Despite Concerns Raised by FAA, Congress, Industry, Tax Rules Remain in Effect

Business aviation groups Thursday applauded the FAA for sending a letter to the Internal Revenue Service (IRS) seeking suspension of tax rules that are confusing for the business aviation industry to implement and have the potential to decrease funding for important aviation infrastructure projects.

The FAA's recent letter to IRS Commissioner Mark Everson requests that the IRS "...suspend implementation of [the] new rules until a workable solution is reached with the affected industries." The letter adds: "We all want to minimize the financial and administrative burden on aviation users and ensure that each trust fund receives credit for the appropriate tax revenue."

NBAA President and CEO Ed Bolen thanked the FAA for its letter on behalf of the industry. "The business aviation community is pleased that the FAA has recognized that the IRS rules pose a tremendous burden for our industry and may adversely affect much-needed funding for aviation infrastructure maintenance and improvements."

The provisions, which were recently implemented as part of H.R. 3 (commonly known as the "Highway Bill"), are intended to discourage highway diesel fuel operators from using jet fuel to avoid the higher taxes on highway fuel, a practice IRS officials maintain is prevalent.

Unfortunately, the rules require that parties in business aviation first pay taxes on jet fuel at the rate applied to the costlier highway diesel fuel, then apply for a refund for the difference between the highway rate and the jet fuel rate -- a time-consuming and confusing process.

Additionally, under the rules, all jet fuel taxes collected at the higher rate are deposited into the Highway Trust Fund and transferred to the Airport and Airway Trust Fund only after a refund of credit has been applied for.

The FAA's letter to the IRS about the matter comes amidst related actions taken by Congress and business aviation industry groups.

Senate Commerce Committee Chairman Ted Stevens (R-AK), Aviation Subcommittee Chairman Conrad Burns (R-MT) and House Aviation Subcommittee Member Robin Hayes (R-8-NC) have contacted US Treasury Secretary John W. Snow urging suspension of the new rules until a workable solution is reached with business aviation.

NBAA, the General Aviation Manufacturers Association (GAMA) and the National Air Transportation Association (NATA) also recently sent a letter to Snow asking that the rules be shelved until a more feasible approach for addressing the fuel fraud issue could be produced.

"This IRS provision would create an impractical, bureaucratic process that adds administrative burdens to both the government and the aviation community," said GAMA President and CEO Peter J. Bunce. "We appreciate the FAA requesting that this rule be suspended until a workable solution can be implemented."

"We thank the FAA for their letter of support and continued efforts in addressing this issue," said NATA President James K. Coyne. "It would be an unfortunate and avoidable tragedy if the predominantly small businesses that operate FBOs were forced to take on the financial burden of protecting the trust fund."

FMI: www.nbaa.org