[Congressional Record Volume 144, Number 136 (Friday, October 2, 1998)]
[Senate]
[Pages S11339-S11340]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. CHAFEE:
  S. 2542. A bill to amend the Internal Revenue Code of 1986 to modify 
the tax on commercial aviation to and from airports located on sparsely 
populated islands, to the Committee on Finance.


        legislation providing relief for certain island airports

 Mr. CHAFEE. Mr. President, today, I am introducing legislation 
to provide relief to communities for whom air transportation is vital 
to their survival.
  Last year, Congress altered the structure of the aviation excise tax 
which funds the Airport and Airway Trust Fund. As part of the Taxpayer 
Relief Act of 1997, the 10% ad valorem ticket tax was replaced with a 
combination ad valorem/flight segment charge. When fully phased in, the 
tax will consist of an ad valorem tax of 7.5% of the price of a ticket 
and a $3.00 charge per flight segment.
  This change has dramatically increased the tax imposed on low-fare 
flights. A typical flight to or from the Block Island community located 
in my state costs $28. Prior to last year, the tax on this flight would 
be 10% or $2.80. When fully implemented, however, the new structure 
will increase the tax on the same ticket by 82%, to $5.10.
  This new structure was intended to provide a user-based approach to 
paying for the use of FAA services and facilities. However, short 
distance flights between islands and a mainland make little demand on 
Air Traffic Control services as these flight segments do not use ATC 
centers, rarely use departure or arrive control, often operate under 
visual flight rules and usually are transferred from the departure 
control tower to the destination control tower.
  Congress recognized that this new tax structure would adversely 
affect rural communities. Consequently, flights to or from rural 
airports are taxed at a rate of 7.5% of the ticket price, with no per 
passenger segment charge. For purposes of this exemption, a rural 
airport is one that is located at least 75 miles away from an airport 
with more than 100,000 passengers. Unfortunately, this restrictive 
definition fails to recognize the unique nature of island communities.
  Island communities face transportation problems similar to those 
encountered by passengers from rural areas. Air and ferry 
transportation provide islands with a vital link to the mainland for 
shopping, employment, health care, and other needs. Most commercial 
passenger enplanements at island airports are for short-distance 
flights simply to get off the island. For those communities, air and 
ferry service maintain a delicate balance, and both are needed to meet 
the communities' needs for mainland access.
  The current excise tax structure provides a disincentive to providing 
service to remote island communities. This result is contrary to 
Congress' intent to increase air service to these remote communities.
  My legislation reinstates the prior tax structure for flights to or 
from an

[[Page S11340]]

island community. Thus, a passenger flying to or from such a community 
would pay a tax equal to 10% of the price of a ticket. It is important 
to note that this is less favorable than the exemption currently 
provided to passengers to and from rural airports.
  I encourage my colleagues to join me as cosponsors of this important 
health initiative.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2542

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. MODIFICATION OF TAX ON AIR TRANSPORTATION TO AND 
                   FROM SPARSELY POPULATED ISLANDS.

       (a) In General.--Subsection (e) of section 4261 of the 
     Internal Revenue Code of 1986 is amended by redesignating 
     paragraphs (4) and (5) as paragraphs (5) and (6) and by 
     inserting after paragraph (3) the following new paragraph:
       ``(4) Segments to and from certain island airports.--
       ``(A) Exception from segment tax.--The tax imposed by 
     subsection (b)(1) shall not apply to any domestic segment 
     beginning or ending at an airport which is a qualified island 
     airport for the calendar year in which such segment begins or 
     ends (as the case may be).
       ``(B) Qualified island airport.--For purposes of this 
     paragraph, the term `qualified island airport' means, with 
     respect to any calendar year, any airport if--
       ``(i) such airport is located on an island having a 
     population of 20,000 or less (determined under the 1990 
     decennial census), and
       ``(ii) during the second preceding calendar year--
       ``(I) there were 400,000 or fewer commercial passengers 
     departing by air from such airport, and
       ``(II) 50 percent or more of the initial flight segments of 
     such commercial passengers are 100 miles or less.
       ``(C) Ticket tax.--In the case of any domestic segment 
     beginning or ending at an airport which is a qualified island 
     airport for the calendar year in which such segment begins or 
     ends (as the case may be), subsection (a) shall be applied by 
     substituting `10 percent' for `7.5 percent' and paragraph (6) 
     shall not apply. A rule similar to the rule of paragraph 
     (1)(C)(ii) shall apply for purposes of this subparagraph.''
       (b) Conforming Amendment.--Clause (i) of section 
     4261(e)(1)(C) of such Code is amended by striking ``Paragraph 
     (5)'' and inserting ``Paragraph (6)''.
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to transportation beginning 7 days after the date of 
     enactment of this Act.
       (2) Treatment of amounts paid.--The amendments made by this 
     section shall not apply to amounts paid before 7 days after 
     the date of enactment of this Act.
                                 ______