Presented by

IFTA Managers’ and Law Enforcement Seminar

September 20-22, 2006

Ron HesterRon Hester

OntarioOntario

Ministry of FinanceMinistry of Finance

What You’ll Learn

The Basics – the core principles and the benefits

How IFTA Works – from A to Z The Amendment Process – how IFTA

changes Compliance – jurisdiction and carrier –

administrative and roadside enforcement Some Issues – What’s on the horizon IFTA, Inc. – Who they are and the services

they provide

WHAT IS IFTA?

The International Fuel Tax Agreement A tax collection agreement by and among

the 48 contiguous States and the 10 Canadian Provinces bordering the US

Uniform administration of motor fuels use taxation laws with respect to qualified motor vehicles operated in more than one member jurisdiction

IFTA’S CORE PRINCIPLES

Base JurisdictionRetention of Sovereign Authority to determine tax rates, exemptions and exercise other substantive tax authorityUniform Definition of Qualified Motor Vehicle

BASE JURISDICTION

Where qualified motor vehicles are registered (IRP)Where operational control and operational records are maintained or can be made availableWhere some travel is accrued

TAX COLLECTED THROUGH IFTA

Motor fuel use taxes that are imposed by each jurisdiction on the consumption of motor fuel in qualified motor vehicles.

QUALIFIED MOTOR VEHICLE

Motor vehicle used, designed or maintained for the transportation of persons or property andGross vehicle or registered gross vehicle weight over 26,000 lbs. or 11,797 kgs.Three-axles regardless of weight

Used in combination when the weight of the combination exceeds 26,000 lbs. or 11,797 kgs.

WHO MAY LICENSE?

Any person based in a member jurisdiction operating a qualified motor vehicle in two or more member jurisdictions

THE BENEFITS TO THE LICENSEE

One license and one set of decals for each qualified motor vehicle to operate through all member jurisdictionsOne tax return filed each quarter with the base jurisdictionOne tax payment or refundOne audit by the base jurisdictionReduced administrative costs

BENEFITS TO THE JURISDICTION

Increased enforcementIncreased audit coverageLower administrative costs

GETTING STARTED

Carrier submits licenseapplication

to base jurisdiction1Base jurisdiction

reviews and processeslicense application

of qualifiedcandidate

2

Base jurisdiction issuesone IFTA license to

carrier and 2 decals foreach QMV operated

3Licensee operates

and prepares quarterlyIFTA tax return with

base jurisdiction4

Base Jurisdiction (BJ) is a US jurisdictionBase Jurisdiction (BJ) is a US jurisdiction

THE IFTA TAX RETURN

Total Miles Total Fuel MPG

10000 2000 5.00

Jurisdiction Total Miles Tax. Miles Tax. Fuel Tax-Pd Fuel Net Tax. Fuel Tax Rate Tax Int. TotalBJ 2500 2500 500 1000 -500 0.15 (75.00)$ 0 (75.00)$ AA 2500 2500 500 500 0 0.09 -$ 0 0.00BB 2500 2500 500 300 200 0.25 50.00$ 0 50.00CC 2500 2500 500 200 300 0.23 69.00$ 0 69.00

Total 44.00$

WHAT HAPPENS NEXT

Licensee files tax returnwith base jurisdiction

and remits $44.005Base jurisdiction

reviews and processestax return and

remittance6

Base jurisdiction processes all other tax

returns received7

At the end of each monthbase jurisdiction sendstransmittal reports to all

other memberjurisdictions.

8

TRANSMITTAL REPORT

License # Total Miles Tax. Miles MPG Tax. Fuel Tax-Pd Fuel Net Tax. Fuel Tax Int. TotalBJ123456789 2500 2500 5.00 500 1000 -500 (125.00)$ 0 (125.00)$ BJ234567891 2500 2500 5.00 500 500 0 -$ 0 -$ BJ345678911 2500 2500 5.00 500 300 200 50.00$ 0 50.00$ BJ456789111 2500 2500 5.00 500 200 300 75.00$ 0 75.00$ BJ567891111 2500 2500 5.00 500 2000 -1500 (375.00)$ 0 (375.00)$

Totals 12500 12500 25 2500 4000 -1500 (375.00)$ 0 (375.00)$

Transmittal from Base Jurisdiction to Jurisdiction AA

05/2200

WHAT HAPPENS NEXT

Base jurisdiction sendsthe transmittal report

to Jurisdiction AA andall other member

jurisdictions

9Base jurisdiction

processes all transmittalreports and payments

received fromother jurisdictions

(including $375 fromJurisdiction AA)

10

Base jurisdiction sendsrefunds to licensees and

issues assessmentsfor any taxes due

11

WHAT HAPPENS NEXTBase jurisdiction

conducts audits on licensees

for itself and allmember

jurisdictions

12Enforcement activities

during process: i.e. Roadside &

Inspections13

AUDITS

The base jurisdiction will conduct audits for itself and all member jurisdictionsJurisdictions must complete audits on an average of 3% of its licensees each yearOf the 3%, 25% of the audits must involve high-distance accountsOf the 3%, 15% of the audits must involve low-distance accountsAudit monies are transmitted with the monthly transmittal reports; audit reports are sent upon completion

COMMITTEE INFO Audit Committee Agreement Procedures Committee (APC) Attorneys Section Steering Committee Clearinghouse Advisory Committee Dispute Resolution Committee (DRC) Industry Advisory Committee (IAC) Information Technology Advisory

Committee (ITAC) Law Enforcement Committee (LEC) Program Compliance Review Committee

(PCRC)

The IFTA Articles of Agreement, R1600 provides that the following may propose amendments to the IFTA Articles of Agreement Procedures Manual or Audit Manual:

Committees: Agreement Procedures/Audit/ Law Enforcement/Program Compliance Review

The IFTA, Inc. Board of Trustees

Any Member Jurisdiction

WHO CAN SUBMIT A PROPOSAL?WHO CAN SUBMIT A PROPOSAL?

How Ballots Work

Sponsors submit ProposalsProposals distributed for comment periodProposals discussed at Annual Business MeetingSponsors review proposals and may submit revisions

Proposals distributed for second comment periodSponsors review and may submit revisionsBallots distributed for voteAll comments and votes are submitted through IFTA, Inc. website

Ballot Time Frames

Full Track45 days – comment period45 days – sponsor review after ABM45 days – comment period60 days - vote

Short Track30 days – comment period30 days – sponsor review after ABM30 days – comment period30 days - vote

Annual Business Meeting

Short track ballot proposals must receive an affirmative vote of ¾ of the member jurisdictions to continue on the short track – if not, ballot proposal dies Full track ballot proposals may be moved to short track – must receive an affirmative vote of ¾ of the member jurisdictions to move to short track – if not, ballot stays on full track and moves forward

2006 BALLOT PROCESS STATUS

Short Track:Second 30-day comment period

ending October 2, 2006

Full TrackSecond 45-day comment period

ending October 16, 2006

2007 BALLOT PROCESS

Deadline for Submitting Ballot Proposals:

COMPLIANCE

IFTA, Inc. ClearinghouseEnforcement (field/roadside)Program Compliance ReviewsConsensus Board InterpretationsDispute Resolution

ENFORCEMENT OF IFTA

Credentials A jurisdiction issues one license to the

carrier The carrier must copy the license and place

a copy in each qualified motor vehicle A Jurisdiction issues two decals to the

carrier for each qualified motor vehicle The carrier must display a decal on each

side (driver and passenger) of each qualified motor vehicle

ENFORCEMENT OF IFTA

An IFTA temporary decal permit This permit may be carried ONLY in place of

the decals It is valid for only 30 days It is vehicle specific (VIN must be included) It’s main purpose is to allow a carrier to add a

qualified motor vehicle immediately – places a copy of the license in the vehicle and the jurisdiction faxes the temporary permit until permanent decals reach the carrier

ENFORCEMENT OF IFTA

Trip Permit

A jurisdiction may issue a trip permit to a carrier This trip permit is in lieu of an IFTA license Most jurisdiction trip permits are limited by time (i.e.

days, hours, etc.) This is NOT an IFTA trip permit – it allows the carrier

to travel through the jurisdiction that issued it and no other

A trip permit has to be obtained for each jurisdiction separately

ENFORCEMENT OF IFTA

Jurisdictions exchange quarterly a listing of new and cancelled accountsJurisdictions exchange, at least every 10 days, the following:

Listing of suspended licensesListing of revoked licensesListing of reinstated licenses

USES OF INFORMATION

Administrative To ensure that a carrier in a revoked

status in one jurisdiction does not receive a license from another

Roadside To ensure that a carrier in a revoked,

suspended, or cancelled status is not continuing operations

WHY ENFORCE?

If a carrier is operating on a suspended or revoked license, this indicates that the carrier is not complying with the terms of IFTA Including failure to file tax returns, failure to pay a tax

return, failure to pay an audit assessmentIf a carrier is operating on a cancelled license, the carrier has indicated to the jurisdiction that he or she is no longer operating― Stopping the carrier from operating in your jurisdiction

stops the carrier from operating in all jurisdictions – payment by this carrier pays your taxes too

Each IFTA jurisdiction has a Program Compliance Review (PCR) once every four years

The purpose of the review is to determine if the jurisdiction is in compliance with the Agreement

PROGRAM COMPLIANCEPROGRAM COMPLIANCE

CONSENSUS BOARD INTERPRETATIONS

A process through which provisions of the IFTA governing documents may be interpreted and commentary added to the affected provisions

A jurisdiction, committee or Board member requests an interpretation

The Board may issue a proposed interpretationA proposed interpretation must be ratified by ¾ affirmative vote of the membership at an Annual Business MeetingIf ratified, commentary is added to the affected IFTA governing document

Alternate FuelsNAFTANative Issues

INTERNATIONALFUEL TAX

ASSOCIATION, INC.Manages

The International Fuel Tax Agreement

What is IFTA, Inc.?

A not-for-profit association incorporated under laws of the State of ArizonaMembership in IFTA constitutes membership in IFTA, Inc.Association is funded by membership duesIncorporated to conduct business activitiesMembership elects a 9-member Board of Trustees

THE PEOPLELONETTE L. TURNER – EXECUTIVE DIRECTOR

DEBORA K. MEISE – PROGRAM DIRECTOR

JASON DEGRAF – INFORMATION SERVICES ADMINISTRATOR

TAMMY TRINKER – EVENTS COORDINATOR

TOM KING - WEBMASTER

JESSICA EUBANKS – EXECUTIVE ASSISTANT

RICHARD O. BECKNER – PROGRAM COMPLIANCE ADMINISTRATOR

Services Provided

Administering the ballot process and the IFTA governing documentsGathering and distribution of the quarterly tax ratesProviding technical assistance to the member jurisdictions and licenseesGathering and distribution of the jurisdiction annual reportsLeading and participating in the required program compliance reviews

Other Services

Planning and preparation of an annual audit workshop (along with IRP), an attorneys’ meeting, an annual business meeting, a managers’ workshop and law enforcement training seminarParticipating in other related association and government meetingsMonitoring activities such as NAFTA

IFTA/IRP AUDIT WORKSHOPJANUARY 4-7, 2007

Tempe Mission Palms HotelTempe, Arizona

IFTA Attorneys' Section MeetingMay 11-12, 2007

Indianapolis, Indiana

Questions