FedEx Corp. and Gov. Bill Haslam’s administration are asking lawmakers to cap the company’s aviation-fuel tax liability to the state at $10.5 million a year — about one third of the $32 million it paid last year.
Further from the Commercial Appeal:
Memphis-based FedEx pays on average between 66 and 75 percent of the total $41 million to $48 million a year that the state’s aviation-fuel tax generates, because of its huge fuel purchases in Memphis.
The tax is 4.5 percent per gallon. The revenue flows into a fund created in 1988 that helps pay for airport improvements across the state. The revenue fluctuates from year to year with the price of fuel.
A bill suddenly moving through the Legislature would cap the annual tax liability for any single payer at $21.75 million this year and phase it down to $10.5 million in four years. According to testimony in a committee Tuesday, no other taxpayer is close to that cap, but Southwest Airlines is second at about $6 million per year.
But large and small airports that use revenue from the tax to pay for airport improvements are questioning the tax break — mostly because there’s no plan to replace the lost revenue and partly because it surfaced late last week in the form of an amendment to an innocuous “caption” bill. The Legislature uses caption bills as placeholders for later-filed amendments often only marginally related to the original bill’s stated purpose. In this case, the original House Bill 1147 only required additional information in reports on how aviation-tax revenue is spent and had no reference to a tax break.
The bill with the new amendment won a recommendation for approval Tuesday in the House Transportation Committee, where officials of the state departments of transportation, revenue, and economic and community development advocated for passage with warnings that FedEx could shift more of its flights from Memphis to its similar hubs in Indianapolis and Greensboro, N.C., to avoid the Tennessee tax, costing Tennessee jobs and revenue.
Indiana has no such tax and North Carolina caps its tax at $2.5 million per taxpayer, the bill’s House sponsor, Rep. Mark White, R-Memphis, said.
“Currently we have one payer in our state paying 66 percent of the state’s entire aviation fuel tax, or in fiscal year 2014, $32 million of the entire $48 million,” White told the committee. “FedEx states that it is unsustainable for their company to justify keeping on paying this level of tax when they have capacity at their Indianapolis and Greensboro hubs with little or no aviation fuel tax.”