1 

### Catherine M. van Heuven

From: Randall.Fiertz@faa.gov

Sent: Friday, September 18, 2015 1:54 PM

To: Peter Kirsch

Cc: Catherine M. van Heuven

Subject: RE: Fuel Tax Question

Hi Peter:

Here is our response to your questions:

FAA’s Response to Questions from Kaplan, Kirsch & Rockwell LLP Concerning the Use of Proceeds from State Aviation Fuel

Taxes

– September 15, 2015

Background:

We (Kaplan Kirsch & Rockwell LLP) have a client airport sponsor (a County) whose airport lies within the jurisdiction of a

municipality (non

‐ sponsor). The municipality levies a general sales tax which also applies to aviation fuel. The

municipality has had a general sales tax in place and unchanged since before 1987. In 1990, the airport was annexed

into the municipality at the request of, and under the initiative of, the County/sponsor.

The municipality has been collecting sales tax on sale of aviation fuel at the Airport since 1990 and has not dedicated the

revenue to airport purposes.

Question #1:

Under these facts, is the municipality’s tax eligible for any exceptions under the grandfather clause? The precise

question is whether the grandfather provisions of the law and FAA policy apply to the date of the enactment of the tax

(pre

‐ 1987) or to the date on which it applied to aviation fuel at a particular airport (post

‐ 1987)?

FAA Response to Question #1:

Title 49 U.S.C. §§ 47107(b) and 47133 require that local taxes on aviation fuel (except taxes in effect on December 30,

1987) be expended for the capital or operating costs of the airport; the local airport system; or other local facilities

owned or operated by the airport owner or operator and directly and substantially related to the air transportation of

passengers or property. The FAA confirmed in its Amendment that proceeds from taxes on the sales of aviation fuel

(imposed by either an airport sponsor or a non

‐ sponsor) are required to be used for airport

‐ related purposes except for

taxes that qualify for grandfathering from revenue use requirements. Taxes on aviation fuel that qualify for

grandfathering are those state or local taxes on aviation fuel in effect on December 30, 1987. Any amendments of the

grandfathered tax statutes that make substantive changes after December 30, 1987, may affect the grandfathered

status of the tax or the increase to the tax.

Based on the information provided, the grandfather provisions of the law and FAA policy appear to be applicable to the

date of the enactment of the tax (pre

‐ 1987). However, we will need to review true and correct copies of original

legislation and/or tax code and summary explanation of law reflecting tax was in effect on December 30, 1987, and

unchanged; copies of the legislation regarding the annexation of the airport into the non

‐ sponsor municipality;

document identifying the purpose and applicability of the tax, the use of proceeds, any administrative costs charged for

the collection and allocation of the proceeds of the aviation fuel tax; document identifying the tax rate or rates, credits,

or exemptions; and document detailing commitment to advise of any subsequent amendments that could affect

grandfathered status.2 Question #2:

Second, if it the tax is not grandfathered, could the municipality discharge its obligations (under the “offsets” principle

set forth in the answers to questions from NASAO last month) by formally dedicating that revenue to direct and long

‐

term incentives for air service? In other words, would the municipality be limited in its permissible use of its fuel tax

revenue to only those expenditures that would be permissible (under the FAA’s Policy and Procedures Concerning the

Use of Airport Revenue (Revenue Use Policy) and federal law) if undertaken by the sponsor?

FAA Response to Question #2:

The aviation fuel tax funds, via offset or otherwise, may only be used for lawful aviation purposes as provided for under

federal law and the Revenue Use Policy. The Revenue Use Policy sets out the very limited incentives that an airport

sponsor may permissibly undertake, and states the prohibition on the direct payment of subsidies to airline. You are

correct that the municipality is limited in its permissible use of its fuel tax revenue to only those expenditures that would

be permissible under the Revenue Use Policy and federal law, if undertaken by the airport sponsor.

The foregoing responses provide only the present views of the FAA based on the information provided by counsel for

the County. It does not preclude or constrain the FAA’s discretion or preclude any changes in our views. This response

also does not bind the FAA to any particular resolution in the event that a complaint is filed regarding the issues

addressed herein.

Have a good weekend and please let me know if you have further questions.

Randy

Randall Fiertz

Director, Airport Compliance and Management Analysis

Federal Aviation Administration

(202) 267-8728

From: Peter Kirsch [mailto:pkirsch@kaplankirsch.com]

Sent: Monday, September 14, 2015 10:02 PM

To: Fiertz, Randall (FAA)

Cc: Catherine M. van Heuven

Subject: RE: Fuel Tax Question

Randy:

Have your folks had a chance to consider the question I posed a few weeks ago (see below). If so, could we find a time

to talk later this week?



### ________________________ _____________

Peter J Kirsch

http://www.kaplankirsch.com3 16 75 Broadway, Suite 2300, Denver, CO 80202

1001 Connecticut Avenue, N.W. Suite 800, Washington, DC 20036

O: (303) 825 7000

C: (202) 596 1112

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From: Peter Kirsch

Sent: Friday, August 28, 2015 10:36 AM

To: Randall.Fiertz@faa.gov

Cc: Catherine M. van Heuven

Subject: Fuel Tax Question

Randy:

Hope all is well with you. I would appreciate if you could help us with a question with respect to the FAA’s

recent clarification of the law on use of aviation fuel tax revenue by non

‐ sponsors.

We have a client airport sponsor (a County) whose airport lies within the jurisdiction of a municipality (non

‐ sponsor). The municipality levies a general sales tax which also applies to aviation fuel. The municipality has

had its a general sales tax in place and unchanged since before 1987. In 1990, the airport was annexed into the

municipality at the request of, and under the initiative of, the County/sponsor.

The municipality has been collecting sales tax on sale of aviation fuel at the Airport since 1990 and has not

dedicated the revenue to airport purposes.

The first question is whether, under these facts, the municipality’s tax eligible for any exceptions under the

grandfather clause? The precise question is whether the grandfather provisions of the law and FAA policy apply

to the date of the enactment of the tax (pre

‐ 1987) or to the date on which it applied to aviation fuel at a

particular airport (post

‐ 1987)?

Second, if it the tax is not grandfathered, could the municipality discharge its obligations (under the “offsets”

principle set forth in the answers to questions from NASAO last month) by formally dedicating that revenue to

direct and long

‐ term incentives for air service? In other words, would the municipality be limited in its

permissible use of its fuel tax revenue to only those expenditures that would be permissible (under the Revenue

Use Policy and federal law) if undertaken by the sponsor?

If you are not the right person to answer this question, I would be much obliged if you could refer me to

whomever within your office is the point person for the fuel tax issues. My partner, Katie van Heuven or I will

give you a call in the next few days to discuss. Thanks much.