Report Validates NBAA Position On Improper Diversion of Jet-A Taxes, Association Says

The Government Accountability Office (GAO) published a report this week focused on the so-called "fuel fraud" provision in aviation fuel tax laws. The GAO determined that as a result of the provision, between $1 billion and $2 billion has been improperly held back from the Airport and Airway Trust Fund over largely unfounded concerns about the use of aviation jet fuel in ground vehicles.

In place for more than 10 years, the provision automatically diverted a portion of excise taxes on turbine aircraft fuel to the Highway Trust Fund, based on the purported rationale that commercial truck operators might have been avoiding payment of taxes on diesel fuel by instead purchasing the turbine aircraft fuel for use in their vehicles.

The provision tasks aviation fuel vendors with voluntarily filing for credits on a per-transaction basis, which then correctly routes those funds for aviation-related uses. In comments to the GAO, NBAA and other stakeholders noted the credit process is unnecessarily burdensome, and offers little practical incentive for vendors to follow it.

The report, which came about following a request for a GAO investigation on the issue by Rep. Mike Pompeo (R-KS), determined that any uses of aviation fuel in ground vehicles over the past decade have been “rare,” and that both “economic and technological disincentives” further restrict the likelihood of such diversions taking place today.

The NBAA said the report validates long-standing concerns expressed by NBAA and other groups about the validity of a so-called “fuel fraud” provision on aviation taxes.

"After an extensive and unbiased investigative process, the GAO's findings validate our belief that the current system is fundamentally flawed, and not structurally aligned with the intent of either the highway or aviation trust funds," said NBAA Chief Operating Officer Steve Brown.

“We thank Congressman Pompeo for his request for a fair and equitable, third-party investigation on this issue,” Brown continued. “With the facts from this report now in hand, our hope is that Congress will correct this issue in a future transportation bill that properly routes all turbine fuel excise tax revenues to the aviation trust fund.”

FMI: GAO Report