1. Presented by IFTA Managers’ Workshop and Law Enforcement Seminar September 21-24, 2005 Ron Hester Tax Administration Manager ON Ministry of Finance Lt. John Moses Alabama Department of Revenue

2. What You’ll Learn The Basics – the core principles and the benefits How IFTA Works – from A to Z The Amendment Process – how IFTA changes Compliance – jurisdiction and carrier – administrative and roadside enforcement Some Issues – What’s on the horizon IFTA, Inc. – Who we are and the services we provide

4. WHAT IS IFTA? The International Fuel Tax Agreement A tax collection agreement by and among the 48 contiguous States and the 10 Canadian Provinces bordering the US Uniform administration of motor fuels use taxation laws with respect to qualified motor vehicles operated in more than one member jurisdiction

5. IFTA’S CORE PRINCIPLES Base Jurisdiction Retention of Sovereign Authority to determine tax rates, exemptions and exercise other substantive tax authority Uniform Definition of Qualified Motor Vehicle

6. BASE JURISDICTION Where qualified motor vehicles are registered (IRP) Where operational control and operational records are maintained or can be made available Where some travel is accrued

7. TAX COLLECTED THROUGH IFTA Motor fuel use taxes that are imposed by each jurisdiction on the consumption of motor fuel in qualified motor vehicles.

8. QUALIFIED MOTOR VEHICLE Motor vehicle used, designed or maintained for the transportation of persons or property and Gross vehicle or registered gross vehicle weight over 26,000 lbs. or 11,797 kgs. Three-axles regardless of weight Used in combination when the weight of the combination exceeds 26,000 lbs. or 11,797 kgs.

9. WHO MAY LICENSE? Any person based in a member jurisdiction operating a qualified motor vehicle in two or more member jurisdictions

10. THE BENEFITS TO THE LICENSEE One license and one set of decals for each qualified motor vehicle to operate through all member jurisdictions One tax return filed each quarter with the base jurisdiction One tax payment or refund One audit by the base jurisdiction Reduced administrative costs

11. BENEFITS TO THE JURISDICTION Fewer taxpayers Lower administrative costs Increased audit coverage Increased enforcement

13. GETTING STARTED Carrier submits license application to base jurisdiction 1 Base jurisdiction reviews and processes license application of qualified candidate 2 Base jurisdiction issues one IFTA license to carrier and 2 decals for each QMV operated 3 Licensee operates and prepares quarterly IFTA tax return with base jurisdiction 4

14. Base Jurisdiction (BJ) is a US jurisdiction THE IFTA TAX RETURN

15. WHAT HAPPENS NEXT Licensee files tax return with base jurisdiction and remits $44.00 5 Base jurisdiction reviews and processes tax return and remittance 6 Base jurisdiction processes all other tax returns received 7 At the end of each month base jurisdiction sends transmittal reports to all other member jurisdictions. 8

16. TRANSMITTAL REPORT 05/2200

17. WHAT HAPPENS NEXT Base jurisdiction sends the transmittal report to Jurisdiction AA and all other member jurisdictions 9 Base jurisdiction processes all transmittal reports and payments received from other jurisdictions (including $375 from Jurisdiction AA) 10 Base jurisdiction sends refunds to licensees and issues assessments for any taxes due 11

18. AUDITS The base jurisdiction will conduct audits for itself and all member jurisdictions Jurisdictions must complete audits on an average of 3% of its licensees each year Of the 3%, 25% of the audits must involve high-distance accounts Of the 3%, 15% of the audits must involve low-distance accounts Audit monies are transmitted with the monthly transmittal reports; audit reports are sent upon completion

20. The IFTA Articles of Agreement, R1600 provides that the following may propose amendments to the IFTA Articles of Agreement Procedures Manual or Audit Manual: Committees: Agreement Procedures/Audit/ Law Enforcement/Program Compliance Review The IFTA, Inc. Board of Trustees Any Member Jurisdiction WHO CAN SUBMIT A PROPOSAL?

21. How Ballots Work Sponsors submit Proposals Proposals distributed for comment period Proposals discussed at Annual Business Meeting Sponsors review proposals and may submit revisions Proposals distributed for second comment period Sponsors review and may submit revisions Ballots distributed for vote All comments and votes are submitted through IFTA, Inc. website

22. Ballot Time Frames (1/05) Full Track *45 days – comment period 45 days – sponsor review after ABM 45 days – comment period *60 days - vote Short Track 30 days – comment period 30 days – sponsor review after ABM 30 days – comment period 30 days - vote *Change: from 90 days

23. Annual Business Meeting Short track ballot proposals must receive an affirmative vote of ¾ of the member jurisdictions to continue on the short track – if not, ballot proposal dies Full track ballot proposals may be moved to short track – must receive an affirmative vote of ¾ of the member jurisdictions to move to short track – if not, ballot stays on full track and moves forward

24. 2005 BALLOT PROCESS STATUS Short Track: Second 30-day comment period ending October 10, 2005 Full Track Second 45-day comment period ending October 28, 2005

25. 2006 BALLOT PROCESS Deadline for Submitting Ballot Proposals:

27. Consensus Board Interpretations Dispute Resolution Program Compliance Reviews Enforcement IFTA, Inc. Clearinghouse

28. CONSENSUS BOARD INTERPRETATIONS A process through which provisions of the IFTA governing documents may be interpreted and commentary added to the affected provisions

29. A jurisdiction, committee or Board member requests an interpretation The Board may issue a proposed interpretation A proposed interpretation must be ratified by ¾ affirmative vote of the membership at an Annual Business Meeting If ratified, commentary is added to the affected IFTA governing document

30. Changes to the Review Guide  General Information  PCR Committee  PCR Scheduling  Terms  Review Topics & Worksheets  Scheduling PC Reviews  Review  Report Process  Follow Up  Reassessment  Appeal Process PROGRAM COMPLIANCE

31. Top List of PCR Citings for 2004  P1040Late Transmittal of Funds (Returns)9  P1040Late Payment of Billing Transmittals7  P1040Late Mailing of Transmittals7  P1040Late Payment of Transmittals5  R1230.300.010Incorrect Audit Interest4  A660.100.030Net Distance Adjustments Not On  Licensee Audit Report4  A660.100.035Net Tax Paid Fuel Purchases Adjustments Not On Licensee Audit Report4

32. ENFORCEMENT OF IFTA Jurisdictions exchange quarterly a listing of new and cancelled accounts Jurisdictions exchange, at least every 10 days, the following: Listing of suspended licenses Listing of revoked licenses Listing of reinstated licenses

33. USES OF INFORMATION Administrative To ensure that a carrier in a revoked license in one jurisdiction does not receive a license from another Roadside To ensure that a carrier in a revoked, suspended, or cancelled status is not continuing operations

34. ROADSIDE ENFORCEMENT Credentials A jurisdiction issues one license to the carrier  The carrier must copy the license and place a copy in each qualified motor vehicle A Jurisdiction issues two decals to the carrier for each qualified motor vehicle  The carrier must display a decal on each side (driver and passenger) of each qualified motor vehicle

35. OTHER CREDENTIALS An IFTA temporary decal permit This permit may be carried ONLY in place of the decals It is valid for only 30 days It is vehicle specific (VIN must be included) It’s main purpose is to allow a carrier to add a qualified motor vehicle immediately – places a copy of the license in the vehicle and the jurisdiction faxes the temporary permit until permanent decals reach the carrier

36. Trip Permit A jurisdiction may issue a trip permit to a carrier This trip permit is in lieu of an IFTA license Most jurisdiction trip permits are limited by time (i.e. days, hours, etc.) This is NOT an IFTA trip permit – it allows the carrier to travel through the jurisdiction that issued it and no other A trip permit has to be obtained for each jurisdiction separately

37. WHY ENFORCE? If a carrier is operating on a suspended or revoked license, this indicates that the carrier is not complying with the terms of IFTA Including failure to file tax returns, failure to pay a tax return, failure to pay an audit assessment If a carrier is operating on a cancelled license, the carrier has indicated to the jurisdiction that he or she is no longer operating ― Stopping the carrier from operating in your jurisdiction stops the carrier from operating in all jurisdictions – payment by this carrier pays your taxes too

38.  Mark Bell (KY) (a/k/a The IFTA Gipper)

39. NAFTA Interest Multiple Count Audits

40. INTERNATIONAL FUEL TAX ASSOCIATION, INC. Manages The International Fuel Tax Agreement

41. What is IFTA, Inc.? A not-for-profit association incorporated under laws of the State of Arizona Membership in IFTA constitutes membership in IFTA, Inc. Association is funded by membership dues Incorporated to conduct business activities Membership elects a 9-member Board of Trustees

43. THE PEOPLE LONETTE L. TURNER – EXECUTIVE DIRECTOR DEBORA K. MEISE – PROGRAM DIRECTOR JASON DEGRAF – INFORMATION SERVICES ADMINISTRATOR TAMMY TRINKER – EVENTS COORDINATOR TOM KING - WEBMASTER JESSICA EUBANKS – EXECUTIVE ASSISTANT RICHARD O. BECKNER – PROGRAM COMPLIANCE ADMINISTRATOR

44. Services Provided Administering the ballot process and the IFTA governing documents Gathering and distribution of the quarterly tax rates Providing technical assistance to the member jurisdictions and licensees Gathering and distribution of the jurisdiction annual reports Leading and participating in the required program compliance reviews

45. Other Services Planning and preparation of an annual audit workshop (along with IRP), an attorneys’ meeting, an annual business meeting, a managers’ workshop and law enforcement training seminar Participating in other related association and government meetings Monitoring activities such as NAFTA

47. IFTA/IRP AUDIT WORKSHOP JANUARY 6-9, 2006 Tempe Mission Palms Hotel Tempe, Arizona IFTA Attorneys' Section Meeting APRIL 21-22, 2006 Sheraton San Marcos Chandler, Arizona

48. Questions