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STATE TAX & FISCAL UPDATE

STATE TAX & FISCAL UPDATE. Bob Pitcher VP, State Laws, ATA NAFC Annual Meeting June 17, 2014. Today’s Agenda. State & Local Government Fiscal Situation State Tax Changes Business Taxes Highway Taxes IRP, IFTA & UCR Have We Made Any Progress?. State & Local Fiscal Update.

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STATE TAX & FISCAL UPDATE

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  1. STATE TAX & FISCAL UPDATE Bob Pitcher VP, State Laws, ATA NAFC Annual Meeting June 17, 2014

  2. Today’s Agenda • State & Local Government Fiscal Situation • State Tax Changes • Business Taxes • Highway Taxes • IRP, IFTA & UCR • Have We Made Any Progress?

  3. State & Local Fiscal Update Some Trouble Spots • Detroit • Chicago • Rhode Island • Puerto Rico Are These Places Bellwethers?

  4. Detroit • Largest City Bankruptcy in U.S. History • Filed Under Ch. 9 in July 2013 • Corruption, Mismanagement, Population Loss, Unpaid Taxes • $18.5 Billion in Debt • Pensions the Big Issue • Bankruptcy Trial Starts July 2014

  5. Chicago • Pensions (5 funds) Dragging City Down • 36% Funded – c. $35 Billion Deficit (under GASB rules!) • State Legislature Controls the Game • Raise Taxes? • Cut Benefits?

  6. Rhode Island • Pensions Again the Problem • 58% Funded - $4 Billion Deficit (GASB) • Local Pensions All PArt of State Fund • 2011 Reforms • Litigation  Arbitration  Vote  Limbo • Union Opposition • Central Falls Bankruptcy

  7. Puerto Rico • Small Population & Economy • Subject to Federal Minimum Wage • Government Sector 20% of Employment • Debt $70 Billion – 89% of Personal Income • Junk-Bond Credit Rating – Pension 7% Funded • Not Eligible for Bankruptcy • Analogies to Greece – Bailout Coming?

  8. Are These Places Bellwethers? • Warnings, Certainly • Extreme Cases, But Suggestive Danger Signs for Others: • Unaffordable Pensions & Benefits • Bad Politics • Damaged Economies Some Places Will Follow the Same Path

  9. States Generally • Most Current Budgets in Decent Shape • Some Spending Increases, But Growth Slow • Some Recovery in Housing Prices • Oil & Gas Boom • Northeast, IL, CA Worst Off, Great Plains Doing Fine • States Not Well Prepared for Next Recession

  10. Local Governments • A Real Mix • Few Really Stressed (CA, PA) • Depends Mostly on Local Economies • Mismanagement, Population Loss the Greater Dangers, Pensions Generally Less Troublesome • Some Growth in Local Govt. Employment

  11. Government Employment • Last 18 Months: • Federal Employment Down 3-4% (Retirements) • State Govt. Employment Steady • Local Govt. Employment Up a Bit (Teachers) • Early Signs of a Flood of Retirements • Turnover Among Younger Workers Also Up • Overall Loss of Govt. Expertise Imminent?

  12. Private-Sector Employment • %age of “Real” P-S Jobs Gained, 2007-12: • ND, 25% TX, 6% SD, NY, LA, VT, <2% • All Other States Lost P-S Jobs 2007-12 • Statewide %age of “Real” P-S Jobs: • NM, 68% VA, 70% AK, 71% • MS, 72% WY, 73% AL, 74% • North Central States Have Largest “Real” P-S

  13. Long-Term Challenges • Pensions & Retiree Benefits • A Mix, But Many Places in Trouble • Reforms Coming Too Slowly • No Easy Choices • Effect on Government? • Federal Mandates • Health Care: Medicaid Consumes 23% of All State Spending – Set to Rise • Highway Program Devolution?

  14. Federalism • Increased Federal Aid to States Now • More Mandates, More Strings • Politics of Changes in Federal Spending • Potential Entitlement Fixes, Tax Reform • Some State Reforms – Enough to Help? • Similar State  Local Dynamics • Come the Next Recession….

  15. State Tax Changes • A Lot Last Year – A Lot Fewer This Year • Elections Coming Up • Few Themes Evident in 2014 Legislation • States Concerned with Highway Funding

  16. Trucks & Roads • AL property tax MS sales tax • CO sales tax MO sales tax? • GA property tax (‘13) NV fuel tax (’13) • KS property tax (‘12) NH fuel tax • MA fuel tax (‘13) PA fuel tax (‘13) • MI fuel tax? SC property tax? • MN sales tax

  17. General Taxes • IL increases??? • IN corporate income & property taxes • MO personal income & maybe sales tax • NV margin tax • OK personal income tax • TX margin tax?

  18. Update on IRP IFTA UCR

  19. IRP • Full Reciprocity Plan • IRP Membership for Mexico? • Changes in PRISM

  20. FRP • Effective for IRP Registrations Beginning in 2015 • ALL IRP Registrants Will Be Registered in ALL IRP States and Provinces • No More Estimated Distance or Fees • Fees Based, as Now, on Actual Fleet Distance Traveled • New Carriers Pay a One-Time Standard Fee

  21. FRP, cont’d. • Change the Biggest to IRP in 20 Years • In Discussion for 30+ Years • All Favorable for Industry (& States) • Greater Flexibility • Saves Fees for Permits, Added States, etc. • Simpler for States to Manage

  22. Mexican Membership • New Administration in Mexico • Mexican Carriers Beginning to See Advantages • Movement Toward Membership? • Still Some Years Off

  23. Changes in PRISM • With URS, FMCSA Drops State Check for MCS-150 Update • PRISM States to Deny Registration for Code 52 • States Can No Longer Assist Carriers with MCS Updates

  24. IFTA • Audit & Record-Keeping Rules • Taxation of Natural Gas • State Compliance with IFTA Rules • Electronic Credentials?

  25. IFTA Audit Rewrite • State & Industry Project (Similar to IRP’s) • Drafting Now Finished – 2014 Ballot • If It’s Accepted, Effective 2016 • Flexibility for Distance Records • Few Changes for Fuel Records • Should Help Eliminate Bad Audits • Some Opposition – Industry Support Needed

  26. Natural Gas • IFTA Adopted GGE Standard for CNG • States Beginning to See n/g IFTA Reports • NCWM Discussions on Metering Standards • An IFTA DGE Standard for LNG? • Reporting Dual-Fuel Vehicles • Adjustments & Confusion Continue

  27. Will IFTA Make Its Members Follow the Rules? • NJ Debacle • IFTA Dispute Process Flawed • IFTA States Seem Ambivalent • IRP Process Far Better • Industry Message to IFTA Board

  28. Electronic Credentialsfor IRP & IFTA ? • Committee Discussions Beginning • A Chance to Eliminate IFTA Decals? • What Does It All Mean? • Effect of Federal ELD Rule?

  29. UCR • States May Collect All Their Money This Year! • Administration Proposes Amendments to Act • Remove Federal Representation on UCR Board • Incorporation of UCR as Private Entity • New Board Members Chosen by Co-optation • Leave Board (States) to Set Fees • States May Like These Changes

  30. A LONG LOOK BACK & A SHORT LOOK FORWARD

  31. Where Did We Stand 30 Years Ago? • Economic Deregulation Was Recent • Interstate Trucking Was Expanding FAST • State Operating Taxes Were a Crisis for the Industry • Industry Expertise Assembled • ATA Taxation & Reciprocity Committee • NAFC Tax Committee • Western Highway Institute Tax Committee

  32. Fuel Use Taxes: The Poster Child Non-Uniform Burdensome Expensive!

  33. Non-Uniformity in: Vehicles Registration Credentials Bonding Leases Tax Reports Credits & Refunds Audit & Administration

  34. What Vehicles Had to Be Reported ? • All Commercial Vehicles • > 2 Axles • > 7,000 lbs. Empty Wt. • > 10,000 lbs. Empty Wt. • > 18,000 lbs. GVW or 7,500 lbs. Empty Wt • > 16,000 lbs. GVW • > 30 Gallon Fuel Tank Capacity & at least 16 Other Definitions!

  35. What Tax Registration WasRequired? • Annual, Biennial, or Permanent? • Any Registration Fees? One-Time or Annual? • Fees per Fleet or per Vehicle? • Licenses for Each Place of Business? • When to Be Renewed: October, December, January, March, April, or July? • Vehicle-Specific Cab Cards? • Account Numbers on the Vehicle?

  36. Credentials (DECALS!) • 1 per Vehicle – or 2? • On Left Side, Right Side – or Front? • Display Dates? • Annual, Biennial – or Permanent? • Were There Decal Fees? YOU BETCHA! Charged by 22 states

  37. Bonding • Required by 19 States • Various Amounts and Limits • Required for Refunds in c. 10 More States • Alternative Security Rarely Allowed

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