Contacts:
– Dan Hubbard, NBAA, at (202) 783-9360
– Jens Hennig, GAMA, at (202) 393-1500
– Dan Kidder, NATA, at (703) 575-2044

Business Aviation Groups Laud Congressional Action to Halt Implementation of Onerous ‘Fuel Fraud’ Provisions in Highway Bill

WASHINGTON, DC, October 3, 2005 — Several business aviation groups today welcomed recent action taken by federal lawmakers to shelve a series of provisions in the 2005 Highway Bill that are unreasonably difficult for the business aviation industry to implement and potentially detrimental to aviation infrastructure funding.

In the past two weeks, 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) sent letters to U.S. Treasury Secretary John W. Snow urging immediate suspension of the new rules until a workable solution is reached with business aviation.

“We commend the House and Senate leaders who have sought suspension of legislation that would be punitive to our industry, and would likely impact the well-being of funding for critically needed improvements and maintenance to the nation’s aviation infrastructure,” said Ed Bolen, president and CEO of the National Business Aviation Association (NBAA). “This is a double whammy that our industry cannot afford.”

The Internal Revenue Service (IRS) maintained that the legislative language — which was included in Section 1161 of H.R. 3 (commonly known as the “Highway Bill”) — was needed 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 language enacted to address the supposed problem requires 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 difficult process.

Furthermore, the rules require that all jet fuel taxes collected at the higher rate be 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. Therefore, the provisions effectively produce a tax increase, coupled with a possible decrease in revenue for the Airport and Airway Trust Fund.

The Congressional letters sent to Sec. Snow to halt implementation of the rules coincide with an industry letter sent to the Treasury Department by NBAA, the General Aviation Manufacturers Association (GAMA) and the National Air Transportation Association (NATA). That letter also requested that the new rules be suspended, stating: “The business aviation industry supports efforts by the Administration and Congress to combat fuel tax fraud and welcomes an opportunity to work jointly on a practical solution to the problem. But, the new provisions in H.R. 3 are unworkable and will only result in confusion and improper administration of the tax laws.”

In thanking Rep. Hayes and Sens. Stevens and Burns for their action on behalf of the industry, GAMA President and CEO Pete Bunce said: “Effectively raising the tax rate on fuel and creating more administrative burdens on our industry will only cripple the rebound our industry has been experiencing. Hopefully, officials at the U.S. Treasury will heed the call from Capitol Hill and the industry alike to halt implementation of these onerous provisions.”

“This new fuel tax system presents an untenable situation for our nation’s FBOs — these predominately small businesses have neither the staff nor financial resources to implement such a convoluted system and should not bear the burden of ensuring the trust fund is adequately protected," said NATA President James K. Coyne. "We applaud the efforts of these members of Congress to protect the Aviation Trust Fund and urge Secretary Snow to prevent this raid from happening.”