The FAA is intensifying its review of how California handles tax revenue tied to jet fuel sales, after telling the state Department of Finance to provide records showing how the money is collected, transferred and spent. The dispute centers on federal rules that require aviation fuel tax proceeds to be used for airport-related purposes or state aviation programs.
According to state legislative records, California’s sales tax on jet fuel sold to common carriers is deposited into the state’s General Fund, though other aviation fuel taxes already support the Aeronautics Account.
The state has argued that its overall airport spending satisfies the FAA’s standard. In a March 20 response described by CalMatters, the Finance Department said the state would spend more than $2 billion on airports from 2020 through 2026, compared with $226 million in jet fuel tax revenue over that period. FAA spokesperson Cassandra Nolan told CalMatters the agency is “assessing” whether California is in compliance.
The conflict follows years of back-and-forth between California and federal officials. A 2023 audit by the U.S. Department of Transportation’s Office of Inspector General said the FAA had made progress identifying which jurisdictions’ laws matched the 2014 aviation-fuel tax policy, but had not tested whether compliant jurisdictions were actually using the money as promised, and had not taken enforcement action against the five jurisdictions still not in compliance, including California.
The audit said California submitted a 2019 action plan estimating about $55 million a year in tax proceeds would go to transportation projects that state officials said benefited the airport system, but the state had not provided documentation of actual proceeds collected since fiscal 2017 or a breakdown of receipts collected by local jurisdictions and airport sponsors.
The California Senate Transportation Committee also said the FAA rejected California’s earlier position that the state complied because it spent more on airports than it received in aviation-fuel-related tax revenue, and warned federal funding could be affected if the issue remained unresolved.
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