Policy and Procedures Concerning the Use of Airport Revenue; Proceeds From Taxes on Aviation Fuel, 69789-69793 [2013-27860]

Agencies

• Federal Aviation Administration
• DEPARTMENT OF TRANSPORTATION

[Federal Register Volume 78, Number 225 (Thursday, November 21, 2013)]
[Proposed Rules]
[Pages 69789-69793]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-27860]


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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: Notice of Proposed Clarification of Policy; Request for 
Comments.

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SUMMARY: This action proposes to amend the Federal Aviation 
Administration (``FAA'') Policy and Procedures Concerning the Use of 
Airport Revenue published in the Federal Register on February 16, 1999 
(``Revenue Use Policy'') to clarify FAA's policy on Federal 
requirements for the use of proceeds 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. 
The 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 notice publishes a proposed 
clarification of FAA's understanding 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 are used for 
certain aviation-related purposes. These purposes include airport 
capital and operating costs, and state aviation programs. In view of 
the interests of sellers and consumers of aviation fuel, and of state 
and local government taxing authorities in limits on use of proceeds 
from taxes touching aviation fuel, this notice solicits public comment 
on the proposed policy clarification. This notice also solicits 
comments about whether there are other reasonable interpretations 
regarding local taxes that are not enumerated here and should be 
considered by the FAA. Finally, this proposed policy clarification, if 
finalized, would apply prospectively to use of proceeds from both new 
taxes and to existing taxes that do not qualify for grandfathering from 
revenue use requirements.

DATES: Comments must be received by January 21, 2014. Comments that are 
received after that date will be considered only to the extent 
possible.

ADDRESSES: To read background documents or comments received, go to 
https://www.regulations.gov at any time or to Room W12-140 on the ground 
floor of the DOT West Building, 1200 New Jersey Avenue SE., Washington, 
DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal 
holidays.
    You may also send written comments by any of the following methods.
     Federal eRulemaking Portal: Go to https://www.regulations.gov and follow the instructions for sending your 
comments electronically. Docket Number: FAA 2013-0988.
     Mail: Docket Management Facility, U.S. Department of 
Transportation, 1200 New Jersey Avenue SE., West Building Ground Floor, 
Room W12-140, Washington, DC 20590-0001.
     Hand Delivery: Deliver to mail address above between 9:00 
a.m. and 5 p.m. EST, Monday through Friday, except Federal holidays.
     Fax: (202) 493-2251.
    Identify all transmissions with ``Docket Number FAA 2013-0988'' at 
the beginning of the document.

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:

Authority for the Proposed Policy Clarification

    This notice is published under the authority described in Subtitle 
VII, part B, chapter 471, section 47122, and the Federal Aviation 
Administration Authorization Act of 1994, section 112(a), Public Law 
103-305, 49 U.S.C. 47107(l)(1) (Aug. 23, 1994).

Background

    The Airport and Airway Improvement Act of 1982, now codified at 49 
U.S.C. 47101 et seq. (AAIA), establishes the Airport Improvement 
Program (AIP) for awarding Federal grants to airports in the United 
States. The AAIA requires that an airport sponsor accepting a grant 
under the AIP give assurances that any revenues received by the airport 
will be used for the capital and operating

[[Page 69790]]

expenses of the airport, the local airport system, or other local 
facilities owned or operated by the airport owner or operator and 
directly and substantially related to air transportation. The purposes 
of the revenue use requirements are to prevent a ``hidden tax'' on air 
transportation, and to ensure that Federal airport grants are used to 
supplement funding for airport projects and are not simply used to 
substitute funds diverted to support local non-airport programs.
    In the years following the 1982 enactment of the AAIA, there were 
several instances of new state taxes being imposed on the sale of 
aviation fuel at AIP-funded airports. The application of the AAIA 
revenue use requirements to these new taxes was not entirely clear.\1\ 
In response, Congress adopted an amendment to the AAIA in 1987 to bring 
state and local taxes on aviation fuel within the scope of the airport 
revenue use requirements of the AAIA. The amendment also provided that 
revenues from a state fuel tax could be used for state aviation 
programs, in addition to the uses permitted for revenue received by the 
airport sponsor.
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    \1\ Title 49 of the U.S.C., section 40116(e), permits states and 
political subdivisions to levy or collect certain taxes, including 
property taxes, net income taxes, franchise taxes, and sales or use 
taxes on the sale of goods or services. Title 49 U.S.C. 40116(b), 
states and political subdivisions may not levy or collect a tax on 
(1) an individual traveling in air commerce; (2) the transportation 
of an individual traveling in air commerce; (3) the sale of air 
transportation; or (4) the gross receipts from that air commerce or 
transportation. The FAA Authorization Act of 1994 Section 112(e), 
amended the Anti-Head Tax Act, 49 U.S.C. 40116(d)(2)(A) to prohibit 
State, political subdivision, or an authority acting for a State or 
political subdivision from collecting a new tax, fee, or charge 
which is imposed exclusively upon any business located at a 
commercial service airport or operating as a permittee of the 
airport, other than a tax, fee, or charge utilized for airport or 
aeronautical purposes.
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    Specifically, 49 U.S.C. 47107(b), as amended in 1987, requires that 
recipients of airport grants under the Airport Improvement Program 
provide the FAA with written assurances on use of revenue that local 
taxes on aviation fuel (except taxes in effect on December 30, 1987) 
and the revenues generated by a public airport will be expended for the 
capital or operating costs of the airport; the local airport system; or 
other local facilities owned or operated by the airport owner or 
operator and directly and substantially related to the air 
transportation of passengers or property.
    This revenue use limitation does not apply if a provision enacted 
not later than September 2, 1982, in a law controlling financing by the 
airport owner or operator, or a covenant or assurance in a debt 
obligation issued not later than September 2, 1982, by the owner or 
operator, provides that the revenues, including local taxes on aviation 
fuel at public airports, from any of the facilities of the owner or 
operator, including the airport, be used to support not only the 
airport but also the general debt obligations or other facilities of 
the owner or operator. The statute does not prevent the use of a State 
tax on aviation fuel to support a State aviation program or the use of 
airport revenue on or off the airport for a noise mitigation purpose.
    However, the 1987 amendment itself was open to interpretation on 
the application of use requirements to different taxes on aviation 
fuel. The conference report on the 1987 amendment to the AAIA did not 
clearly resolve all of these issues. The report stated:

    The assurance requiring that local taxes on aviation fuel must 
be spent on the airport is intended to apply to local fuel taxes 
only, and not to other taxes imposed by local governments, or to 
state taxes. Similarly, this provision is not intended to modify 
subsequent provisions in the bill which clarify that a state may 
commit the proceeds from state aviation fuel taxes to state aviation 
agencies and that an airport may apply airport revenues for airport 
noise abatement on or off the airport.

(1987 U.S.C.C.A.N. vol. 5, pp. 2613-2614 (H.R. Rep. No. 100-123(II)); 
2638-2639 (H.R. Rep. No. 100-484))
    In 1996, Congress enacted 49 U.S.C. 47133 to extend substantially 
the of 49 U.S.C. 47107(b) identical requirements for use of airport 
revenue and state and local taxes on aviation fuel to all airports that 
have been the subject of Federal assistance, regardless of whether the 
airport is currently subject to an FAA grant agreement.
    The conference report for the FAA Reauthorization Act of 1996, 
which added section 47133, noted that ``revenue diversion burdens 
interstate commerce even if the airport is no longer receiving 
grants,'' and that the new Sec.  47133 would remove the ``perverse 
incentive'' for airports to refuse AIP grants in order to avoid Federal 
policies on use of airport revenue.
    The FAA Reauthorization Act of 1994, Section 112(a), codified at 
section 47107(l) directed FAA to establish policies and procedures to 
assure the prompt and effective enforcement of illegal diversion of 
airport revenue. Accordingly, to implement Sections 47107(b) and 47133, 
FAA has issued a comprehensive Revenue Use Policy on the use of 
revenues received by an airport sponsor. The Revenue Use Policy, at 
Section II.b.2., includes state or local taxes on aviation fuel in the 
definition of airport revenue:

    2. State or local taxes on aviation fuel (except taxes in effect 
on December 30, 1987) are considered to be airport revenue subject 
to the revenue-use requirement. However, revenues from state taxes 
on aviation fuel may be used to support state aviation programs or 
for noise mitigation purposes, on or off the airport.

    On the subject of noise mitigation, section 47133(c) states: ``Rule 
of construction.--Nothing in this section may be construed to prevent 
the use of a state tax on aviation fuel to support a state aviation 
program or the use of airport revenue on or off the airport for a noise 
mitigation purpose.'' While the statute does not expressly state that 
aviation fuel tax proceeds can be used for noise mitigation, those 
proceeds could be used for any purpose for which an airport operator's 
revenue could be used, and that expressly includes noise mitigation.

Aviation Fuel

    As background, aviation fuel includes two general categories of 
fuel used in aircraft: aviation gasoline, or ``avgas,'' used in 
reciprocating engines; and kerosene jet fuel used in turbine engines. 
The American Society for Testing and Materials (ASTM) has issued 
separate standards for aviation fuel: ASTM D910 and D6227 for avgas and 
ASTM D1655-13 and D6615-11a for civil jet fuel. Both avgas and jet fuel 
are high-quality petroleum products that are refined, delivered, and 
stored separately from other fuels, such as vehicle gasoline, which can 
be refined to lower standards. Since aviation fuel and other fuels are 
distinct products, it should not be difficult for state and local 
government to identify the tax revenues attributable solely to aviation 
fuels.

The Case for Clarification

    The FAA believes that general clarification is needed of the 
Revenue Use Policy and agency interpretation of Sections 47107(b) and 
47133 for reference by all state and local taxing authorities.

Prior FAA Opinions

    The FAA has issued five opinions on particular state or local 
aviation taxes on aviation fuel since 1987:
    In 1990, Senator Slade Gorton sought clarification on whether the 
State of Washington or a locality within the state could impose a sales 
tax on aviation fuel and use the proceeds for a non-aviation purpose. 
FAA concluded that if the State and its localities imposed a direct tax 
on aviation fuel and used it for non-

[[Page 69791]]

aviation purposes, it would be contrary to revenue use restrictions 
under 49 U.S.C. 47107. The FAA advised that a local tax on aviation 
fuel after December 1987 can only be expended for the capital and 
operating costs of the airport. The FAA further advised that the state 
tax on aviation fuel could only be spent on the local airport system or 
a state aviation program or noise mitigation measures on or off the 
airport. The opinion explained that Congress, by expressly permitting 
specific uses of aviation fuel tax revenue, necessarily excluded other 
non-airport related uses.
    In 1992, Senator Christopher Bond sought clarification on the 
limitations on the imposition of a use tax on aviation fuel. The FAA 
response acknowledged that states are permitted to impose a use tax on 
aviation fuel, but that the AAIA limits the use that a state may 
prescribe for taxes collected at Federally-funded airports. The FAA 
concluded that the collection of the proposed tax at Federally-funded 
airports in the state would be in conflict with Federal grant assurance 
requirements, because the state's tax statute provided for unlimited 
use of tax proceeds. The tax at issue in Missouri was a general sales 
tax, not a specific tax on aviation fuel.
    In 2000, the Tennessee Legislature considered diverting funds 
designated for the Tennessee Transportation Equity Fund (Equity Fund) 
or allocating funds already in the Equity Fund to the state general 
fund. The proceeds in the Equity Fund came from a 4 1/2% tax on the 
sale of aviation fuel on Federally obligated airports. The FAA advised 
that such action would be contrary to Federal law. In addition, FAA 
explained that the State of Tennessee could not rely on the fact that 
its 1986 state aviation fuel tax was grandfathered to enact new 
measures to divert, directly or indirectly, revenue previously 
allocated to aviation use. The FAA further advised that passage of the 
legislation to permit general use of the proceeds from the aviation 
fuel tax would place in jeopardy continued Federal funding of airport 
and noise abatement projects at Federally-assisted airports throughout 
the State of Tennessee.
    In 2009, the State of Nebraska had a statewide general sales tax 
upon retail sales of products and services, but at some point had 
exempted the sale of aircraft fuel from the sales tax. The Nebraska 
Legislature considered repealing that exemption and proposed to make 
the aircraft fuel tax proceeds payable to the state general fund. An 
opinion was sought on whether the proposed sales tax upon aircraft fuel 
would violate 49 U.S.C. 40116, 49 U.S.C. 47107, or other Federal 
statutes, rules, or regulations. The FAA advised that if the State 
Legislature imposed a sales tax on aviation fuel sold on an airport, 
the use of the proceeds from the tax to support non-aviation activities 
would be inconsistent with Federal law. Monies from such a tax would 
have to be spent to support either (1) the capital or operating costs 
of the airport, the local airport system, or other local facilities 
owned or operated by the airport owner or operator and directly and 
substantially related to the air transportation of passengers or 
property; or (2) a state aviation program. The FAA advised that the 
enactment of the legislation to permit general use of the proceeds from 
the aviation fuel tax could jeopardize continued Federal funding of 
airport and noise abatement projects at Federally-assisted airports 
throughout the State of Nebraska.
    In 2010, a state senator from Hawaii wrote to the General Counsel 
of the United States Department of Transportation and FAA Chief Counsel 
requesting a legal opinion concerning a proposed broad state tax on 
petroleum products that would have applied to aviation fuel as well as 
to other fuels. The Hawaii Attorney General took the position that 
because the tax law did not use the term ``aviation fuel'' and was not 
limited to aviation fuel, the requirements of Sections 47107(b) and 
47133 would not apply. The FAA, responding for both FAA and DOT General 
Counsel, disagreed, and concluded that the proposed tax would be 
invalid under Federal law unless the proceeds from the sale of aviation 
fuel were used consistently with the revenue use statutes, or unless 
aviation fuel was expressly exempted from the tax.

Interpretation of Sections 47107(b) and 47133

    In each of FAA's five opinions since 1987, the agency interpreted 
the provisions of Sections 47107(b) and 47133 to apply to any state or 
local tax on aviation fuel, whether the tax was specifically targeted 
at aviation fuel or was a general sales tax on products that included 
aviation fuel without exemption. Also, FAA interpreted these statutes 
to make no distinction between taxes imposed by a local government or 
state government agency. The FAA continues to see this interpretation 
as the most reasonable construction of these statutes, in view of the 
letter and intent of the statutes. At the same time, the agency also 
understands that there can be alternate views of the interpretation of 
a facially ambiguous statute. The agency is also aware that any 
interpretation of this statute will have substantial practical 
consequences both for state and local government agencies and for 
industry consumers of aviation fuel.
    Any question of statutory interpretation begins with looking at the 
plain language of the statute to discover its original intent. To 
discover a statute's original intent, courts first look to the words of 
the statute and apply their usual and ordinary meanings. ``[T]he 
meaning of a statute must, in the first instance, be sought in the 
language in which the act is framed, and if that is plain . . . the 
sole function of the courts is to enforce it according to its terms.'' 
Caminetti v. U.S., 242 U.S. 470, 485 (1917). If the meaning is clear, 
the agency must ``give effect to the unambiguously expressed intent of 
Congress.'' Barnhart v. Walton, 535 U.S. 212, 217-218 (U.S. 2002), 
citing Chevron v. Natural Resources Defense Council, Inc., 467 U.S. 
837, 842-843 (1984). This principle is called `the plain meaning rule.' 
The rule ``generally means when the language of the statute is clear 
and not unreasonable or illogical in its operation, the court may not 
go outside the statute to give it a different meaning.'' 2A Sutherland 
Statutory Construction section 46:1 (7th ed.) (Nov. 2012).
    If after looking at the language of the statute the meaning of the 
statute remains unclear (e.g., the statute is silent or ambiguous), 
courts attempt to ascertain the intent of the legislature by looking at 
legislative history. 3A Sutherland Statutory Construction section 66:3 
(7th ed.) (Nov. 2012). ``Where, as here, resolution of a question of 
Federal law turns on a statute and the intention of Congress, we look 
first to the statutory language and then to the legislative history if 
the statutory language is unclear.'' Blum v. Stenson, 465 U.S. 886, 
896-897 (1984). When a Federal agency interprets a statute, the primary 
focus is to determine the intent of Congress. Where different 
interpretations are possible, a court must look to reasons for the 
enactment of the statute and the purposes to be gained by it and 
construe the statute in the manner which is consistent with the law's 
purpose. Dole v. United Steelworkers of America, 494 U.S. 26, 35 
(1990). Where a statute ``is silent or ambiguous with respect to the 
specific issue,'' an agency's interpretation must be sustained if it is 
``based on a permissible construction'' of the Act. Chevron, 476 U.S. 
at 843. The U.S. Supreme Court has ``long recognized that considerable 
weight should be accorded to an executive

[[Page 69792]]

department's construction of a statutory scheme it is entrusted to 
administer . . . .'' Chevron at 844. ``[T]he well-reasoned views of the 
agencies implementing a statute `constitute a body of experience and 
informed judgment to which courts and litigants may properly resort for 
guidance.' '' Bragdon v. Abbott, 524 U.S. 624, 642 (1998), citing 
Skidmore v. Swift & Co., 323 U.S. 134, 139-140 (1944).
    While the plain language of these statutes is not precise and could 
be subject to alternate interpretations, FAA believes that there are 
compelling reasons for the agency's past reading of the statutes. 
Alternate interpretations, while possible, tend to be inconsistent with 
the basic purposes of the legislation, including the need to avoid 
``hidden taxation,'' and may not adequately account for language in 
legislative history indicating intent for a broader reach of the 
revenue use requirements.

    Statutory construction, however, is a holistic endeavor. A 
provision that may seem ambiguous in isolation is often clarified by 
the remainder of the statutory scheme because the same terminology 
is used elsewhere in a context that makes its meaning clear . . . or 
because only one of the permissible meanings produces a substantive 
effect that is compatible with the rest of the law. United Savings 
Association of Texas v. Timbers of Inwood Forest Associates, Ltd., 
484 U.S. 365, 371 (1988).

    Courts harmonize the various parts of a statute if possible, 
reconciling them in the manner that best carries out the overriding 
purpose of the legislation. 3B Sutherland Statutory Construction 
section 75:2 (7th ed.) (Nov. 2012).
    Reasons for FAA's interpretation of Sections 47107(b) and 47133, 
and for the clarification of policy on use of aviation fuel tax 
proceeds proposed in this Notice, include:
    Local taxes. The term ``local taxes'' is reasonably interpreted to 
include both local government and state government taxes. ``Local'' 
refers to the geographic locale where the tax is collected, not to 
local government. This interpretation is supported both by the 
statutory language and by legislative intent (see 1987 U.S.C.C.A.N. 
vol. 5, pp. 2613-2614 (H.R. Rep. No. 100-123(II)); 2638-2639 (H.R. Rep. 
No. 100-484)):
     The provisions permitting certain uses of a ``state tax'' 
in sections 47107(b)(3) and 47133(c) would be unnecessary and 
meaningless unless state taxes were included in the requirements of 
sections 47107(b)(1) and (2) and 47133(a), which refer only to 
``local'' taxes.
     There is no apparent rationale for distinguishing between 
local government and state government taxes for accomplishing the 
purposes of the Federal airport revenue use requirements, i.e., the 
prohibition on airport revenue diversion and avoidance of hidden taxes 
on aviation. Under the statutory framework, state governments are 
allowed slightly broader use of proceeds from aviation fuel taxes--
i.e., support of state aviation programs--but otherwise all state and 
local government taxes on aviation fuel are treated identically.
     Requiring aviation use of local government proceeds but 
not state proceeds from taxes on aviation fuel would substantially 
undermine the purpose and effect of Sections 47107(b) and 47133, and 
would be inconsistent with the congressional intent behind the 1987 
amendment regarding taxation of aviation fuel.
     The AAIA uses the term ``political subdivisions of the 
state'' elsewhere in the statute where the intent is to refer to local 
government.
    The FAA seeks comment on whether there are other reasonable 
interpretations regarding local taxes that are not enumerated here and 
should be considered by the FAA.
    Taxes on aviation fuel. Given the basic purpose of the revenue use 
statutes, the term ``taxes on aviation fuel'' cannot reasonably be 
construed to mean only taxes specifically on aviation fuel, and not to 
include taxes on petroleum products generally or general sales taxes on 
all goods that touch on aviation fuel. It seems to us that the most 
reasonable test is whether payment of the tax is required for sale of 
aviation fuel, not what the tax is called or whether other products are 
also subject to the tax. For a number of reasons, FAA has to date 
interpreted sections 47107(b) and 47133 to apply to all taxes that 
touch the sale of aviation fuel, regardless of whether the taxes are 
specific or general. These reasons include:
     Limiting the application of sections 47107(b) and 47133 
only to taxes specifically imposed solely on aviation fuel would 
substantially defeat the legislative purpose of these statutes. If 
revenues from taxes on aviation fuel could be used for any purpose 
simply because the tax also applied to other products, then state and 
local governments could easily structure taxes to circumvent the effect 
of sections 47107(b) and 47133.
     The amendment as originally adopted by Congress in 1987 
referred to ``any local taxes on aviation fuel.'' The word ``any'' was 
removed in the 1994 recodification of the AAIA, but Congress made clear 
in adopting the recodification that changes in wording would not make 
any change in the meaning or construction of the statute. See Public 
Law 103-272, section 1 (July 5, 1994). In our view, ``any'' connotes 
broad applicability and without restriction.
     Legislation enacted in 1994 and 1996 adopted increasingly 
stringent requirements for use of airport revenue and added sanctions 
for violations of revenue use requirements, including civil penalty 
authority for violations of 47107(b) and 47133. This indicates 
congressional support for the most effective administration of the 
revenue use requirements, and argues against an interpretation that 
effectively leaves aviation fuel tax proceeds subject to potentially 
unlimited state taxation.
    The FAA seeks comments on whether there are other reasonable 
interpretations of the phrase ``taxes on aviation fuel'' that are not 
enumerated here and should be considered by the FAA.
    Other taxes. The conference report on the 1987 amendment to the 
AAIA states that:
    The assurance requiring that local taxes on aviation fuel must be 
spent on the airport is intended to apply to local fuel taxes only, and 
not to other taxes imposed by local governments, or to state taxes. 
(1987 U.S.C.C.A.N. vol. 5, pp. 2613-2614 (H.R. Rep. No. 100-123(II)); 
2638-2639 (H.R. Rep. No. 100-484))
    While this could be read out of context to appear to exempt all 
state taxes, including taxes on aviation fuel, from the statute, the 
report states in the next sentence that:

    * * * a state may commit the proceeds from state aviation fuel 
taxes to state aviation agencies * * * (H.R. Rep. No. 100-4844, p. 
2638-2639)

    Because this second sentence expressly refers to a permitted but 
still limited use of state aviation fuel tax revenues, it is clear that 
Congress intended for the statute to apply to such revenues. In our 
view, the reasonable reading of both provisions together is to take the 
term ``other taxes imposed by local governments, or to state taxes'' to 
mean taxes collected from sale of products other than aviation fuel. In 
other words, simply because a general tax collects revenues from sales 
of both aviation fuel and other products, the total revenues from the 
tax are not considered airport revenue. Only the tax collections from 
the sale of aviation fuel are subject to the statutory revenue use 
requirements. ``Other taxes'' means tax revenues collected from sale of 
products other than aviation fuel.
    Grandfathered taxes. Sections 47107(b) and 47133 both contain a

[[Page 69793]]

``grandfather'' exception for taxes in effect on December 30, 1987. By 
itself the term ``in effect'' could mean enacted but not imposed, or 
enacted and actually being collected. The conference report to the 
Federal Aviation Reauthorization Act of 1996 clarifies congressional 
intent toward the scope of this exception:

    The conferees want to clarify that if a local fuel tax was 
enacted or adopted before December 30, 1987, but for which 
collections were not made until some significant period of time 
after December 30, 1987, it shall not be grandfathered pursuant to 
this section and all proceeds of such a tax must be used for the 
capital or operating costs of the airport, the local airport system, 
or pursuant to paragraph (3) of subsection (a).

    Accordingly, the fact that an ordinance permitting taxes on 
aviation fuel existed in 1987 is not sufficient to exempt the tax from 
the revenue use requirements. A tax ordinance is grandfathered only if 
collection of the tax revenues on the sale of aviation fuel was 
initiated before December 30, 1987 or within a relatively short period 
after that date. If tax collections begin later, then the proceeds must 
be used for the purposes in sections 47107(b) and 47133.

Compliance

    Airport sponsors. An airport sponsor applying for an AIP grant 
agrees to comply with a number of standard grant assurances, which are 
published on FAA's Airports Web site. See https://www.faa.gov/airports/aip/grant_assurances/. Grant Assurance no. 25, Airport Revenues, 
incorporates the provisions of 49 U.S.C. 47107(b) in each AIP grant 
agreement. So, executing a grant application involves assuring FAA that 
fuel taxes collected on aviation fuel will only be used for certain 
aviation purposes. Neither section 47107(b) nor section 47133 limits 
this requirement to taxes imposed by the airport sponsor; the assurance 
applies to any state or local government tax on aviation fuel. As FAA 
noted in a 2009 letter to the Hall County Airport Authority, Nebraska, 
regarding proposed state legislation to tax aviation fuel:

    * * * enactment of the [state] legislation to permit general use 
of the proceeds from the aviation fuel tax could jeopardize 
continued federal funding of airport and noise abatement projects at 
Federally-assisted airports throughout the [state].

    Non-sponsor state and local governments. Title 49 U.S.C. 47133 
contains a prohibition on use of aviation fuel tax proceeds for general 
purposes. This is a direct and self-implementing statutory requirement, 
and does not rely on contract terms, as does section 47107(b). Congress 
has provided two means for Federal enforcement of the terms of section 
47133: Civil penalty authority in 49 U.S.C. 46301(a), and application 
to U.S. district court for judicial enforcement pursuant to 49 U.S.C. 
47111(f).
    Prospective application. In determining that a clarification of 
agency policy on use of aviation fuel tax proceeds is warranted, FAA is 
mindful that entities affected by this policy may not have fully 
understood the scope of Federal requirements in the past. Accordingly, 
it is FAA's intention to apply any final clarification of policy 
adopted in this proceeding prospectively, and to allow affected parties 
a reasonable time to bring state and local government taxes into 
compliance.
    Request for comments. The clarification of policy proposed in this 
notice is intended to clarify FAA's interpretation of statutory 
requirements for use of airport revenue. In view of the potential 
interests of aircraft operators, aviation service providers, the 
aviation fuel industry, state and local taxing authorities and others 
in the Federal requirements applicable to aviation fuel taxes, this 
notice requests public comment on the proposed policy clarification.

Clarification of the Revenue Use Policy on Use of Proceeds From Taxes 
on Aviation Fuel

    In consideration of the foregoing, FAA proposes to amend the Policy 
and Procedures 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 to be airport revenue subject to 
the revenue-use requirement. However, revenues from state taxes on 
aviation fuel may be used to support state aviation programs, and as 
airport revenue can be used for noise mitigation purposes, on or off 
the airport.

    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 tax on 
aviation fuel may be used for any purpose for which other airport 
revenues may be used, and 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 commitment is not 
limited to taxes on aviation fuel imposed by the airport operator, 
and includes taxes on aviation fuel imposed by state government and 
other local jurisdictions.
    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 a tax imposed by either a state government or a 
local government taxing authority;
    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, 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.

    Issued in Washington, DC on November 14, 2013.
Randall S. Fiertz,
Director, Office of Airport Compliance and Management Analysis.
[FR Doc. 2013-27860 Filed 11-19-13; 11:15 am]
BILLING CODE 4910-13-P