A CAPITOL VIEW Revenue Raised at the Airport Should Stay at the Airport By Jonathon T. Freye T he most recent Infrastructure Report Card, issued by the American Society of Civil Engineers, gave airports a “D.” The Airports Council International estimates there are over $100 billion in unmet airport infrastructure needs. And, all of us are aware of long-overdue projects at our own airports: aprons in need of repaving, taxiway lights that need to be replaced—the list goes on. So, it might surprise you to learn that, despite the significant level of need at airports around the coun- try, revenue intended for airport use is being diverted elsewhere. Since 1987, a federal law has required that tax revenues generated by the sale of aviation fuel be remit- ted to the airport for operational expenses and capital improvement. Simply put, revenue raised on an airport by the sale of aviation fuel should stay on the airport. But, many state and local tax authorities interpreted the statue to only apply to taxes they may have levied specifically on aviation fuel, and not to revenues raised by general sales taxes. In their view, and despite apply- ing to aviation activities, a general sales tax did not count as an aviation-specific tax, and that they could use those revenues for other activities such as debt reduction, education, or road construction. In contrast, the Federal Aviation Administration (FAA) said the law applies to any tax, including general sales taxes, that are imposed on the sale of aviation fuel. In a policy memo finalized in 2014, the FAA acknowledged widespread confusion and misinterpretation of the law and gave tax jurisdictions three years to create a plan to come into compliance and submit it for FAA approval. The issue is politically challenging for several reasons. First, elected officials, who determine tax policy at the state and local levels, are keenly aware of the programs the tax revenues are being used to support. Almost certainly, they wager that the programs they’ve previ- ously been using the monies for (e.g. school funding) outweigh airport capital improvements in the minds of their voters. Second, most tax jurisdictions are not concerned with the source of general sales tax revenue. Businesses report and remit their sales tax burden on a regular basis, altogether. From an administrative standpoint, airport businesses such as FBOs are not usually required to dis- aggregate their sales tax data; that is to say, not required to separate the amount of general sales tax revenues raised from the sale of fuel, versus the remainder of the tax revenue generated by other activities (sale of pilot supplies, catering, etc.). Thus, to receive such reports, tax jurisdictions would likely have to amend the tax code to require that taxes be filed in way that separates fuel revenues from all other activities—which our members tell us is not a problem to do. NATA continues to discuss the issue with our mem- bers and with the FAA. While over 100 jurisdictions are out of compliance, progress is being made. The state of Michigan, for example, has already changed its tax code to come into compliance. NATA will continue to educate our members on ways to advocate for local jurisdictions to come into compliance with this important policy, so airports can use the funds for necessary infrastructure projects. For more information, a webinar and talking points are available to members, who wish to engage their local policymakers, at www.nata.aero under the Government Affairs tab. Aviation Business Journal | Fall 2019 7
