II

104TH CONGRESS

2D SESSION S. 1774

To enhance the enforceability of airport revenue diversion provisions under

chapter 471 of title 49, United States Code, and for other purposes.

IN THE SENATE OF THE UNITED STATES

MAY 17, 1996

Mr. MCCAIN introduced the following bill; which was read twice and referred

to the Committee on Commerce, Science, and Transportation

A BILL

To enhance the enforceability of airport revenue diversion

provisions under chapter 471 of title 49, United States

Code, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Airport Revenue Pro5 tection Act of 1996’’.

6 SEC. 2. FINDINGS; PURPOSE.

7 (a) IN GENERAL.—The Congress finds that—

8 (1) section 47107 of title 49, United States

9 Code, prohibits the diversion of certain revenue gen-
2

•S 1774 IS

1 erated by a public airport as a condition of receiving

2 a project grant;

3 (2) a grant recipient that uses airport revenue

4 for purposes that are not airport related in a man5 ner inconsistent with chapter 471 of title 49, United

6 States Code, illegally diverts airport revenues;

7 (3) any diversion of airport revenues in viola8 tion of the condition referred to in paragraph (1)

9 undermines the interest of the United States in pro10 moting a strong national air transportation system

11 that is responsive to the needs of airport users;

12 (4) the Secretary and the Administrator have

13 not enforced airport revenue diversion rules ade14 quately;

15 (5) despite attempts by the Congress to halt the

16 illegal diversion of revenues referred to in paragraph

17 (1), including the enactment of laws to strengthen

18 the enforcement authority of the Department of

19 Transportation (including the Federal Aviation Ad20 ministration), such illegal airport revenue diversion

21 continues to occur;

22 (6) sponsors who have been found to have ille23 gally diverted airport revenues have not reimbursed

24 airports in a timely manner;
3

•S 1774 IS

1 (7) sponsors are openly and publicly seeking

2 ways to divert additional airport revenues; and

3 (8) to the detriment of the United States

4 Treasury, the Secretary and the Administrator have

5 failed to seek adequately the return of illegally di6 verted airport revenues referred to in paragraph (1).

7 (b) PURPOSE.—The purpose of this Act is to ensure

8 that airport users are not burdened with hidden taxation

9 for unrelated municipal services and activities by—

10 (1) eliminating the ability of any State or politi11 cal subdivision thereof that is a recipient of a project

12 grant to divert airport revenues for purposes that

13 are not related to an airport, in violation of section

14 47107 of title 49, United States Code;

15 (2) imposing financial reporting requirements

16 that are designed to identify instances of illegal di17 versions referred to in paragraph (1);

18 (3) establishing a statute of limitations for air19 port revenue diversion actions;

20 (4) clarifying limitations on revenue diversion

21 that is permitted under chapter 471 of title 49,

22 United States Code; and

23 (5) establishing clear penalties and enforcement

24 mechanisms for identifying and prosecuting airport

25 revenue diversion.
4

•S 1774 IS

1 SEC. 3. DEFINITIONS.

2 For purposes of this Act, the following definitions

3 shall apply:

4 (1) ADMINISTRATOR.—The term ‘‘Adminis5 trator’’ means the Administrator of the Federal

6 Aviation Administration.

7 (2) AIRPORT.—The term ‘‘airport’’ has the

8 meaning provided that term in section 47102(2) of

9 title 49, United States Code.

10 (3) PROJECT GRANT.—The term ‘‘project

11 grant’’ has the meaning provided that term in sec12 tion 47102(14) of title 49, United States Code.

13 (4) SECRETARY.—The term ‘‘Secretary’’ means

14 the Secretary of Transportation.

15 (5) SPONSOR.—The term ‘‘sponsor’’ has the

16 meaning provided that term in section 47102(19) of

17 title 49, United States Code.

18 SEC. 4. RESTRICTION ON USE OF AIRPORT REVENUES.

19 (a) IN GENERAL.—Chapter 471 of title 49, United

20 States Code, is amended by adding at the end of sub21 chapter I the following new section:

22 ‘‘§ 47132. Restriction on use of revenues

23 ‘‘(a) PROHIBITION.—Local taxes on aviation fuel (ex24 cept taxes in effect on December 30, 1987) or the revenues

25 generated by an airport that is the subject of Federal as26 sistance or that operates pursuant to an airport operating
5

•S 1774 IS

1 certificate issued under section 44706 may not be ex2 pended for any purpose other than the capital or operating

3 costs of—

4 ‘‘(1) the airport;

5 ‘‘(2) the local airport system; or

6 ‘‘(3) any other local facility that is owned or op7 erated by the person or entity that owns or operates

8 the airport that is directly and substantially related

9 to the air transportation of passengers or property.

10 ‘‘(b) EXCEPTIONS.—

11 ‘‘(1) IN GENERAL.—Subsection (a) shall not

12 apply with respect to any provision of law enacted

13 before September 3, 1982, that—

14 ‘‘(A) controls financing by the owner or

15 operator, or a covenant or assurance in a debt

16 obligation issued not later than September 2,

17 1982, by the owner or operator; and

18 ‘‘(B) provides that the revenues, including

19 local taxes on aviation fuel at public airports,

20 from any of the facilities of the owner or opera21 tor involved (including the airport of the owner

22 or operator) be used to support both the airport

23 and general debt obligations of other facilities

24 of the owner or operator.
6

•S 1774 IS

1 ‘‘(2) SUNSET.—This subsection shall have no

2 force and effect beginning on the earlier of—

3 ‘‘(A) the date on which all debt obligations

4 covered under this subsection are either retired

5 or refinanced; or

6 ‘‘(B) the date that is 10 years after the

7 date of enactment of the Airport Revenue Pro8 tection Act of 1996.

9 ‘‘(c) RULE OF CONSTRUCTION.—Nothing in this sec10 tion may be construed to prevent the use of a State tax

11 on aviation fuel to support a State aviation program or

12 the use of airport revenue on or off the airport for a noise

13 mitigation purpose.’’.

14 (b) CONFORMING AMENDMENT.—The chapter analy15 sis for subchapter I of chapter 471 of title 49, United

16 States Code, is amended by adding at the end the follow17 ing new item:

‘‘47132. Restriction on use of revenues.’’.

18 SEC. 5. REGULATIONS; AUDITS AND ACCOUNTABILITY.

19 (a) IN GENERAL.—Section 47107 of title 49, United

20 States Code, is amended by adding at the end the follow21 ing new subsections:

22 ‘‘(m) AUDIT CERTIFICATION.—

23 ‘‘(1) IN GENERAL.—The Secretary of Transpor24 tation (hereafter in this section referred to as the

25 ‘Secretary’), acting through the Administrator of the
7

•S 1774 IS

1 Federal Aviation Administration (hereafter in this

2 section referred to as the ‘Administrator’), shall pro3 mulgate regulations that require a recipient of a

4 project grant (or any other recipient of Federal fi5 nancial assistance that is provided for an airport)

6 to include as part of an annual audit conducted

7 under sections 7501 through 7505 of title 31, a re8 view and opinion of the review concerning the fund9 ing activities with respect to an airport that is the

10 subject of the project grant (or other Federal finan11 cial assistance) and the sponsors (or other recipi12 ents) involved.

13 ‘‘(2) CONTENT OF REVIEW.—A review con14 ducted under paragraph (1) shall provide reasonable

15 assurances that funds paid or transferred to spon16 sors are paid or transferred in a manner consistent

17 with the applicable requirements of this chapter and

18 any other applicable provision of law (including reg19 ulations promulgated by the Secretary or the Admin20 istrator).

21 ‘‘(3) REQUIREMENTS FOR AUDIT REPORT.—

22 The report submitted to the Secretary under this

23 subsection shall include a specific determination and

24 opinion regarding the appropriateness of the disposi-
8

•S 1774 IS

1 tion of airport funds paid or transferred to a spon2 sor.

3 ‘‘(4) CERTIFICATION BY INSPECTOR GEN4 ERAL.—Upon completion of each audit and review

5 conducted under this subsection, the Inspector Gen6 eral of the Department of Transportation shall,

7 upon making a determination that the audit and re8 view meet the requirements of this section, certify

9 that the audit and review meet those requirements.

10 ‘‘(n) RECOVERY OF ILLEGALLY DIVERTED FUNDS.—

11 ‘‘(1) IN GENERAL.—Not later than 180 days

12 after the issuance of an audit or any other report

13 that identifies an illegal diversion of airport revenues

14 (as determined under subsections (b) and (l) and

15 section 47132), the Secretary, acting through the

16 Administrator, shall—

17 ‘‘(A) review the audit or report;

18 ‘‘(B) perform appropriate factfinding; and

19 ‘‘(C) render a final determination concern20 ing whether the illegal diversion of airport reve21 nues asserted in the audit or report occurred.

22 ‘‘(2) NOTIFICATION.—Upon making such a

23 finding, the Secretary, acting through the Adminis24 trator, shall provide written notification to the spon25 sor and the airport of—
9

•S 1774 IS

1 ‘‘(A) the finding; and

2 ‘‘(B) the obligations of the sponsor to re3 imburse the airport involved under this para4 graph.

5 ‘‘(3) ADMINISTRATIVE ACTION.—If a sponsor

6 receives notification that the sponsor is required to

7 reimburse an airport, the Secretary, acting through

8 the Administrator, shall—

9 ‘‘(A) assess an administrative penalty

10 against the sponsor in an amount equal to—

11 ‘‘(i) the amount of the illegal diversion

12 in question;

13 ‘‘(ii) interest (as determined under

14 subsection (o)); and

15 ‘‘(iii) at the discretion of the Sec16 retary, acting through the Administrator,

17 in accordance with procedures established

18 under subsection (q), an amount to make

19 a payment to a petitioner under subsection

20 (q)(4); or

21 ‘‘(B) notwithstanding any other provision

22 of law, withhold an amount calculated in the

23 same manner as provided under subparagraph

24 (A) from funds that would otherwise be made

25 available to the sponsor as part of an appor-
10

•S 1774 IS

1 tionment under sections 47114 or a grant made

2 from amounts apportioned under section 47114

3 pursuant to section 47117.

4 Any withholding made under subparagraph (B) shall

5 not be subject to section 47106(d) or 47111(d), or

6 the hearing requirement under section 47111(e).

7 ‘‘(4) CIVIL ACTION.—

8 ‘‘(A) IN GENERAL.—If a sponsor fails to

9 pay the amount specified in paragraph (3) dur10 ing the 180-day period beginning on the date of

11 notification and the Secretary or the Adminis12 trator is unable to withhold a sufficient amount

13 under paragraph (3)(B), the Secretary, acting

14 through the Administrator, shall initiate a civil

15 action under which the sponsor shall be liable

16 for civil penalty in an amount equal to the ille17 gal diversion in question plus interest (as deter18 mined under subsection (o)).

19 ‘‘(B) ADDITIONAL AMOUNT.—In addition

20 to the amount determined under subparagraph

21 (A), if applicable, the civil penalty may include

22 an amount that the court shall cause to be

23 transferred to a petitioner under subsection

24 (q)(4).

25 ‘‘(5) DISPOSITION OF PENALTIES.—
11

•S 1774 IS

1 ‘‘(A) ADMINISTRATIVE PENALTIES.—The

2 Secretary or the Administrator shall transfer

3 any amounts collected as an administrative pen4 alty under paragraph (3)(A) to the Airport and

5 Airway Trust Fund established under section

6 9502(d) of the Internal Revenue Code of 1986.

7 ‘‘(B) AMOUNTS WITHHELD.—The Sec8 retary or the Administrator shall transfer any

9 amounts withheld under paragraph (3)(B) to

10 the Airport and Airway Trust Fund.

11 ‘‘(C) CIVIL PENALTIES.—With respect to

12 any amount collected by a court in a civil action

13 under paragraph (4), the court shall cause to be

14 transferred to the Airport and Airway Trust

15 Fund any amount collected as a civil penalty

16 under paragraph (4).

17 ‘‘(6) REIMBURSEMENT.—The Secretary, acting

18 through the Administrator, shall, as soon as prac19 ticable after any amount is collected from a sponsor

20 under paragraph (3) or (4), cause to be transferred

21 from the Airport and Airway Trust Fund to an air22 port affected by a diversion that is the subject of an

23 administrative action under paragraph (3) or a civil

24 action under paragraph (4), reimbursement in an

25 amount equal to the amount that has been collected
12

•S 1774 IS

1 from the sponsor under paragraph (3) or (4) (in2 cluding any amount of interest calculated under sub3 section (o)), other than any amount that has been

4 collected under paragraph (3) or (4) for a payment

5 to a petitioner under subsection (q)(4).

6 ‘‘(7) STATUTE OF LIMITATIONS.—No person

7 may bring an action for the recovery of funds ille8 gally diverted in violation of this section (as deter9 mined under subsections (b) and (l)) or section

10 47132 after the date that is 6 years after the date

11 on which the diversion occurred.

12 ‘‘(o) INTEREST.—

13 ‘‘(1) IN GENERAL.—Except as provided in para14 graph (2), the Secretary, acting through the Admin15 istrator, shall charge a minimum annual rate of in16 terest on the amount of any illegal diversion of reve17 nues referred to in subsection (n) in an amount

18 equal to the average investment interest rate for tax

19 and loan accounts of the Department of the Treas20 ury (as determined by the Secretary of the Treas21 ury) for the applicable calendar year, rounded to the

22 nearest whole percentage point.

23 ‘‘(2) ADJUSTMENT OF INTEREST RATES.—If,

24 with respect to a calendar quarter, the average in25 vestment interest rate for tax and loan accounts of
13

•S 1774 IS

1 the Department of the Treasury exceeds the average

2 investment interest rate for the immediately preced3 ing calendar quarter, rounded to the nearest whole

4 percentage point, the Secretary of the Treasury may

5 adjust the interest rate charged under this sub6 section in a manner that reflects that change.

7 ‘‘(3) ACCRUAL.—Interest assessed under sub8 section (n) shall accrue from the date of the actual

9 illegal diversion of revenues referred to in subsection

10 (n).

11 ‘‘(4) DETERMINATION OF APPLICABLE RATE.—

12 The applicable rate of interest charged under para13 graph (1) shall—

14 ‘‘(A) be the rate in effect on the date on

15 which interest begins to accrue under para16 graph (3); and

17 ‘‘(B) remain at a rate fixed under subpara18 graph (A) during the duration of the indebted19 ness.

20 ‘‘(p) PAYMENT BY AIRPORT TO SPONSOR.—If, in the

21 course of an audit or other review conducted under this

22 section, the Secretary determines that an airport owes a

23 sponsor funds as a result of activities conducted by the

24 sponsor or expenditures by the sponsor for the benefit of

25 the airport, interest on that amount shall be determined
14

•S 1774 IS

1 in the same manner as provided in paragraphs (1) through

2 (4) of subsection (o), except that the amount of any inter3 est assessed under this subsection shall be determined

4 from the date on which the Secretary or the Administrator

5 makes that determination.’’.

6 (b) REVISION OF POLICIES AND PROCEDURES;

7 DEADLINES.—

8 (1) IN GENERAL.—Not later than 90 days after

9 the date of enactment of this Act, the Secretary, act10 ing through the Administrator, shall revise the poli11 cies and procedures established under section 47107

12 (l) of title 49, United States Code, to take into ac13 count the amendments made to that section by this

14 Act.

15 (2) DEADLINES.—Section 47107(l) of title 49,

16 United States Code, is amended by adding at the

17 end the following new paragraph:

18 ‘‘(5) DEADLINES.—In addition to the statute of

19 limitations specified in subsection (n)(7), the follow20 ing statutes of limitations and deadlines shall apply

21 with respect to project grants made under this chap22 ter:

23 ‘‘(A) Any request to any airport for addi24 tional payments for services conducted off of
15

•S 1774 IS

1 the airport shall be filed not later than 6 years

2 after the date on which the expense is incurred.

3 ‘‘(B) Any amount of airport funds that are

4 used to make a payment as described in sub5 paragraph (A) after the date specified in that

6 subparagraph shall be considered to be an ille7 gal diversion of airport revenues that is subject

8 to subsection (n).’’.

9 SEC. 6. ELIMINATION OF CERTAIN EXCEPTIONS.

10 (a) IN GENERAL.—Section 47107(b)(2) of title 49,

11 United States Code, is amended—

12 (1) by inserting ‘‘(A)’’ before ‘‘Notwithstanding

13 subsection (b)(1)’’; and

14 (2) by adding at the end the following new sub15 paragraph:

16 ‘‘(B) This paragraph shall have no force and effect

17 beginning on the earlier of—

18 ‘‘(i) the date on which all debt obligations cov19 ered under this paragraph on the day before the

20 date of enactment of the Airport Revenue Protection

21 Act of 1996 are either retired or refinanced; or

22 ‘‘(ii) the date that is 10 years after the date of

23 enactment of the Airport Revenue Protection Act of

24 1996.’’.
16

•S 1774 IS

1 (b) HAWAII.—Section 47107(j) of title 49, United

2 States Code, is amended by adding at the end the follow3 ing new paragraph:

4 ‘‘(8) This subsection shall have no force and effect

5 beginning on the earlier of—

6 ‘‘(A) the date on which all debt obligations re7 ferred to in paragraph (2) that are covered under

8 this subsection are either retired or refinanced; or

9 ‘‘(B) the date that is 10 years after the date of

10 enactment of the Airport Revenue Protection Act of

11 1996.’’.

12 SEC. 7. WHISTLEBLOWER PROTECTION AND PAYMENTS.

13 Section 47107 of title 49, United States Code, as

14 amended by section 5 of this Act, is further amended by

15 adding at the end the following new subsection:

16 ‘‘(q) WHISTLEBLOWER PROTECTION AND PAY17 MENTS.—

18 ‘‘(1) IN GENERAL.—Not later than 180 days

19 after the date of enactment of the Airport Revenue

20 Protection Act of 1996, the Secretary, acting

21 through the Administrator, shall establish a process

22 under which a private citizen or other party (other

23 than an employee of the Department of Transpor24 tation and the organization or entity that conducts

25 an audit under subsection (m)) may petition the
17

•S 1774 IS

1 Secretary or the Administrator for review of an alle2 gation of illegal diversion of airport revenues.

3 ‘‘(2) EVALUATION.—Not later than 30 days

4 after the date on which a petition is made under

5 paragraph (1), the Secretary, acting through the Ad6 ministrator—

7 ‘‘(A) shall evaluate the petition if it asserts

8 that an illegal diversion of airport revenues (as

9 determined under subsections (b) and (l) and

10 section 47132) has occurred in an amount

11 greater than or equal to $10,000 for a calendar

12 year period; and

13 ‘‘(B) may evaluate the petition if it asserts

14 an illegal diversion of airport revenues in an

15 amount less than the amount specified in sub16 paragraph (A).

17 ‘‘(3) ACTION BY THE SECRETARY OF TRANS18 PORTATION.—If the Secretary, acting through the

19 Administrator, reviews a petition described under

20 paragraph (1) and determines that an illegal diver21 sion of revenues (as determined under subsections

22 (b) and (l) and section 47132) has occurred, the

23 Secretary, acting through the Administrator, shall

24 take such action, in accordance with this section, as

25 is necessary to—
18

•S 1774 IS

1 ‘‘(A) recover the illegally diverted revenues;

2 and

3 ‘‘(B) provide for reimbursement to the air4 port of the amount illegally diverted.

5 ‘‘(4) PAYMENT TO PETITIONER.—Notwith6 standing any other provision of law, in any case in

7 which the Secretary or the Administrator recovers

8 funds under paragraph (3), the Secretary or the Ad9 ministrator shall take such action as may be nec10 essary (including requiring the sponsor to make a

11 payment for the petitioner and transferring funds

12 from the Airport and Airway Trust Fund established

13 under section 9502(d) of the Internal Revenue Code

14 of 1986), to make a payment to the petitioner, in ac15 cordance with procedures that the Secretary, acting

16 through the Administrator, shall establish by regula17 tion (after providing opportunity for notice and pub18 lic comment).

19 ‘‘(5) PROHIBITION ON DISCLOSURE.—Neither

20 the Secretary nor the Administrator may disclose to

21 an airport, a sponsor, or the general public the iden22 tity of a petitioner under this subsection without the

23 consent of the petitioner.’’.
19

•S 1774 IS

1 SEC. 8. QUI TAM ACTIONS.

2 Section 47107 of title 49, United States Code, as

3 amended by section 6 of this Act, is further amended by

4 adding at the end the following new subsection:

5 ‘‘(r) QUI TAM ACTIONS.—Notwithstanding any other

6 provision of law, a private citizen may bring a civil action

7 for a violation of this section in the same manner as is

8 provided for a civil action for a violation of section 3729

9 of title 31 under section 3730 of that title.’’.

10 SEC. 9. CONFORMING AMENDMENTS TO THE INTERNAL

11 REVENUE CODE OF 1986.

12 Section 9502(d) of the Internal Revenue Code of

13 1986 is amended—

14 (1) in subsection (b)—

15 (A) by striking ‘‘and’’ at the end of para16 graph (3);

17 (B) by striking the period at the end of

18 paragraph (4) and inserting ‘‘, and’’; and

19 (C) by adding at the end the following:

20 ‘‘(5) amounts determined by the Secretary of

21 the Treasury to be equivalent to the amounts of ad22 ministrative and civil penalties collected under sec23 tion 47107(n) of title 49, United States Code.’’; and

24 (2) in subsection (d), by adding at the end the

25 following new paragraph:
20

•S 1774 IS

1 ‘‘(4) TRANSFERS FROM THE AIRPORT AND AIR2 WAY TRUST FUND ON ACCOUNT OF CERTAIN AIR3 PORTS.—The Secretary of the Treasury may trans4 fer from the Airport and Airway Trust Fund to the

5 Secretary of Transportation or the Administrator of

6 the Federal Aviation Administration an amount to

7 make a payment—

8 ‘‘(A) to an airport affected by a diversion

9 that is the subject of an administrative action

10 under paragraph (3) or a civil action under

11 paragraph (4) of section 47107(n) of title 49,

12 United States Code; or

13 ‘‘(B) pursuant to section 47107(q)(4) of

14 title 49, United States Code.’’.

Æ