FHWA Attribution of Federal Highway Trust Fund Tax Receipts

IFTA Annual Business MeetingNew Orleans, LouisianaJuly 18-19, 2008

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

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

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

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

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

Federal Highway Account Taxes2007

Gasoline - $20.6 billion Diesel - $8.9 billion Retail - $3.8 billion Use – $1.0 billion Tires - $.4 billion

Total – $34.8 billion

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

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

Apportionment and Motor Fuel Data

ProgramApproximate

Annual Funding

2008

Motor Fuel Factor

Apportion-ment Based

on Motor Fuel

SurfaceTransporta-

tion$ 6.4 Billion 35 % $ 2.24 Billion

InterstateMaintenance

$ 5 Billion 33.3 % $ 1.67 Billion

NationalHighway System

$ 6.1 Billion 30 % $ 1.83 Billion

EquityBonus (Est.)

$ 9.2 Billion 100 % $ 9.2 Billion

The Attribution Process

FHWA attribution supports the apportionment process

How FHWA calculates attribution The role of State data

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

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

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

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

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

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

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

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

Attribution and Data Quality

FHWA’s goal is an accurate data-set for attribution

FHWA performs actions aimed at improving accuracy of State reporting

FHWA Reviews

Motor Fuel Reviews Review State reporting procedures Risk assessment

State visits by FHWA HQ staff Typically, 3 per year Improves communication

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

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

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.

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)

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

Summary

Apportionment Funding distribution Formula based

Attribution Why FHWA does attribution How FHWA performs attribution

Summary - II

IFTA data as significant to FHWA FHWA’s use of IFTA data Current practice The future