1. IFTA ANNUAL BUSINESS MEETING DISCUSSION OF IFTA FULL TRACK BALLOTS 5-2009 AND 6-2009

2. BACKGROUND  In September 2007, the IFTA Audit Committee conducted a survey of the member jurisdictions on a variety of audit related issues. The purpose for the survey was to identify areas of substantive concern by the members for possible further analysis and ballot recommendation (where applicable).  The survey was directed to all IFTA Commissioners through the IFTA, Inc. repository.

3. BACKGROUND  The survey continued into 2008 in an effort to solicit a response from all members of the Agreement. In total, 51 jurisdictions responded. Not all jurisdictions participating answered all of the questions.  The data was collected and consolidated in July 2008.  The members expressed (per the responses) a significant concern in two unique areas.

4. BACKGROUND  The first area had to do with what specific distance records support needed to be present in the licensee’s documentation.  More specifically, what (if anything) should be done to address odometers (or hubodometers) and routes of travel.

5. BACKGROUND  The issue was presented in three parts; the initial question was as follows: Sections P500 and P600 of the Agreement outline the various recordkeeping requirements imposed upon an IFTA licensee. Two of those requirements (Route of Travel, Beginning and Ending Odometer or Hubodometer Readings of the Trip) may be waived by the base jurisdiction. Please answer the following questions based on how your jurisdiction audits motor carriers subject to the IFTA.

6. BACKGROUND  Does your jurisdiction waive the requirement for a carrier to maintain route of travel per trip? Yes14 No36  Does your jurisdiction waive the requirement for a carrier to maintain beginning and ending odometer or hubodometer readings per trip? Yes11 No39

7. BACKGROUND  Those two questions were followed up with:  Should IFTA allow for a waiver of (circle all that apply): Route of travel 3 Odometers 0 Either routes or odometers11 Neither routes nor odometers37

8. BALLOT 6-2009  The preceding question and its resultant answers provided the foundation for Ballot 6- 2009 as presented for the First Comment Period. That Ballot would have accomplished the following: Eliminated the permissive waiver (may be waived by the base jurisdiction) for both odometers/hubodometers and routes of travel.

9. BALLOT 6-2009  Comments received in the First Comment Period Ended May 22, 2009: 20 Opposed 16 Support 10 Undecided  The opposing comments most frequently cited two areas of concern: A loss of flexibility and allowances for auditor discretion A desire to allow for the waiver of one, but not both. Mirroring the language in the IRP.

10. BALLOT 6-2009  The Audit Committee reviewed the comments and unanimously agreed to revise the original ballot to mirror the language in the IRP.  That is, the base jurisdiction may waive either odometers/hubodometers, (or) life to date meter readings, or routes of travel, but not both.  This is the revised ballot before you for discussion.

11. BACKGROUND  The second area of concern had to do with how inadequate distance records should be handled. Section A550.100 of the Agreement addresses Fuel Use Estimation. There is no provision to address inadequate distance records.  More specifically, should jurisdictional tax be refunded when the distance records are deemed inadequate.

12. BACKGROUND  The survey presented scenarios that were based on a pre-IFTA and post-IFTA implementation environment. The scenarios were similar in their design. The specific issue had to do with what ought to be done when a licensee’s distance records are inadequate.

13. BACKGROUND  The specific questions were as follows: Under the Agreement, your jurisdiction has authorized the member jurisdictions to administer, enforce, and collect your jurisdiction’s fuel use tax. Should unverified tax credits for tax due your jurisdiction be refunded to the licensee by the member jurisdictions?  Yes10  No37

14. BACKGROUND  The first follow up question was: It has been opined in the audit community that the Agreement is unclear on the issue of credit denial. Should the Agreement be amended to define a member jurisdiction’s right to deny jurisdictional credits for lack of verifiable documentation?  Yes, but permissive to the base jurisdiction 10  Yes, mandatory when records are inadequate or non- compliant 27  No 10

15. BALLOT 5-2009  It should be noted that “jurisdictional credits” did not mean credits given for tax paid fuel purchases with verifiable documentation. This misunderstanding caused several opposing comments in the comment period for the ensuing draft ballot proposal.  Ballot 5-2009 was drafted with the intent to accomplish three things: Provide the base jurisdiction with the authority to deny jurisdictional credits when the distance records are inadequate or non-compliant with the recordkeeping requirements, and Establish a time frame by which the licensee must comply with the recordkeeping requirements, and Provide a mandate for a base jurisdiction to deny such credits when the licensee does not bring records into compliance.

16. BALLOT 5-2009  Comments received in the First Comment Period Ended May 22, 2009: 27 Opposed 9 Support 12 Undecided  The opposing comments most frequently cited the following: Confusing language A belief that follow-up examinations are required and a mandate to deny credit if records are found as non-compliant. Disagreement over granting a six-month period to bring records into compliance. Loss of base jurisdiction discretion.

17. BALLOT 5-2009  The Audit Committee reviewed the comments and unanimously agreed to revise the original ballot to comply with the comments made.  That is, the base jurisdiction has the authority to hold member jurisdictions harmless (i.e. accept reported taxes due as filed) if records are found to be non- compliant with the recordkeeping requirements of Procedures Manual Sections P500 through P670 or are unable to support any tax return filed by the licensee.  This is the revised ballot before you for discussion.

18. FTPBP 5-2009 *A550INADEQUATE LICENSEE RECORDS/ASSESSMENT [Sections A550.100 through A550.200 remain unchanged] A550.300Non-Compliant Distance Records If the licensee's records are non-compliant with the recordkeeping provisions stated in Procedures Manual Sections P500 through P670, or are unable to support any tax return filed by the licensee, the base jurisdiction shall have the authority to hold the member jurisdictions harmless by accepting the individual jurisdictional taxes as reported by the licensee. This does not preclude the ability of the base jurisdiction to make pre or post audit adjustments for differences between reported and audited distance in jurisdictions where verifiable differences in distance is found; or the use of additional actions as provided for in Section A550.100 and A550.200.

19. FTPBP 5-2009 REVISIONS FOLLOWING THE FIRST COMMENT PERIOD Line 9 added word “Distance” Deleted second paragraph Deleted the references to “and/or fuel” Deleted last sentence

20. FTPBP 6-2009

22. FTPBP 6-2009 concluded REVISIONS FOLLOWING THE FIRST COMMENT PERIOD Line 14 added “The base jurisdiction may waive either item (.015 or.020), but may not waive both items (.015 and.020).” Line 22 added “or other perpetual life to date” Line 32 – added “The base jurisdiction may waive either item (.015 or.020), but may not waive both items (.015 and.020).” Line 47 added “or other perpetual life to date”