The Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), enacted March 27, 2020, creates an "excise tax holiday period" for certain aviation excise taxes from March 28, 2020 through December 31, 2020.

Transportation by air

IRC Sections 4261 and 4271 impose taxes on amounts paid for transporting persons or property by air. Under the CARES Act, no tax will be imposed under either section on amounts paid March 28, 2020 through December 31, 2020. This includes the tax imposed under IRC Section 4261(e)(3) for the purchase of the right to make mileage awards.

Kerosene used in commercial aviation

IRC Sections 4041 and 4081 impose taxes on fuel, including fuels used in aviation. The CARES Act considers kerosene (commonly known as jet fuel) used in commercial aviation to be a nontaxable use under IRC Section 6427(l) and provides that no tax will be imposed on kerosene used in commercial aviation under IRC Sections 4041(c) and 4081 from March 28, 2020 through December 31, 2020. The excise tax holiday does not include the Leaking Underground Storage Tank (LUST) tax imposed by IRC Section 4081(a)(2)(B).

While the excise tax holiday applies only to taxes that would have been imposed from March 28, 2020 through December 31, 2020, it is unclear at this time how the IRS will apply the excise tax holiday to specific purchasing fact patterns.

Implications

Those required to collect and remit excise taxes under IRC Sections 4261 and 4271 will not need to do so on amounts paid from March 28, 2020 through December 31, 2020. Additionally, consumers of air transportation services and purchasers of the right to make airline mileage rewards (hotels, car rental companies, banks, etc.) will not be required to pay the excise tax imposed under IRC Section 4261.

Similarly, those required to collect and remit excise taxes imposed under IRC Sections 4041 and 4081 will not be required to collect and remit excise taxes imposed on kerosene used in commercial aviation and purchasers of such fuel will not be required to pay the excise tax on this fuel. The excise tax holiday is limited to use in commercial aviation and does not apply to purchasers for use in noncommercial aviation.

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