1. FHWA Attribution of Federal Highway Trust Fund Tax Receipts IFTA Annual Business Meeting New Orleans, Louisiana July 18-19, 2008

2. The Big Picture  What’s important about motor fuel data, attribution, and the apportionment process? The amounts of funding involved The distribution of those funds, or Your State’s Share

3. Introduction I  FHWA estimates how much federal highway tax money comes from each State  Compared to how much each State receives from FHWA  Derives a “for every dollar in, how much does my State receive” or Donor-Donee ratio  This is extremely important: To Congress, FHWA, and the States That the data be correct

4. Introduction II  The methodologies are reasonable  The data is less than perfect Different motor fuel laws in each State Tax Systems designed for  Revenue collection  Not data collection State agency interest levels Tax evasion Imperfect reporting on form FHWA-551M

5. Federal Highway Taxes  Fuel Tax (cents per gallon): Gasoline 18.4 Diesel 24.4  Retail Excise Tax – 12% for 33,000 lbs. Tractors or 26,000 lbs. Trailers  Tire Tax – 9.45 cents per 10 lbs. over 3,500 max. rated load capacity  Use Tax – trucks over 55,000 lbs. sliding scale up to $550

6. Highway Accounts  Highway Trust Fund Accounts Mass Transit Account  Receives 2.86 cents for every gallon of fuel  Receives none of the “truck” taxes Highway Account  The rest of this presentation will cover only the Highway Account

7. Federal Highway Account Taxes 2007  Gasoline - $20.6 billion  Diesel - $8.9 billion  Retail - $3.8 billion  Use – $1.0 billion  Tires - $.4 billion  Total – $34.8 billion

9. Federal-aid Funds  Apportioned funds: Formula based Formulas determined by Congress $34.7 Billion in 2007  Allocated funds Everything else $6.1 billion in 2007  Spending more than we collect Fund balance is falling

10. Apportionments  Under SAFETEA-LU, more than $14.9 billion is annually apportioned based on motor fuel data  That’s about 37% of 2007 Federal Highway Programs

11. Apportionment and Motor Fuel Data Program Approximate Annual Funding 2008 Motor Fuel Factor Apportion- ment Based on Motor Fuel Surface Transporta- tion $ 6.4 Billion35 %$ 2.24 Billion Interstate Maintenance $ 5 Billion33.3 %$ 1.67 Billion National Highway System $ 6.1 Billion30 %$ 1.83 Billion Equity Bonus (Est.) $ 9.2 Billion100 %$ 9.2 Billion

12. The Attribution Process  FHWA attribution supports the apportionment process  How FHWA calculates attribution  The role of State data

13. How Attribution Works I  State-by-State contributions to the Federal Highway Trust Fund were not available from the Internal Revenue Service (IRS)  With EXSTARS, that data is coming on- line

14. How Attribution Works II Typical federal motor fuel taxpayer is an oil company or oil wholesaler 8,000 are licensed with IRS Federal tax is imposed as the fuel crosses the rack  Bulk shipments  Terminals  Truck shipments  IRS reports total tax receipts (after refunds and transfers) for each motor fuel tax type

15. How Attribution Works III  HTF contributions from highway users in each State are estimated using State motor fuel data States report the motor fuel taxed under each State’s procedures FHWA uses established methodologies to derive a consistent, compatible dataset for attribution

16. FHWA Estimation of Non-Highway Gasoline  Estimate off-highway uses of: Agriculture Construction Industrial and commercial Small boat Aviation gasoline  Compare to State-reported amounts  Use one or the other

17. How Attribution Works IV  From adjusted State motor fuel data Measure on-highway gallons of motor fuel (Gasoline - Special fuels) Sum to derive the national total (by type) Derive each State’s share of the national total Use those shares (based on gallons) to determine revenue shares

18. How Attribution Works V  For the federal truck taxes: Tire tax Truck and trailer retail sales excise tax Heavy vehicle use tax  Attributed to each State in proportion to the highway use of special fuels

19. For Math Lovers Only SS i,k = SG i,j x TR k (  SG i ) j SS = State share of Federal motor fuel receipts SG = State gallons of motor fuel TR = Net Federal Treasury motor fuel tax revenue i = State, 1 through 51 (D.C. counts as a State) j = Fuel type: gasoline, special fuels k= US Treasury revenue by highway tax type

20. Attribution Timing  States report monthly tax data Monthly Motor Fuel Reported by States  A calendar year’s worth of data is analyzed by FHWA the following summer Non-highway estimates are applied Selected tables in Highway Statistics  States make adjustments and corrections in over another year Modified tables in Verification Memo  Calendar year fuel data is applied to Fiscal year IRS revenue data Selected tables in Highway Statistics

21. Attribution and Data Quality  FHWA’s goal is an accurate data-set for attribution  FHWA performs actions aimed at improving accuracy of State reporting

22. FHWA Reviews  Motor Fuel Reviews Review State reporting procedures Risk assessment  State visits by FHWA HQ staff Typically, 3 per year Improves communication

23. IFTA Data  Carriers subject to IFTA are a significant portion of diesel fuel use  FHWA interest: gallons consumed in each State  Additional calculations are necessary to derive this number correctly  “Transmittals” are the key documents  “Net Taxable Fuel” is the key element

24. In Concept  Include the net taxable gallons consumed in your State by your IFTA carriers  Include net taxable gallons consumed in your State but reported by another jurisdiction

25. In Current Practice  Each State’s Transmittal report must be examined Three surcharge States  Indiana  Kentucky  Virginia Net taxable gallons are now reported such that they can be used for FHWA purposes  Manual adjustments must be made with the ten jurisdictions not in the IFTA Clearinghouse.

26. In Current Practice - II  Inconsistent numbering of the “Transmittal Period” column Resolved when the IFTA Clearinghouse implements funds netting  Inconsistent treatment in reporting audits Some show net taxable gallons Others enter only dollars (which require additional calculation)

27. The Future  By the next annual business meeting, we hope most of these issues will be resolved  Probably the biggest hurdle is communicating to the un-initiated in your State how to handle IFTA data for FHWA reporting purposes

28. Summary  Apportionment Funding distribution Formula based  Attribution Why FHWA does attribution How FHWA performs attribution

29. Summary - II  IFTA data as significant to FHWA  FHWA’s use of IFTA data  Current practice  The future