Fuel Fraud Repeal Gains Traction Under Plane Act
A GAO study estimated that the aviation trust fund may have lost well over $1 billion because of the nearly 15-year-old fuel fraud tax law.
The Government Accountability Office estimated that fuel vendors have overpaid by as much as $230 million in tax revenue as a result of the fuel fraud law.

The nearly 15-year effort to repeal the highway diesel fuel tax on business aviation took a notable step forward with this week’s introduction of the so-called Plane Act (S.2198). Jointly introduced on Monday by Sen. James Inhofe (R-Oklahoma) and Angus King (I-Maine), the bill would roll back the “fuel fraud” tax measure imposed in 2005 as an attempt to discourage truck drivers from purchasing aviation jet fuel to avoid paying the 2.5-cent per gallon higher tax levy on highway diesel fuel.


That law requires noncommercial jet fuel to be treated as highway diesel fuel: taxed at the same rate and deposited into the highway trust fund until approved aviation vendors demonstrate that the fuel was used for aviation purposes and seek refunds.


The net result is a significant amount of aviation revenue has been lost to the trust fund as many vendors have not sought the refunds, finding the process cumbersome or too bureaucratic. In 2016, the Government Accountability Office estimated that the aviation trust fund had lost between $1 billion and $2 billion “or more” in tax revenue, and fuel vendors have overpaid by as much as $230 million in tax revenue as a result of the then decade-old fuel fraud law.


While the aviation system has lost revenue, efforts to reverse the law had been difficult, since it created a windfall for the highway trust fund. The National Air Transportation Association (NATA), which has worked for years behind the scenes to convince lawmakers to reverse the law, praised the measure in the Plane Act to lift the tax. “[It] would undo an ill-founded policy that has taken money away from the aviation system for over a decade,” said NATA president Gary Dempsey. “This legislation will enable NATA’s members to keep fuel prices competitive, and ensure the tax revenue from jet fuel sales supports aviation system users.”


While it is unclear whether the Plane Act will progress as a standalone bill this year, it is part of a series of bills that Inhofe has introduced and been successful in shepherding through Congress over the past decade to strengthen pilots rights and correct nagging general aviation issues. These include two separate Pilots Bill of Rights acts.