2015 Legislative Session Preview: Dogfight breaking out over jet fuel sales tax exemption

Editor’s Note: As the 2015 Legislative Session approaches, FloridaPolitics.com is reporting on several “legislative food fights” likely to break out during the annual lawmaking period. These food fights don’t always make the front page of the Tampa Bay Times, but they are the kind of industry vs. industry or intra-industry turfbattles that drive Tallahassee — and expand the economics for state lobbyists.

One profile focused on an expected scrum between Big Tobacco and trial lawyers. Today’s installment is about a tax exemption on jet fuel purchases.

Two Florida lawmakers have on their radar the grounding of a sales tax exemption on jet fuel purchases.

Miami Sen. Anitere Flores and Fort Lauderdale Rep. George Moraitis have drafted legislation (SB 722, HB 595) that would end a tax carve-out extended in the aftermath of the 9/11 terrorist attacks. Supporters of the legislation say it would level the fuel-tax playing field for major air carriers operating in the state.

In 1996, the Legislature designed a tax incentive plan to attract then-viable Pan Am to Florida. It passed legislation stipulating a 100 percent tax rebate be made available to any carrier that offered transcontinental jet service, increased its Florida-based work force by 1,000 percent and offered 250 or more full-time jobs. However, by 2000, the exemption was no longer necessary, so the Legislature repealed the rebate during that year’s legislative session (even though the exemption was scheduled to sunset in 2001).

Then 9/11 happened.

In the wake of the September 11 terrorist attacks, the tourism industry-conscious Legislature reimplemented the exemption partially based on the rationale that repealing the carve-out could be seen as a tax increase that would further depress air travel, already flagging in the wake of the attacks. Only this time, the reset of the exemption was broader, leaving behind the sunset clause and no means for enforcing the requirement that carriers receiving the rebate continue to add workforce, the original bill’s raison d’être.

This is where the Flores-Moraitis legislation comes into play. Since the reinstatement of the bill to incentivize Pan Am to fly in Florida, that airline has ceased flying anywhere — but the tax rebates remain. And they have been utilized in ways that the 1996 bill’s sponsors would likely find counter to their original attempt.

Blue chip airlines such as Delta and American Airlines — which operate a major national hub with a full support staff in Miami — are not offered their rebate on their combined fuel tax bill of about $23 million, while carriers such as Southwest, JetBlue, Spirit AirTran — not exactly mom-and-pop shops — get back all of the about $25 million in taxes they spend on fuel.

The proposed bills would repeal the exemption to apply the jet fuel tax evenly to all airlines rather than government picking winners and losers. It also drops the fuel tax rate from 6.9 cents per gallon to 5.4 cents per gallon for all airlines, making the bill revenue neutral and not an overall tax increase.

At a time when the LIP funding crisis leaves Gov. Rick Scott‘s budget with a projected billion-dollar shortfall, Flores’ and Moraitis’ bills may have an improved chance of coming in for a landing.

Repealing the tax exemption won’t come without a dogfight in the Legislature — and that means several lobbying firms recently have been retained for the air-to-air combat.

Delta Airlines has retained Nick Iarossi, Ron LaFace, Jen Gaviria and Chris Schoonover of Capital City Consulting, while JetBlue recently hired the Advocacy Group at Cardenas Partners, which includes Slater Bayliss and Stephen Shiver. Southwest Airlines’ lobbyist is represented by Bo Rivard. American Airlines has not yet retained an outside firm.

U.S. Airways Group, which is neutral on this issue, is represented by Southern Strategy Group.

HB 595 was referred to the Economic Development & Tourism Subcommittee, while SB 722 was sent to the Committees on Transportation; Finance and Tax; and Appropriations.