1. INTERNATIONAL FUEL TAX AGREEMENT
PROGRAM COMPLIANCE/ DISPUTE RESOLUTION

2. IFTA MEMBERSHIP PRINCIPLES
Governing Documents: Article R120
The Audit Manual and Procedures Manual authorized by this Agreement are equally expressive of, and constitute evidence of this multijurisdictional agreement. The provisions of all three IFTA documents shall be equally binding upon the member jurisdictions and licensees and are known as the IFTA governing documents.

3. IFTA MEMBERSHIP PRINCIPLES
Cooperative Administration: Article R140
It is the purpose of this Agreement to enable participating jurisdictions to act cooperatively and provide mutual assistance in the administration and collection of motor fuels use taxes.

4. IFTA MEMBERSHIP PRINCIPLES
ARTICLE XV, MEMBERSHIP
R1510, Conditions for Membership.
Applicant shall agree to abide by all terms, conditions, and requirements of the Articles of Agreement, Procedures Manual, Audit Manual, and the Bylaws of the Association. R
Comply with all audit policies and procedures, including employment of a sufficient number of auditors to assure that audit of IFTA licensees are completed as prescribed in Section A310 of the IFTA Audit Manual.

5. IFTA MEMBERSHIP PRINCIPLES
Submit to a program compliance review to determine compliance with the Agreement. Such review shall be performed after one year of implementation and once every four years thereafter unless a review is ordered as prescribed by this Agreement R
Submit an annual report to the repository as specified in the Procedures Manual.

6. IFTA MEMBERSHIP PRINCIPLES
R1515- Adopting Resolution
The adopting resolution shall contain statements relating to the conditions for membership into the Agreement and shall include the following:
A copy of the enabling statute authorizing the jurisdiction to enter into and abide by the obligations of the Agreement

7. IFTA MEMBERSHIP PRINCIPLES
A statement of taxable fuels and tax rates for these fuels
A statement as to the number of:
Prospective licensees based in the jurisdiction
Audit personnel who will be dedicated to auditing under this Agreement; and
Supervisory and clerical personnel who will be dedicated to receipting, processing, and disbursing funds received under the provisions of the Agreement.

8. IFTA MEMBERSHIP PRINCIPLES
PROGRAM COMPLIANCE REVIEWS
Member jurisdictions shall permit periodic compliance reviews to be performed to assure they are in compliance with the provisions of the Agreement.

9. MEMBERSHIP IN IFTA Why raise the items in the first seven slides?
Because at some point enabling legislation (providing for the ability to enter into a cooperative agreement to administer fuel use taxes) was passed by your jurisdiction’s legislative body and an adopting resolution agreeing to abide by the IFTA and its governing documents was signed.
Because as members we are all in this together; to ensure the continuance of IFTA’s objectives all members must act cooperatively to administer, collect, and enforce fuel use taxes in accordance with the Agreement and the laws of the member jurisdictions.
In short, the Program Compliance Review Process only reinforces what we’ve already agreed to do.

10. MEMBERSHIP IN IFTA Program Compliance Reviews Issues
Review is performed, issues of non-compliance are discovered.
Decision is made (by the PCRC) to perform a Follow-Up and/or Reassessment per the PCR Process (As ratified by the membership in July 2006).
The follow-up or reassessment processes fail to bring the issue and the jurisdiction into compliance and a Final Determination Finding of Non-Compliance is issued.
No provision for penalties

11. MEMBERSHIP IN IFTA
A CLOSER LOOK AT THE FOLLOW-UP AND REASSESSMENT PROCESSES:
Follow Up
a. If the findings include a recommendation for Follow Up and the Director (Program Compliance Review Director) has questions regarding the recommendation, the Director will, within thirty (30) days of receipt of the request, contact the Committee chair regarding the recommendation for Follow Up. The Director and the Committee chair will make a final determination on the Follow Up request.
b. Once all recommendations have been reviewed and the determination has been made that Follow Up is required, the Director will proceed. The goal of the Follow Up is to obtain verification of compliance from a Subject that has stated that it will be in compliance by a certain date. Some discretion is given to the Director in establishing the time frame for Follow Up.

12. MEMBERSHIP IN IFTA
c. To complete the Follow Up, the Director will contact the Subject, in writing, requesting that the Subject submit documentation supporting its statement that it has complied as stated in its response required in III.A.5. herein.
d. Upon receipt of the Follow Up documentation from the Subject, the Director will review it. If the documentation proves that the Subject is now in compliance, the Director will issue the Final Report.
e. If the Director determines that the documentation does not prove compliance or if the Subject fails to provide the required documentation, the Director will notify the Chair to proceed with the Reassessment Process.

13. MEMBERSHIP IN IFTA
A CLOSER LOOK AT THE FOLLOW-UP AND REASSESSMENT PROCESSES:
Reassessment
a. If the findings of the Panel include a recommendation for Reassessment, the recommendation is forwarded to the Chair and Vice Chair of the Committee. In order for the Reassessment to go forward, a majority of the five (the three Panel members, the Chair and the Vice Chair) must agree with the recommendation. Either the Chair or the Vice Chair must be part of the majority.

14. MEMBERSHIP IN IFTA
b. If the Reassessment goes forward, the Chair, the Vice Chair, the Committee members not serving on the Panel and the Director will develop a Reassessment plan and timeline. The date of compliance will depend entirely upon the area of non-compliance found. If for example there is a problem with content of credentials, the Subject will probably be given until the next renewal period to cure. If the problem is untimely transmittals, working with the Subject’s processing unit may also take some time but member jurisdictions are entitled to expect cure within a reasonable time. Therefore, discretion is given to the parties in establishing the time frame for Reassessment of compliance.

15. MEMBERSHIP IN IFTA
c. Once the Reassessment plan and timeline have been developed, the Reassessment will proceed. The Director will contact the Subject and provide the IFTA Program Compliance Review Guide Reassessment plan and timeline. The goal of the Reassessment is to bring the Subject into compliance and to issue a report of such compliance with the following year’s Program Compliance Review Final Reports.

16. MEMBERSHIP IN IFTA
d. Once the Director has contacted the Subject, a review of the particular area(s) of non-compliance will be conducted. The Reassessment Plan will be reviewed by the Director and the Subject. If the Subject requests some modification to the timeline, and the Director approves of the modification, the Director will notify the Chair that the timeline has been modified. When the Reassessment Plan has been approved by the Subject as indicated by the signature of its IFTA Commissioner, it will be returned to the Director. It will be the responsibility of the Director to track the Reassessment to ensure that the Subject's Reassessment Plan and timeline are followed. Again, discretion here will be given to the Director due to timing issues. However, the Director has discretion to require periodic reports and updates from the Subject to ensure the Reassessment Plan is being followed.

17. MEMBERSHIP IN IFTA
e. Upon bringing its program into compliance, the IFTA Commissioner of the Subject will verify compliance in writing to the Director. The verification will be forwarded to the Committee chair by the Director. The verification will be included in the Subject's file at the offices of IFTA, Inc. and the verification will be disseminated to all member jurisdictions as proof of compliance.
f. If the Subject fails to bring its program into compliance as required by the Reassessment Plan, a report will be filed with the Committee chair by the Director. Copies of the report will be submitted to the Subject and the Team. The report will be included in the Subject's file at the offices of IFTA, Inc. The final report will also be disseminated to all member jurisdictions.

18. MEMBERSHIP IN IFTA
g. Based on the report, two-thirds of the full Committee must determine whether to make a Final Determination Finding of Non-Compliance.
h. If a Final Determination Finding of Non-Compliance is issued, it will be forwarded by the Director to the Subject in care of its IFTA Commissioner and to the head of the Subject agency through which the fuel use taxes are collected pursuant to the IFTA, and to the Governor or Premier of the Subject.
i. Following the issuance of a Final Determination Finding of Non-Compliance, the Committee will refer the matter to the Dispute Resolution Committee for dispute resolution enforcement proceedings within sixty (60) days of the issuance of such Finding. Such dispute resolution enforcement proceedings shall be initiated in the manner prescribed by the IFTA Dispute Resolution Process.

19. MEMBERSHIP IN IFTA
QUESTION:
WHAT HAPPENS WHEN A MEMBER IS ISSUED A FINAL DETERMINATION FINDING OF NON-COMPLIANCE?

20. MEMBERSHIP IN IFTA
ANSWER:
LITTLE, IF ANYTHING (OTHER THAN WHAT IS PRESCRIBED IN ITEM “H” OF THE REASSESSMENT PROCESS).

21. ACTION ITEMS
Research performed by the PCRC and the IFTA Attorneys’ Section resulting in a report given to the IFTA Board of Trustees at the 2003 third quarter meeting of the Board.
Proposal to allow the PCRC to initiate a dispute against a jurisdiction that remains out of compliance following a Program Compliance Review and Reassessment.

22. ACTION ITEMS
Changes proposed (in 2004) to the existing Program Compliance Review Guide and the Dispute Resolution Process. Added a Program Compliance Enforcement Process to the Dispute Resolution Process.
Discussions at the 2004 ABM. Concern expressed as to whether there should be standards established to determine when and under what circumstances the PCRC could bring forward a dispute.

23. ACTION ITEMS
Formed the Compliance Review Requirements Committee. Thorough review of the governing documents. Recommendations made to the Board.
Formed the Compliance Review Ballots Development Committee. Drafted several ballots for the 2006 year.

24. ACTION ITEMS IFTA FT Final Ballot Proposal 12-2006
Would allow “Compliance matters from the Program Compliance Review Committee” to be cause for utilizing the IFTA Dispute Resolution Process.
Comments
Language was very generic; thereby allowing any compliance matter forwarded by the PCRC to be eligible for dispute.
Concern over giving the PCRC the same authority as a member of the Agreement.

25. ACTION ITEMS
Ballot failed narrowly (43 yes votes, 44 needed for passage).
The IFTA Board revisited the language and re-drafted the proposal (IFTA FT Ballot Proposal ) based on research and discussion at the 2007 ABM.
Limitation of the articles that would qualify. Only issues affecting sections R970, R1210, R1230, R1260, R1270, P1040, A310, A320, and A690 would qualify.
Required that follow-up, reassessment, and an issuance of a Final Determination Finding of Non-Compliance take place before a dispute could be initiated.
Ballot failed.
Still concern over allowing a committee to act as a member.

26. WHY IS THIS SO IMPORTANT?
Let’s look at the sections of the IFTA that Ballot would have focused on:
R970 Late Filing. This establishes that any tax return not filed or full payment not made by the due date of the return shall be considered late and any taxes due considered delinquent.
R1210 Assessment. Establishes what the base jurisdiction must do when the licensee fails to act compliantly with filing, records retention, or records presentation requirements.

27. WHY IS THIS SO IMPORTANT?
R1230 Interest. Establishes interest rate, basis for calculation, and requirement to remit interest collected to the member jurisdictions.
R1260 Waiver of Penalties and Interest. Allows for waiver of penalties by the base jurisdiction, allows for waiver of base jurisdiction interest, requires written permission from a member to waive a member’s interest due, allows licensees the opportunity to appeal a penalty levied.

28. WHY IS THIS SO IMPORTANT?
R1270 Revocation of License. Requires (subject to jurisdictional law) revocation of a license when the licensee has not satisfied a tax delinquency or appealed a notification of delinquency.
P1040 Monthly Transmittals. Establishes how and when funds collected are to be transmitted and what formatting the transmittal must contain.
A310 Number of Audits. Establishes what volume of audits must be performed and what minimum scope the audits must contain.

29. WHY IS THIS SO IMPORTANT?
A320 Selection of Audits. Establishes the criteria for determining the stratification of the account base for audit purposes and what minimum volume from each strata must be audited.
A690 Communication of Audit Findings. Establishes when and how completed audits are communicated to the affected member jurisdictions, how audit funds collected may be transmitted, and provides for the member jurisdictions to request audit work papers for review.

30. WHY IS THIS SO IMPORTANT?
Each of the sections identified are related to the basics of administering, collecting, transmitting, and enforcing tax in each of the 58 member jurisdictions.
ALL MEMBERS SHOULD BE COMPLIANT WITH THESE ARTICLES AND SECTIONS

31. AN IDEA!!!
If we agree that Sections R970, R1210, R1230, R1260, R1270, P1040, A310, A320, and A690 are critical to the continuance of the “Cooperative Administration” concept, then we must ensure that no member may ever be allowed to violate those sections, be reviewed by the membership (PCR Process), ignore attempts at remediation (follow-up and reassessment) and not be held accountable.

32. AN IDEA!!!
In late September 2007 I approached several IFTA colleagues at the FTA Motor Fuel Tax Section Annual Meeting in Baton Rouge with an idea.
What if we could get past the thought that a committee could initiate a dispute? What if we merely allowed the PCRC to forward a recommendation to the membership itself?

33. AN IDEA!!!
What if we only allowed a dispute based on the Compliance Review Process to be presented to the DRC after ratification and acceptance by the membership at large? This would be similar to the ballot or CBI processes.
In December 2007, I discussed this idea with Scott Bryer (NH), IFTA Board Member.
In January 2008, I discussed the idea with Lonette Turner, Executive Director of IFTA, Inc. I asked her to share my idea with the Board.

34. AN IDEA!!!
In early March 2008, Lonette and I collaborated on a prototype ballot proposal designed to give the Board some indication of how the concept might work. It was presented to the Board at their April meeting.
A subcommittee was developed to analyze the prototype and make changes where appropriate.
Debbie Meise, IFTA, Inc.
Rena Hussey, Virginia, IFTA Board Member
Scott Greenawalt, Oklahoma, IFTA Board Member
Bob Turner, Montana, IFTA Board Member
Jay Starling, Alabama, PCRC Chair
Rick LaRose, Connecticut, DRC Vice-Chair

35. AN IDEA!!! The conceptual ballot has had several iterations.
Here is what the ballot essentially provides:
Permits use of the dispute process when the PCR process including follow-up and/or reassessment has been completed, a Final Determination Finding of Non-Compliance has been issued relative to the subject sections of the IFTA, and the membership has approved the recommendation for the initiation of a dispute against the subject jurisdiction.

36. AN IDEA!!!
Defines the requirement to submit the Final Determination Finding of Non-Compliance to IFTA, Inc.
Defines the requirement to conduct a confidential vote of the membership.
Defines who (Commissioners or named delegate) must vote, and what constitutes an overall “affirmative” vote thereby resulting in the forwarding of the issue to the DRC for consideration.

37. AREAS OF CONCERN How will the vote be conducted?
IFTA, Inc. will conduct and complete a confidential vote of the membership through use of a secured voting mechanism. The member jurisdictions will have 30 days to vote.
Will the results be made public?
The authors believe that only the end result (i.e. x Yes, y No votes) will be published. The intent is to have the membership itself speak as one, which is a bit different than voting on a ballot.

38. AREAS OF CONCERN
What constitutes an affirmation of the dispute (i.e. the issue will be forwarded to the DRC)?
An affirmative vote of the majority of the votes cast is required.
What happens if there is no affirmation?
The issue does not go forward to the DRC.
What happens if there is affirmation?
The issue is referred to the DRC for consideration. IMPORTANT: The Dispute Process, including verification that the complaint has merit and has been entered into in “good faith” remains intact.

39. AREAS OF CONCERN
If the dispute goes forward to the DRC, who is the “Complainant”?
The complainant would be the membership. Representing the membership would be the PCRC.
If the membership is represented by the PCRC, isn’t this the same issue that defeated the first two ballots?
The authors do not believe so since there would be a requirement of the membership’s ratification before any such issue could go forward.

40. FINAL THOUGHTS Why should we do this?
As members, we trust that our fellow members will act faithfully in our behalf. Egregious violations of the selected sections of the Agreement we all agreed to abide by should be addressed.
We need to make the Program Compliance Review Process meaningful. The dispute process has an available penalty phase for parties deemed non-compliant; use of the dispute process helps validate the usefulness of the reviews.

41. FINAL THOUGHTS
The sections of the Agreement identified should be important to all of us. Keep in mind that other taxing authorities collect and enforce in your behalf. When one of the identified sections is ignored and not enforced, your jurisdiction’s expected revenue may be compromised.
We need to implement this concept not only to monitor and address areas of severe non-compliance, but to distinguish those members who attempt to comply and accomplish compliance with the Agreement through observance of the program’s objectives from those who do not.

42. FINAL THOUGHTS
To effect the continued success of the IFTA, we must all ensure that in addition to the core principles and benefits that our friends in the industry enjoy; we, as members, continue to comply with the issues and principles that are central to the administration of fuel use taxes in accordance with the Agreement.
All members are rightfully proud of the nearly 25 years of cooperative administration of fuel use taxes we have enjoyed. A failure to provide for the continued mutual trust and cooperation through administrative processes may result in other authoritative bodies (federal government, courts) intervening in what clearly belongs to the members of the Association.

43. QUESTIONS?
THANK YOU!