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US Temporary Air Ticket Tax Extension Agreed

by Mike Godfrey, Tax-News.com, Washington

09 August 2011


President Barack Obama has signed legislation to extend authority, until September 16 this year, for the United States Internal Revenue Service (IRS) to collect the airline passenger ticket tax and other aviation-related taxes that had expired at midnight on July 22.

The US taxes which have now been extended include the 7.5% passenger ticket tax and flight segment tax of USD3.70 per passenger, together with the passenger facility charge of up to USD4.50 and a federal security charge of USD2.50. It was pointed out that, previously, Congress had extended the taxes up to twenty separate times, without controversy.

Due to the delay, several Federal Aviation Administration (FAA) programmes had also expired. Many airport modernization projects across the country have been halted, and nearly 4,000 FAA personnel, many needed to oversee various aspects of these projects, were furloughed without pay, beginning on July 23.

The extension bill had been unable to be passed before Congress went on vacation due to disagreement between Democrat and Republican politicians. Before the deadline date, in an attempt to protect airport subsidies included in the Essential Air Service (EAS) programmes within the legislation, the Democrat-led Senate failed to approve an extension that the Republican-led House of Representatives had already passed.

The House bill would maintain current funding levels for the FAA, but would also eliminate passenger ticket subsidies at some airports, and limit EAS eligibility to communities that are located 90 or more miles from a large or medium hub airport.

However, following pressure on several fronts, the Senate has been prevailed upon to agree to accept the House bill and to the consequent extension to September 16, 2011. There will be further discussions on the shape of any further renewal when Congress reassembles after the holidays.

As Orrin Hatch, the Republican Ranking Member of the Senate Finance Committee, said in a statement: “When it came down to it, losing nearly USD30m per day to protect USD16.5m in subsidies just didn’t make sense. Now it’s time for Congress to get down to work and resolve its differences.”

In a bipartisan letter, Democrats Max Baucus, the Senate Finance Committee Chairman, and Sander Levin, the House Ways and Means Committee Ranking Member, together with Republicans, Orrin Hatch, the Senate Finance Committee Ranking Member, and Dave Camp, the House Ways and Means Committee Chairman, have urged the IRS to use its discretion and authority as it administers the reinstatement of the aviation-related taxes.

They consider that, while the IRS would normally be required to collect lost tax revenue once the FAA resumes normal functions, it should be asked to concentrate on restarting its FAA tax collection systems and processes going forward, rather than collecting ticket taxes retroactively.

“We are concerned about the impact on consumers and the aviation industry if these taxes are collected retroactively,” the Committee leaders wrote to the IRS. “Furthermore, we understand that the IRS has limited resources - some of which will be required to restart systems and processes to begin collecting these taxes again going forward - and that the retroactive collection of trust fund taxes would add further strain to those resources. Therefore, we encourage you to utilize all your discretion and authority to extend relief for passengers and airlines with respect to ticket taxes that were not paid or collected because of the lapse, and provide the industry a three day period of time to restart processes to collect the taxes.”

TAGS: tax | air passenger duty (APD) | law | aviation | Internal Revenue Service (IRS) | travel and tourism | legislation | United States

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