RECOMMEND the Board support draft legislation regarding Federal Aviation Administration fuel sales tax.

The Federal Aviation Administration (FAA) adopted a rule on aviation fuel sales taxes in 2014 that reinterpreted federal law on aviation fuel taxes. Previously, fuel excise taxes were used for airport expenses, but sales taxes were exempt from this diversion. Now, the FAA is also applying that rule to sales taxes, including local transportation sales taxes, which could decrease the amount of funding available for surface transportation projects and set a precedent for other entities to take similar action.

Unknown, possibly significant, impact to Measure X revenues.

Attachment 1 is a summary of the 2014 FAA rulemaking and the legislation introduced by Representative Grace F. Napolitano (CA-32). Attachment 2 is the draft bill and Attachment 3 is a redline of how the bill will change current law. The legislation is intended to overturn the rulemaking and "re-establish Congressional intent and 29 years of federal interpretation that the limitation on the use of sales taxes collected on aviation fuel for airport purposes is applied to excise taxes on aviation fuel only, and not to general sales taxes that states and localities impose on all goods."

Staff requests the Executive Committee recommend the Agency support this draft legislation.