Air Capital Insider

Aviation group hopes for end to federal ‘fuel fraud’ law

The U.S. House on Thursday passed a $325 billion highway bill that includes an amendment requiring a federal agency to study the diversion of general aviation jet fuel tax proceeds to the federal Highway Trust Fund.

The amendment by U.S. Rep. Mike Pompeo, R-Wichita, and approved Wednesday for inclusion in the highway bill, requires the Government Accountability Office to study the impact of diverting tax revenue collected from the sale of non-commercial jet fuel.

Federal excise taxes on the sale of non-commercial jet fuel to general and business aircraft have been diverted into the highway fund since 2005. That’s when “fuel fraud” law was enacted because of concerns that a 2 1/2 cent per-gallon additional tax on highway diesel fuel would prompt trucking firms to use jet fuel to get around paying the higher tax. The law raised the non-commercial jet fuel tax rate to that of highway diesel, although it did provide for a refund of those taxes if an operator could prove the jet fuel was used for non-commercial aircraft.

But the National Air Transportation Association said there’s no way to collect the refund because the Internal Revenue Service doesn’t provide that mechanism.

“Thus the Airport and Airways Trust Fund receives no revenue from the majority of general and business aviation jet fuel sales because non-commercial end users are not permitted to apply for the refund themselves,” NATA president Thomas Hendricks said in a statement. “We … hope GAO examines whether fuel additives and diesel engine design changes since 2005 also render the provision nothing more than a bureaucratic roadblock draining the Airport and Airway Trust Fund of revenues needed for airport improvements and the deployment of a modernized air traffic control system.”

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