Presented by IFTA Managers’ and Law Enforcement Seminar September 20-22, 2006 Ron Hester Ontario Ministry 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 Jurisdiction Retention of Sovereign Authority to determine tax rates, exemptions and exercise other substantive tax authority Uniform 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 available Where 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 and Gross 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 jurisdictions One tax return filed each quarter with the base jurisdiction One tax payment or refund One audit by the base jurisdiction Reduced administrative costs

BENEFITS TO THE JURISDICTION Increased enforcement Increased audit coverage Lower administrative costs

GETTING STARTED Carrier submits license application to base jurisdiction 1 Base jurisdiction reviews and processes license application of qualified candidate 2 Base jurisdiction issues one IFTA license to carrier and 2 decals for each QMV operated 3 Licensee operates and prepares quarterly IFTA tax return with base jurisdiction 4

Base Jurisdiction (BJ) is a US jurisdiction THE IFTA TAX RETURN

WHAT HAPPENS NEXT Licensee files tax return with base jurisdiction and remits $ Base jurisdiction reviews and processes tax return and remittance 6 Base jurisdiction processes all other tax returns received 7 At the end of each month base jurisdiction sends transmittal reports to all other member jurisdictions. 8

TRANSMITTAL REPORT 05/2200

WHAT HAPPENS NEXT Base jurisdiction sends the transmittal report to Jurisdiction AA and all other member jurisdictions 9 Base jurisdiction processes all transmittal reports and payments received from other jurisdictions (including $375 from Jurisdiction AA) 10 Base jurisdiction sends refunds to licensees and issues assessments for any taxes due 11

WHAT HAPPENS NEXT Base jurisdiction conducts audits on licensees for itself and all member jurisdictions 12 Enforcement activities during process: i.e. Roadside & Inspections 13

AUDITS The base jurisdiction will conduct audits for itself and all member jurisdictions Jurisdictions must complete audits on an average of 3% of its licensees each year Of the 3%, 25% of the audits must involve high-distance accounts Of the 3%, 15% of the audits must involve low-distance accounts Audit 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?

How Ballots Work Sponsors submit Proposals Proposals distributed for comment period Proposals discussed at Annual Business Meeting Sponsors review proposals and may submit revisions Proposals distributed for second comment period Sponsors review and may submit revisions Ballots distributed for vote All comments and votes are submitted through IFTA, Inc. website

Ballot Time Frames Full Track 45 days – comment period 45 days – sponsor review after ABM 45 days – comment period 60 days - vote Short Track 30 days – comment period 30 days – sponsor review after ABM 30 days – comment period 30 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 Track Second 45-day comment period ending October 16, 2006

2007 BALLOT PROCESS Deadline for Submitting Ballot Proposals:

COMPLIANCE IFTA, Inc. Clearinghouse Enforcement (field/roadside) Program Compliance Reviews Consensus Board Interpretations Dispute 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 accounts Jurisdictions exchange, at least every 10 days, the following: Listing of suspended licenses Listing of revoked licenses Listing 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 assessment If 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 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 interpretation A proposed interpretation must be ratified by ¾ affirmative vote of the membership at an Annual Business Meeting If ratified, commentary is added to the affected IFTA governing document

Alternate Fuels NAFTA Native Issues

INTERNATIONAL FUEL 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 Arizona Membership in IFTA constitutes membership in IFTA, Inc. Association is funded by membership dues Incorporated to conduct business activities Membership elects a 9-member Board of Trustees

THE PEOPLE LONETTE 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 documents Gathering and distribution of the quarterly tax rates Providing technical assistance to the member jurisdictions and licensees Gathering and distribution of the jurisdiction annual reports Leading 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 seminar Participating in other related association and government meetings Monitoring activities such as NAFTA

IFTA/IRP AUDIT WORKSHOP JANUARY 4-7, 2007 Tempe Mission Palms Hotel Tempe, Arizona IFTA Attorneys' Section Meeting May 11-12, 2007 Indianapolis, Indiana

Questions