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Wed, May 02, 2012

House Voices Add To Concern Over 'Fuel Fraud' Law

NBAA Joins Other Advocacy Organizations Opposing The Revenue Shift

In an April 25 letter to Representative Dave Camp (R-4-MI), chairman of the House Committee on Ways & Means, a bipartisan group of members from the U.S. House of Representatives called for the repeal of a seven-year-old law that increases costs for Jet-A users, while preventing a significant amount of fuel tax revenue from being used to support aviation programs.

The so-called "fuel fraud" provision went into effect in October 2005 to ostensibly combat the possibility that commercial truck operators could purchase Jet-A for use in their vehicles in order to avoid paying higher taxes on diesel. Aviation groups and the lawmakers who signed the letter maintain that the law is a "solution in search of a problem," since there is no documented evidence that truckers have ever done this on a large scale.
"This provision is harming our national airspace system by depriving it of funds needed to enhance safety and efficiency," reads the April 25 letter, which was signed by 32 House representatives. "...We respectfully request the inclusion of a provision in the next highway reauthorization legislation that would repeal the fuel fraud provision."

Since enactment of the policy, taxes on both Jet-A and highway diesel fuel have been collected at a rate of 24.4 cents-per-gallon (CPG), although the tax on jet fuel has legally remained 21.9 CPG. In order for that revenue to be properly routed to aviation needs - and for vendors to be reimbursed for the 2.5 CPG difference - aviation fuel providers are required to jump through a series of arduous bureaucratic hoops, including registering with the Internal Revenue Service and submitting detailed records of each fuel purchase.

"The administrative hassle associated with this process has resulted in many fuel vendors opting to pass the additional tax on to the end user, and forego the process of applying for a refund," the letter notes. "When these fuel vendors forgo the refund process, due to its administrative burden, the Airport and Airway Trust Fund receives no revenue from the taxes collected on the sale of aviation jet fuel because non-commercial end users are not permitted to apply for the refund themselves."
NBAA has joined with the National Air Transportation Association and several other aviation groups in calling for a repeal of the "fuel fraud" policy.




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