southwest, Air Tran and Delta- on 

property at the airport are among the County's top ten property taxpayers. 

Nevertheless, Clayton County proposes the FAA approve the County using the value of 

lost tax revenue due to its inability under Georgia state law to tax airport real property 

located in County as an "offset" for the diversion of aviation fuel tax revenue for general 

municipal services and activities. 12 Specifically, Clayton County seeks permission to 

offset its impermissible diversion of approximately $18 million in general sales tax on 

aviation fuel with approximately $100 million "lost" due to its inability under Georgia 

law to tax real property comprising the Airport. 

4 

and precise guidance applying the application of the prohibition on revenue diversion, regardless of 

whether they are responsible for airports or operate State aviation programs; and (ii) three years to 

come into compliance conditioned on their submitting the requisite Action Plan. 

The Georgia Department of Law, on behalf of the Georgia Departments of Transportation and 

Revenue, submitted an Action Plan to the Aviation Fuel Tax Docket. That Action Plan did not 

address compliance by taxing authorities like the Clayton County Entities who are not responsible 

for operating an airport. The Clayton County Entities' initial Action Plan enclosed Georgia's Action 

Plan, and claimed they were "handcuffed" by the absence of collaboration with the HartsfieldJackson Atlanta International Airport, the incapacity to change restrictions on use for aviation fuel 

taxes approved by referendum, and the State's failure to discuss the legal restriction issues in its 

Action Plan. The Entities advised that they were evaluating offsets for the exempted taxes against 

fuel tax revenues and the value of quantifiable in-kind services. 

10 The FAA rejects the Clayton County Entities' contention that federal prohibitions on diversion 

of aviation fuel tax revenue are inconsistent with the federalism principles described in Executive 

Order 13132. The preamble of the 2014 Policy Amendment and a response to a comment 

summarize the Agency's views. [79 Fed. Reg. 66283 and 66287]. 

11 http://www. claytoncountyga. gov I pdfs/finance/B udget%2 OBook%2 020 I 7%20F ina!. pdf 

12 Your letter also notes the lack of guidance as to permissible offsets applicable to taxing authorities 

that are not airport sponsors and do not share a "common treasury" with a taxing authority that is an 

airport sponsor. Nevertheless, your letter further notes during preliminary discussions FAA staff 

"suggested one test may be whether the offset benefits the national air transportation system and is 

quantifiable." 
It is important to note that federal law explicitly permits local ad valorem taxation of 

airport property. See, 49 U.S. C.§ 40116. Thus, the restriction on Clayton County's 

revenue base solely results from Georgia State law prohibiting it from taxing real 

property used for airport purposes. But for that provision of Georgia law, you note 

Clayton County would have approximately $100 million to fund a variety of municipal 

services and programs, including public education and infrastructure. 

Significantly, in issuing the 2014 Policy Amendment, the FAA acknowledged the impact 

on state and local governments. For example, the Policy Amendment, noted: 

The FAA believes that State and local officials should 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 plan 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. [79 Fed. Reg. 66286]. 

Because the real property taxes are made impermissible by operation of Georgia law, the 

Clayton County's "relief" from such prohibition must be provided by the Georgia State 

legislature, not by the FAA. Indeed, the three-year transition period the FAA provided to 

jurisdictions to submit Action Plans was for the very purpose of giving State and local 

legislatures ample time to restructure fiscal policies, processes, and practices necessary to 

end impermissible diversions of aviation fuel revenues. 

To further facilitate compliance, the FAA issued guidance permitting the use of offsets in 

recognition of a non-airport sponsor's legitimate charges to airport sponsors for, inter 

alia, payments for services or facilities provided to the airport, or for payments to 

compensate nonsponsoring governmental bodies for lost tax revenues not exceeding 

stated tax rates. 

On July 9, 2015, the FAA's Office of Airports provided guidance to the State of 

Michigan and the State of Georgia as to the contours of permissible offsets. In Michigan, 

a portion of its general sales tax (including on the sale of aviation fuel) was 

constitutionally dedicated to educational purposes. We advised that federal aviation fuel 

tax requirements were met by the State appropriating from its general fund an amount 

equal to or exceeding the aviation taxes collected and remitting such funds to the State's 

aviation program fund or applicable airport revenue account. We further advised that the 

State had to have requirements in place to ensure the appropriations are implemented and 

enforceable by state or local agencies and mechanisms to account for and remit to the 

local airport entity the dollar amount of the revenues generated for the applicable fuel tax. 

In the Agency's response to Georgia, we advised the State would be required to 

specifically appropriate as a line item in its budget and pay into airport revenue accounts 

an amount at least equal to the total amount of aviation fuel taxes levied and not used by 

local jurisdictions for aviation-related purposes. 

5 
However, the Clayton County Entities propose neither to "offset" an impermissibly 

diverted aviation fuel tax revenue stream with some other revenue stream from the State 

or a common treasury nor to "offset" an impermissibly diverted revenue stream with the 

value of services provided to the aviation-related operations or programs. Rather, the 

Entities propose to offset impermissibly diverted aviation fuel tax revenues with the 

imputed "value" of equally impermissible or phantom real property tax revenues. 

While your Action Plan meets the minimum requirements of the Policy Amendment 

regarding the submission of an action plan, we are concerned that the Clayton County 

Entities will not be in compliance with the aviation fuel tax revenue use requirements by 

December 8, 2017, based on the concerns expressed above. Kevin Willis, the FAA's 

Director of the Office of Airport Compliance and Management Analysis, is available to 

discuss with you in more detail permissible offsets of diversions of aviation fuels tax 

revenues, and other potential means to achieve compliance by the December 8, 2017 

deadline. 

In light of the guidance provided as to the contours of permissible and impermissible 

offsets, this letter will be submitted to Docket No. 2013-0988. 

The foregoing response represents the present view of the FAA's Office of Chief Counsel 

based on the facts presented in your September 13, 2016letter to the Administrator, 

September 16, 2016 letter to the Associate Administrator for Airports and the amended 

Action Plan and does not constrain future FAA action or opinion. This advisory response 

does not constitute a final agency action or an "order issued by the Secretary of 

Transportation" under 49 U.S.C. § 46110. 

We sent a letter to each of the cosigners of the September 16, 20 16 letter. 

Should you have any question or seek additional information, please do not hesitate to 

contact either me, or Elizabeth Newman, Senior Attorney, Airports Branch, Office of the 

Chief Counsel. 

"'' c<fu y~ 

c~JI!Go= ;I Chief~~sel 

6