Coronavirus Stimulus Bill Includes Jet Fuel Excise Tax Holiday

Mar 30, 2020

The $2 trillion stimulus bill passed on Friday by Congress in the wake of the Coronavirus pandemic includes a provision enacting an “excise tax holiday” for federal excise taxes on sales of jet fuel (kerosene) for use in commercial aviation. Under the provision (below), as of the date of enactment (the bill was signed on Friday, March 27, 2020) – and through December 31, 2020 – it seems sales of jet fuel sold directly into the fuel tank of an aircraft for use in commercial aviation are subject only to the $0.01 per gallon LUST Tax. The federal excise tax would not be in effect for those sales. Under the language of the bill, it seems sales of jet fuel at the terminal rack into a refueler truck at an non-secured airport terminal will not be exempt from tax. To the extent that the federal excise tax is charged, it seems the ultimate purchaser (airline) can file for an exempt use refund. Note that per a footnote in the Joint Committee on Taxation Report on the estimated revenue effects of the bill, it seems that any tax paid jet fuel currently in inventory would not be not eligible for a refund of the tax paid prior to enactment of the legislation. This provision (which also provides an “excise tax holiday” for airfare ticket taxes) is designed to provide relief to the airline industry. We understand that there are currently discussions ongoing with the IRS seeking guidance as to the actual application of the bill’s language.

The bill is H.R. 748, the “Coronavirus Aid, Relief and Economic Security Act.” The text of the relevant provision is below. Note that to date, no states have enacted similar legislation.  We understand that there are currently discussions ongoing with the IRS seeking guidance as to the actual application of the bill’s language.

SEC. 4007. SUSPENSION OF CERTAIN AVIATION EXCISE TAXES.

(a) TRANSPORTATION BY AIR.—In the case of any amount paid for transportation by air (including any amount treated as paid for transportation by air by reason of section 4261(e)(3) of the Internal Revenue Code of 1986) during the excise tax holiday period, no tax shall be imposed under section 4261 or 4271 of such Code. The preceding sentence shall not apply to amounts paid on or before the date of the enactment of this Act.

(b) USE OF KEROSENE IN COMMERCIAL AVIATION.—In the case of kerosene used in commercial aviation (as defined in section 4083 of the Internal Revenue Code of 1986) during the excise tax holiday period—

(1) no tax shall be imposed on such kerosene under— (A) section 4041(c) of the Internal Revenue Code of 1986, or (B) section 4081 of such Code (other than at the rate provided in subsection (a)(2)(B) thereof), and

(2) section 6427(l) of such Code shall be applied— (A) by treating such use as a nontaxable use, and (B) without regard to paragraph (4)(A)(ii) thereof.

(c) EXCISE TAX HOLIDAY PERIOD.—For purposes of this section, the term ‘‘excise tax holiday period’’ means the period beginning after the date of the enactment of this section and ending before January 1, 2021.