Alternative Fuels and IFTA

1. Alternative Fuels and IFTA Alternative Fuels Committee

2. History • Emergence of alternative fuels • In 2005 membership resolution ratified • Several jurisdictions introduced exemptions and reduced tax rates on blends of biodiesel • Many questions & concerns raised by member jurisdictions and industry

3. Alternative Fuels Committee (AFC) • October 2006 - IFTA, Inc. Board of Trustees approved the formation of a special committee to: • survey jurisdictions • summarize current incentives/exemptions • analyze impacts of alternative fuels • provide recommendations • January 2007- AFC formed with representation from each IFTA committee

4. Alternative Fuels Committee (AFC) COMMITTEE MEMBERS: • Fred Alleman - Audit Committee, Pennsylvania Department of Revenue • Don Boswell– Law Enforcement Committee, Virginia Department of Motor Vehicles • Donna Burch– Industry Advisory Committee, Ryder Transportation Services • Meg Cronk– Agreement Procedures Committee, New York Department of Taxation & Finance • Andrew Foster– Agreement Procedures Committee, New Brunswick Department of Finance • Gary Frohlick– ex-officio Board Member, Saskatchewan Finance • Garry Hinkley– Clearinghouse Committee, Maine Bureau of Motor Vehicles • Mark Osbaldeston– Attorneys Section Committee, Ontario Ministry of Revenue • Robert Pitcher– Industry Advisory Committee, American Trucking Association • Patricia Platt– Program Compliance Review Committee, Kansas Department of Revenue • Jan Skouby– Dispute Resolution Committee, Missouri Motor Carrier Services • Bill Staples– Dispute Resolution Committee, New Brunswick Department of Finance COMMITTEE CHAIR: Kim Craig – IFTA, Inc. Board of Trustees, Ontario Ministry of Revenue IFTA, Inc. ADVISORS • Lonette Turner • Jessica Eubanks

5. AFC - Actions Steps • March 1 held first conference call - subcommittee formed to draft survey • March & April - questions developed and survey drafted • April - final survey approved by committee • May 3 – survey set up on IFTA, Inc. website and email sent to all commissioners • June 26 – AFC conference call to discuss survey results Survey Survey results

6. Survey Results – Part A (Biodiesel) • 50 jurisdictions responded (86%) • 9 jurisdictions indicated that biodiesel in their jurisdiction is handled by a reduced tax rate or full exemption • 6 jurisdictions indicated that within one-two years their jurisdiction will be considering providing an incentive

7. Survey Results – Part A (Biodiesel) • 11 jurisdictions have incentives for biodiesel which included: • Producer credit • Supplier/retailer refund • Distributor deductions • Income tax credit on production • Sales tax incentive • Reported as diesel for IFTA and separate refund process • Tax reduction • Sunset programs in some jurisdictions

8. Survey Results - Part A (Biodiesel) • Majority (70%) respondents want detailed information on incentives offered by other jurisdictions to: • advise carriers/trucking industry • get details of legislation & procedures • support tax policy • help legislators • develop legislation

9. Survey Results – Part B ( General) • Should IFTA set out the fuel types to be covered by the Agreement: • 54% said no • Jurisdiction law determines what and how motor fuel is taxed/exempted • Jurisdictions rights/laws may then contradict IFTA • A new fuel type may be missed and considered exempt • ‘Motor Fuels’ is already defined in IFTA to be all fuels placed in the supply tank • 44% said yes • Co-mingled fuel needs to be reported one way • Uniformity • Consistency • Growth of fuel types resulting from blending

10. Survey Results – Part B (General) • Should a membership vote (amendment to the Agreement) be required to add a fuel type to the tax rate matrix • 56% said yes • Help in administration of IFTA • Jurisdictions should have a say and be given time to implement and provide instructions • Blends should not be allowed on matrix • Need to control types on matrix jurisdictions are required to administer • 38% said no • IFTA should not control/limit fuel types • ‘Motor Fuels’ is already defined in IFTA to be all fuels placed in the supply tank • Jurisdictions should have flexibility to experiment with alternative fuels

11. Survey Results – Part B (General) • 76% said alternative fuels exemptions should be handled in accordance with R830 as stated in the membership resolution passed in 2005 • R830 eases the IFTA administration if licensees submit claims for refunds to the respective jurisdiction, but creates a burden on jurisdictions and consumers • IFTA should not be concerned with alternative fuel on IFTA returns • Cannot force legislatures to abide by resolution • R830 works for exemptions but not for a different tax rate for a fuel type

12. Survey Results – Part B (General) • How should blended/interchangeable fuels (biodiesel/diesel, gas/ethanol) be reported for IFTA? • Reported as diesel or gas and contact jurisdictions re: R830/refund • In accordance with membership resolution • Reported as the main/predominant fuel type purchased or higher tax rate • Reported on return • Jurisdiction indicate how it is taxed • Diesel engine=diesel fuel/ gasoline engines= gasoline • Separate line item on the IFTA return • Excluded from IFTA – can’t effectively report interchangeable fuels • Blends with diesel reported/taxed as diesel; blends with gas reported/taxed as gas

13. Conclusions from survey results • Incentives exist in several jurisdictions and more to come • Several jurisdictions offer incentives without effecting IFTA administration • Majority(70%) of jurisdictions want detailed information on incentives offered by other jurisdictions • Split on whether fuel types: • should be covered by the Agreement • being added to the tax rate matrix require a membership vote • Majority (76%) of jurisdictions want alternative fuels to be handled in accordance with R830 as stated in the membership resolution

14. Next Steps – Membership Feedback • Develop Alternative Fuels Database on the IFTA, Inc. website? • Draft a ballot that incorporates the intent of membership resolution into the Agreement?