A change in tax law in 2005 has resulted in a loss of $1 billion to $2 billion to the Airport and Airway Trust Fund, the Government Accountability Office said in a report released today. “The amounts lost to the Trust Fund as revealed today by the GAO are simply staggering,” said Andrew Priester, chairman for NATA. “Consider how many new runways, instrument approaches, or additional air traffic control towers could have been built, had this money been available for its intended purpose.”The 2005 law directs fuel taxes directly into the Highway Trust Fund, and then vendors of aviation fuel must file paperwork to ensure the funds are transferred to the airport and airway fund. However, the process for vendors to file the paperwork is time-consuming, the GAO found, and the refunds they can qualify for are too small to provide an incentive. As a result, the fund transfers aren’t being made.
The GAO said the tax law was changed to discourage the use of jet fuel for nonaviation purposes, but industry representatives say diversion has always been rare or nonexistent, since the higher cost of aviation fuel would negate any tax advantages. IRS officials told the GAO that since 2006, jet fuel diversion has virtually ceased. The GAO also found that engine technology improvements and fuel composition changes since 2007 limit incentives for jet-fuel diversion. The GAO didn’t make any recommendations. NATA said Congress should repeal the 2005 provision that triggered the loss of aviation tax dollars.
