Internal Revenue Bulletin:  2005-30 

July 25, 2005 

Rev. Proc. 2005-45


SECTION 1. PURPOSE

This revenue procedure provides that the list of rural airports published by the U.S. Department of Transportation, Office of the Secretary of Transportation, may be relied upon to determine whether an airport is a “rural airport,” as defined in § 4261(e)(1)(B) of the Internal Revenue Code, for purposes of the exception from tax on the amount paid for a domestic segment of taxable transportation by air.

SECTION 2. BACKGROUND

.01 Section 4261(a) generally imposes a tax equal to a percentage of the amount paid for taxable transportation of any person (percentage tax).

.02 Section 4261(b) imposes an additional tax on the amount paid for each domestic segment of taxable transportation by air (domestic segment tax).

.03 Section 4261(b)(2) generally defines a domestic segment as any segment consisting of one takeoff and one landing in the course of taxable transportation that begins and ends in the United States (or in Canada or Mexico at a point within 225 miles of the U.S. border).

.04 Section 4261(e)(1)(A) excepts from the domestic segment tax (but not the percentage tax) any domestic segment beginning or ending at an airport which is a rural airport for the calendar year in which such segment begins or ends (as the case may be).

.05 Section 4261(e)(1)(B) provides that an airport is a rural airport for a calendar year if (i) fewer than 100,000 commercial passengers departed by air during the second preceding calendar year from the airport, and (ii) the airport (I) is not located within 75 miles of another airport from which 100,000 or more commercial passengers departed during the second preceding calendar year or (II) is receiving essential air service subsidies as of August 5, 1997.

.06 Rev. Proc. 98-18, 1998-1 C.B. 435, provides a list of airports that qualify as rural airports. Since Rev. Proc. 98-18 was published, the airports that qualify as rural airports have changed.

SECTION 3. APPLICATION

.01 The U.S. Department of Transportation, Office of the Secretary of Transportation, in coordination with the Department of the Treasury, periodically publishes an updated list of airports that meet the requirements of § 4261(e)(1)(B). This list may be relied upon to determine whether an airport is a rural airport for purposes of the exception from the domestic segment tax. The Service will not separately publish the updated list.

.02 The updated list of airports that meet the requirements of § 4261(e)(1)(B) is located at  www.irs.gov/businesses/ small/topic/index.html under the Excise Tax link.

.03 In addition, any airport not listed by the U.S. Department of Transportation, Office of the Secretary of Transportation, qualifies as a rural airport if it meets the requirements of § 4261(e)(1)(B).

.04 The list published by the U.S. Department of Transportation, Office of the Secretary of Transportation, may be relied upon unless and until supplemented or modified by a subsequent list.

SECTION 4. EFFECT ON OTHER DOCUMENTS

Rev. Proc. 98-18, 1998-1 C.B. 435, is obsoleted.

SECTION 5. EFFECTIVE DATE

This revenue procedure applies to domestic segments for which payment is made after July 25, 2005. In the case of domestic segments for which payment is made on or before July 25, 2005, the Service will not challenge reliance upon either the list of rural airports in Rev. Proc. 98-18 or the U.S. Department of Transportation, Office of the Secretary of Transportation list in effect at the time of the domestic segment.

SECTION 6. DRAFTING INFORMATION

The principal author of this revenue procedure is Taylor Cortright of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding this revenue procedure, contact Ms. Cortright at (202) 622-3130 (not a toll-free call).


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