Highway Information Seminar Motor Fuel Session November 16

Highway Information Seminar Motor Fuel Session November 16, 2004

The Big Picture FHWA determines how much federal Highway Trust Fund 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” ratio

The Big Picture II This analysis is extremely important: To Congress FHWA States It’s important that the data be correct

Background Uses of State motor fuel data Federal-aid highway funds Apportionment Federal motor fuel Attribution Importance 20 years ago, historical records Today, drives the distribution of significant federal funds Tomorrow, indications are the data will remain significant

Apportionments Funds for several FHWA programs are apportioned to the States: Formula based Set by law About 85 % of Federal highway funds are apportioned Under TEA-21, about $12 billion (40% of Federal Highway Programs) was annually apportioned based on motor fuel data

Apportionment and Motor Fuel Data Program Approximate Annual Funding Motor Fuel Factor Apportionment Based on Motor Fuel Surface Transportation $ 6 Billion 35 % $ 2 Billion Interstate Maintenance $ 6 Billion 33. 3 % $ 2 Billion National Highway System $ 6 Billion 30 % $ 2 Billion Minimum Guarantee $ 6 Billion 100 % $ 6 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 are not available from the Internal Revenue Service (IRS)

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 Where is the fuel consumed? IRS didn’t know, but has begun to address fuel tracking

How Attribution Works III IRS reports tax receipts for each motor fuel tax type 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 procedures to derive a consistent, compatible dataset for attribution

How Attribution Works IV Measure on-highway gallons of motor fuel (Gasoline - Gasohol - Special fuels) Sum to derive the national total (by type) Derive each State’s share of the national total Use those shares 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 Attribution to each State is in proportion to the highway use of special fuels

Attribution and Data Quality FHWA’s goal is an accurate data-set with which to determine attribution To improve data quality, FHWA needs to work with State data providers to achieve accurate reporting

In Summary Processes: Apportionment process Attribution process Importance: Measurement of motor fuel data Equitable treatment for all States FHWA needs your commitment

FHWA Motor Fuel Reporting: Accomplishments Challenges Changing Environment

Accomplishments: Re-Assessment Input procedures Motor fuel reviews Data verification Outreach

Accomplished: Re-Assessment Time line Began in late 1998 Shortly after TEA-21 passed Methodology Expert advisory group Identify issues Propose solutions

Accomplished: Re-Assessment General Accounting Office (GAO) Concurrent assessment Cooperative effort Substantial agreement on conclusions GAO identified several actions Review & verify State MF reporting Document FHWA attribution methodology Independent review of FHWA methodology Evaluate EXSTARS-EXFIRS for validation

Accomplished: Re-Assessment FHWA identified areas for further study/revision Federal Register Notice General support for the proposals Publication: Attribution and Apportionment of Federal Highway Tax Revenues: Process Refinements

Accomplished: Input Procedures Implemented a submittal process All motor fuel data since January 2002 Generally considered easy-to-use Computer security requirements Secure submittal site Required change to Input Tool use Data providers received USERID Managed by Division Offices

Accomplished: MF Reviews Division Office reviews Continuous Process Improvement Model 45 States have done reviews Quality varies

Accomplished: Data verification Process review versus data verification Why verify? Old procedure - data hand-entered Data needs checking until new procedures Verification memo Sent in March – June each year Typically, several States revise their data So several iterations occur

Accomplished: Publications Attribution and Apportionment of Federal Highway Tax Revenues: Process Refinements Your State’s Share: Attributing Federal Highway Revenues to Each State Guide to Reporting Highway Statistics has been revised and approved by OMB

Accomplished: Revised Guide to Reporting Highway Statistics Data requirements have changed Data providers need to be aware of these changes It will require some effort on the State’s part to be aware and make these changes FHWA will discuss these with you at any time, if you need assistance

Challenges: Motor fuel reviews and follow-up Quality of reviews Quality improvements Risk assessment Verification of data Communication

Challenges: MF Reviews Quality of reviews/Quality improvements Need to bring up the average Three core items: Procedures document Procedures assessment Oversight plan Risk assessment

Challenges: Communication Goal: Keep stakeholders in loop Methods Workshop-Video conference options November workshops on Highway Statistics January-February motor fuel workshops Special request/event video conferences

Challenges: Verification of Data About 20 are reviewing the data Apparently, about 30 are not reviewing the data It’s the States last chance to make sure what they reported is correct

Challenges: Communication II Methods (continued) Community of Practice: Location for all publications/materials Bulletin-board style listserv http: //knowledge. fhwa. dot. gov/cops/hcx. nsf/home? openformgroup=motor%20 fuel%20 reporting/htf%20 attribution

Changing Environment: Reauthorization Reporting changes Attribution analysis changes Gasohol data Federal law changes combating tax evasion

Changing Environment: Reauthorization TEA-21 ended September 30, 2003 Administration-proposed legislation 8 month extension until May, 2005 What Congress will do is unknown No significant MF changes expected

Changing Environment: Reporting & Analysis Changes FHWA will be treating some data differently On-highway public diesel use Alternative fuels reporting Loss allowance treatment Reporting changes Computer security Data uniformity State responsibilities

Changing Environment: Gasohol Revenue Hot topic in reauthorization American Jobs Creation Act of 2004 Highway Trust Fund compensated for gasohol subsidy How this will be treated administratively is still to be determined Will mean increased revenue to the Trust Fund

Changing Environment: Fuel Tax Evasion Federal law changes Mobile machinery Aviation grade kerosene Dye injection equipment Intercity buses Pipeline/vessel registration Other administrative changes Contact: Linda Morris at FHWA

In Summary Identified and discussed Accomplishments Challenges Changes in the MF environment

FHWA Motor Fuel Reporting: Data Submittal Process Discussion of Improvements

Background I 2002 and beyond motor fuel data submitted electronically Submitted by State DOT’s, DOR’s, or FHWA Form 551 M submitted monthly Form 556 submitted annually

Background - II Reported using Smart Input Tool Submitted using Spreadsheet view Wizard view Direct XML Instructions for reporting – Guide to Reporting Highway Statistics – Chapter 2

Motor Fuel Reporting We begin here……. .

Motor Fuel Reporting Gallons from tax returns of seller Depending on point of taxation in State: Terminal Holders Wholesalers Retailers

Motor Fuel Reporting Gasoline and Gasohol Gross Volume Reported Includes: Fully taxed Exempt sales Fully refunded sales Partially exempted sales Partially refunded sales Taxed at reduced rates Assessments

Motor Fuel Reporting Diesel and LPG Gross Volume Reported Includes: Only Highway Use of Diesel and LPG Include Public Use Diesel Revised Chapter 2 of Guide – March 2003

Motor Fuel Reporting Other State Fuel Data Alternative fuels Per gallon equivalent Registration fees in lieu of per gallon taxes Aviation Fuels Transit Fuels

Motor Fuel Reporting Consistency in Data Entries Enter text and data on same line each month New text and data - Identify the entry in the comments section on page 2

Motor Fuel Reporting New Feature in DBMS Data that is incorrectly submitted will be rejected State will be notified that their submittal has been rejected and comments to explain why

Motor Fuel Reporting Stop reporting Off-Highway Diesel fuel Enter zero or nothing in the cell(s) Remember to remove the gallons from the Highway Diesel/LPG Gross Volume Reported in line 1

Motor Fuel Reporting Report current State tax rates every January, and in any month there is a change Enter all rates that apply in your State Enter the effective date Important because the FHWA DBMS uses these entries as input

Motor Fuel Reporting Form Section Defaults Allows you to: Customize the form for your State Set a time period for the custom settings Revise the settings if your State legislature changes motor fuel tax law

Motor Fuel Reporting. Conclusions Report accurate data Enter text and data consistently each month Use Form Section Defaults Enter tax rates Stop reporting off-highway diesel New Procedure – FHWA ability to reject data Revised Chapter 2 – March 2003