Aircraft Club January 2024: Federal excise tax update

January 2024

In brief

What happened?

Last month, the Airport and Airway Extension Act of 2023 was enacted into law, temporarily extending specific Federal Aviation Administration (FAA) programs and activities through March 8, 2024, including excise taxes that fund the Airport and Airway Trust Fund.

Why is it relevant?

Under prior law, the excise taxes were scheduled to expire after December 31, 2023. The December law extends the expiring fuel excise tax rates related specifically to aviation kerosene and aviation gasoline and the excise taxes on the transportation of persons and property by air. Without additional Congressional action, excise taxes will expire on March 8, 2024.

Action to consider

After two back-to-back short-term extensions of FAA reauthorization, many industry groups are calling on Congress to mark up and pass the comprehensive five-year FAA reauthorization bill that was introduced last year in the Senate. Affected companies should continue monitoring the status of this bill and communicate the benefits of a longer-term extension of FAA reauthorization to policy makers.

In detail

Temporary extension

The Airport and Airway Trust Fund provides funding for capital improvements to the US airport and airway system. Expenditures from the fund support many of the programs and activities of the FAA.

Although the 4.3-cents-per-gallon tax rate on aviation fuels is permanent, most other excise taxes related to air transportation were scheduled to expire at the end of 2023. The law extends the expiring fuel excise tax rates related specifically to aviation kerosene and aviation gasoline and the excise taxes on the transportation of persons and property by air. The following excise taxes continue to apply to transportation of persons and property by air until March 8, 2024:

A 7.5% tax on domestic (including the 225-mile zone of Canada and Mexico) transportation,

A $5.00 domestic (including the 225-mile zone of Canada and Mexico) segment tax (2024 rate),

A $22.20 international facilities tax (2024 rate),

A $11.10 Hawaii/Alaska tax (2024 rate), all related to the transportation of persons, and

A 6.25% tax on domestic transportation of property by air.

Please see the November 2023 edition of the Aircraft Club insight article for additional discussion of these federal excise taxes. The law also extends the exemption applicable to fractional ownership flights subject to the Section 4043 fuel surtax to March 8, 2024.

In addition to the provisions described above, the law extends the FAA’s weather reporting programs and the authorization for the Airport Improvement Program, which provides grants for planning, development, and noise compatibility projects at certain public-use airports.