Aviation Fuel Tax Grandfathering Action Plans

The FAA Policy and Procedures Concerning the Use of Airport Revenue; Proceeds From Taxes on Aviation Fuel, (79 Fed. Reg. 66282, November 7, 2014) (Amendment) provides 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. State taxes on aviation fuel may also be used for a state aviation program.

Taxes on aviation fuel that qualify for grandfathering are 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, do not qualify for continued grandfathered status. FAA will need to receive justification from state and local taxing authorities to make a determination of the grandfathered status of existing state and local taxes in effect on December 30, 1987.

The guidance provided on the following scenarios should assist airport sponsors and non-sponsors to determine an appropriate course of action and/or development of an action plan for aviation fuel taxes that may or may not qualify for grandfathered status:

(1)State and/or local tax statute in effect on December 30, 1987, and has been amended forward requiring that funds be used for airport or state aviation purposes – no grandfathering issue; statement from entity confirming use of taxes in compliance with the law.

(2)State and/or local tax statute in effect on December 30, 1987, or thereafter, exempts aviation fuel tax –no grandfathering issue; statement from entity confirming the use of taxes in compliance with the law.

(3)State and/or local tax statute in effect on December 30, 1987, without any changes since enactment; proceeds used for other than airport purposes; and no current grandfathering determination - submit action plan providing written justification why tax on aviation fuel 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 December 30, 1987, and unchanged; b. Document identifying the purpose and applicability of the tax, the use of proceeds, and any administrative costs charged for the collection and allocation of the proceeds of the aviation fuel tax;

c. Document must identify the tax rate or rates, credits, or exemptions; and d. Document detailing commitment to advise of any subsequent amendments that could affect grandfathered status.(4)State and/or local tax statute in effect on December 30, 1987, and amended in subsequent

periods, proceeds used for other than airport purposes, and no current grandfathering determination – submit action plan providing written justification why tax on aviation fuel qualifies for grandfathered status for portion of tax in effect on December 30, 1987, 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 December 30, 1987, and the amendments; b. Document identifying the effective date of the aviation fuel tax, the purpose and applicability of the tax, the use of the proceeds, and any administrative costs charged for the collection and allocation of the proceeds of the aviation fuel 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 aviation fuel; b. Document identifying the effective date of the aviation fuel tax, the purpose and applicability of the tax, the use of the proceeds, and any administrative costs charged for the collection and allocation of the proceeds of the aviation 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 legislative process, including the process necessary to develop accounting, tracking, and reporting mechanisms to provide for discrete information on aviation fuel tax revenues, and disclosure of a reasonable transition period (not to exceed three years) to implement the necessary processes to become compliant with the Amendment.