Report: Fuel fraud law has cost Airport and Airway Trust Fund up to $2 billion

The 2005 highway bill included a measure requiring sellers of business and general aviation jet fuel to collect the federal tax rate on highway diesel fuel, which is higher than the tax rate on noncommercial jet fuel, and then apply to the Internal Revenue Service for a refund of the difference.

The report estimated that, “since fiscal year 2006, between $1 billion and $2 billion, or more than half of tax receipts for sales of noncommercial jet fuel, have not been transferred into the Airport and Airway Trust Fund from the Highway Trust Fund, based on analysis of Federal Aviation Administration (FAA) and IRS data.”

The legislation was meant to prevent truck drivers from filling their tanks with jet fuel instead of diesel, but the GAO report said, “reported instances of jet fuel diversion for nonaviation purposes are rare following the tax changes in 2006, and economic and technological disincentives may further discourage such activity.”

AOPA Senior Vice President of Government Affairs and Advocacy Jim Coon said, “AOPA has long opposed this unnecessary law that diverts much needed funds from our aviation infrastructure and we will continue to work to repeal it.”

Rep. Mike Pompeo, who sponsored the amendment included in last year Highway bill that required the GAO report, said the fuel fraud law is “flawed and misguided.”

Pompeo also urged Congress to “correct this incredibly misguided fuel fraud provision in a manner that supports the general aviation industry.”