INTERNATIONAL FUEL TAX AGREEMENT IFTA –DUAL FUEL … Fuel 2013 ABM for website.pdf · • IFTA tax return was built for reporting one fuel type ... Prorate Distances by Jurisdiction

INTERNATIONAL FUEL TAX

AGREEMENT

Celebrating 30 Years of Cooperation and Trust 1983 - 2013

IFTA – DUAL FUEL VEHICLE TAX REPORTING

Annual IFTA Business Meeting

August 21, 2013Reno, NV

Presented byDUAL FUEL WORKING GROUP


AGREEMENT


Overview

• Dual Fuel Vehicles ‐ 101

• Recommended Reporting Process

• Full‐Track Ballot #03‐2013


AGREEMENT


Dual Fuel Vehicles ‐ 101

• A dual fuel vehicle can use two fuels (e.g., diesel and natural gas at the same time)

• Two types of natural gas• Liquefied Natural Gas (LNG):

– Natural gas stored as a super‐cooled liquid (e.g., ‐260°F or ‐170°C)

– Energy content comparable to gasoline and diesel fuels – Expect will be used more for long‐haul runs– Almost always sold as a liquid measure (e.g., gallons or liters)


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• Two types of natural gas (continued)• Compressed Natural Gas (CNG)

– Natural gas stored as a gas in high‐pressure tanks (e.g., 3,000 to 3,600 psi

– Lower energy content compared to gasoline and diesel fuels

– Often sold as a gaseous measure (e.g., ft3 or m3)



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• How they operate:• Can operate solely on diesel but not natural gas• At idle and low load conditions the engine burns mostly diesel

• At full load, the engine burns up to 95% natural gas (diesel is used solely to trigger combustion)

• Overall the same power and performance of normal diesel engines



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• Why is this engine technology being developed and used:o Significantly lower cost fuel compared to dieselo Environmentally friendly (lower truck

emissions)o Domestic supply – less concern about future

world price and availability compared to other fuels



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• Challenges• Infrastructure:

– Fueling stations with equipment to cool the gas; and – Distribution / fuel supply availability along

transportation corridors for long haul trucks

• Weight and space considerations (e.g., extra engine components and different fuel tanks capable of keeping LNG cool until used which reduce load‐carrying capacity)


AGREEMENT


• Why is this important to IFTA• Anticipate at least 5% of long haul vehicles will

be dual fuel within the next 5 years

• IFTA tax return was built for reporting one fuel type per vehicle, and we need to agree on a new process to ensure a fair and consistent distribution of taxes


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Questions / Discussion


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Recommended Reporting Process

• Considerations: – Accuracy (but not vehicle specific)– Easy to understand (government and industry);– Easy to implement (e.g., integrate into existing systems used by government and industry); and

– Easy to audit

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• Observations: 1. IFTA is not a perfect reporting system (we accept

average fuel consumption for all jurisdictions travelled).

2. IFTA documents are generally silent on how to calculate taxable distances and fuel use

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AGREEMENT


3. New technology is impacting on IFTA:• New fuel types• New engine types• Onboard devices to track the amount of each fuel

used in each jurisdiction are available. However:• Their accuracy needs to be verified• They should not be used since consumption

rates under IFTA are an average based on distance and purchase records over a quarter. (Unless we want to change the entire IFTA reporting process)


Recommended Reporting Process• At a high level:

– 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:• Separately reporting the distances travelled and fuel purchased• Pro‐rating the distances to avoid double counting

Fleet Type Fuel TypeIFTA Return

or Return Line

Actual Distance Travelled

Distances Reported

Pure Diesel Diesel “D” Return #1 100 100

Dual FuelDiesel “dD” Return #2 100 (pro‐rated) 25

LNG “dL” Return #3 (pro‐rated) 75


AGREEMENT



• Dual vehicle distances are pro‐rated based on their fuel purchases:

dD Distance = Total Distance Travelled * Diesel purchaseTotal (Diesel + LNG) purchases

dL Distance = Total Distance Travelled * LNG purchasesTotal (Diesel + LNG) purchases

Recommended Reporting ProcessAssumptions Total Distance dD (gallons) dL (gallons) Total Fuel

J1 8,000 500 - 500

J2 2,000 - 1,000 1,000

Total 10,000 500 1,000 1,500

No exempt distances were traveled in either jurisdiction.

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Calculate MPG Total Distance Total Fuel MPG

10,000 1,500 6.67

Prorate Distances by Jurisdiction Between Fuel Types

Total Fuel Fuel by Type Ratio

dD 1,500

500 0.3333

dL 1,000 0.6667

Total Distance Ratio Prorated Distance

J1 8,000 0.3333 (dD)0.6667 (dL)

2,6675,333

J2 2,000 0.3333 (dD)0.6667 (dL)

6671,333

Total 10,000 10,000


Pro‐Rating Worksheet These fields auto‐populate and then transferred to the appropriate dD and dL form/return for each jurisdiction

TOTAL DISTANCE

TRAVELLED

EXEMPT DISTANCE

TRAVELLED

Total Distance

dD Portion

Exempt Distance

Txbl Distance dD Portion

Total Distance

dL Portion

Exempt Distance

Txbl Distance

dL Portion

J1 8,000 0 2,667 0 2,667 5,333 0 5,333

J2 2,000 0 667 0 667 1,333 0 1,333

Total Miles 10,000 0 3,333 0 3,333 6,667 0 6,667

• Pro‐rating more complicated if a carrier has exempt distances• Developed and tested worksheet which can be used to accurately prorate

the “Total Distance” and “Taxable Distance” between fuel types.

Recommended Reporting ProcessDual Fuel Vehicles – Diesel Average MPG 6.67

Fuel Type Jurisdiction Total Distance

Txbl Distance

Txbl Volume

Tax Paid Volume

Net Txbl Volume Tax Rate Tax Due

dD J1 2,667 2,667 400 500 ‐100 0.2000 ‐$ 20.00

dD J2 667 667 100 0 100 0.1000 $ 10.00

Sub‐total 3,333 3,333 500 500 0 ‐$ 10.00

Dual Fuel Vehicles – LPG Average MPG 6.67


Txbl Distance

Txbl Volume

Tax Paid Volume

Net Txbl Volume Tax Rate Tax Due

dL J1 5,333 5,333 800 0 800 0.0500 $ 40.00

dL J2 1,333 1,333 200 1,000 ‐800 0.1000 ‐ $ 80.00

Sub‐total 6,667 6,667 1,000 1,000 0 ‐$ 40.00

TOTAL DUAL‐FUEL VEHICLES 10,000 10,000 1,500 1,500 ‐$ 50.00


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AGREEMENT


Ballot #03‐2013

• Purpose:– Introduce a standard for converting CNG sold in a gaseous measure to a liquid measure (e.g., ft3 to gallons, and m3 to liters)

– Ensure a fair and consistent process for reporting and disbursement of taxes between jurisdictions

Notes:– This ballot is specific to CNG (i.e., LNG always sold as a liquid measure)– Jurisdictions conversion rates for CNG vary considerably

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CNG Conversion RatesState/Source Cubic Feet Conversion

(Divide by)Gallon

(Gasoline Equivalent)Wikipedia 100,000 126.67 789

Alternative Fuels website

100,000 126.67 789

IRS 100,000 126.67 789

Oklahoma 100,000 126.67 789

Kansas 100,000 120 833

Montana 100,000 120 833

Minnesota 100,000 114.1 876

Oregon 100,000 (Multiply by) 0.01 1,000

California 100,000 100 1,000

Connecticut 100,000 (Multiply by) 0.012 1,200

Pennsylvania 100,000 (Multiply by) 0.0314 3,140

Source – FTA


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Ballot #03‐2013

• Observations: – 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.


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– 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

• 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

Ballot #03‐2013

Ballot #03‐2013• What happens if we use different conversion rates?

CNG Purchased (ft3) Conversion Factors dC (gallons)

126,760 126.76 1,000.00 126,760 100.00 1,267.60

Assumptions Miles dD (gallons) dC (gallons) Total Fuel

Jurisdiction 1 8,000 500 - 500 Jurisdiction 2 2,000 - 1,000 1,000

Total 10,000 500 1,000 1,500

Ballot #03‐2013• What happens if we use different conversion rates? Total Miles dD Purchased dC Purchased Total Fuel MPG

10,000 500 1,000 1,500 6.67

10,000 500 1,276 1,768 5.66

Miles Ratio Prorated Distances

Jurisdiction 1 8,000 0.3333 (dD)0.6667 (dC)

2,6675,333

Jurisdiction 1 (at 100 ft3) 8,000 0.2829 (dD)0.7171 (dC)

2,6635,737

Jurisdiction 2 2,000 0.3333 (dD)0.6667 (dC)

6671,333

Jurisdiction 2 (at 100 ft3) 2,000 0.2829 (dD)0.7171 (dC)

5661,434

Ballot #03‐2013

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dC @ 126.75 ft3


Taxable Distance

Taxable Fuel Volume

Tax Paid Volume

Net Taxable Volume Tax Rate Tax Due

dC J1 5,333 5,333 800 0 800 0.0500 40.00

dC J2 1,333 1,333 200 1000 (800) 0.1000 -80.00

Subtotal 6,667 6,667 1,000 1000 0 -40.00

TOTAL FOR BOTH FUELS10,000 10,000 1,500 1500 (50.00)

dC @ 100ft3)

Fuel Type Jurisdiction Total Distance Taxable Distance

Taxable Fuel Volume

Tax Paid Volume

Net Taxable Volume Tax Rate Tax Due

dC J1 5,737 5,737 1,014 0 1,014 0.0500 50.70

dC J2 1,434 1,434 254 1,268 (1,014) 0.1000 -101.41

Subtotal 7,171 7,171 1,268 1000 0 -50.70

TOTAL FOR BOTH FUELS10,000 10,000 1,768 1500 (60.70)

$ Difference -$10.70

% Difference 21.4%


AGREEMENT


Ballot #03‐2013

• Next Steps: (Assuming the ballot passes)

– Jurisdictions with different conversion rates instruct their carriers, solely for IFTA reporting purposes, to either restate: 1. CNG tax rates/volumes purchased at 100 ft3 (or

something else) to rates/volumes at 126 ft3; or2. CNG tax rates/volumes purchased at 126 ft3 (or

something else) to CNG tax rates/volumes at 100 ft3 and then the jurisdiction convert to 126 ft3 for its transmittal purposes.

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AGREEMENT


Ballot #03‐2013

Notes:• Option #2 will completely address the sovereignty issue.• Either option requires carriers to know what conversion rate is being used by fuel sellers in each jurisdiction they purchase CNG in, and carriers will be required at some point to convert of their purchases:

– To a common standard; or– From a common standard to their base jurisdiction’s standard (if different).

• Next Steps:– There were several constructive suggestions which the Working Group will be adding

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AGREEMENT


Ballot #03‐2013

Article R200: Add definitions of Gallon and of Liter, as applied to CNG:

• R222 Gallon, as applied to compressed natural gas, means a quantity ofcompressed natural gas equal to 126.67 cubic feet of natural gas at 60degrees Fahrenheit and one atmosphere of pressure. In the alternative,Gallon, as applied to compressed natural gas, means a quantity ofcompressed natural gas that weighs 5.66 pounds.

• R237 Liter, as applied to compressed natural gas, means a quantity of compressed natural gas equal to 1.0 cubic meters of natural gas at 15 degrees Celsius and one atmosphere of pressure. In the alternative, Liter, as applied to compressed natural gas, means a quantity of compressed natural gas that weighs 0.7316 kilograms.

(No Changes)

Ballot #03‐2013Article P700: Add to P730 CONVERSION RATES AND

MEASUREMENTS: A note referring to the new definition of a gallon and a liter of CNG:

• P730 CONVERSION RATES AND MEASUREMENTS When the membership includes a member jurisdiction other than a U.S. jurisdiction, conversion rates and measurements must be printed on all standard tax returns or instructions provided with tax returns. If the conversion rates and measurements are not printed on the tax returns, or if specific instructions including those conversion rates and measurements are not included with tax returns, either the IFTA, Inc. web‐site or the base jurisdiction’s web‐site shall be referenced on the tax return instructions, provided those sites contain the current conversion rates and measurements. (See IFTA Articles of Agreement Section R222 regarding the definition of a gallon of compressed natural gas, and R237 regarding the definition of a liter of compressed natural gas. Also see Procedures Manual Section P1300 regarding conversion rates and measurements between U.S. and Canadian jurisdictions.)

(Green signifies no longer a strike through)


AGREEMENT


Ballot #03‐2013

Article P1300: Delete section: P1320 FUELS NOT MEASURED IN LITERS OR GALLONS:

• P1320 FUELS NOT MEASURED IN LITERS OR GALLONS

• For reporting fuels that cannot be measured in liters or gallons (e.g., compressed natural gas), the licensee shall report the fuel in the units of measurement employed by the jurisdiction in which the fuel was used.

(No Changes)


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AGREEMENT


Dual FuelWorking Group

IFTA:Hugh Hughson (BC) Dawn Lietz (NV ) Paul Bernander (WI) Garry Hinkley (MI)Tim Ford (CA) Chuck Ulm (MD)Industry: Robert Pitcher (ATA) Gary Bennion (Con‐Way)FTA:Cindy Anders‐Robb IFTA, Inc. Advisors:Lonette Turner Amanda Koeller


AGREEMENT


Thanks!

Documents

INTERNATIONAL FUEL TAX AGREEMENT IFTA –DUAL FUEL … Fuel 2013 ABM for website.pdf · • IFTA tax return was built for reporting one fuel type ... Prorate Distances by Jurisdiction