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Adds a new section (9512) to subchapter A of the Internal Revenue Code establishing the 'Funding to Support Clean Communities Trust Fund', appropriating to that trust fund amounts equivalent to specified taxes under section 4041(c) (to the extent attributable to a specified rate) and section 4081 (with respect to kerosene to the extent attributable to a specified rate), authorizing expenditures (as provided by appropriation Acts) for grants and activities including grants under Clean Air Act sections 103 and 105 and certain public transit/rail and public transportation improvements, requiring a set-aside of not less than 50 percent for disadvantaged communities, defining 'disadvantaged community' and 'low-income community', and setting an effective date of January 1, 2026.
Makes conforming amendments to subchapter A's provisions governing transfers to the Airport and Airway Trust Fund by modifying subparagraph (A) (inserting additional text after a comma) and by striking the phrase 'rate specified in' in subparagraph (D) and inserting 'rates specified in clauses (i) and (ii)(I) of'. These changes adjust how specified fuel tax rates are referenced for purposes of transfers.
Replaces paragraph (3) of subsection (c) to set new tax rates for sales or uses under section 4041(c) and adds an inflation-adjustment paragraph (4).
Amends subsection (a)(2) (subparagraph (C)) by replacing clause (ii) to set manufacturers excise tax rates for certain aviation uses and adds an inflation-adjustment subparagraph (E). Also updates related cross-references via conforming amendments.
Updates a cross-reference within subsection (d)(2) to target the first subcomponent of the newly structured clause.
Inserts a new subsection (f) providing for refunds or credits (without interest) to ultimate purchasers when the Secretary determines there is reasonable cause that the increased rate should not apply to certain fuels used in non-commercial aviation; includes examples and a termination provision. Also contains conforming language updates to internal cross-references.
Alters a cross-reference in subsection 6427(l)(4)(B)(ii)(II) to point to the first subcomponent of the newly restructured manufacturer-rate clause.
Modifies the rate referenced in section 9503(c)(5)(B).
Revises subsection (f) to limit an exemption from the air transportation excise tax to specific uses and to add an operational requirement regarding airports and certain services under title 49.
Raises the federal excise tax on aviation fuel used for non-commercial flights (private and other non‑commercial aircraft) and updates related tax-code references and manufacturer taxes. The tax increase includes an inflation adjustment beginning after 2026 and allows limited refunds for emergency or research uses through January 1, 2028. Creates a new “Funding to Support Clean Communities Trust Fund” that will receive specified fuel tax revenues. Money in the trust fund (subject to annual appropriation) may be used for air quality monitoring, expanding and maintaining monitoring networks, and improving public transit and passenger rail near airports; at least half of annual funds must be reserved for disadvantaged communities, with priority for communities disproportionately harmed by air pollution. Changes take effect January 1, 2026.
Amend Internal Revenue Code section 4041(c) to set retail excise tax rates: (A) 4.3 cents per gallon for sales or uses for commercial aviation; (B) for sales or uses not for commercial aviation, tax equals 35.9 cents per gallon plus $1.641 per gallon.
Add an inflation adjustment: for any calendar year beginning after 2026, the dollar amount in the added paragraph (3)(B)(ii) (the $1.641 per gallon amount) will be increased by an amount equal to that dollar amount multiplied by the cost-of-living adjustment under section 1(f)(3).
Amend manufacturers excise tax (26 U.S.C. 4081(a)(2)) so that for aviation uses not described in clause (i) the tax equals 35.9 cents per gallon plus $1.641 per gallon.
Add an inflation adjustment for the manufacturers excise tax dollar amount: for calendar years beginning after 2026, the dollar amount in subparagraph (C)(ii)(II) (the $1.641 per gallon) shall be increased using the cost-of-living adjustment under section 1(f)(3).
Conforming amendment: change references in 26 U.S.C. 4081(d)(2) by replacing “(a)(2)(C)(ii)” with “(a)(2)(C)(ii)(I)" to reflect the split of subclauses.
Who is affected and how:
Private/non‑commercial aircraft operators and owners: Face higher per‑gallon federal excise taxes on fuel used for non-commercial flights beginning Jan 1, 2026. This raises operating costs for private jets and other non‑commercial aviation activity; some operators may pass costs to customers or reduce flight activity.
General aviation industry and service providers: Increased fuel tax may reduce demand for some non‑commercial flights and could affect fuel sales, fixed base operators, and maintenance/management services tied to private aviation.
Disadvantaged and pollution‑impacted communities near airports: Potential beneficiaries of new grant funding—projects for air quality monitoring and improvements in public transit and passenger rail near airports are prioritized for these communities. At least half of each year’s fund distributions must be reserved for disadvantaged communities, and priority is given to those disproportionately harmed by air pollution.
Local governments and transit agencies: Eligible to receive appropriated funds for transit and passenger rail improvements near airports; will need to apply for and administer grants and projects under program rules established later.
Federal agencies: Treasury/IRS must implement tax changes and refund rules; implementing agencies (likely EPA, DOT, or others named in implementing guidance) must set up grant programs, distribute funds per statutory priorities, and manage monitoring and transit projects. Administrative burden includes defining eligibility, allocating funds, and coordinating transfers.
Federal budget and revenues: The change raises federal receipts from fuel excise taxes; those receipts are directed into the new trust fund, but actual outlays depend on appropriations. The inflation adjustment can increase revenue over time. The statute provides revenue direction and program authorization but not direct appropriations, so program scale will depend on future budget decisions.
Tradeoffs and implementation considerations:
Equity: The statutory reservation for disadvantaged communities targets benefits to communities with higher pollution burdens but requires robust implementation and outreach to capture local needs.
Timing: Effective date in 2026 gives lead time for tax collection systems and for agencies to prepare program rules; limited refunds through 2028 narrow exceptions shortly after implementation.
Administrative complexity: Changes to tax collections, refunds, and transfers plus creation of a new trust fund will require regulatory and interagency coordination, and future appropriation and program guidance to deliver on the authorized uses.
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Read twice and referred to the Committee on Finance.
Introduced January 21, 2025 by Edward John Markey · Last progress January 21, 2025
Read twice and referred to the Committee on Finance.
Introduced in Senate