18 March 2016 IRS provides guidance on the designation of Secured Airport Terminals In Notice 2016-15, the IRS provides guidance on the designation of Secured Airport Terminals (SATs). The Notice also provides the procedures under which the IRS maintains a published list of SATs and procedures that a terminal operator can use to be added to the list. Kerosene is generally taxed at a rate of 24.4 cents per gallon on its removal from a terminal. If it is removed from a terminal directly into the fuel tank of an aircraft, however, it is taxed at the lower aviation rate (4.4 cents per gallon in the case of commercial aviation and 21.9 cents per gallon in the case of general aviation) or is tax-free (in the case of international flights). A refueler truck, tanker, or tank wagon (a refueler) is treated as part of a terminal for this purpose if the terminal is a Secured Airport Terminal (SAT) and the refueler satisfies certain requirements. These requirements are generally intended to assure that the kerosene is not diverted to highway use. The terminals qualifying as SATs were listed in H.R. Conf. Rep. No.108-755 at 692 (2005). The IRS modified this list in Notice 2005-4, 2005-1 C.B. 289, and Notice 2005-80, 2005-2 C.B. 953. Until now, the IRS has not provided guidance describing the criteria that must be satisfied for designation as a SAT or the procedures for obtaining such a designation. Notice 2016-15 (the Notice), specifies nine criteria that a terminal must satisfy to be designated as a SAT. These are: (1) The terminal operator requests designation in accordance with procedures prescribed in the Notice; (2) The terminal operator is registered under Section 4101; (3) The terminal qualifies as a terminal under the regulations; (4) The terminal is located within an airport; (5) Only authorized vehicles are allowed to enter and exit the terminal; (6) Kerosene in the terminal is exclusively for delivery into aircraft fuel tanks; (7) Kerosene is delivered into aircraft fuel tanks directly from the terminal or by qualifying refuelers; (8) Except in exigent circumstances, no highway vehicle is loaded with kerosene at the terminal; and (9)The terminal has security measures to resist access to the terminal by unauthorized persons and vehicles. The Notice also provides procedures that terminal operators can use to request designation as a SAT. Those procedures include an onsite inspection by the IRS to determine whether the terminal complies with the criteria listed above. The Notice provides appeal procedures for cases in which the initial inspection results in a denial of the designation request. In addition, the Notice requires designated SATs to notify the IRS of any change in material facts and provides for revocation of a SAT designation if the IRS receives or discovers information that a terminal no longer satisfies the criteria for a SAT designation. Finally, the Notice includes a unified list of terminals that qualify as SATs as of March 8, 2016, and states that, in the future, the IRS will maintain a current SAT list on its website. The Notice provides for the first time the criteria a terminal must satisfy and the procedures it must follow to be designated as a SAT. Designation as a SAT is beneficial to aircraft operators that purchase fuel from the SAT. Although the tax rate applicable to the aircraft ultimately depends on the nature of its operations (commercial, international or general aviation), fuel delivered into the aircraft's fuel tank from a SAT will be taxed at the correct rate at the time of the purchase, eliminating the need to file for a refund on fuel that has been taxed at a higher rate.
Document ID: 2016-0532 | |||||||||
