The Trump Administration proposes that certain federal aviation-related excise taxes would “sunset” as part of a plan to reform and “privatize” the air traffic control system—that is, a plan to move air traffic control operations into a new non-governmental entity.
President Trump’s proposal would make the air traffic control entity a self-sustaining function, financed through fees paid by the users of the national air space. A White House release states that these fees would be “…more efficient and less burdensome than the patchwork of aviation taxes that supports the system today.”
Under the administration’s proposal, the transfer of the air traffic control operations from the Federal Aviation Administration (FAA) to a new non-governmental entity would be completed over a three-year transition period (subject to attaining certain milestones). The new air traffic control entity would be financed through the collection of user fees that would cover both the costs of operations and recapitalization. Accordingly, federal aviation excise taxes that currently cover these costs would sunset—except for those taxes necessary to continue to fund the Airport Improvement Program. General fund revenues would fund the rest of the FAA, according to the administration.
The Trump Administration—as part of the fiscal year (FY) 2018 budget released in May 2017—proposed a similar air traffic control reform initiative.
In its FY 2018 budget, the administration proposed changes to the current regime of ticket tax and aviation passenger taxes, in an effort to provide a fee structure so that aviation users would pay the cost of services provided by the air navigation service provider. The administration asserted the air traffic controller user fee would be a more efficient funding model than the current mix of excise taxes.
Read the administration’s fact sheet on the administration's air traffic control initiative [PDF 62 KB] that was released along with the FY 2018 budget proposals.
Legislation would be needed to implement changes to the federal aviation excise tax structure.
© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.