Document ID: FAA-2013-0988-0036
Agency: faa
Document Type: Rule
Title: Policy and Procedures Concerning the Use of Airport Revenue: Proceeds From Taxes on Aviation Fuel
Posted Date: 2014-11-07T05:00Z

[Federal Register Volume 79, Number 216 (Friday, November 7, 2014)]
[Rules and Regulations]
[Pages 66282-66288]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-26408]

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Chapter I

[Docket No. FAA-2013-0988]

Policy and Procedures Concerning the Use of Airport Revenue; 
Proceeds From Taxes on Aviation Fuel

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Final Policy Amendment.

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SUMMARY: This action adopts an amendment to the FAA Policy and 
Procedures Concerning the Use of Airport Revenue published in the 
Federal Register at 64 FR 7696 on February 16, 1999 (``Revenue Use 
Policy''). This action confirms FAA's long-standing policy on Federal 
requirements for the use of proceeds

[[Page 66283]]

from taxes on aviation fuel. Under Federal law, airport operators that 
have accepted Federal assistance generally 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 (imposed by either an airport sponsor or a non-sponsor) are 
subject to use either for a State aviation program or for airport-
related purposes. The statutory revenue use requirements apply to 
certain State 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 the Revenue Use Policy, FAA's 
interpretation of the Federal requirements for use of revenue derived 
from taxes on aviation fuel.

DATES: This document is effective December 8, 2014.

FOR FURTHER INFORMATION CONTACT: Randall S. Fiertz, Director, Office of 
Airport Compliance and Management Analysis, Federal Aviation 
Administration, 800 Independence Avenue SW., Washington, DC 20591, 
telephone (202) 267-3085; facsimile (202) 267-5257.

SUPPLEMENTARY INFORMATION: 

Availability of Documents

    You can get an electronic copy of this Policy and all other 
documents in docket 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.
    You can also get a copy by sending a request to the Federal 
Aviation Administration, Office of Airport Compliance and Management 
Analysis, 800 Independence Avenue SW., Washington, DC 20591, or by 
calling (202) 267-3085. Please make sure to identify the docket number, 
notice number, or amendment number of this proceeding.
    Authority for the Policy Amendment. This Policy Amendment is 
published under the authority described in Subtitle VII, part B, 
chapter 471, section 47122, and the Federal Aviation Administration 
Authorization Act of 1994, Sec.  112(a), Public Law 103-305, 49 U.S.C. 
47107(l)(1) (Aug. 23, 1994).

Background

    On November 21, 2013, FAA published a proposed amendment to its 
policy on Federal requirements for the use of proceeds from taxes on 
aviation 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 accepted Federal assistance generally may use 
airport revenues only for airport-related purposes. The revenue use 
requirements apply to the 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 provide assurance that revenues from State and local 
government taxes on aviation fuel will be used for certain aviation-
related purposes. These purposes include airport capital and operating 
costs, and State 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 
requirements. For existing taxes that do not qualify for grandfathering 
(which are State or local taxes on aviation fuel in effect on December 
30, 1987), the FAA will allow for an up to three-year transition period 
from the effective date of this document.
    The FAA invited public comment on the policy interpretation 
question, in part due to the interests of sellers and consumers of 
aviation fuel, and of State and local government taxing authorities on 
limits on the use of proceeds from taxes touching aviation fuel. The 
notice also solicited comments about whether there are other reasonable 
interpretations of the statute as it relates to local 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 comments on the proposed 
Policy amendment.

Executive Order 13132 (Federalism)

    Executive Order 13132 establishes certain principles and criteria 
that apply to regulations, legislative comments, and other policy 
statements that have a substantial direct effect on States, or on the 
relationship between the national government and the States or on the 
responsibilities among the various levels of government. Because States 
have flexibility in designing general sales taxes subject to the 
limited restriction on the use of aviation fuel tax proceeds, State 
decisions will ultimately influence, regulate, and control 
implementation of taxes, including those touching aviation fuel.
    While this final policy amendment does not impose substantial 
direct requirement costs on State and local 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 language of the statute at issue, 49 U.S.C. 47133, and the 
detailed legislative history, reflect strong Congressional intent that 
aviation fuel taxes be used for airport purposes and State aviation 
programs.
    In compliance with the requirement 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 cooperatively with States, 
local governments, and political subdivisions, including participating 
in conference calls with representatives from the National Governors 
Association, US Conference of Mayors, National Conference of State 
Legislatures, National League of Cities, and National Association of 
State Aviation Officials. In addition, FAA reached out to certain 
states on an individual basis and interested trade groups including 
Airlines for America; American Association 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 responds to 
these comments.
    Through consultation, meetings and teleconferences as part of a 
robust public engagement process, FAA has balanced the States' 
interests in meeting its taxing obligations, and Congress' intent to 
ensure that taxes on aviation fuel are expended for airport purposes. 
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 on the proposals, from 
airport operators; industry and nonprofit associations representing 
airports, air carriers, business aviation

[[Page 66284]]

and airport service businesses; an air carrier; State government 
agencies; and private citizens. This summary of comments reflects the 
major issues raised and does not restate each comment received. The FAA 
considered all comments received even if not specifically identified 
and responded to in this notice.
    A majority of commenters supported the general purpose of the 
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. Sec.  47107(b) and Sec.  
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 of these statutes.
    The comments requesting a change in the proposed policy tended to 
focus on several issues:
    1. The unfairness of holding airport operators responsible for the 
actions of State and local government taxing authorities, particularly 
non-sponsor governments.
    2. The intent of Sec.  47133 to require compliance by non-sponsor 
State and local governments.
    3. Defining the portion of general sales taxes collected on 
aviation fuel as an `aviation fuel tax,' and the administrative burden 
of identifying the aviation fuel component of general taxes.
    4. Time allowed before full compliance with Sec.  47133 is 
required.
    5. Clarifying that ``noise mitigation'' refers only to mitigation 
of aircraft noise.
    6. How FAA will enforce Sec.  47133 with respect to jurisdictions 
that are not parties to an AIP grant agreement.
    7. The proposal requires a federalism analysis under Executive 
Order 13132.
    8. Suggestions for editorial changes to the 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 of the airport and 
government commenters, argued that proposed new paragraph IV.D.2 would 
unfairly hold airport operators responsible for the imposition of taxes 
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 
of airport revenue. These commenters state that in many cases, an 
airport operator does not have control over local 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 it impossible to provide assurance that other 
government agencies would comply with the revenue use statutes for the 
life of an AIP 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 State 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 
of the reservation of State powers in the U.S. Constitution, and urged 
FAA to conduct a federalism analysis of this proposal because of the 
impact on State and local government relations.
    Response: Upon entering into an AIP grant agreement, an airport 
sponsor does in fact provide assurances that local taxes on aviation 
fuel will be in compliance with Sec. Sec.  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 of the airport; the local airport system; or 
other facilities which are owned and operated by the owner or operator 
of the 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 of aviation 
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 of commenters that it 
would be unfair to penalize airport sponsors for taxes imposed by 
another entity. Thus, the FAA is revising paragraph IV.D.2 to 
acknowledge the differences in taxes that are and are not controlled by 
the airport sponsor, for purposes of grant compliance. For taxes within 
the airport sponsor's direct control, the airport sponsor must comply 
with the revenue use requirements of Sec. Sec.  47107(b) and 47133. 
Further, in instances of unlawful revenue diversion where the sponsor 
is in control of the 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, municipality, 
or political subdivision thereof (including any multimodal 
transportation agency or transit authority of which 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).]
    For taxes imposed by non-sponsor State and local governments, the 
airport sponsor will be expected to advise those entities of Federal 
requirements for use of aviation 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 Sec. Sec.  47107(b) and 
47133. If a noncompliant tax is adopted by a non-sponsor State or local 
government, notwithstanding the airport sponsor's advice and efforts, 
the FAA would not take enforcement action against the airport sponsor 
out of fairness to the sponsor who is not responsible for the 
noncompliance. However, the FAA will pursue enforcement action pursuant 
to 49 U.S.C. 46301 or 47111 (f) 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 to

[[Page 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 imposed by the airport operator or 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.
    The 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 Sec. Sec.  
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 Sec.  47133 and Sec.  47111(f), whereas 
Sec.  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 refer 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 Sec.  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 aviation fuel, the FAA has 
communicated a consistent message that compliance with Sec.  47133 is 
required. The FAA letters to non-sponsors describing this obligation 
are cited in the notice of proposed policy at 78 FR 69790-69691. Copies 
of FAA's letters are posted in Docket No. FAA-2013-0988. 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 FR at 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 Act of 1982 
(AAIA), as amended and recodified, 49 U.S.C. 47101, et se. However, as 
noted, Sec.  47133 imposes an obligation on entities that are not 
airport sponsors. First, the language of Sec.  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 non-sponsor. Second, Sec.  
47133 (c) limits 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 Sec.  47133. But that would be 
contrary to the language of Sec.  47133 which makes no distinction 
between sponsor or non-sponsor entities for purposes of the limitation 
on the use of aviation tax revenues. Moreover, FAA's civil penalty 
enforcement authority in 49 U.S.C. Sec.  46301 specifically authorizes 
the imposition of civil penalties for a violation of Sec.  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 Sec.  47133 and render the 
statutory requirement virtually meaningless.
    Importantly, Congress did not limit FAA's enforcement authority in 
49 U.S.C. Sec.  47111 (f) to just airport sponsors, but rather 
permitted judicial enforcement to restrain ``any violation'' of chapter 
471--that includes the requirements of Sec.  47133--by any person for a 
violation. ``Any violation'' encompasses violations by non-sponsors as 
well as airport sponsors. This expansive authority is based on the 
plain language of section, 47111(f), and supported by a review of the 
legislative history and prior versions of the law under consideration. 
These prior versions limited enforcement to the airport sponsor. See 
140 Cong. 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 or 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.'' 
(emphasis added)
    Given that the FAA interprets section 47111 and 47133 to obligate 
non-sponsor State and local governments to use proceeds from aviation 
fuel taxes for certain purposes, the FAA does not agree that the same 
sanctions that apply to other aviation statutes would not apply to 
Sec.  47133. Congress expressly provided for such sanctions by 
including Sec.  47133 in the statutory provisions that can be enforced 
by civil penalty in 49 U.S.C. 46301. In addition as noted, compliance 
with Sec.  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. 47111(f).
    3. Comment: Defining the taxes on aviation fuel collected 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 the 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 interprets 
Sec. Sec.  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 revenues collected on aviation fuel from the 
rest of a general tax collection. The Franklin-Hart Airport Authority, 
Georgia, expressed concern that redirecting some local taxes on 
aviation fuel to the airport could lead those jurisdictions to reduce 
other, non-tax support for the airport. The comment suggested that for 
that reason the proposed policy could be a hardship for the airport, 
but did not assert that the proposed amendment was incorrect. One 
individual commented that an airport receives the same general benefit 
as other taxpayers, and that general taxes on aviation fuel sales 
should be retained by State and local governments to pay for these 
general community services.
    Response: AAAE and one individual were the only commenters that

[[Page 66286]]

specifically objected to the proposed amendment that general taxes 
collected on aviation fuel sales are ``taxes on aviation 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 
airport grant revenue assurance provision to include, within the scope 
of revenue retention, ``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 of the United States, related 
to transportation, are revised, codified, and enacted by subsections 
(c)-(e) of this section without substantive change as subtitles II, 
III, and V-X of title 49, United States Code, ``Transportation''. 
Those laws may be cited as ``49 U.S.C. __--''. Section 1.(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 of the 
revenue use statutes. The FAA continues to believe that applying the 
requirements of Sec. Sec.  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 of those 
statutes, and most consistent with the congressional intent of the 
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 of reporting 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 of time to bring itself into compliance through an 
``action plan,'' which takes account of the State's legislative 
schedule, if necessary. And while we appreciate that there could be 
some additional work required to track the amount of ``general'' tax 
revenue attributable to aviation fuel, the FAA is charged with 
implementing Sec.  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 itself into 
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 FAA 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 non-sponsor 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 allowed for 
jurisdictions imposing taxes that affect aviation fuel 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 if 
jurisdictions require more time, they can stop collecting the taxes 
until the tax law is brought into compliance.
    Response: The notice of proposed 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 of Transportation, as well as airport sponsors and non-
airport sponsors (including a State, a political subdivision of a 
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 itself requested additional time to 
come into compliance with the policy. While comments were limited to 
agencies of the State of Georgia and a few local jurisdictions in 
Georgia, the FAA understands that other States may have laws that 
require, or at least allow, proceeds of general 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 
legislature 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 of aviation 
fuel tax revenues. The action plan should detail the process necessary 
to develop reporting requirements 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 of its 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 of the effective date of this 
notice.
    Initiation of an action plan would provide State and local 
governments sufficient time to plan for restructuring of general 
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 of an 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: The policy 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.

[[Page 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 consideration of 
other sources of noise for mitigation purposes. In addition, we note 
that the statute provides for use of airport revenues on and off 
airport for noise mitigation purposes.
    6. Comment: FAA should clarify how it will 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 agreement 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 Sec.  47133 by non-
sponsor State and local governments: civil penalties, under 49 U.S.C. 
46301(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 IX.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 by 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 permissible, a policy interpreting the statute in a 
manner that substantially undermined the legislative purpose of the 
statute is not a viable option for the agency. Accordingly, the FAA 
believes that the policy as adopted correctly implements 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 mandate set forth in section 47133, the 
requirements of Executive Order 13132 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 consultation, 
meetings and teleconferences as part of a robust public engagement 
process, FAA has 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 process, the FAA also published the 
policy amendment for notice and comment in the Federal Register, 
soliciting comment from State and local governments, as well as other 
interested parties. The only cost information submitted by any 
commenter was received from the Franklin-Hart Airport Authority, which 
expressed concern that redirecting some local taxes on aviation fuel to 
the airport could lead those jurisdictions to reduce other, non-tax 
support for the airport. However, the anticipated cost would result not 
from the agency's policy itself, but from the expected actions of local 
governments in reducing voluntary support for the airport.
    For the above reasons, the FAA finds that further analysis of the 
adopted policy for federalism issues is not required by Executive Order 
13132.
    8. Comment: The final policy should include certain grammatical and 
style changes.
    Response: Delta Airlines and Airlines For America 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 Sec. Sec.  47107(b) and 47133 
apply to taxes on the use of aviation fuel.
    In each case the proposed edits more accurately describe the 
requirements of Sec. Sec.  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 taxes on aviation fuel (except taxes in effect on 
December 30, 1987) are considered subject to the revenue-use 
requirements in 49 U.S.C. 47107 (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 be used on or off the airport for a 
noise mitigation purpose.
    2. In Section IV, Statutory Requirements for the Use of Airport 
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 on Aviation Fuel.
    1. Federal law limits use of the proceeds from a State or local 
government tax on 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 to an AIP grant agreement have 
agreed, as a condition of receiving a grant, that the proceeds from a 
State or local government tax on aviation fuel will be used only for 
the purposes listed in paragraph 1. This assurance is considered an 
enforceable commitment with respect to taxes on aviation fuel imposed 
by the airport operator. For taxes on aviation fuel imposed by non-
sponsor State government and other local jurisdictions, airport 
sponsors are

[[Page 66288]]

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 of Federal assistance (as defined in 
Section II.b.2 of this Policy), whether or not the airport is currently 
subject to the terms of an AIP 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 of revenues 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 for 
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 of fuel at the airport are 
collected; and
    d. apply to a new assessment or imposition of a tax on aviation 
fuel, even if the 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 of proceeds from a tax on aviation fuel, the 
Secretary may assess a civil penalty as described in E.1.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 of 
the State's commitments in its application for participation in the 
program.

    Issued in Washington, DC, on November 3, 2014.
Randall S. Fiertz,
Director, Office of Airport Compliance and Management Analysis.
[FR Doc. 2014-26408 Filed 11-6-14; 8:45 am]
BILLING CODE 4910-13-P