DAVID Y.IGE 

GOVERNOR 

Federal Aviation Administration 

EXECUTIVE CHAMBERS 

HONOLULU 

December 8, 2015 

Attention: Mr. Byron K. Huffman, Acting Director, 

Office of Airport Compliance and Management Analysis 

800 Independence A venue, SW 

Washington, DC 20591 

Dear Mr. Huffman: 

This letter is submitted by the State of Hawaii in response to your letter dated November 24, 

2015 with regard to the adoption by the Federal Aviation Administration (the "FAA") of its 

"Policy and Procedures Concerning the Use of Airport Revenue; Proceeds from Taxes on 

Aviation Fuel" (79 Fed. Reg. 6628) (the "Revenue Use Policy Amendment"), amending the 

FAA's "Policy and Procedures Concerning the Use of Airport Revenue" (64 Fed. Reg. 7696, 

February 16, 1999) (the "Revenue Use Policy") and following a telephone conversation on 

December 8, 2105 between our counsel at Katten Muchin Rosenman, LLP, and Mr. James 

Brown of the FAA. 

It is our conclusion that the State of Hawaii's aviation fuel tax Jaw is exempt from the Revenue 

Use Policy Amendment, and that certain administrative rules and lease and other arrangements 

with airlines providing for rebates or credits in respect of aviation fuel taxes paid to the airports 

by such airlines are in compliance with the Revenue Use Policy. We explain the credit and 

rebate program more fully below to permit the FAA to determine whether the State of Hawaii's 

position is correct. If the FAA determines that the rebate and credit program is not a permissible 

use of non-exempt aviation fuel tax revenues, upon such determination by the FAA, the State 

will promptly develop and submit an "action plan" to remedy any impermissible use. 

Aviation Fuel Tax Law in Hawaii 

The State of Hawaii's aviation fuel tax laws are codified in Section 243 of the Hawaii Revised 

Statutes ("Haw. Rev. Stat."). Haw. Rev. Stat. Section 243-4(a)(2), in effect on December 30, 

1987, provided for a licensing tax "[f]or each gallon of gasoline or other aviation fuel sold for 

use in or used for airplanes" in the amount of" 1 cent." Haw. Rev. Stat. Section 243-4(a)(2) 

(1985). Haw. Rev. Stat. Section 243-4(a)(2), presently in effect, provides for the same licensing 

tax, but in the amount of "2 cents" for each such gallon. Haw. Rev. Stat. Section 243-4(a)(2) 

(2014). 
Mr. Byron K. Huffman 

December 8, 2015 

Page Two 

The Revenue Use Policy Amendment states that "[s]tate or local taxes on aviation fuel (except 

taxes in effect on December 30, 1987) are considered subject to the revenue-use requirements in 

49 U.S.C. 47107)." Because the State of Hawaii's aviation fuel tax was in effect on December 

30, 1987, it is our understanding that the State of Hawaii's aviation fuel tax is exempted from the 

provisions of the Revenue Use Policy as amended by the Revenue Use Policy Amendment. It is 

our understanding, however, that only the tax in effect as of December 30, 1987 (1 cent per 

gallon) is exempted from the provisions of the Revenue Use Policy as amended by the Revenue 

Use Policy Amendment. Accordingly, if the FAA determines that the program described herein 

providing for credits and rebates of aviation fuel taxes to airlines is not a permissible "airportrelated" use, the State of Hawaii believes it would only need to reduce, by the l cent per gallon 

difference, the current amount of the State of Hawaii aviation fuel tax coJJected and not used for 

airport-related purposes to the exempt level in effect as of December 30, 1987. 

Rebate and Credit Mechanics in Hawaii 

Haw. Rev. Stat. Section 261-5, in effect on December 30, 1987 and presently in effect, states that 

the Director (the "Director") of the Department of Transportation "may, in the Director's 

discretion, grant a rebate of the aviation fuel taxes ... [up to] one-half cent per gallon" in the 

ensuing fiscal year to any person who has paid airport use charges or landing fees. Haw. Rev. 

Stat. Section 261-5 (1969 and 2014). 

The provision for the repayment of aviation fuel taxes differs between ( 1) airlines subject to 

lease agreements (the "Lease Agreements") with the Department of Transportation ("Signatory 

Airlines") and (2) airlines not subject to the Lease Agreements with the Department of 

Transportation ("Non-signatory Airlines"). Aviation fuel tax payments for Non-signatory 

Airlines are subject to Hawaii Administrative Rules ("Haw. Admin. Rules"). Haw. Admin. 

Rules Chpt. 19-16. 1-5 states that, subject to certain limitations, Non-signatory Airlines can 

receive a credit against landing fees and airport system support charges equal to the amount of 

aviation fuel taxes paid by the respective Non-signatory Airline. Aviation fuel tax payments for 

Signatory Airlines are governed by the terms of the Lease Agreements. Similar to the rules that 

govern Non-signatory Airlines, the Lease Agreements provide that credits shall be provided 

related to certain aviation fuel tax payments. 

The practice of both Signatory Airlines and Non-signatory Airlines is to apply for a credit rather 

than applying for the rebate. The process is as follows: (1) Airlines purchase fuel from a 

distributor permitted by the Department of Taxation and pay two cents per gallon for aviation 

fuel taxes; (2) Airlines submit a claim to the Department of Transportation within six months of 

the payment of aviation fuel taxes and (3) Airlines receive a credit for the landing fee and airport 

system support charges owed for a particular month, equal to the amount of aviation fuel taxes 

paid during the same month.