Delta spokesman correct on federal law and jet fuel tax breaks

A handful of state lawmakers are pushing legislation to end lucrative tax exemptions on jet fuel that have added tens of millions of dollars to Delta Air Lines’ bottom line for nearly a decade.

They have introduced House Bill 175 to eliminate the exemptions first given to the hometown carrier in 2006. That was when Delta was headed into Chapter 11 bankruptcy reorganization and needed all the help it could get.

A similar measure was proposed late in the 2014 legislative session, but never pursued.

Delta executives are fighting to stop this year’s bill. They argue it is a tax increase, likely passed onto consumers through higher air fares.

On Feb. 2, Trebor Banstetter, a Delta spokesman, said the bill, sponsored by state Rep. Earl Ehrhart, R-Powder Springs, and others, "violates.federal law and puts the state at risk of losing critical aviation funding from the Federal Aviation Administration."

Ehrhart’s bill would reinstate jet sales taxes on jet fuel used by Delta, sending the proceeds to the state general fund.

Banstetter’s point: The FAA in law and policy has made clear that jet fuel tax revenues can only be spent on airports or aviation. Otherwise, FAA funding could be lost.

Delta is one of the state’s largest and most influential employers, with $659 million in net income in 2014 and about 32,000 Georgia workers, most in metro Atlanta.

PolitiFact decided to check the facts.

First, a little background.

Lawmakers -- including Ehrhart -- have voted repeatedly to extend the fuel tax exemptions first approved in 2005, saving Delta millions of dollars each years. They made them permanent in 2012.

Recently, Ehrhart and the bill’s second sponsor, Rep. Howard Maxwell, R-Dallas, have criticized Delta executives for piping up on political issues.

Some Paulding County officials said last year they resented Delta’s vocal opposition to plans to commercialize their tiny county airport. Maxwell said he told Delta officials "to shut up and leave Paulding County alone."

Ehrhart this year voiced displeasure with Delta CEO Richard Anderson after hearing that Anderson said lawmakers should not be "chicken" about raising the state’s gasoline taxes for transportation. He also complained this month on the House floor that one of Delta’s 12 registered lobbyists was threatening co-sponsors of his bill, a charge airline executives deny.

Two legislators have withdrawn as sponsors of the bill, according to the House Clerk’s Office.

Ehrhart said HB 175 is about "corporate welfare."

"We helped them {Delta} when they were struggling and because they were one of the biggest employers in the state. But these things aren’t supposed to last forever. They need to get off the taxpayer dime."

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Ehrhart said he expects a hearing on his bill Tuesday.

Banstetter said Ehrhart’s bill would violate two federal laws, 49 U.S.C. 47107 and 47133, requiring that any state or local jet fuel taxes imposed after 1987 go to cover airport capital or operating costs. It also would change state law so the existing sales tax exemptions would apply to airlines with a tax liability of less than $15 million per year -- essentially singling out and cutting out Delta, he said.

The bill would mean Delta would be subject to jet fuel taxes, including a statewide 1 percent sales tax and a 1-percent transportation special purpose local option sales tax (TSPLOST) in Columbus and Augusta, Banstetter said. Total jet fuel taxes exemptions currently add up to about $21 million a year, the lion’s share for fuel bought by Delta.

Georgia received about $67 million in airport funding from the FAA in Fiscal Year 2014, according to the agency’s website.

An FAA spokesperson said agency officials as general policy do not discuss pending legislation.

The FAA issued a policy statement last November, with major implications for how airlines set up their jet fuel-purchasing operations and making clear that tax money collected on jet fuel could only be used for airport and aviation purposes. State and local governments were given no more than three years to adjust.

The jet fuel tax isn’t a make-or-break proposition for the airlines, but a big deal nonetheless. In 2013, United Airlines and American Airlines came under scrutiny for setting up offices outside Chicago in order to make jet fuel purchases, ostensibly to  avoid paying Cook County's taxes, according to news reports. Just this week, a lobbyist for American Airlines told Charlotte N.C. leaders that a state tax break on jet fuel was his airlines’ top legislative priority of the year.

Ehrhart told PolitiFact he’ll work to use the three-year window provided by the FAA to Georgia’s advantage. He said his strategy will be to have the fuel tax on Delta reinstated and have the proceeds go the general fund for at least a couple years and then for aviation uses as the FAA requires.

 "That could be $25 million to $45 million a year, real money," he said. "I have a solid legal opinion that we can do that. Delta says we can’t? Tell them to bring their proof, and I’ll bring mine."

Gregory Walden, a former chief counsel at the FAA, was one of a handful of aviation experts we contacted who agreed to comment on the record.

"FAA policy gives states up to three years to come into compliance with its November 2014 policy that state fuel tax proceeds must be directed either to the airport where the fuel is provided or to state aviation programs, Thus, the state (Georgia) will not risk losing any current or future FAA grant funds if it complies with the FAA policy within the period set out in that policy," said Walden, an attorney with Akin, Gump, Strauss, Hauer & Feld in Washington D.C., an aviation law professor at George Mason University and counsel to Propeller Airports.

Propeller Airports has been fighting to expand commercial aviation in Paulding.

Kenneth Quinn is an aviation attorney in the Washington law firm of Pillsbury Winthrop Shaw Pittman, whose clients include Delta.

Quinn said the airline spokesman’s comments were addressing the legislation as filed, not "potential revisions" now being discussed.

"The bill now before the legislature imposes the taxes and permits non-aviation use of revenues indefinitely," Quinn said. "It is difficult to assess the legality of proposed amendments without having the amended language under discussion."

But he questions what Ehrhart is suggesting.

"The three-year period was not a grace period for states or local municipalities to introduce new aviation fuel taxes with non-aviation revenue use," Quinn said. "The bottom line is that Georgia cannot cure the problems in the bill by attempting to recharacterize this new new tax as old. No transition or grace period exists for imposition of this tax."

Our conclusion: Delta’s Banstetter said House Bill 175, sponsored by state Rep. Earl Ehrhart, R-Powder Springs, "violates federal law and puts the state at risk of losing critical aviation funding from the Federation Aviation Administration." He bases that on federal laws stating that aviation fuel taxes must be used for airports or aviation purposes and an FAA policy statement last November, clarifying the agency’s position and giving governments no more than three years to adjust.

We know this: Georgia lawmakers have been passing jet fuel tax exemptions for Delta since 2005, when the airlines was in dire financial trouble. Since Banstetter made his statement, Ehrhart has said he’s developing a plan that would allow the tax money to go to aviation uses by the FAA’s three-year deadline. But reading the bill you couldn’t know that.

We rate Banstetter’s statement True.