BALLOT July 2009 IFTA Annual Business Meeting

Ballot Sponsors Jurisdiction of: Alabama Connecticut Montana Oklahoma Virginia

Presentation Outline History – Bob Turner (MT) Richard LaRose (CT) Ballot Purpose – Rena Hussey (VA) Hypothetical Scenario – Jay Starling (AL)

IFTA FULL TRACK BALLOT PROPOSAL A LOOK AT THE HISTORY OF THIS BALLOT

INITIAL RESEARCH Research performed by the PCRC & the IFTA Attorneys’ Section resulted in a report to the IFTA Board of Trustees in Proposal to allow the PCRC to initiate a dispute against a jurisdiction that remains out of compliance following a Program Compliance Review and Reassessment.

PROCESS DEVELOPMENT Changes proposed (in 2004) to the existing Program Compliance Review Guide and the Dispute Resolution Process - Added a Program Compliance Enforcement 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.

2004 ABM FOLLOW-UP 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.

BALLOT LANGUAGE IFTA Final Ballot Proposal –Would allow “Compliance matters from the PCRC” 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.

BALLOT LANGUAGE (CONT’D) Ballot failed narrowly by one vote. The IFTA Board revisited the language and re-drafted the proposal (IFTA Ballot Proposal ) based on jurisdictional feedback and discussion at the 2007 ABM. –Limitation of the articles that would qualify. Only substantive issues would qualify - R970, R1210, R1230, R1260, R1270, P1040, A310, A320 and A690. –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.

BALLOT Here are the sections of the Agreement that Ballot would have focused on: –R970 Late Filing. Any tax return not filed or full payment not made by the due date shall be considered late & the taxes are 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.

BALLOT (CONT’D) –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 and interest by the base jurisdiction, requires written permission from a member to waive a member’s interest due, allows licensees the opportunity to appeal a penalty levied.

BALLOT (CONT’D) –R1270 Revocation of License. Requires revocation of a license when the licensee has not satisfied a tax delinquency or appealed a delinquency notification. –P1040 Monthly Transmittals. Establishes how and when funds collected are to be transmitted. –A310 Number of Audits. Establishes what volume of audits must be performed and what minimum scope the audits must contain.

BALLOT (CONT’D) –A320 Selection of Audits. Establishes the criteria for determining the stratification of the account base for audit purposes and minimum volume. –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.

AN ALTERNATIVE METHOD TO ADDRESS NON-COMPLIANCE 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.

AN ALTERNATIVE METHOD TO ADDRESS NON-COMPLIANCE During late 2007 and early 2008, Rick LaRose (CT) approached the IFTA Board of Trustees with an alternative method based on the provisions of Ballot while at the same time addressing the concerns of the members regarding the permitting of a committee to levy a dispute against a member of the Agreement.

AN ALTERNATIVE METHOD TO ADDRESS NON-COMPLIANCE In March 2008, a prototype ballot was drafted for the purpose of giving the Board of Trustees an idea of how the proposed concept might work. 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

AN ALTERNATIVE METHOD TO ADDRESS NON-COMPLIANCE A presentation was given at the 2008 Annual Business Meeting to brief the Commissioners on the research performed by the subcommittee and to provide an overview of the intent of a potential ballot. After several iterations and the completion of a Commissioners’ Survey to address certain elements of the proposal, IFTA Full Track Ballot was drafted and presented to the membership for comment.

Ballot Purpose presented by Rena Hussey (VA) Authorize the membership collectively to utilize the Dispute Resolution Process to resolve critical compliance matters arising from the PCR process

Ballot Purpose Require PCRC to recommend to membership that a dispute be initiated against a member jurisdiction that: Has been found non-compliant on certain articles of the governing documents following completion of the PCR process, including follow-up and/or reassessment; and Has been found non-compliant on certain articles of the governing documents following completion of the PCR process, including follow-up and/or reassessment; and Has been issued a FDFNC by the PCRC Has been issued a FDFNC by the PCRC

Ballot Purpose Establish process for membership to act upon the PCRC’s recommendation for the initiation of a dispute

Subject Articles R970 - Late filing R970 - Late filing R Assessment R Assessment R Interest R Interest R Waiver of penalties & interest R Waiver of penalties & interest R Revocation of license R Revocation of license P Monthly transmittals P Monthly transmittals A310 - Number of audits A310 - Number of audits A320 - Selection of audits A320 - Selection of audits A690 - Communication of audit findings A690 - Communication of audit findings

Process for Membership to Act PCRC issues FDFNC PCRC issues FDFNC IFTA, Inc. initiates electronic voting process IFTA, Inc. initiates electronic voting process Voting must be in writing by Commissioner or specified delegate Voting must be in writing by Commissioner or specified delegate Electronic vote deemed vote in writing Electronic vote deemed vote in writing 30 day voting period 30 day voting period Affirmative vote of 2/3 of total votes cast is required to initiate dispute Affirmative vote of 2/3 of total votes cast is required to initiate dispute If approved, PCRC forwards FDFNC to DRC If approved, PCRC forwards FDFNC to DRC

Hypothetical Scenarios Presented by Jay Starling (AL)

Hypothetical Scenario PCR team conducts PCR PCR draft report PCRC panel review Compliance? PCR Final report Follow Up Reassessment Yes No

Hypothetical Scenario Follow Up PCRC panel review Follow Up Plan Compliance? Reassessment Final Report No Yes

Hypothetical Scenario Reassessment Plan PCRC review Compliance? Final Report Final Report of Non-Compliance No Yes