# Roswell International Air Center

November 12, 2015

Demesia Padilla, Cabinet Secretary I Jerry Smith Circle Roswell, NM 88203 575-347-5703 fax 575-347-2595



## New Mexico Taxation & 

## Revenue Department P.O. Box 630 Santa Fe, NM 87504-0630

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

Dear Secretary Padilla:

I am the Director of the Roswell International 

## Air Center in Roswell, New Mexico, which operates the Municipal Airport. I am writing to alert you to federal compliance restrictions on the use of State and local tax revenues derived from the sale ofaviation 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 Roswell International Air Center is bound by multiple federal policies, procedures, and legal requirements, including federal assurances made by the City of Roswell 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 airportrelated purposes.

These airport revenue use requirements apply to proceeds from cettain State and local government 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 City of Roswell inform you of its provision s, and take reasonable actions within the power of the City to influence the State to conform to those requirements. I have included a copy ofthe Policy Amendment with this letter for your review.

The Policy Amendment confirms that State and local taxes on aviation fuel , whether part of a genera! 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 trar1sportation. 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 "grandfathered" 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 on aviation fuel, determine whether grandfathering exists, and ifnot, whether use of the tax revenue complies with the Policy Amendment.

We have been advised that the sale ofaviation gasoline, aviation jet fuel and other aviation fuel in the State of New Mexico is subject to taxation under New Mexico iaw, which includes the following


### • 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 of 

## 5.1 25% is assessed on the sale ofjet fuel, pursua'lt 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 or any other applicable taxes were in effect on December 30, 1987, and have not changed in character or use in any substantial way since that date. However, ifthe above or any other applicable aviation fuel taxes 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

revenues derived from the applicable taxes are set aside properly for local airport purposes and State aviation programs in compliance with the Policy Amendment. Please note that the FAA recently clarified that the tax revenue use requirements are met when the state appropriates money for local airport purposes or State aviation programs from its general fund in an a.11ount equal to or exceeding the local and State aviation fuel tax proceeds collected. 

## See, "Questions for the FAA from NASAO Members February 

### 25, 2015 and July 

### 15, 2015", attached.

Deadline to Submit Action Plan

We urge the State to take whatever action is necessary to address these compliance issues, ensure compliance with federal requirements, and appropriately 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 2014. The FAA

### further understands that changes to bring State and loca l taxes into complia:1ce may require State legislation. In this regard, the FAA requires that State officials submit by December 8, 2015, an action plan to initiate the process to amend any non-com pliant State laws on use ofaviation 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 penalty, 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.

lf you have questions or require further information, please contact Mr. Randall S

. Fiertz, Director, Office of Airport Compliance and Management Analysis, Federal Aviation Administration, 800 Independence Avenue, SW, Washington, DC 20591. You also may contact me, and 

### I will help put you in touch with 

## Mr

. Fiertz and others within the FAA who can guide the State in the necessary compliance. Respectfully,



# ~,~
encl: 

### Policy Amendment Questions for the FAA from NASAO Members



### copy w/encl:

C : Dan Moran, Grants Administrator, Aviation Division 

### Randy Fiertz, FAA

### 66282 Federal Register 

### I Vol. 79, 

### No. 216 

### I Friday, Novem ber 7, 2014/ Rules and Regula tions

dated April17, 2012. except airplanes on which m odification sta tus "32-64" is mar ked on the identification plate: Within 20,000 flight h ours or 10 years after September 24, 20 13 (the effective date ofAD 201 3-16-{)8). whichever occurs first, install a new jam nut having part number 49606-5, in accordance with Part B ofthe Accompli shment lnstructions of Bombardier Service Bulletin 670BA

- 32-Q3 1, Revision C, dated April17, 2012; and Goodrich Service Bulletin 4960Q32-04 R3. dated December 15, 2011. (j) Retained Credit for Previous Actions With Change to Paragraph (j)(l)(iii) ofThis AD

(1) This paragraph restates the credit provided by paragraph (j)(l) ofAD 2013-16- 08, Amendment 39-17546 (78 FR 51055, August20, 2013), with a change to tl1e service information citat ion in paragraph (j)(1J(Iii) oftl1is AD

. This paragraph provides credit for the actions required by paragraphs (g) and (i) ofthis AD. ifthose actions were performed before September 24, 2013 (the P.ffective date ofAD 2013-16-{)8), using the service information specified inparagraph (j)(t)(i). {j)(l)(ii). or (j)(l)(iii) ofthis AD, which is not incorporated by reference in this AD.

(i) Bombardier ServiceBulletin 670BA-32- 031, dated March 14, 2011.

(ii) Bombar dier Service Bulletin 670BA

32-Q31, Revision A, dated J une 9, 2011. (iii) Bombardier Service Bulletin 670BA32-Q31. Revision B, dated July 29, 2011.

(2) This paragraph restates the credit provided by p aragraph (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 required by paragraph (h) ofthis AD, ifthose actions were performedbefore September 24, 2013 ( ilie effective date ofAD 2013-16-{)8), u sing the service information specified in paragrap h (j)(2)(i) or (j)(2)(ii) ofthis AD. which Is not incorporated by reference in this AD.

(i) Bombardier Service Bulletin 6708.'\

- 32- 033, dated March 14, 20'11

.

(ii) Bombardier Service Bulletin 670BA

32-033, Revision A, dated July 29. 2011. (k) Retained Parts Installation Limitations With Change to Paragraph (k)(2) ofThis AD

(1) This paragraph restates the parts installationlimita tion specified in paragraph (k)(1) o f AD 2013

- 16-08. Amendment 39- 17546 (78 FR 51055. August 20, 2013), with no changes

. As of September 24, 2013 (the effective date ofAD 2013-16

- 08), no person may install on any airplane an MLG retract i on actuator assembly having any part number and serial number identified in paragraph l.A., Effectivity, ofBombardier ServiceBulletin 670BA-32-{)31, Revision C, dated April17

. 2012 , unless that retraction actuator assembly bas been inspcr.ted as specified in paragraph (g) ofthis AD, and all applicable corrective actions (i.e., replacement ofilie retract actuator) specified in paragraph (g) ofthis AD have been done. Repea t the inspection specified in parag raph (g) ofthis AD thereafter at ilie intervals specified in paragraph (g) ofthis AD.

(2) This paragraph restates the parts installation limitation specified in paragraph (k)(2) ofAD 2013-16-{)8
, Amendment 39- 17546 (78 FR 51055, August 20, 2013), with
a revised part name. As ofilie effective date ofLIUs AD, no person may install on any airplane an MLG dressed shock strut having any part number and serial number identified in paragraph l.A

.. Effectivity. ofBombardier Service Bulletin 670BA-32-033, Revision B, dated June 26, 2012, unless that retraction ac:;t

uator assembly has been inspected and all applicab le corrective act ions have been done, in accordance ·.vitb the Accomplishment I nstructions ofBom bardier Service Bulletin 570BA-32-{)33, Revision B, dated June 26, 2012. (I) Other F AA AD Provisions The following provisions alRo apply to this AD:

( 1 ) Alt ernative Methods of Com pliance {AMOCs): The ManagAr, New York Aircraft Certification Office (AGO), ANE-170, FAA, has the authority to approve Alv10Cs for this AD. ifreque&tcd using the procedures found in 14 CFR 39. 19. ln accordance with 14 CFR 39.19, send your request lo your principal inspector or local Flig ht Standards District Office, as appropriate. Ifsend ing information directly to the ACO, send it to ATTN: Program Manager, Continuing Operational Safety, FAA, New York AGO, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone 516-228-7300; fax 516-794-5531. Before nsing any approved 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 ref erence this AD.

(2) Contacting the Manu facturer: For any requ.iremant in this AD to obtain corrective actions from a manufactur er,

**ili~** action must be accomplished using a method approved by the Manager. New York AGO, ANE-170, Engine and Propeller Directorate, FAA; or Transport Canada Civil Aviation (TCCA); or Bombardier's TCCA Design Approval Organization (DAO). Ifapproved by futl Dl\0, the approval m11st include the DAD

authorized signature. (m) Related Informa tion (1) Refer to Mandatory Continuing Airworthiness Information (MCAI) Canadian Airworthiness Directive CF-2011

- 36R1. dated October 3, 2012, for related information

. You may examine the MCAJ in the A D docket on the lnternet at http:// www.regulations.gov/ #!documentDetail;D=F AA

- 2014·0483

-0002. (2) S11rvice informa tio

n identified in this AU that is not inco rporated by reference is avail able at the addresses specified in paragra phs (n)(4), (n)(5), and (n)(6] ofthis AD. ( n ) MaterialIncorporated b y Reference

( 1) The Director ofthe Federal Register appruved the Incorporation by reference (IBR) ofthe 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 applicable to do the actions required by this AD, unless this AD specifies otherwise. (3) The f ollowing service information was approved for IBR on September 24, 2013 (78 FR 51055, August 20. 2013 )

.

(i) Bombardier Service Bulletin 670BA-32- 031, Revision C. dated Aprii 17 , 2012.

(ii) Bombardier Service Bulletin 670BA32-{)33, Revision B. dated June 26, 2012.

( iii) Goodrich Service Bulletin 49000-32

- 46 R2, dated November 11. 2011.

(iv) Goodr ich Service Bulletin 49600-32- 63 Rl, dated May 17, 2011.

(v) Goodrich Service Bulletin

**4960Q-32~4** R3, dated December 15, 2011.

(4) For Bom bardier 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 informa tion 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@goodrich.com; Internet http://www.goodrich.com/ TP.chPubs. (6) You may view this service information at the FAA, Transport Airplane Directorate, 1601 Lind Avenue SW., Renton, WA. For information on the availability ofthis 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 Records Administration (NARA). For information on the availability ofthis material at NARA. call 202

- 741-6030, or go to: http: //

**www.archives.gov/federol regi.~terlcfrlibr·**  locations.html.

Issued in Renton, Washington, on October 28, 2014

. Jeffrey E. Duven, Manager, TtansportAirplaneDirect orate, Aircraft Certification Servict!. [F'R Doc. 201 4-26437 Filed 11-6-14; 8:45 ami BILLIIlG CODE 491Q-13-P

DEPARTMENT OF TRANSPORTATION Federal Aviation Administration
14 CFR Chapter I [Docket No

. FAA

- 2013-0988] Policy and Procedures Concerning the Use of Airport Revenue; Proceeds From Taxes on Aviation Fuel
AGENCY : Federal Aviation Administration (FAA), DOT. ACTION : Final Policy Amendment.
SUMMARY: This action adopts an amendment to the FAA 

### Poli-;y and Procedures Concerning the Use of Airport 

### Revenue published in the Federal Register at 

### 64 FR 7 696 on February 16 , 1999 ("Revenue Use Policy"). This action confirms FAA's long-standing policy on Feder al requirements for the use ofproceeds

### Federal Register/Vol. 79, No. 216 /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 f or airport-related purposes. Local taxes un 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 State aviation program or for airport-related purposes. The sta tutory 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 fonnally adopts, through an amendment to the Revenue Use Policy, FAA's interpretation of the Federal requirements for use ofrevenue derived from taxes on aviation fuel. DATES: This document is effective December 8, 2014. FOR FURT HER INF ORMA TION CONTACT: Randall S. Fiertz, Director, Office of Airport Compliance and Management Analysis, Federal Aviation Administration, 800 Independence Avenue SW., Washington, DC 20591, telephone (202) 267

- 3085 ; facsimile (202) 267-5257. SUP PLEME N TA RY IN F ORMAT ION: Availability ofDocuments

You can get an electronic copy o f this Policy and all other document s in docket FAA 2013-Q988 using the Internet by: (1) Searching the Federal eRulemaking portal at http:// wwr.v.regulations.gov/search; (2) Visiting FAA's Regulations and Policies Web page at http://www

. faa.gov/regulations_ polic:ies/policy _guidance/; or (3 ) Accessing the Government Printing Office's Web page at http:// Wl¥W.gpoaccess.govlindex.html.

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

- 3085. Please make sure to identify the docket number, notice number, or amendment number ofthis proceeriing.

Authority for the PolicyAmendment. This Policy Amendment is published under the authority described in Subtitle VII, part B, chapter 471, section 47122, and the Federal Aviation Administration Authorization Act of 1994, § l12 (a), Public Law 103-3 05, 49 U.S.C. 47107(lj(1) (Aug. 23, 1994). Background

On November 21, 2013, FAA published a proposed amendment to its policy on Federal requirements for the
use ofproceeds from taxes on aviation fuel. (78 FR 69789, November 21, 2013). This action finalizes the amendment of FAA's Revenue Use Policy. Uuder Federal law, airport operators that have accepted Federal assistance generally may use airport revenues only for airport-related purposes. The revenue use requirements apply to the proceeds from certain State and local gov&rnment taxes on aviation fuel, as well as to revenues received directly by an airport operator

. This document formally adopts FAA's interpretation ofthe 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 must 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 ope r ating costs, and State aviation programs. The policy amendment applies prospectively to use ofproceeds 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 grandfathcring (which are State or local taxes on aviation fuel in effect on December 30, 1987), the FAA will ailow for an up to three-year transition period from the effective date ofthis do cument. The FAA invited public comment on the policy interpretation question, in part due to the interests of sellers and consumers ofaviation fuel, and of State and local government taxing authorities
on limits on the use of proceeds from taxes touching aviation fuel. The notice also solicited comments about whether there are other reasonable interpretations ofthe statute as it relates to local taxes that were not enumerated in the published notice of proposed clarification that should have been
considered by the FAA.

The comment period for the notice of proposed clarification closed on January 21, 2014. The FAA extended the comment period for thirty days until March 3. 20 14 (79 FR 5318, January 31, 2014) in order to provide the public additional time to submit comments on the proposed Policy amendment. Executive Order 13132 (Federalism)

Executive Order 1 3132 establishes certain principles and criteria that apply to regulations , legislative comrueni:s, and other policy statements that have a substantial direct effect on States, or on the relationship between the national government and the States or on the responsibilities among the various levels ofgovernment. Because States have flexibility in designing general sales taxes subject to the limited restriction on the use ofaviation fuel tax proceeds, State decisions will ultimately influence, regulate, and control implementation oftaxes, including those touching aviation fuel.

While this final policy amendment does not impose substanHal direct requirement costs on State and local governments, this amendment may have Federalism implications due to effects on the use of the proceeds for taxes assessed on aviation fuel. FAA believes that the Federalism implications (if any)
are substantially mitigated because the plain language ofthe statute at issue, 49 U.S.C. 47133 , and the detailed legislative history, reflect strong Congressional intent that aviation fuel taxes be used for airport purposes and State aviation programs.

In compliance with the requirement ofExecutive Order 13132 that agencies examine closely any policies that may have Federalism implications or limit the policy making discretion ofthe 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 ofMayors, National Conference ofState Legislatures, National League ofCities, and National Association ofState Aviation Officials. In addition, FAA reached out to certain states on an individual basis and interested trade groups including Airlines for America; American Association ofAirport Executives; and Airports Council International-North America. Furthermor e, we published the proposed amendment for notice and comment, and r eceived comments from Kentucky, Iowa, and Georgia. This notice responds to these comments.

Through consultation, meetings and teleconferences as part ofa 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 ofExecutive Order 1 3 132

. Comme nts Received on t he Proposed Policy Amendment

The FAA received 25 substantive comments on the proposals, from airport operators; industry and nonprofit associations representing airports, air carr iers. business aviation

### 66284 

### Federal Register/Vel. 79, No. 216/F riday, November 7, 

### 2014 /Rules and Regulations

and airport service businesses; an air carrier; St ale government agencies; and private citizens. This summary of comments reflects the major issues raised and does not restate each comment received

. The FAA considered ali comments received even ifnot specifically i dentified and responded to in this notice.

A majority ofcommenters supported the general purpose ofthe policy (and the underlying statutes): using airport revenue for airport purposes and using State and local aviation fuel tax revenue for airport purposes or State aviation programs. Commenters representing airlines and airport users all supported the FAA's proposed amendment ofthe Revenue Use Policy regarding 49 U.S.C. § 47107 (b) and § 47133. An air carrier expressed the position that there is no ambiguity in the 1987 amendment to section 47107, and maintained that there are no other possible correct interpr etations ofthese statutes. The comments requesting a change in the proposed policy tended to focus on several issues:

1. The unfairness ofholding airport operators responsible for the actions of State and local government laxing authorities, pRrticularly non-sponsor governments.

2. The intent of§ 47133 to require compliance by non-sponsor Sta te and local governments.

3

. Defining the portion ofgeneral sales taxes (;Oilected 011 aviation fuel as an 'aviation fuel tax,' and the administrative burden of identifying the aviation fuel component ofgeneral taxes.

4

. Time allowed before full compliance with §47133 is

**r~uired.**

5. Clarifying that " noise mihgation" refers only to mitigation ofaircraft noise.

6. How FAA will enforce §47133 with respect to jurisdictions that are not parties to an AlP grant ag reement. 7. The proposal requires a federalism analysis under Executive Order 13132.

8. Suggestions for editorial changes to the proposed policy language.

1. Comment: Airport operators should not beheld responsiblejor State and local taxes outside of the airport operator's control.

The majority ofcommenters , including all ofthe airport and government commenters, argued that proposed new paragraph IV.D

.2 would unfairly hold airport operators responsible f or the imposition oftaxes over which th ey had no control. Airport operators are typically local governments, either cities or counties,
or public airport authorities. These local entities contend that they have no control over State and local taxes, and therefore have no abilitv to eliminate a State or local tax that is· not in compliance with Federal requirements for use ofairport revenue. These corrunenters state that in many cases, an airport operator does not have control over local taxes, ifthe airport is located in a different jurisdiction than the operating government entity. They note that port authorities and airport authorities may not have any taxing power, and therefore have no ability to control even local taxes on the airpor t. Be yond 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 use requirements. However, no local airport sponsor could actually provide that assurance because the airport sponsor has no ability to prevent a noncomplying StatP. tax. Airport sponso rs would find it impossible t o provide assurance that other government agencies would comply with the revenue use statutes for the life ofan AlP grant. Further, sponsors should notbe required to agree to a condition that would subject the airport to sanctions with no ability to correct the noncomplying condition. Second, ACI-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 Ordar 13132 on federalism, because the agency did not conduct a federalism analysis on t.'le impacts on State tii.Xing 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 ofthe reservat ion 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 AlP grant agreement, an airport sponsor does in fact provide assurances that local taxes on aviation fuel will be in compliaPce with §§47107(b) and 47133, as required by Congress

. The grant assurances provided by airport sponsors include Grant Assurance 25 , which provides, in relevant part: "All revenues generated by the airport and any local taxes on aviation fuel established after December 30, 1987, will be expended by it for the capital or operating costs of the airport; the local airport system: or other facilities which are owned and ope rated by the o'Wller or operator ofthe airport and which are directly and substantially related to the actual air transportation of passengers or property

.. . ."Moreover
, airport sponsors often can have influence on the taxation ofaviation 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 ofgrant compliance. For taxes within the airport sponsor's direct control. the airport sponsor must comply with the revenue use requirements of§§471 07[b) and 47133. Further, in instances of unlawful revenue diversion where the sponsor is in control ofthe 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 otherwisebe made available to a State, municipality, or polit ical subdivision thereof (including any multimodal transportation agency or transit authority of which the sponsor is a member entity) as part ofan 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 airport sponsor will be expected to advise those entities ofFederal requirements for use ofaviation fuel tax revenues, and to take action reasonably within the sponsor's power to tailor State and loca l taxation to conform to the requirements of §§47107(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 would 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 action 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

**assuranct~** No. 21 to

### Federal Register /Val. 79, Nc. 216/Friday, November 7, 2014/Rules and Regulations 

### 66285

maintain compatible land use around the airport.

Accordingly, as revised, paragraph IV.D.2 will state that assurance 25 will be considered an enforceable commitment with respect to taxes on aviation

**fUf~l** imposed by the airport operator or owner itself; for taxes imposed by non-sponsor State and local jurisdic tions, an airport sponsor will 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 regarding the lOth Amendment of the U.S. Constitution, the FAA appropriately presumes the constitutionality ofthe statutes implemented by

**thi~** policy.

2. Comment: FAA should not enforce compliance by State and local governments that are not airport sponsors.

The Georgia Department ofLaw, on behalfofthe Georgia Depllrtment of Transportation and the Georgia Department ofRevenue (GOOT/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 airport sponsors is "unprecedented and illogical." (The FAA notes that sanctions would apply to non-sponsors under§ 47133 and §47111(0, whereas § 47107 is binding only on parties that have signed 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 nonsponsor 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 certain nonsponsors. Also, contrary to GDOT/ GDOR's comments , the FAA has not been silent on this issue. In the few circumstances involving the issue ofa non

-sponsor imposing a tax on aviation fuel, the FAA has communicated a consistent message that compliance with §47133 is required. The FAA letters to non-sponsors describing this obligation are cited in the notice of proposed policy at 78 FR 6979o-69691

. Copies ofF AA's letters are posted in Docket No. FAA -2013-Q988. The Federal Register 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

.

GDOT/GDOR argue that imposing sanctions (and therefore compliance) on non

-sponsor governments is both unfair and contrary to the logical enforcement ofthe former Airport and Airway Improvement Act of 1982 (AAIA), as amended and recodified, 49 U.S.C. 47101, et se. Howl:!ver, as noted, § 47133 imposes an obligation on entities that are not airport sponsors. First, the language

**of§4713~** (a) imposes a limitation on the use oflocal taxes on aviation fuel, regardless ofwhether the tax is imposed by a sponsor or nonsponsor. Second, § 47133 (c) limits the use ofState-imposed taxes on aviation fuel to State aviation programs. Uses of tax revenues beyond these permissible uses are a violation of Section 47133. Therefore, the obligation to enforce complia nce with the statute, using available sanctions for noncompliance, is not only logical but is required as part ofthe FAA's statutory responsibility for implementation 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 ofthe limitation on the use ofaviation 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§ 47133 and does not exclude non-sponsors from its coverage. GDOT/GDOR's interpretation would effectively mean that non

-sponsor governments are allowed to disregard the requirements of §47133 and render the statutory I'P.quirement 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 "anv violation" ofchapter 471-that includes the requirements of§ 47133-by anyperson for a violation. "Any violation" encompasses violations by non-sponsors as well as airport sponsors

. This expansive authority is based on the plain language ofsection. 47111(£), and supported by a review of thP. legislative history and prior versions of the law under consideration. These prior vsrsions limited enf orcement to the airport sponsor. See 140 Cong. Rec. $7139-02, 1994 WL 27189 (noting that under the bill, "such court shall have jurisdiction to enforce obedience thereto by a writ ofinjunction or other process, mandatory or otherwise. restraining such airport sponsor from further violation of such section or assurance and requiring their obedience thereto.") However, Congress ultimately expanded this authority by explicitly stating in section 47111(f) that "such court shall have jurisdiction to enfor ce obedience thereto by a writ of injunction or other process. mandatory or otherwise, restraining anyperson from further violation." (emphasis added)

Given that the FAA interprets section 47111 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 providP.d for such sanctions by including§47133 in the statutOf'J 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 governments may be enforced by application to the U.S. district court for judicial enforcement under 49 U.S.C. 47111(£).

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 ofAirport Executives (AAAE) commented that applying the revenue use req uirements to generally applicable taxes, such as sales taxes and taxes on all fuel products, is not supported by the l egislative history and incorrectly

**interprets§~** 47107(b) and 47133. Both AAAE and GDOT/GDOR commented that it would be difficult and costly for State and local governments and taxpayers to segregate revenues collected on aviation fuel from the rest ofa general tax collection. The FranklinHart Airport Authority, Georgia, expressed concern that redirecting some local taxes on aviation fuel to the airport could lead those jurisdictions to reduce other, non-tax support for the airport. The comment suggested that for that reason the proposed policy could be a hardship for the airport, but did not assert that the proposed amendment
was incorrect. One individual commented that nn airport receives the same general benefit as other taxpayers, and that general taxes on aviation fuel sales should be retained by State and l ocal governments to pay for these general community services.

Response: AAAE and one individual
were the only commenters that

### 66286 Federal Register 

### I Vol. 79, 

### No. 216/ 

### Friday, November 7, 2014/

### Rules and Regulations
specifically objected to the proposed amendment that general taxes collected
on aviation fuel sales are "taxes on aviation fuel." The FAA's rationale for clarifying that general sales taxes also collected on aviation fuels constitute "taxes on aviation fuel" is based on the plain reading ofthe statute. The Airport and Airway Safety and Capacity Expansion Act of 1987, Pub. Law No. 10Q-223, amended the airport grant revenue assurance provision to include, within the scope ofrevenue retention, "any" taxes on aviation fuel. 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 ofthe United States, related to transportation, are revised. codified, and enacted by subsections (cHe l ofthis section without substantive change as subtitles 

## n. m. and V-X oftitle 49, United States Code, "Transportation". Those laws may be cited as "49 U.S.C.

_ _ ... Section l.(a)

Additionally, 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 the purposes of the revenue use sta tutes. The FAA continues to believe that applymg the requirements of §§47107(b) and 47133 to the portion of general taxes collected on aviat ion fuel sales, in addition to aviation-specific fuel taxes, is the most reasonable interpretation ofthose statutes, and most consistent with the congressional intent ofthe legislation on use of aviation fuel tax revenues. 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 separate from other items taxed under the same ordinance.

As explained more fully below, the FAA would permit a State a reasonable amount oftime to bring itself into compliance through an "action plan, ·· which takes account of the Stat e's legislative schedule, ifnecessary

. And while we appreciate that there could be some additional work required to track the amount of "general" tax revenue attributable to aviation fuel, the FAA is charged with implementing §47133, which does not carve out an exception for revenue generated through a general tax. We believe that the FAA's acceptance that a State will require time to bring itself into ccmplian<.;e will afford the State sufficient time to develop a mechanism fer administering taxes in accordance with this policy.

With respect to the comment that aviation fuel tax revenues should support general government services, the FAA notes, first, that general sales taxes ofall other products and services at 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 charge for those services and be reimbursed from airport funds.

4. 

### Comment: The FA.A should clarify the time 

### line allowed for jurisdictions imposing taxes that affect aviationfuel to come into compliance with the policy.

GDOT/GDOR requested a more definitive time for Georgia slate agencies and locai jurisdictions to comply with the announced policy, and specificaliy requested that the FAA provide at least 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 polir;y. 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 ifjurisdictions 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 noncomplying tax laws to be brought into compliance 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 followed pre"iously by affected State and local government non-sponsors-despite the existence of DOT 

### IF

AA's legal opinions on this subjecL The amendment we adopt today is a final decision and amends FAA's Policy and Procedure Concerning the Use ofAirport Revenue as set forth below. The amendment binds the FAA and the Secretary ofTransportation, as well as airport sponsors and non-airport sponsors (including a State, a political subdivision ofa State, and a political authority of at least 2 States) covered by this Policy.

Therefore, after considering on this matter, the comments we have received and the potential difficulties with
requiring immediat e compliance, FAA has concluded that there is a need for all affected entities to have sufficient time to come into compliance with the final policy announced today. GDOT/ GDOR itselfrequested additional timA to come into compliance with the policy. While comments were limited tc agencies of the State ofGeorgia and a few localjurisdictions in Georgia, the FAA understands that other States may have laws that require, or at least allow, proceeds ofgeneral taxes on aviation fuel to be used for purposes other than airports or State aviation programs.

The FAA further understands that changes to bring State and local taxes into compliance mayrequire State legislation. The Georgia legislature meets each year from January through March. Accordingly, in Georgia, the State and local taxes at issue could not practically be amended until early 2015. A legislative season from January to March or April is common to many other States as well. On this basis, 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 ofaviation fuel tax revenues. The action plan should detail the process necessary to develop reporting requirements and tracking systems for discrete information on aviation fuel tax revenues. The plan may include a reasonable transition period, not t o exceed three years, during which the FAA would agree, in 

### an exercise ofits prosecutorial discretion, not to enforce the revenue use requireme:1t against a non-sponsor State or local government. State and local governments should submit an action plan to the FAA within a year of the effective date ofthis notice.

Initiation ofan action plan would provide State and local governments sufficient t ime to plan for restructuring ofgeneral revenues to adapt to the dedication of aviation fuel tax revenue to airports and State aviation programs

**wit.~in** a reasonable transition period, not to exceed three years from the effective date ofthis notice. Demonstration ofan action plan detailing (1) a commitment to undertake the legislative process; and (2) the timeframe for action within the three year period, will demonstrate voluntary compliance with federul obligations.

5. 

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

### Federal Register I 

### Vol. 79, No. 216 I 

### Friday, November 7, 20 14 I 

### Rules and Regulations 

### 66287
Response.: The definition of "noise mitigation" was not the subject ofthe proposed amendment. While the phrase "noise mitigation" in Section 47133 commonly refers to aircraft noise, we decline here t o reach whether the statute precludes consideration of other
sources of noise for mitigation purposes. In addition, we note that the statute provides for use of airport revenues on and off airport for noise mitigat ion purposes.

6. Comment: FAA should clarify how it will require non-airport sponsors to comply with thepolicy.

Tlie Iowa Public Airports Association requested clarification on how parties that have not entered into a grant agreement with the FAA would be required to comply with the federal requirements for use ofaviation fuel tax revenues.

Response: The preamble ofthe notice ofproposed policy noted that there are two means ofenforcing compliance with §47133 by non-sponsor State and local governments: civil penalties, under 49 U.S.C. 46301(a), and application to the U.S

. district court for judicial enforcement under 49 U.S.C. 47111 (£). While not an issue 

### in Iowa, States that have entered into block grant agreements with thl:l FAA under 49 U

.S.C

. 47128 could also be subject to action for breach ofthat agreement. The FAA a grees that the agency's enforcement process should be described in the policy statement itself. Accordingly, new language has been added to Section IX.E., Sa nctionsfor Noncompliance, for this purpose.

7. Comment: The proposalaffects 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 federalism analysis on the impacts on State taxing authority and the relationship between State and local governments and airport sponsors

.

Response: First, to the extent the comment referred to paragraph IV.D.2 of the proposed policy, holding airport sponsors responsible for taxation beyond their control, that issue is resolved by the changes to paragraph IV.D.2 in the final policy.

Second, the FAA does not agree that the proposed policy is not required by statute. In the notice ofproposed policy, the FAA analyzed each of the key terms ofthe statute with reference to the legislative intent ofthe revenue use legislation, to the meaning ofthe 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 ofthe statute was reasonably possible. Even if
an alternative interpretation ofcertain terms were theoretically permissible, a policy interpreting the statute in 

### a manner that substantially undermined the legislative purpose ofthe statute is not 

### a viab le option for the agency. Accordingly, the FAA believes that the policy as adopted correctly implements the revenue use legislation adopted by Congress. The policy is, therefore, required by statute for purposes ofthe executive order. Because this policy simply implements the explicit mandat e set forth in section 47133, the requirements ofExecutive Order 13132
and DOT's Guidance on Federalism (July 21, 1988), are not triggered.

Thus, although a federalism analysis ofthis policy is not required by Executive Order 13132, the FAA did engage in efforts to consult**wiL~** and
wor k cooperativeiy 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' interests in meeting its taxing obligations, and Congress' intentto 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 published the policy amendment for notice and comment in the Federal Register, soliciting comment from State and local governments, as well as other interested parties. The only cost information submitted by any commenter was received from the Franklin-Hart Airport Authority, which expressed concern that redirecting some local taxes on aviation fuel to the airport could lead those jurisdictions to reduce other, nontax support for the airport. However, the anticipated cost would result not from the agency's policy itself, but from the expected actions oflocal governments in reducing voluntary support for the airport.

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

8

. Comment: Thefinal policyshould include certain grammatical and style changes. Response: Delta Airlines and Airlin

· es For America recommended certain edits for grammar and clarity:

Paragraph II.B

.2 : Clarify the pr.rase "on or offthe airport."

Paragraph IV.D.l: Clarify that only State aviation fuei taxes may be used for State aviation programs.

Paragraph IV.D.4.b: Clarify that §§47 107(b) and 47133 apply to taxes on the use ofaviation fuel.

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 reasons set out above, the FJI..A amends the Policy and Procedure Concerning the Use ofAirport 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**(exc~pt** taxes in effect on December 30, 1987) are considered subject to the
revenue-use requirements in 49 U.S.C

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

2

. In Section IV, Statutory Requirements for the Use ofAirport Revenue, renumber paragraphs D and E
as paragraphs E and F. and add a new paragraph 

### 0 to read as follows:

D

. Use ofProceeds from Taxes on .Avia lion Fuel. 1. Federal law limits use ofthe proceeds from a State or local government tax on aviation fuel to the purposes permitted in those sections, as described in IV.A. ofthis 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 also be used for a State aviation program.

2. Airport sponsors that are subject to an AlP grant agreement have agreed, as a condition ofreceiving a grant, that the proceeds from 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 imposed by the airport operator. For taxes on aviation fuel imposed by nonsponsor State government and other local jurisdictions, airport sponsors are

### 66288 Federal Register/Vol. 79, No. 216/Friday, November 7, 2014/Rules and Regulation8
expected to inform taxing authorities of Federal requirements for use ofaviation fuel tax revenues and to take reasonable
action within their power to influence State and local tax laws to conform to those requirements.

3. The Federal limits on use of aviation fuel tax proceeds apply at an airport that is the subject ofFederal
as sistance ( as defined in Section II.b.2 of this Policy), whether or not the airport is currently subject to the terms ofan AIP grant agreement, and regardless of the State or local jurisdiction imposing the tax.

4. The limits on use ofaviation fuel tax revenues established by section 47107(b) and section 471 33 :

a. 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;

b. Apply to any tax on aviation fuel, whether the tax is imposed only on aviation fuel or is imposed on other products as well as aviation fuel. However. the limits on use ofrevenues apply only to the amounts oftax collected specifically for the sale, use. purchase or storage ofaviation fuel. and not to the amounts collected 

### 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 offuel at the airport are collected; and

d. apply to 

### a new assessment or imposition of a tax on aviation fuel,
even if the tax could have been imposed earlier under a statute enacted before December 30, 1987.

3. rn S ection IX, Monitoring and Compliance, add a new paragraph h. to E. 1 to read as follows:

h. For a non-sponsor State or local government that fails to comply with requirements for use of proceeds from a tax on aviation 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 order. In addition, for a State government that participates in the State Block Grant Program under 49 U.S.C. 47128, the FAA may have additional sanctions for violation of the State's commitments in its application for participat ion in the program. Issued in Washington, DC, on November 3 , 2014. Randall S. Fiertz, Director, Office of Airport Compliance and ManagementAnalysis. [FR Doc. 2014--26408 Filed 11-6

- 14; 8 :45am]
BILLI NG CODE 4910-13-P DEPARTMENT OF COMMERCE
Bureau of Industry and Security

15 CFR Part 744**[Doc~etNo.14 1029906-4906-01]**  RIN 0694-AG31
Venezuela: Implementation of Certain Military End Uses and End Users License Requirements Under the Export Administration Regulations

AGENCY : Bureau ofJndustry and Security, Commerce

. ACTION: Final rule.

SUMMARY: In response to the Venezuelan military's violent repression ofthe Venezuelan people, the Bureau of Industry and Secur ity (BIS) amends the Export Administration Regulations (EAR) in this final rule to impose license requirements on the export, reexport, or transfer (in-country) of certain items to or within Venezuela when intended for a military end use or end user. This change complements an existing U.S. arms embargo against Venezuela for its failure to cooperate in
areas ofcounterterrorism

. DATES: Effective date: This rule is effective November 7, 20 14 FOR FURTHER INFORMATION CONTACT: Foreign Policy Division, Office of Non proliferation and Treaty Compliance, Btueau ofIndustry 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 reptession included direct violence against protesters, detentions ofprotesters and political leaders, and acts of intimidation, resulting in
numerous deaths and injuries

. On July 30, 2014, the Department of State imposed visa restrictions against Venezuelan government officials, including members of the Venezuelan military, who participated or were complicit in human rights violations and undermined democratic processes.

The actions and policies ofthe Venezuelan military undermine democratic processes and institutions and thereby constitute an unusual and extraordinary threat to the national security 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 requirements on Venezuela. Militarv End Use and End User Restrictions

It is generally the policy ofthe 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 security and foreign policy of the United States and its allies. In furtherance of this policy, the Bureau of Industry and Security (BIS) established
a license requirement for certain items intended for "military end uses" in a final rule published June 19, 2007 (72 FR 33646). Specifically, that final rule established a control. based on knowledge ofa "military end use," on exports and reexports ofcertain 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 exported, reexported or transferred (in country) to the People's Republic ofChina. Subsequently, BIS applied "military 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

. Goverrunent"s
response to L'le abuses by the Venezuelan military, in this rule, BIS amends§ 744

. 21 ofthe EAR to apply "military end use" and "military end user" license requirements to V

enezuela. Specifically, DIS amends § 744.21 by adding "or V enezuela" after "Russia," wherever that name appears, including in the heading ofthe**s~:ction.** Items subject to these license requirements are those listed in Supplement N o. 2 to Part 744

. This final rule also adds a paragraph (h) to address the effects ofthese new license requirements on transactions under t;Ontract prior to the effect ive date ofthis rule. Saving Clause

Shipments ofitems removed from eligibility for export or reexport under a license exception or without a license (i.e., under the designator " NLR") as a result ofthis regulatory action that were on dock for loading, on lighter, laden aboard an expor ting car rier, or en rout e aboard Cl carrier to a port ofexport, 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 without

### 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 additional response to questions from Michigan and Georgia

. We've added those responses below to the earlier responses received 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 equal to" the tax collected on aviation fuel is acceptable for the purpose of compliance with the Revenue Use Pol i cy. As the portion of our sales tax a n question is constitutionally dedicated to other purposes (education), 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, wehave concluded that offsets arepermitted. Aviationfuel tax statutory requirements are met bya State appropriating money for airportpurposes from its general fund in an amount equal to or exceeding the aviationfuel taxproceeds collected, and remitting suchfunds into the State aviation programfund, or to the applicable airport revenue account.

We want topoint outyour question raises another issue since you reference that aportion of the aviationfuel sales tax being constitutionally dedicated to otherpurposes. The FAA's Policy and Procedures Concerning the Use of AirportRevenues {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 dedicatedportion of the taxes and cannot comment further on the grandjathering of the aviation fuel taxes. Guidance regarding theprocess to determine whethera ta.IC is eligiblefor grandfathered status is posted at regulations.gov, Docket FAA-2013-0988

.
In proceeding with apermitted offset, the State and local governments interested in making an offset need to confirm thatsuch 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 bystate or local agencies; the State will also need to account for and remit to the State aviationfund or to a local airport entity the dollar amount of the revenues generated from the state or local aviationfuei tax, as applicable

. The State musthave appropriate controls in place to ensure tax revenues are promptly remitted to the appropriate airport revenue accounts and State aviation program accounts.

Aviation Fuel Tax Grandfathering Action Plans

The FAA Policy and Procedures Concerning the Use of AirportRevenue; Proceeds From Taxes on Aviation Fuel
, {79 Fed

. Reg. 66282, November 7, 

## 2014) (Amendment)provides thatproceedsfrom

1

### taxes on the sales of aviationfuel (imposed by either an airport sponsor or a non-sponsor) are required to be used for airport-relatedpurposes except for taxes that qualify for grandfathering from

revenue use requirements

. State taxes on aviationfuel mayalso be used for a state aviation program.

Taxes on aviationfuel thatqualify for grandfathering are state or local taxes on aviationfuel in effect

on December 30, 

### 1987. Anyamendments of the grandfathered tax statutes that make substantive changes afterDecember30, 

### 1987, do not qualify for continued grandfathered status. FAA will need to receive justificationfrom state and local taxing authorities to make a determination of the grandfathered status of existing state and local taxes in effect on December30, 

### 1987.

The guidance provided on the following scenarios should assist airport sponsors and nonI!Jsponsors to determine an appropriate course of action and/or development of an action planfor aviationfuel taxes that may or maynot qualify for grandfatheredstatus:
(1} State and/or local taxstatute in effect on December 30, 

### 1987, and has been amended forward requiring that funds be used for airport or state aviationpurposes
- no grandfathering issue; statement from entity confirming use of taxes in compliance with the law.
(2} State and/or local taxstatute in

. effect on December 30, 

### 1987, or thereafter, exempts aviation fuel
tax -no grandfathering issue; statement from entityconfirming the use of taxes in compliance with the law.
(3) State and/or local taxstatute in effect on December 30, 

### 1987, without any changes since enactment; proceeds used for other than airportpurposes; and no current grandfathering determination

- submit actionplan providing writtenjustification 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 law reflecting tax was in effect on December30, 

### 1987, and unchanged;

b

. Document identifying thepurpose and applicability of the tax, the use of proceeds, and any administrative costs charged for the collection andallocation of theproceeds of the aviation fuel tax;

c. Document must identify the tax rate orrates, credits, or exemptions; and

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

(4) State and/or local taxstatute in effect on December 30, 

### 1987, and amended in subsequent periods, proceeds used for other than airportpurposes, and no current grandfathering determination -submitaction plan providing writtenjustification why tax on aviationfuel qualifies for grandfathered status forportion of tax in effect on December30; 

### 1987, with the following:

a

. True and correct copies of original legislation and/or tax code ondsummary explanation of law reflecting tax was in effect on December30, 

### 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 eligible for 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 identify ing the effective date of the aviationfuel tax, thepurpose andapplicability of the tax, the use of theproceeds, and any administrative costs charged for the collection and allocation of theproceeds of the avi at

ion fuel 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 legislativeprocess, 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 necessaryprocesses 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. Ifthe AAIA [Airport and Airway Improvement Act of 1982 (49 U.S.C. 

### § 47101, et seq.)] requires that the proceeds from a particular tax on aviation 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 (he reinafter "airport purposes"), may that requirement be satisfied by the State's appropriation of monies for airport purposes from its general fund?



## Yes. The AAIA requires the proceeds from local avi ationfuel 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 andsubstantially related to the air transportation of passengers or property

. Additionally, i n accordance with 49 U

.S

. C. § 

## 47133, a State tax on aviat ionfuel 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 besatisfied by the State's appropriation of monies for airportpurposes 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 equt:l to or exceeding the aviation fuel taxproceeds 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 anddeposit an amount equal to orexceeding the

.State aviationfuel taxproceeds into the State aviation program fund.

State andlocal governments interested in making an offset would need to confirm that such actions are lawful and consistent with applicable State and loco/laws, 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 andState aviation program accounts receive on a continuing basis during each risco/year an amount equal to the full amounts collected for aviationfuel taxes.

2. Ifthe 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 airportpurposes 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 aviationfuel 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. Ifthe 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 fuel derived by all local ju risdictions in the State in Oider to comply with the AAIA's requirements? For example, if local sales taxes on aviation fuel state-wide total $100 million (none of which is used by the local taxing jurisdictions 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 andpayan amount equal to the aviationfuel taxproceeds levied and collected within a local jurisdiction when such proceeds are not used for airportpurposes. Yes, the amount of the State's annual appropriationfor airportpurposes must be at least equal to orexceed the total amount of aviation fuel taxes derived by all local jurisdictions in the State.

4

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

5. Ifthe 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 ju r isdiction's tax collections on aviation fuet 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 of the 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

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



## As noted above, the answers to Questions No. 1 and 3 are "yes."State appropriated fundsfor airportpurposes have to be used ordistributed to match each local jurisdiction's tax collect i ons on aviationfuel. Thus, the $1 million of appropriated funds attributable to a particular jurisdictionfor airportpurposes mustbe used in that localjurisdictionfor permissible airportprojects orprograms

. It does notsuffice 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:

I. First, it is clear that 1987 is the grandfatherpoint. 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 Jaws 25 years orso 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 "grandjathered"- the overage must be used for airportpurposes • What iftax "sunsets" but was then extended? Depends on if gap

.

5

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

o 

## Grandfather cutoffdate for existing aviation**ft~el** 

## 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 mayor may not result in negating the grandfathered status depending on the amendment itself. FAA will need to review the legislation

or amendments to aviationfuel taxes in order to confirm compliance with the federal requirements.

II. What will be the enforcement mechanism for states and localities that do not come into compliance? Willfunds be withheld? Other?

o 

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

o 

## If state or locality is NOTan airport sponsor: impose civilpenaltiesAND 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 

## If block grant state is levying a tax on aviationfuel contrary to the revenue use requirements and the FAAs Revenue Use Policy, it could be a breach of contract between FAA andBlock Grant State.

o 

## Sponsors and non-sponsors would be treated same whether under a block grant ornot.

IV. One state has a general state sales tax on jet fuel. The state statutoryprovisions dedicatingjet fuel sales taxes to aviation in the state passed in 

## 1993. However, there

were certain constitutionalprovisions 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 constitutionalprovisions 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 December30, 1987, and unchanged thereafter.

6

## ii. In general, if the revenue diversion was lawful, FAA would notbe concerned with how the funds are spent- iftax was in place before December 30, 1987.


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

1. May the state come into compliance with the FAA policy by 

## exempting aviationfuelfrom that tax?

o 

## Simply, yes. If aviationfuel 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 orsanctions (assuming that until the e xemption kicks i n, the revenue will 

## continue to be distributed according to the
const itutional earmark)?



## o The state will have one year (from December 8, 2014) 

## to include the exemption of
taxes on aviationfuel in the actionplan.


# 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 providing formal notification to states on whether they are potentially
not in compliance?

o 

## Not unless the FAA receives a complaint ornotification.



## o Too manypossible state/municipality combinations for FAA toprovide direct notification

.
4. Ifso, when will that occur?



# o Not applicable

- won't occur.

VI. Is the FAA policy limited to aviationfuel sales tax revenue from 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 ora local government taxing authority whether ornotacting as a sponsor or airport owneroroperator.

7

### o 

## NPIAS does notcome 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. 

# If only federally obligated airports: For thepurpose of the FAA policy, does accepting a planning grant only (no construction grants) result in an airport falling under thi s newpolicy?



## o 

## For this purpose, an air:port receiving a planning grant is deemed as having "received federal assistance" and therefo;e, 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.

VI/f. Offsets. Can tax on aviationfuel revenue be collected 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