### Mayor Sally Burbridge 

### Mayor Pro-Te m Sherri A. 

### Sipe 

### Commissioners Roberta S. Locke

Katee McClure Sheri L. 

### Rogers

A desirableplace to live, work andplay; rich in history andsmall town values!

November 17,2015

Demesia Padilla, Cabinet Secretary New Mexico Taxation & 

### Revenue Department P.O

. Box630 Santa Fe, NM 87504-0630


### Re: Federal Aviation Administration Policy Regarding Use of Aviation Fuel Tax Revenue and Deadline to Submit Action Plan by December 8, 2015.
Dear Secretary Padilla:
I am the Mayor of the City of Aztec, which operates the Nl9 Aztec 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 of aviation 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/opera tor that has accepted federal grant assistance, the City of Aztec is bound by multiple federal policies, procedures, and legal requirements, including federal assurances made by the City ofAztec 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 airport-related purposes
. These airport r evenue use requirements apply to proceeds from certain 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 loca l tax 

### on aviation fuel. The Policy Amendment requires that the City of Aztec inform you of its provisions, and tak e reasonable actions within the power of the City of Aztec to influence the State to conform to those requirements. 1 have included a copy ofthe Policy Amendment with this lett er for your review

. The Policy Amendment confirms that State and local taxes on aviation fuel, whether part of a general 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 ofairport r evenue. See 79 Fed

. Reg

. at 66287. Generally speaking, this means that pro ceeds from taxes on aviation fuel must be used for the capita l or operating expenses of the airport where the fuel is sold, of the local airport system, or of other facilities owned or 201 

### West Chaco 

## + Aztec, New Mexico 87410 

## + (505) 334-7600 

## + Fax: (505) 334-7609



### www
.aztecnm

.gov 

## + + + Winner All American City Award 

## + + + www.aztecnm.com 

## COPY..

### operated by the airport and direct)y and substantially related to air transportation

. 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 r estrictions do not apply to "grandfat hered" taxes in effect on or before December 30, 1987. 

### State Aviation Fuel 

### Taxes and Compliance
In order to comply wit h the Policy Amendment, the State must identif y all New Mexico state and local taxes on aviation fuel, determine whether grandfathering exists, and if not, whether use of the tax revenue complies with the Policy Amendment.
We have been advised that t he sale of aviation gasoline, aviation jet fuel and other aviation fuel in the State ofNew Mexico is subject to taxation under New Mexico law, 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 5.125% is assessed on the sale ofjet fuel, pursuant to NMSA 1978, § 

### 7-9-4.
The grandfathering provision found in the Policy Amendment would apply to the use of the State sales tax on jet 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, if

### the 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 genera l fund 

### in an amount 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 requir ements, and appropriat ely advise the FAA. The FAA has concluded that there is a need f or 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 b:ring State and local taxes into compliance may r equire 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 noncompliant State laws on use of aviation 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 of Transportation 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.
If 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


### 201 West Chaco + Aztec, New Mexico 87410 + (505) 334-7600 + Fax: (505) 334-7609 www.aztecnm.gov + + + Winner All American City Award+ + + www.aztecnm.com.l

### 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. Respectful!y,

encl: Policy Amendment Questions for the FAA from NASAO Members
copy w/encl:
C: Dan Moran, Grants Administrator, Aviation Division Randy Fiertz, FAA 

# \

201 

### West Chaco 

# + Aztec, New Mexico 87410 

### + (505) 334-7600 

# + Fax: (505) 334-7609 

### www.aztecrun.gov + 

## + + Winner All American City Award+ + 

## + www.aztecnm.com•.

## -!S.""-?? GPO::? 66282 Federal Register/Val. 79, 

### No. 216/Friday, November 7, 

### 2014/Rules and Regulations
dated April17, 2012, except airplanes on which modification stat us "32-64" is ma rked on the identification plate: Within 20,000 flight hours or 10years after September 24, 2013 (the effective date ofAD 2013-1&-08), whichever 

### occurs first, install a newjam nut having part number 49606-5, in accordance with Part B ofthe Accomplishment Instructions of Bombardier Service Bulletin 670BA-32-031, Revision C, datedApril17, 2012; and Goodrich Service Bulletin 49600

- 32-64 R3 , dated December 15, 2011. (j) Retained Credit for Previous Actions With Change to Paragraph (j)(1)(iii) ofTbis AD

(1 ) This paragraph restates the credit providedby paragraph (j){l) ofAD 2013-16- 08, Amendment 39-17546 (78 FR 51055, August 20, 2013), with a change to the service information citation in paragraph (j)(t){iii) ofthis AD

. This paragraph provides credit for the actions required by paragraphs (g) and (i) ofthis AD, ifthose actions were performed before Sept ember 24, 2013 (the effective date ofAD 2013-H>-4J8), using the service information specified in paragraph (j)(1)(i), (j)(1){ii), or (j)(1)(iii) ofthis AD, which is not incorporated by reference in this AD.

(i) Bombardier Service Bulletin 670BA-32

- 031, dated March 14, 2011

.

(ii) Bombardier Service Bulletin 670BA32-031, Revision A, datedJune 9, 2011.

(iii) Bombardie r Service Bulletin 670BA32-031, Revision B, dated July 29, 2011.

(2) This paragraph restates the credit provided by paragraph (j)(2) ofAD 2013

- 16- 08 , Amendment 30-17546 (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 performed before September 24 , 2013 (the effective date ofAD 2013

- 16-08). using the service information specified in paragraph (j)(2)(1) or (j)(2)(ii) of this AD, which is not incorporated by reference in this AD

.

(i) Bombardier Service Bulletin 670BA-32- 033, dated March 14, 2011

.

(ii) Bombardier Service Bulletin 670BA32-Q33, R evisio n A, dated July 29, 2011

. (k) Retained Parts Installa tion Limitations With Change to Paragraph (lc)(2) of This AD (1) This paragraph restates the parts installation limitation specified in paragra ph (k)(1) ofAD 2013-16-08, Amendment 39- 17546 (78 FR 51055 , August 20, 2013). with no changes. As ofSeptember 24, 2013 (the effective date ofAD 2013-16-0B). no person may install on any airplane an MLG retraction actuator assembly having any part number and serial numberidentified in paragraph 1 .A., Effectivity, ofBombardier Service Bulletin 670BA-32-031, Revision C, dated Apri117, 2012, unless that retraction actuator assembly has been inspected as specified in paragraph (g) ofthis AD, and all applicable corrective actions (i.e. , replacement ofthe retract actuator) specified in paragraph (g) ofthis AD have been done. Repeat the inspection specified in paragraph (g) ofthis AD thereafter at the intervals specified in paragraph (g) ofthis AD

.

(2) This paragraph restates the parts insta llation limitation specified in paragraph (k)(2) ofAD 2013-16

- 08, Amendment39- 17546 (78 FR 51055, August 20, 2013). with a revised part name
. As ofthe effective date ofthis AD , no person may install on any airplane an MLG dressed shock strut having any part numberand serial number identified inparagraph l

.A., Effectivity, ofBombardier Service Bulletin 670BA-32-033, Revision 8, dated June 26, 2012, unless that retraction actuator assembly has been inspected and all applicable corrective actions have been done, in accordance with the Accomplishment Instructions ofBombardier Service Bulletin 670BA

- 32-033, Revision B, dated June 26, 2012. (I) Other FAA AD Provisions

The following provisions also apply to this AD:

(1) Al ternative Mothods of Compliance (AMOCs): The Manager, New York Aircraft Certification Office (AGO), ANE-170, FAA, has the authority to approve AMOCs for this AD, ifrequested using the procedures found in 14 CFR 39

.19

. ln accordance with 14 CFR 39.19, send your request to your principal inspector or local Flight Standards District Office, as appropriate. lf sending information directly to the ACO, send it to ATTN: Program Manager, Continuing Operational Safety, FAA, New York AGO, 1600 St ewart Avenue, Suite 410, W estbury, NY 11590; telephone 516-228-7300; fax 516-794-5531. Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the local flight standards district office/ certifica te holding district office. The AMOC approval letter must specifically reference this AD.

(2) Contacting the Manufactur er: For any requirement in this AD to obtain corrective actions from a manufacturer, the action must be accomplished using a method approved by the Manager, New York ACO, ANE-170, Engine and Propeller Directorate, FAA; or Transport Canada Civil Aviation (TCCA); or Bombardier's TCCA Desi gn Approval Organization (DAO)

. Ifapproved by the DAO, the approval must include the DAO· authoriz ed signature
. (m) R elated Information (1) Refer to Mandatory Continuing Airworthiness lnformation (MCAI) Canadian Airwor thiness Directive CF-2011-36Rl, dated October 3, 2012, for related information. You may examine the MCAI in the AD docket on the Internet at http:// www.regulations.gov / #!

documentDetoil ;D=F AA

-2014-048 3

-0002. (2) Service information identified in this AD that is not incorporated by reference is available at the addresses specified in paragraphs (n)(4). (n)(S) , and (n)(6) ofthis AD. ( n ) Material Incorporated by Reference

(1) The Director ofthe Federal Register aiJproved the incorporation by reference (ffiR) ofthe service information listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.

(2) You must usc this service information as applicable to do the actions required by this AD, unless this AD specifies otherwise

. (3) The following service information was approved for IBR on September 24 , 2013 (78 FR 51055, August 20 , 2013).

(i) Bombardier Service Bulletin 670BA-32

- 031 , R evision C. dated April17, 2012. (ii) Bombardier Service Bulletin 670BA32-Q33, Revision B, dated June 26, 2012.

(iii) Goodrich Service Bulletin 49000-32

- 46 R2, dated November 11, 2011

.

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

(v) Goodrich Service Bulletin 49600-32-64 R3, dated December 15, 2011

.

(4) For Bombardier service information identified in this AD, contact Bombardier, lnc. , 400 COte-Vertu Road West, D orval, Quebec H4S 1Y9, Canada; telephone 514- 855-5000; fax 514-855-7401; email thd. crj@ aero
.bombardier. com; Inte rnet http:// www.bombardi er.com. (5) For Goodrich service inf orma tion identified in this AD, contact Goodrich Corporation, Landing Gear, 1400 South Service Road, West Oakville L6L 5Y7, Ontario, Canada; telephone

**905~25 1568;**  emailjean.breed@goodrich.com; Internet http://www.goodrich.com/TechPubs.

(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 , call425-227-1221.

(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, orgo to: http:// www.ar chiv es
.govlfederal·regist erlcfr libr

locations

.html

. Issued in Renton, Washington, on October 28, 2014

. J effrey E. Duven, Manager , TransportAirplaneDirectorate, Aircraft Certification Service

. [FR Doc. 2014-26437 Filed 1 1-6-14; 8:45am] BI LLI NG COD! 491o-1 l-P

DEPARTM ENT OF TRANSPORTA TION F

ederal Aviation Adm i n is t ration 1 4 CFR Chapter I (Docket No

. FAA -201 3-0988] Policy and Procedu res Concerning the Use of Ai rport Revenue; Proceed s From Taxes on Aviation Fuel AG ENCY: Federal Aviation Administration (FAA), DOT. ACTION: Final Policy Amendment. SUMMARY: T h is action adopts 

### an amendment to the FAA Policyand Procedure s Concerning the Use of Airport Revenue published in the Feder al Register at 64 FR 7696 o n February 16, 1999 ("Revenue Use Policy"). This action confirms FAA's long-sta nding policy on Federal requirements f or the use of proceedsFederal Register/Val. 79, No. 216/Friday,**No~ember** 7.' 2014/Rules ari d Regulations 66283 from taxes on av iation fuel. U nder Federal law, airport operators that have accepted Federal assistance gen e rally may use airport revenues only for airport-related purposes. Local taxes on aviation fuel are subject to airport revenue use requirements. State taxes on aviation fuel (imp osed by e ith er an airport sponsor or a non
- spon s or) are · subject to use either for a State aviation program or for airport-related purposes. The statutory rev e nue use requirements app ly to certain Stat e and local government taxes on aviation fuel, as well as to revenues received directly by

an airport operator. This document formally adopts , through an amendment to th e Revenue Use Policy, FAA's inter pretation of the Federal requirements for use of revenue derived from taxes on aviation fuel. DATES: This document is effective December 8, 2014. FOR FURTHER I NFORMATION CONTACT: Randall S. Fiertz, Director, Office of Airport Compliance and Management Analysis, Federal Aviation Adm in istration, 800 Independence Avenue SW ., Washington, DC 20591, telephone (202) 267-3085; facsimile (202) 267-5257. SUPPLEMENTARY I NFORMAT I ON: Availability of Docwnents You can get an e l ectronic copy of this Policy and all other documents in

dock e t FAA 2013-0988 using the Internet by: (1) Searching the Federal eRulemaking portal at http:// www.regulations.gov/search; (2) Visiting FAA's Regulations and Policies Web

page at http://www.faa.gov/regulations _ policies/policy _guidance/; or (3) Accessing the Government Printing

Office's Web page at http:// www.gpoaccess.gov/index.html . Yo u can also get a copy by sending a request to the Federal Aviation Administration, Office of Airport Compliance and Management Analysis, 800 Independence Avenu e SW., Washington, DC 20591, or by calling (202) 267-3085. Pl ease m a k e sure to identify the docket number, notice number, or amendment number ofthis proc ee ding. Authority for the Policy Amendment. This Policy Amendment is published under the authority described in Subtitle VII, part B, chapter 471, section

47122, and th e F ede ral Aviation Administration Authorization Act of 1994, § 112(a), Public Law 103-305,49 U .S .C. 47107(1)(1) (Aug. 23, 1994). Background On November 21 , 2013, FAA

published a proposed amendment to its

po li cy on Federal requirements f or the u se of proceeds from taxes on av i ation fuel. (78 FR 69789, November 21, 2013). This action finalizes the amendment of FAA's Revenue Use Policy. Under Federal law, airport operators that have

accept ed Federal assistance generally

may u se airport revenues only for airport-related purposes. The revenue use requir ements apply to th e proceeds from certain State and local government taxes on aviation fuel, as well as to revenues received directly · by an airport operator . This document formally

adopts FAA's interpretation of the 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 prov id e assurance that revenues from State and local government taxes o · n aviation fuel will be used for 'certain aviation-re lat ed purposes. These

purposes include airport capital and operating costs, and St a te aviation programs. The policy amendment

applies prospectively to use of proceeds from both new taxes and to existing taxes that do not qualify for grandfathering from revenue use r eq uir emen t s. For exist i ng tax es that do not qualify for grandfathering (which · are State or local taxes on aviation fuel in e ff ect on D ecember 30, 1987), the FAA will allow for an up to three-year transition period from the effective dat e of this document. The FAA invited public comment on the policy interpretation question, in part due to the interests of sellers and c o nsumers of aviation fuel , and of State and local government taxing authorities

on limits on the us e of proceeds from taxes touching av i ation fuel. The not i ce

also so li c it ed comments about whether the re are other reasonable interpretations of the statute as it relates to lo cal 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, 2014 (79 FR 5318, January 31,

2014) in order to provide the public · additional time to submit tomments on the proposed Policy am e ndment. Executive Order 13132**{F~deralism}** Executive Order 13132 es tablis hes certain principles and criteria that apply to regulations, legislative (Wmments, and other policy statements that have a substantial direct effect on . States, or on the relationship between the nat-ional government and the States or on the

responsibilities among the various l evels of government. Because Stat es have flexibility in designing general sales taxes subject to the lim i ted restriction on the use of avia t ion fuel tax proceeds, State decisions will ultimately

influen ce, regulate, and control im p lementation of taxes, including those touching aviation fuel. While th i s final policy amendmen t does not i m po se substantial direct requirement costs on State and loc a l 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 l anguage of the statute at i ssue, 49 U . S . C. 47133, and the detailed legislative history, reflect strong Congressional intent that aviation fuel t axes be used for airpor t purposes and State av i ation programs. In compliance with the requireme nt

of Executive Order 13132 that agencies examine closely any policies that may have Federalism implications or limit

the policy making
· discretion of the States, FAA engaged in efforts to consult

with and work coopera tive ly with States, local governments, and political · subdivisions, including participating in

conference calls with representatives from the N ational Governors Association, US Conference of Mayors, Na t ional Conference of State Legislatures, National League of C it ies, and National Association of State

Av iation Officials. In addition, FAA reached out t o certain states on an individual basis and interested trade groups including Airlines for Ameri c a; American A ssociation of Airport Executives; and Airports Council International-North America. Furthermore, we published the proposed amendment for notice and comment, and received comments from Kentucky, Iowa, and Georgia . This notice r espon ds to these comments. Through c onsultation, meetings and teleconferences as part 0f a robust public engagement process, FAA has balanced the States' interests · in me eting its taxing obligations, and Congress' intent to ensure that taxes on aviation fue l are expended for airport purpos e s . By doing so, the FAA has complied with the requirements of Executive Order 13132 . Comments Received on the Proposed Policy Amendment . The FAA received 25 substantive comments o n the proposals, from airport operators; industry and nonprofit associat ions repres e nting

airports, air carriers, business aviation

### 66284 Federal RegisterI Vol. 79, No. 216/Friday, November 7, 2014/Rules and Regulations
and airport service businesses; an air carrier; State government agencies; and private citizens. This summary of comments reflects

**~he** major issues raised and does not restate each comment received. The FAA considered all comments received even if not specifically identified andresponded 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 of the 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 interpretations 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 tho actions of State and local government taxing authorities, particularly non-sponsor governments

.

2

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

3. Defining the portion ofgeneral sales taxes collected on aviation fuel as an 'avia tion fuel tax,' and the administrative burden ofidentifying the aviation fuel component ofgeneral taxes.

4. Time allowed before full compliance with§47133 is required.

5. Clarifying that "noise mitigation" ref ers only to mitigation ofaircraft noise

.

6. How FAA will enforce§ 47133 with respect to jurisdictions that are not parties to an AlP grant agreement.

7. The proposal requires a federalism analysis under Executive Order 13132.

8. Suggestions for editorial changes to tho proposed policy language

.

1. Comment:Airport operators should not be held responsible for State and local taxes outside of the airport operator's control.

The majority of commenters, including all ofthe airport and government commenters, argued that proposed new paragraph IV.D.2 would unfairly hold airport operators responsible for the imposition oftaxes over which they 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 ability to eliminate a State or local tax that is not in compliance with Federal requirements for use ofairport r evenue. These comlllenters state that in many cases, an airport operator does not have control over loca l taxes, if the 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 airport.

Beyond 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 State tax. Airport sponsors would find itimpossible to provide assurance that other government agencies would comply with the revenue use statutes for the life of an AI P grant. Further, sponsors should not be 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 Sta te 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 Order 13132 on federalism, 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. The American Association of Airport Executives (AAAE) also suggested that the proposal may be in violation ofthe reservation of State powers in the U

.S. Constitution, and urged FAA to conduct a federalism analysis ofthis proposal because ofthe impact on State and local government relations

.

Response: Upon enter ing into an AlP grant agreement, an airport sponsor does in fact provide assurances that local taxes on aviation fuel will be in compliance 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 ofthe airport; the local airport system; or other facilities which are owned and operated by the owner 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 ofcommenters that it would be unfair to penalize airport sponsors for taxes imposed by another entity. Thus, the FAA is revising paragraph IV.0.2 to acknowledge the differences in taxes that are and are not controlled bytho 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§§47107(b) and 47133. Further, in instances ofunlawful 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 otherwise be made available to a State, municipalit y, or politica l subdivision thereof (including any multimodal transportation agency ortransit authority ofwhich the sponsor is a member entity) as part of an apportionment or grant made available pursuant to Title 49. [See 49 U

.S.C. 47107(n)(3).j

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 local taxation to conform to the requirements of §§47107(b) and 47133. Ifa noncompliant tax is adopted by a non· sponsor State or local government, notwithstanding the airport sponsor's advice and effort s, the FAA would not take enforcement action against the airport sponsor out of fairness to the sponsor who is not responsible f or the noncompliance. However, the FAA will pursue enforcement act ion pursuant to 49 U.S.C. 46301 or 47111 (0 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 assurance No. 21 toFederal Register/Vol. 79, No . 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 fuel impo sed by the airport operator o r owner itself; for taxes imposed by non
- sponsor State and local jurisdictions, 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 . Th e comments on federalism and federalism analysis are discussed separately under Comment 7. With respect to the comment that the proposal raises issues regarding the 10th Amendment of the U.S. Constitution, the FAA appropriately presumes the constitutionality of the statutes implemented by this policy. 2. Comment: FAA should not enforce compliance by State and local governments that are not airport sponsors. The Georgia Department of Law, on behalf of the Georgia Department of Transportation and the Georgia Department of Revenue (GDOT/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(f), 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 r efe r to airport sponsors, and do not mention non
sponsor 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 non- sponsors. Also, contrary to GDOT/

GDOR's comments, the FAA has not been silent on this issue. In the few circumstances involving the issue of a

non-sponsor imposing a tax on aviat i on fuel, the FAA has communicated a consistent message that compliance with§ 47133 is required. The FAA letters to non
- sponsors describing this obligation are c it ed in the notice of proposed policy at 78 FR 69790-69691. 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

of the former Airport and Airway Improvement A ct of 1982 (AAIA), as amended and recodified, 49 U.S.C. 4 7101, et se. However, as noted,§ 47133 imposes an obligation on entities that are not airport sponsors. First, the language of§ 47133 (a) imposes a limitation on the use of local taxes on

aviation fuel, regardless of whether the tax is imposed by a sponsor or nonsponsor. Second, §471 33 (c) limi t s the use of State-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 compliance with the statute, using available sanctions for noncompliance, is not only logical but is required as part of the 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 of the limitation on the use of aviation tax revenues. Moreov e r, FAA's civil penalty enforcement. authority in 49 U.S.C. § 46301 specifically authorizes the imposition of civil penalties for a viol ation 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 requirement virtually meaningless. importantly, Congress did not limit FAA's enforcemen t authority in 49 U . S.C . § 47111 (0 to just airport · . sponsors, but rather permitted ju dicial enforcement to restrain "a n y violation" of chapter 471-that includes the · requirements of§ 47133-by any person for a violation. "Any violation," . encompasses violations by non-spOn$Ors as well as airport sponsors . This expansive authority is based on the plain language of section, 47111(£), and supported by a review of the legislative history and prior versions of the l aw

under consideration . These prior versions limited enforcement to the

airport sponsor. See 140 Cpng. Rec. S7139-02, 1994 WL 27189 (noting that under the bill, "such court shall have jurisdiction to enforce obedience thereto

by a writ of injunction or other process, mandatory o r 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 enforce obedience thereto by a writ of injunction or other process, mandatory or otherwise, restraining any person from further violation." {e mphasis added) · · Given that the FAA interprets section

47111 and 47133 to obligate nonsponsor Sta te and local governments to use pro'Ceeds from aviation fuel taxes for certain purposes, the FAA does not agr e.e that the same sanctions that apply

to other aviation statutes would not apply to § 47133. Congress expressly provided for such sanctions by i ncluding§ 47133 in the statutory 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. 47Hl(f). 3. Comment: Defining the taxes on aviation fu e l cdllected 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 of Airport

Executives {AAAE) commented that

applying th e revenue use requirements to generally applicable taxes, such as sales taxes and taxes on all fuel products, is not supported by the legislative history and incorrectly int e rprets §§ 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 revenu es collected on aviation fuel from the rest of a general tax collection . The FranklinHart Airpor t Authority, Georgia, expressed concern that redirecting some local taxes on aviation fuel to the a i rport could lead those jurisdictions to redu ce other, non
- tax support for the airport. Th e comment suggested that for that rea s on the proposed policy could be a hardship for the airport, but did not . ass e rt that the proposed amendment was incorrect. One individual commented that an airport receives th e same general benefit as other taxpayers,

and that general taxes on aviation fuel sales shou ld be retained by State and local governments to pay for these general community services. R es ponse : AAAE and one individual were the only commenters that

### 66286 Federal Register/Val. 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 aviatiion 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 of the statute. The Airport and Airway Safety and Capacity Expansion Act of 1987, Pub. Law No. 100-223, amended the airpor1 grant revenue assurance provision to include, within the scope ofrevenue retentioR, "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 (c)

- ( e) ofthis section without substantive change as subtitles 

### n, Ill, and V

- X oftitle 49, United States Code, "Transpor tation". 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 ofthe revenue use statutes. The FAA continues to believe that applying the requirements of §§47107(b) and 47133 to the portion of general taxes collected on aviation 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 ofreporting 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 itselfinto compliance through an "action plan," which takes account of the State's legislative schedule, if necessary. And while we appreciate that therecould 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 itselfinto compliance will afford the State sufficient time to develop a mechanism for administering taxes in accordance with this policy.

With respect to the comment that aviation fuel tax revenues should support general government services, the F AA.notes, first, that general sales taxes of all 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 FAA should clarify the time line allowedforjurisdictions imposing taxes that affect aviationfuel to come into compliance with the policy.

. · GDOT/GDOR requested a more definitive time for Georgia state agencies and local jurisdictions to comply with the announced policy, and specifically 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 policy. 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 collectin g the taxes until the tax law is brought into compliance.

Response: The notice ofproposed 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 previously by affected State and local government non-sponsors-despite the existence of DOT/FAA's legal opinions on this subject. The amendment we adopt today is a final decision and amends FAA's Policy and Procedure Concerning the Use of Airport 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 immediate 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 time to come into compliance with the policy. While comments were limited to agencies ofthe State ofGeorgia and a few local jurisdictions 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 may require State legislation. The Georgia legislatu re 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 requirement s and tracking systems for discrete information on aviation fuel tax revenues. The plan may include a reasonable transition period, not to exceed three years, during which the FAA would agree, in an exercise ofits prosecutorial discretion, not to enforce the revenue use requirement against a non-sponsor State or local government. State and local governments should submit an action plan to the FAA within a year ofthe effective date ofthis notice.

Initiation ofan action plan would provide State and local governments sufficient time to plan for restructuring ofgeneral revenues to adapt to the dedication of aviation fuel tax revenue to airports and State aviation programs within a reasonable transition period, not to exceed three years from the effective date of this 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 federal obligations.

5. Comment: Thepolicy should make clear that "noise mitigation" refers only to mitigation of aircraft noise. The National Association of State Aviation Officials commented that the reference to off-airport noise mitigation, as an acceptable use of aviation fuel tax proceeds, should be revised to clarify that this refers only to noise related to aircraft operation.Federal Register /Vol. 79, No. 216/ Friday, November 7, 2014 I Rules and Regulations 66287 Response: The definition of "noise mitigation" was not the subject of the

proposed amendment. While the phrase "noise mitigation" in Section 47133 commonly refers to aircraft noise, we decline here to reach whether the statute precludes conside ration of other sources of noise for mitigation purposes. In addition, we note that the statute prov id es for use of airport revenues on and off airport for noise mitigation purposes. 6. Comment: FAA should clarify how it wiiJ require non-airport sponsors to comply with the policy.

The Iowa Public Airports Association requested clarification on how parties that have not entered into a grant agr e ement with the FAA would be required to comply with the federal requirements for use of aviation fuel tax revenues. Response: The preamble of the notice of proposed policy noted that there are two means of enforcing compliance with § 47133 by non-sponsor State and local governments: civil penalties, unde . r 49 U.S.C. 4630 1 ( a) , and application to the U.S. district court for judicial enforcement under 49 U.S . C. 47111(f). While not an issue in Iowa, States that have entered into block grant agreements with the FAA under 49 U.S.C. 47128 could also be subject to action for breach of that agreement. The

FAA agrees that the agency's enforcement process should be described in the policy statement itself. Accordingly, new language has been added to Section lX.E., Sanctions for Noncompliance, for this purpose. 7. Comment: The proposal affects the relationship between federal, State and local governments, and therefore requires a federalism 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 b y 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 of proposed policy, the FAA analyzed each of the key terms

of the statute with reference to the legislative intent of the revenue use

legislation, to the meaning of the 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 of the .... statute was reasonably possible . Even if an alternative interpretation of certain terms were theoretically permiss ible , a policy interpreting the statute in a manner that substantially llildermined the legislative purpose o.f the statute is " not a viable option for the agency. Accordingly, the FAA believes that the policy as adopted correctly implem e nts the revenue use legislation adopted by Congress. The policy is, therefore,

required by statute for purposes of the executive order. Because this policy

simply implements the explicit mandat · e set forth in section 47133, the requirements of Executive Order 1313 . 2 and DOT's Guidance on Federalism ' (July 21, 1988), are not triggered. Thus, although a federalism analysis of this policy is not required by Executive Order 13132, the FAA did engage in efforts to consult with and .

work cooperatively with States, local governments, political subdivisions, and interested trade groups. Through consultatio n, meetings and teleconferences as part of a robust public engagement process, FAA ha s balanced the States' interests in meeting its taxing obligations, and Congress' intent to 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 pro cess, the FAA also published the policy amendment for notice and comment in the Federal Register , soliciting comment from State and l ocal ' governments, as well as other interested parties. The only cost information submitted by any commenter was

received from the Franklin-Hart Airport Authority, which expresSEid concern that redirecting some local taxes on aviation fuel to the airport cou ld lead those jurisdictions to reduce other, nontax support fcir the airport. However, the anticipated cost would result not from the agency's policy itself, but from the expected actions of local governments in redu cing voluntary support for the airport. For the above reasons, the FAA finds that further analysis of the adopted policy for f edera lism is s ues is not required by Executive Order 13132 . . 8 . Comment: The final policy should include certain grammatica l and sty}e changes.

Response: Delta Airlines and Airlines Fo r Ameri c a recommended certain edits for grammar and clarity: Paragraph II.B . 2: Clarify the . phrase "on or off the airport." Paragraph IV.D.1: Clarify that only State aviation fuel taxes may be used for State aviation programs. Paragraph IV.D.4.b: Clarify that §§ 47107(b ) and 47133 apply to taxes on the use of aviation fuel. In each case the proposed edits more accurately describf:) 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 FAA amends the Policy and Procedure Concerning the Use of Airport 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 ta;xes on aviation fue l (except 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 b e used on or off the airport for a noise mitigation purpose. 2. In Section IV, Statutory Requirements for the Use of A irport Revenue, renumber paragraphs D and E as paragraphs E and F, and add a new paragraph D to read as follows: D. Use of Proceeds from Taxes o_n

Av i ation Fuel. 1. Federal law limits use of the proceeds from a State or local government tax qn aviation fuel to the purposes permitted in those sections, as described in IV .A. of this 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 t o

an AIP gran t' agreement have agreed, as

a condition of receiving a grant, that the proceeds from a State or local government tax on aviation fue1 will be used only for the purposes listed in paragraph 1. This assurance is considered an enforceable commitment with respec t to taxes on aviation fuel imposed by the airport operator. For taxes on aviation fuel imposed by nonsponsor Sta t e government and other lo ca l jurisdictions, airport sponsors are

### 66288 Federal Register/Vol. 79, No. 216/Friday, November 7, 2014/Rules and Regulations expected to inform taxing authorities of Federal requirements for use of aviation 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 assistance (as defined in Section II.b.2 of this Policy), whether or not the airport is currently subject to the terms of an AfP grant agreement, and regardless of the State or local jurisdiction imposing the tax.

4

. The limits on use of aviation fuel tax revenues established by section 47107(b) and section 47133:

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 of tax collected specifically for the sale, use, purchase or storage of aviation fuel, and not to the amounts collected f or 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 atthe airport are collected; and

d. apply to a new assessment or imposition of a tax on aviation fuel, even ifthe tax could have been imposed earlier under a statute enacted before December 30, 1987.

3. In Section 

### 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 ofproceeds' from a tax on aviation fuel, the Secretary may assess a civil penalty as described in E.t.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 ofthe State's commitments in its application for participation in the program.

Issued in Washington, DC, on November 3, 2014. Randall S. Fiertz, Dire ctor , Office of Airport Compliance and ManagementAnalysis. I FR Doc. 2014

- 26408 Filed 11-6-14: 8:45 ami BILLING CODE

**91~13-P** DEPARTMENT OF COMMERCE Bureau of Industry and Security 15 CFR Part 744 [Docket No. 141029906-4906-01] RIN 0694-AG31 Venezuela : Implementation of Certain Military End Uses and End Users License Requirements Under the Export Administration Regulations AGENCY: Bureau ofIndustry and Security, Commerce. ACTION: Final rule. S

• UMMARY: In response to the Venezuelan military's violent repression ofthe Venezuelan people, the Bureau of Industry and Security (BIS) amends the Export Administration Regulations (EAR) in this final rule to impose license requirements on the export, reexport, or tran sfer (in-country) of certain items to or within Venezuela when intended for a military end use o r 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 ef

fective November 7, 2014 FOR FURTHER INFORMATION CONTACT: Foreign Policy Division, Office of Nonproliferation and Treaty Compliance, Bureau 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 repression included direct violence against protesters, detentions of protesters and political leaders, and acts of intimidation, resulting in numerous deaths and injuries. On July 30, 2014, the Department ofState 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 of the Venezuelan military undermine democratic processes and institutions and thereby constitute an unusual and extraordinary threat to the national security and foreign policy ofthe 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. Military 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 ofthis 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 of certain items on the Commerce Control List (CCL) that otherwise would not require 

### a license to a specified destination. The "military end use" control initia.lly applied to certain items exported, reexported or transferred (in country) to the People's Republic ofChina. Subsoquontly, 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. Government's response to the abuses by the Venezuelan military, in this rule, BIS amends § 744.21 of the EAR to apply "military end use" and "military end user" license requirements to Venezuela. Specifically, BIS amends § 744.21 by adding "orVenezuela" after "Russia," wherever that name appears, including in the heading of the section. Items subject to these license requirements are those listed in Supplement No. 2 to Part 744.

This final rule also adds a paragraph (h) to address the effects ofthese new license requirements on transactions under contract prior to the effective date ofthis rule. Saving Clause

Shipments of items 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 exporting carrier, or en route aboard a carrier to a port of export, on November 7, 2014, pursuant to actual orders for export orreexport to a foreign destination, may proceed to that destination under the previously applicable license except ion or without**~.** - 1-'' ',: '<

### 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 f rom 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 compl iance with the Revenue Use Pol icy. As the portion of our sa les tax in question is const itutionally dedicated to other purposes (education), we are contemplating as part of an action plan a methodology to accurately record the amount being col lected and then a mechanism to allocate that amount from other state sources to state aviation programs. Any insight would be very helpful. 

### Response:
Yes, we have concluded that offset s arepermitted.Aviation fuel tax statutory requirements are met bya State appropriating money for airportpurposes from its genera/fund in an amount equal to or exceeding the aviationfuel taxproceeds collected, and remitting such funds into the State aviation program fund, orto the applicable airport revenue account.
We want topointout your question raises another issue sinceyou reference thata portion of the aviationfuel sales taxbeing constitutionallydedicated to otherpurposes. The FAA's Policy and Procedures Concerning the Use of Airport Revenues {64 Fed. Reg. 7696, February 16, 1999)provides for taxes on aviationfuel in effecton December 30, 1987 tobe "grandfathered". We do not have sufficient data concerning the constitutionallydedicatedportion of the taxes andcannot comment further on the grandfathering of the aviationfuel taxes. Guidance regarding theprocess to determine whethera tax is eligible for grandfathered status ispostedat regulations.gov, Docket FAA

- 2013-0988.

In proceeding with a permittedoffset, theStateand local governments interested in making an offset need to confirm thatsuch actions are lawful andconsi stent with applicable State and local laws, and advise FAA accordingly. Additionalfy, the actionplan should confirm that requirements are inplace to ensure the appropriations are implementedandenforceable bystateorlocal agencies; the State will also needto account for and remit to the State aviationfund or to a local airport entity the dollar amount of the revenues generated from the state orlocal aviationfuel tax, as applicable

. The State musthave appropriate controls inplace to ensure tax revenues arepromptly remitted to the appropriate airport revenue accounts andState aviation program accounts.
Aviation Fuel Tax GrandfatheringAction Plans
The FAA Policy andProcedures Concerning the Use of AirportRevenue; Proceeds From Taxes on A11iation Fuel, {79 Fed. Reg

. 66282, November 7, 2014) (Amendment ) provides thatproceeds from

1taxes 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, 1.987. Any amendments of the grandfathered tax statutes that make substantive changes after December 30, 1.987, 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

- a-nd nont!Jsponsors tci 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, 1.987, 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 aviationJuel 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, 1.987, 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**effe~;t** on**Dec~mber** 30, 1.987, with the following: '**·~** 1 •**~** i , ' .• ' ' 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 th ' e ameruJ.ments; - . 2

### b. Document identifying the effective date oftheaviationfuel tax, thepurpose andapplicability of the tax, the use of theproceeds, andanyadministrative costs charged for the collection andallocation of theproceeds of the aviationfuel taxes;

c
. 

### Document identifying the tax rate or rates, credits, orexemptions; and
d. Document detailing commitment to advise of anysubsequent amendments thatcouldaffect grandfatheredstatus

.
(5) State and/orlaw taxstatutenotin effecton December30, 1987, andnot eligiblefor grandfathered status

- submit action plan to correct non-compliant law with the following:

a. True andcorrect copies of the legislation and/or tax code, andsummaries of the legislation creating the taxon aviationfuel;
b. Document identifying theeffective date of the aviation fuel tax, thepurpose andapplicability of the tax, the use of theproceeds, andanyadministrative costs charged for the collection andallocation of theproceeds of theaviationfuel taxes;

c. 

### Summaries of anyamendments and/or recodifications of the taxcode;
d. Document identifying the tax rateorrates, 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 aviation fuel tax revenues, anddisclosure of a reasonable transition period (not to exceed three years) to implement the necessaryprocesses tobecomecompliant with theAmendment.



## In developing an action plan,

**~DOT**

**.** 

## and GDOR submitted the following questions to the FAA for clarification regarding the New Policy:

1. If the 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 thatjurisdic t ion for airport improvement or aviation

- related purposes (hereinafter "airport purposes"), may that requirement be satisfied by the State's appropriation of monies for airport purposes from its general fund ?


### Yes. TheAAIA requires theproceeds from local aviation fuel taxes imposedbya particular jurisdiction be usedby that jurisdictionfor the capital oroperating costs of (a) the airport; (b) the local airportsystem; or (c) other local facilities ownedor operated by the airport owner or operator anddirectly andsubstantially related 

### to the air transportation of passengers or property. Additionally, in accordance with49 U.S. C. § 

### 47133, a State taxon aviationfuel may be used to supporta State aviationprogram, and airport revenue maybe usedon or off the airport for a noise mitigationpurpose.

3We have concluded that these aviation fuel tax statutory requirements may be satisfied by the State's appropriation of monies for airport purposes from its general funds. We are labeling this type of action as an offset, and are permitting offsets when the State appropriates money for airport purposes'from its gent?rai fund in an amount equal to or exceeding the aviation fuel tax proceeds**collected~** and then remits such funds into the applicable airport revenue account. The same is true for a State aviation fuel tax; the State could appropriate monies from its general fund and deposit an amount equal to or exceeding the State aviation fuel tax proceeds into the State aviation program**fund~** .. State and local governments interested in making an offset would need to confirm**~hat** such actions are lawful and consistent with applicable State ancf local**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 and State aviation program accounts recejve on a con _ tif!uing basis during each fiscal year an amount equal to the full amount$ collected for aviation fuel taxes . 2. If the 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 appropriation from its genera/fund for airport purposes would have to be reflected in a specific line item in the State's annual · budget. A**Sf?ecifi~** line item for airport purposes in a State's annual budget appropriation is a**comp~nent** of tiJe 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 aviation fuel 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. If the 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 jurisdictions in the State in order t o comply with the AAIA's requirements? For example, if local sales taxes on aviation fuel state-wi . de 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 and pay an amount equal to the aviation fuel tax proceeds levied and collected within a local jurisdiction when such proceeds are not used for airport purposes. Yes, the amount of the State's annual appropriation for airport purposes must be at least equal-to or exceed 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?


### Asnotedabove, the answers
_

to Questions No. 1 and3 are "yes

. " The answer to Question No. 4 is yes
. The State'spayment of collected aviation fuel taxes to airport sponsors may come from appropriated funds in one fiscal ye_ar based on the local aviation fuel taxes collected during the immediateprior fiscal year, provided thepayments made are reconciled with amounts collected in accordance with GenerallyAcceptedAccounting Standards {GAAP) and suchpayments are made on a timely andpromptbasis within defined reportingperiods. The State's actionplan should detail theprocess for collection, timely reconciliation andprompt paymentof fJppropr iated.funds within defined reportingperiods

.
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 j urisdiction's tax collections on aviation fuel, or could the appropriated funds be used or distributed more generalfy? 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 ofthe 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

-wide for airport purposes, regardless of how much a local jurisdiction has received i n taxes on aviation f uel and where the appropriated funds are used?


### Asnoted above, the answers to Questions No. 1 and3 are "yes."State appropriated fundsfor airportpurposes have to be used ordistributed to match each local jurisdiction's tax collections on aviation fuel

. Thus, the $1 million of appropriated funds attributable to a particular jur isdictionfor airportpurposes must be used in that localjurisdictionfor permissible airportprojects orprograms. It does notsuffice that$100 million in appropriated funds is usedstl!te-wide for airportpu_rposes.



## The following are the original questions from the states and the FAA's response:

I. First, it is clear that 1987is the grandfatherpoint. For clarity, a tax in place before then and unchanged is grandfathered, but what 

## ifthere is a tax in place before 1987which has been amended either to change the rate, or to add orsubtract what is covered (for example when Virginia changedits sales tax laws 25years orso ago to exclude certain foods and medicines)

. Does that change the grandfathered status?

o 

### It couldsince it depends on , . • Exempted aviation fuel, then added back in-not exempted
• Rate changed from 4% to 

### 6%, then only the 4% revenue is "grandfathered''- the overage must be used for airportpurposes • What iftax "sunsets"butwas then extended?Depends on if gap.

5• Amendments to the legislation may or may not result in exempt status . FAA will need to review the enabling and amendment language . o Grandfather cutoff date for existing aviation fuel taxes is December 30, 1987. FAA will need to receive documentation filed with the action plans to determine the grandfather status of aviation fuel taxes. Amendment s to legislation may or may not result in negating the grandfathered status depending on the amendment itself. FAA will need to review the legislation or amendments to aviation fuel 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? Will funds be withheld? Other? o If state or locality is an airport sponsor: treat as normal revenue diversion (finding of non-compliance, civil penalties, wi . thholding of transportation grants, filing with U.S. district court . to seek enforcement of o,rder). o If state or locality is NOT an airport sponsor: impose civil penalties AND 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 poss i ble for block grant states? o If block grant state is levying a tax on aviation fuel contrary to the revenue use requirements and the FAAs Revenue Use Policy, it could be a breach of contract between FAA and Block Grant State. o Sponsors and non-sponsors would be treated same whethe r under a block grant or not . JV . One state has a general state sales tax on jet fuel . The state statutory provisions dedicating jet fuel sales taxes to aviation in the state passed in 1993. However, there were certain constitutional provisions in place in the state before 1987 that dedicate a portion of any general sales taxes to three other purposes (education, conservation,

parks and soils) . A legal interpretation was given in that state that said because the constitutional provisions dedicating general safes taxe_s . to those other purposes were in effect before 1987, they are grandfathered in and the state should be in**~ompliance** with the FAA's policy . Does the FAA agree with that interpretation? o In general, FAA would agree , but we would ..,ant to make sure that i . The general sales tax subject to thf? coostitutional provision was in place before December 30,1987, and unchanged thereafter. 6

### ii

. 

### In general , if the revenue diversion was lawful, FAA would not be concerned with how the funds
·are spent

- iftax was inplace before December 30, 1987.
V. 

### Ifa state has a tax that is subject to the FAA's policy and the revenue from that tax is con s titutionally ear marked for non7 

### aviationpurposes:
1. May the state·come into compliance with the FAA policy by exempting aviationfuel from that tax?

. ' · ,,

o 

### Simply, yes
. Ifaviation fuel is exempt from anystate orlocal tax, there would be
no issue

. 

## o This wouldbe 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 implementsuch an exemption without incurring penalties orsanctions (assuming that until the exemption kick s in, the revenue will continue to be distributed according to the constitutional earmark)?

o 

### The state will have one year (from December8, 2014} to include the exempt ion of taxes on aviat ionfuel in the actionplan. o Exempt ion to be implemented within a reasonable transitionper iod, not to exceed three years (no later than December 8, 2017}.
3. Will the FAA beprovidingformal-notification to states on whether they are potentially not in compliance?

o 

### Not unless the FAA r eceives a complaint or notification

. o 

### Too manypossible state/municipality combinations for FAA toprovide direct notificat ion.
4

. 

## If so, when will that occur?



## ·o Not applicable

- won'toccur.
VI. Is the FAA policy limited to aviationfuel sales tax revenue from all NPIAS airports or only f

ederally obligated NPIAS air ports?



## 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 or a local government taxing authority whether or not acting as a sponsororairportowner 

### of operator. ·

7o NPIAS does not come into consideration within the guidelines of the amendment. The restrictions on use of aviation fuel tax proceeds 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 the purpose of the FAA policy, does accepting a planning grant only (no construction grants) result in an airport falling under this new policy? o For this purpose, an airport receiving a planning grant is deemed as having "received federal assistance" and therefore, this policy applies. (See clarification in the 2014 amendment to the grant assurances at 79 Fed. Reg. 18733, Apri/3, 2014 . } o A sponsor undertaking a federally funded planning project is subject to the revenue use requirements . VIII. Offsets. Can tax on aviation fuel 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