[Congressional Record Volume 143, Number 24 (Friday, February 28, 1997)]
[Senate]
[Pages S1803-S1804]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




         AIRPORT AND AIRWAY TRUST FUND REINVESTMENT ACT OF 1997

 Mr. GORTON. Mr. President, I am pleased to have joined my 
colleagues in supporting final passage of H.R. 668, an urgently needed 
measure to reimpose the aviation excise taxes through the end of fiscal 
year 1997, and give the Internal Revenue Service authority to transfer 
previously collected aviation excise taxes into the Airport and Airway 
Trust Fund.
  Reinstatement of these excise taxes for fiscal year 1997 are 
essential to the continued operation of our Federal aviation system. 
The Airport and Airway Trust Fund into which these taxes are deposited, 
is funded by a 10-percent passenger ticket tax; a 6.25-percent cargo 
waybill tax; a $6.00 per person international departure tax; and 
certain general aviation fuel taxes. In 1997, this trust fund is 
expected to provide 62 percent of the Federal Aviation Administration's 
[FAA] fiscal year 1997 budget. More specifically, the trust fund is 
expected to provide $5.3 billion of the FAA's $8.6 billion total fiscal 
year 1997 budget. Of this $5.3 billion, $3.6 billion will provide 100 
percent of the resources necessary to fund the FAA's capital programs, 
while $1.7 billion will provide 34 percent of the fiscal year 1997 
budget for FAA operations.

[[Page S1804]]

  When the authority to collect the aviation excise taxes lapsed on 
December 31, 1996, officials from both the General Accounting Office 
[GAO] and the FAA initially predicted that the $4.35 billion in 
uncommitted balances in the fund at that time would be available to 
fund the FAA's capital programs through June 30, 1997. If Congress did 
not reinstate the taxes by July 1, 1997, they predicted, the Office of 
Management and Budget [OMB] would have to reduce the FAA's capital 
accounts, which are totally funded out of the trust fund--including 
both the facilities and equipment [F&E] account and Airport Improvement 
Program, to account for the $1 billion shortfall between the trust 
fund's fiscal year 1997 expected contribution of $5.3 and the actual 
contribution of $4.35.
  According to the FAA, this reduction in the facilities and equipment 
account could force the FAA to issue stop work orders on all major F&E 
contracts, which include upgrades of the current air traffic control 
system throughout the country. The Airport Improvement Program would 
suffer an even greater impact. Under the original projections, if the 
aviation taxes were not reinstated, funding for the airport improvement 
would have to be reduced by as much as $300 million in fiscal year 
1997. Existing funding agreements under the AIP would be maintained, 
but no new, discretionary funding would be provided for high priority 
safety and security projects, capacity projects, and important noise 
mitigation programs.
  From a Washington State perspective, fiscal year 1997 funding for 
noise mitigation is particularly important. Seattle-Tacoma 
International Airport has been a national leader in noise mitigation 
programs and was the first to implement a local housing insulation 
program to reduce the impact on houses near the airport. The current 
program, which is partially funded through the AIP's discretionary 
noise mitigation grants, is scheduled to run through the year 2003.
  Under the FAA and GAO's original projections, it was clear that 
reinstating the taxes as quickly as possible was the appropriate action 
for Congress to take to ensure that the U.S. aviation system continues 
to be the best system in the world. The need to do this became even 
more urgent in mid-January, however, when the Treasury Department 
announced that because of an accounting error, the Airport and Airway 
Trust Fund could be insolvent as early as March or April.
  Let me explain the events, as I understand them, which led to 
accounting error made at by the Treasury Department. Each airline 
deposits the ticket taxes it collects to the IRS every 2 weeks. Under 
the look-back provisions of the IRS safe harbor rule, however, an 
airline can base the amount of that payment on the amount of excise 
taxes it collected in a 2-week period from the second preceding quarter 
before the current quarter. In other words, in making a 2-week tax 
payment in the third quarter of the year, an airline can deposit the 
amount it collected in a 2-week period during the first quarter of that 
year. If the taxes it deposits are less than what the airline actually 
took in during the third quarter, the airline can make up that 
underpayment when it files its quarterly return. The quarterly return 
date is approximately 2 months after the close of the quarter.
  The 10-percent ticket tax was in place during the fourth quarter of 
1996. The airlines semimonthly tax payments for that quarter, however, 
were based on the second quarter of 1996, during which time no excise 
taxes were collected. The airlines, in essence, did not remit any 
excise taxes during the fourth quarter of 1996, even though they were 
collecting these taxes from passengers at that time. The airlines had 
to make up for these tax underpayments by the time they file their 
fourth quarter returns, which are due today. Without this legislation, 
however, these taxes would not be deposited into the aviation trust 
fund, since the general-fund-to-trust-fund transfer authority expired 
along with the aviation excise taxes on December 31, 1996.
  It appears that the Treasury Department did not account for the 
complex accounting procedures, and assumed that the trust fund would be 
credited with $1.5 billion more than it could have been, unless 
Congress reinstated the authority for the IRS to transfer the fourth 
quarter excise taxes to the trust fund.
  Last night, the Senate passed the bill that will avert the imminent 
insolvency of the trust fund and ensure that our aviation system 
remains the best and safest in the world. The temporary reinstatement 
of the excise taxes, however, does not necessarily mean that the taxes 
should be extended indefinitely. Last year, Congress created the 
National Civil Aviation Review Commission [NCARC] to study new 
mechanisms to fund the FAA after an indepedent audit of FAA needs. The 
report on the independent audit of the FAA's projected needs was 
released today, February 28, and now the NCARC can do its work and 
report back to Congress in early October 1997. While I would have 
preferred to maintain the aviation taxes through the end of the year to 
ensure that there was not another lapse while Congress thoroughly 
considers the NCARC recommendations, procedural and time contraints 
made it impossible to do this. 

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