Reporting BEST PRACTICES IFTA – Dual Fuel Reporting BEST PRACTICES    August 18, 2016 Indianapolis, IN Hugh Hughson (BC)

Overview Change in the recommended reporting methodology Reminders (effective dates) for: Ballot #3 - 2013 Ballot #5 - 2105

Original Methodology Dual fuel vehicles must be treated and reported separately (e.g., gasoline fleet, diesel fuel fleet, LNG fleet, dual fuel fleet) Duel fuel vehicles must be treated and reported as two vehicles (e.g., DL and DLG)

Revised Methodology Duel fuel vehicles are not separately reported Dual fuel vehicles’ fuel purchases and distances travelled (after pro-rating) are added/combined with other fleets (e.g., DL is added to D, DLG is added to LNG)

DL Portion of a DL-DLG fleet Original Methodology Final Tax Return A B C D E F G H MPG Jurisdiction Fuel Type Total Distance Taxable Distance Taxable Fuel Volume Tax Paid Volume Net Taxable Volume Tax Rate Tax Due Pure Diesel Fleet J1 2,000,000 303,490 200,000 103,490 0.2000 $ 20,697.91 J2 1,103,013 167,376 270,866 - 103,490 0.1000 -10,348.95 3,103,013 470,866 - 6.59 DL Portion of a DL-DLG fleet DL 320,135 300,000 20,135 $ 4,026.92 1,289,841 206,461 226,596 - 20,135 -$ 2,013.46 DLG Portion of a DL-DLG DLG 180,000 28,812 20,000 8,812 0.0500 $ 440.61 41,857 6,700 15,512 - 8,812 -$ 1,762.41 3,511,698 562,108 6.25 Pure LNG Fleet LNG $ - TOTAL ACTIVITY 6,614,711 1,032,974 $ 11,040.60

All Diesel and LNG Reporting Combined Revised Methodology Final Tax Return A B C D E F G H MPG Jurisdiction Fuel Type Total Distance Taxable Distance Taxable Fuel Volume Tax Paid Volume Net Taxable Volume Tax Rate Tax Due All Diesel and LNG Reporting Combined J1 D + DL 4,000,000 624,111 500,000 124,111 0.2000 $ 24,822.12 J2 2,392,854 373,351 497,462 - 124,111 0.1000 -$ 12,411.06 6,392,854 997,462 6.41 DLG + LNG 180,000 28,812 20,000 8,812 0.0500 $ 440.60 41,857 6,700 15,512 - 8,812 -$ 1,762.41 221,857 35,512 6.25 TOTAL ACTIVITY 6,614,711 1,032,974 $ 11,089.25 6.40

Rational/Benefits Fewer dual fuel vehicles than originally anticipated Skewing concerns previously identified are in part are related to IFTA rounding rules and can go either way No tax return or system changes and associated costs required for jurisdictions or carriers (i.e., additional fuel types and rows) Less complexity and fewer potential errors by tax preparers [NEW CONSIDERATION - diesel and propane Testing of the Worksheet “Calculations” shows financial variations ranging from 2.7% to 13.5% between the two methodologies even if the overall consumption rates are the same. However, the majority of the skewing appears to be related to IFTA rounding rules. For example: Three decimals to two 2.061 goes to 2.06 2.065 goes to 2.07 Four decimals to two: 2.4878 goes to 2.49 2.4948 goes to 2.49

Reminders Ballot #03-2013 (CNG) A Gallon equals 126.67 cubic feet or 5.66 pounds A Liter equals 1.0 cubic meters or 0.678 kilograms Effective Date - July 1, 2015 As per Lonette’s July 15, 2016 memo: If needed please revise your tax rates ASAP; or Indicate in your jurisdiction’s IFTA Footnote, your statutory CNG tax rate and units of measure, if the measures used in the statute are different than the ballot

Reminders Ballot #05-2015 (LNG) a diesel gallon equivalent 6.06 pounds a diesel liter equivalent 0.73 kilograms Effective July 1, 2017 (but please feel free to update your tax rates earlier) There is no impact to sovereignty: A method for restating volumes of CNG and jurisdiction’s tax rate into a different but common unit or measure for use by other IFTA jurisdictions.. Almost identical to Procedures Manual Section P1300 to convert tax rates and volume measurements between U.S. and Canadian jurisdictions. By way of an example: BC's tax rate is converted through a two-part process for IFTA reporting purposes (i.e., litres to gallons, and Canadian currency to US currency) The result is BC’s tax of 0.2267 cents per litre for diesel set by our legislature is restated to 0.8398 cents per gallon for US IFTA jurisdictions IFTA has not forced BC to change its tax rate, BC/IFTA are simply restating BC’s tax rate for others to ensure the correct reporting and distribution of taxes between IFTA jurisdictions Consider the impact to IFTA if we all had different definitions of a gallon or liter?

Questions / Discussion

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