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GAO-16-746R 1 (2016-08-08)

handle is hein.gao/gaobaakct0001 and id is 1 raw text is: c(AO U.S. GOVERNMENT ACCOUNTABILITY OFFICE 441 G St. N.W. Washington, DC 20548 August 8, 2016 The Honorable John Thune Chairman The Honorable Bill Nelson Ranking Member Committee on Commerce, Science, and Transportation United States Senate The Honorable Bill Shuster Chairman The Honorable Peter DeFazio Ranking Member Committee on Transportation and Infrastructure House of Representatives Airport and Airway Trust Fund: Less Than Half of Noncommercial Jet Fuel Tax Receipts Are Transferred Ensuring excise tax compliance on highway motor fuel has been an ongoing concern for federal agencies for decades. While several legislative changes were enacted in the 1980s and 1990s to reduce incentives to evade motor fuel taxes, in 2002, the Internal Revenue Service (IRS) testified that increases in federal and state excise tax rates had increased incentives for tax evasion. In testimony, the IRS identified several examples of fuel fraud, including the misuse of tax exemptions to evade excise taxes on diesel fuel, the transfer of motor fuel across state or local boundaries, the smuggling of motor fuel into the United States, and illegally blending motor fuel with other substances to reduce the effective excise tax rate.1 Similarly, in 2003, the Secretary of Transportation called fuel fraud a serious and growing problem that requires an equally serious Federal response.2 At that time, the Department of Transportation's Inspector General testified that the Federal Highway Administration (FHWA) estimated that motor fuel tax evasion activities reduced excise tax receipts, which serve as a funding mechanism for and are deposited into the Highway Trust Fund, by at least $1 billion annually.3 Among the various types of fuel tax fraud, federal officials raised concerns about the diversion of jet fuel to diesel truck use because jet fuel taxes were lower than those for diesel. At the time, the two fuels were largely substitutable, but the federal excise tax for diesel fuel ($0.244 per gallon) was greater than the federal excise tax for jet fuel used in commercial aviation ($0.044 'Joseph Brimacombe, Deputy Director of Compliance, Small Business and Self Operating Divisions, IRS. Schemes, Scams, and Cons: Fuel Tax Fraud, testimony before the S. Comm. on Finance, 107th Cong. 64-76 (2002). 2Secretary of Transportation Norman Y. Mineta. SAFETEA: Reauthorization of Surface Transportation Programs, testimony before the S. Subcomm. on Transportation and Infrastructure, Comm. on Environment and Public Works, 108th Cong. 27-33 (2003). 3Ken Mead, Inspector General, Department of Transportation, Office, Management of Cost Drivers on Federal-aid Highway Projects, testimony before the U.S. House of Representatives, Subcomm. on Transportation, Treasury and Independent Agencies, Comm. on Appropriations, 108th Congress (2003). GAO-16-746R, Airport and Airway Trust Fund

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