STATE TAX & FISCAL UPDATE

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STATE TAX & FISCAL
UPDATE
Bob Pitcher
VP, State Laws, ATA
NAFC Annual Meeting
June 17, 2014
Today’s Agenda
• State & Local Government Fiscal Situation
• State Tax Changes
– Business Taxes
– Highway Taxes
• IRP, IFTA & UCR
• Have We Made Any Progress?
State & Local Fiscal Update
Some Trouble Spots
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Detroit
Chicago
Rhode Island
Puerto Rico
Are These Places Bellwethers?
Detroit
• Largest City Bankruptcy in U.S. History
• Filed Under Ch. 9 in July 2013
• Corruption, Mismanagement, Population Loss,
Unpaid Taxes
• $18.5 Billion in Debt
• Pensions the Big Issue
• Bankruptcy Trial Starts July 2014
Chicago
• Pensions (5 funds) Dragging City Down
• 36% Funded – c. $35 Billion Deficit (under
GASB rules!)
• State Legislature Controls the Game
• Raise Taxes?
• Cut Benefits?
Rhode Island
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Pensions Again the Problem
58% Funded - $4 Billion Deficit (GASB)
Local Pensions All PArt of State Fund
2011 Reforms
Litigation  Arbitration  Vote  Limbo
Union Opposition
Central Falls Bankruptcy
Puerto Rico
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Small Population & Economy
Subject to Federal Minimum Wage
Government Sector 20% of Employment
Debt $70 Billion – 89% of Personal Income
Junk-Bond Credit Rating – Pension 7% Funded
Not Eligible for Bankruptcy
Analogies to Greece – Bailout Coming?
Are These Places
Bellwethers?
• Warnings, Certainly
• Extreme Cases, But Suggestive
Danger Signs for Others:
• Unaffordable Pensions & Benefits
• Bad Politics
• Damaged Economies
Some Places Will Follow the Same Path
States Generally
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Most Current Budgets in Decent Shape
Some Spending Increases, But Growth Slow
Some Recovery in Housing Prices
Oil & Gas Boom
Northeast, IL, CA Worst Off, Great Plains Doing
Fine
• States Not Well Prepared for Next Recession
Local Governments
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A Real Mix
Few Really Stressed (CA, PA)
Depends Mostly on Local Economies
Mismanagement, Population Loss the Greater
Dangers, Pensions Generally Less Troublesome
• Some Growth in Local Govt. Employment
Government Employment
• Last 18 Months:
– Federal Employment Down 3-4% (Retirements)
– State Govt. Employment Steady
– Local Govt. Employment Up a Bit (Teachers)
• Early Signs of a Flood of Retirements
• Turnover Among Younger Workers Also Up
• Overall Loss of Govt. Expertise Imminent?
Private-Sector Employment
• %age of “Real” P-S Jobs Gained, 2007-12:
– ND, 25%
TX, 6%
SD, NY, LA, VT, <2%
– All Other States Lost P-S Jobs 2007-12
• Statewide %age of “Real” P-S Jobs:
– NM, 68%
– MS, 72%
VA, 70%
WY, 73%
AK, 71%
AL, 74%
• North Central States Have Largest “Real” P-S
Long-Term Challenges
• Pensions & Retiree Benefits
– A Mix, But Many Places in Trouble
– Reforms Coming Too Slowly
– No Easy Choices
– Effect on Government?
• Federal Mandates
– Health Care: Medicaid Consumes 23% of All State
Spending – Set to Rise
– Highway Program Devolution?
Federalism
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Increased Federal Aid to States Now
More Mandates, More Strings
Politics of Changes in Federal Spending
Potential Entitlement Fixes, Tax Reform
Some State Reforms – Enough to Help?
Similar State  Local Dynamics
Come the Next Recession….
State Tax Changes
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A Lot Last Year – A Lot Fewer This Year
Elections Coming Up
Few Themes Evident in 2014 Legislation
States Concerned with Highway Funding
Trucks & Roads
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AL property tax
CO sales tax
GA property tax (‘13)
KS property tax (‘12)
MA fuel tax (‘13)
MI fuel tax?
MN sales tax
MS
MO
NV
NH
PA
SC
sales tax
sales tax?
fuel tax (’13)
fuel tax
fuel tax (‘13)
property tax?
General Taxes
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IL
IN
MO
NV
OK
TX
increases???
corporate income & property taxes
personal income & maybe sales tax
margin tax
personal income tax
margin tax?
Update on
IRP
IFTA
UCR
IRP
• Full Reciprocity Plan
• IRP Membership for Mexico?
• Changes in PRISM
FRP
• Effective for IRP Registrations Beginning in
2015
• ALL IRP Registrants Will Be Registered in ALL
IRP States and Provinces
• No More Estimated Distance or Fees
• Fees Based, as Now, on Actual Fleet Distance
Traveled
• New Carriers Pay a One-Time Standard Fee
FRP, cont’d.
• Change the Biggest to IRP in 20 Years
• In Discussion for 30+ Years
• All Favorable for Industry (& States)
– Greater Flexibility
– Saves Fees for Permits, Added States, etc.
– Simpler for States to Manage
Mexican Membership
• New Administration in Mexico
• Mexican Carriers Beginning to See Advantages
• Movement Toward Membership?
• Still Some Years Off
Changes in PRISM
• With URS, FMCSA Drops State Check for MCS150 Update
• PRISM States to Deny Registration for Code 52
• States Can No Longer Assist Carriers with MCS
Updates
IFTA
• Audit & Record-Keeping Rules
• Taxation of Natural Gas
• State Compliance with IFTA Rules
• Electronic Credentials?
IFTA Audit Rewrite
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State & Industry Project (Similar to IRP’s)
Drafting Now Finished – 2014 Ballot
If It’s Accepted, Effective 2016
Flexibility for Distance Records
Few Changes for Fuel Records
Should Help Eliminate Bad Audits
Some Opposition – Industry Support Needed
Natural Gas
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IFTA Adopted GGE Standard for CNG
States Beginning to See n/g IFTA Reports
NCWM Discussions on Metering Standards
An IFTA DGE Standard for LNG?
Reporting Dual-Fuel Vehicles
Adjustments & Confusion Continue
Will IFTA Make Its Members
Follow the Rules?
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NJ Debacle
IFTA Dispute Process Flawed
IFTA States Seem Ambivalent
IRP Process Far Better
Industry Message to IFTA Board
Electronic Credentials
for IRP & IFTA ?
• Committee Discussions Beginning
• A Chance to Eliminate IFTA Decals?
• What Does It All Mean?
• Effect of Federal ELD Rule?
UCR
• States May Collect All Their Money This Year!
• Administration Proposes Amendments to Act
– Remove Federal Representation on UCR Board
– Incorporation of UCR as Private Entity
– New Board Members Chosen by Co-optation
– Leave Board (States) to Set Fees
• States May Like These Changes
A LONG LOOK BACK
&
A SHORT LOOK FORWARD
Where Did We Stand 30 Years Ago?
• Economic Deregulation Was Recent
• Interstate Trucking Was Expanding FAST
• State Operating Taxes Were a Crisis for the
Industry
• Industry Expertise Assembled
• ATA Taxation & Reciprocity Committee
• NAFC Tax Committee
• Western Highway Institute Tax Committee
Fuel Use Taxes:
The Poster Child
Non-Uniform
Burdensome
Expensive!
Non-Uniformity in:
Vehicles
Registration
Credentials
Bonding
Leases
Tax Reports
Credits & Refunds
Audit & Administration
What Vehicles Had to Be
Reported ?
• All Commercial Vehicles
• > 2 Axles
• > 7,000 lbs. Empty Wt.
• > 10,000 lbs. Empty Wt.
• > 18,000 lbs. GVW or 7,500 lbs. Empty Wt
• > 16,000 lbs. GVW
• > 30 Gallon Fuel Tank Capacity
& at least 16 Other Definitions!
What Tax Registration Was
Required?
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Annual, Biennial, or Permanent?
Any Registration Fees? One-Time or Annual?
Fees per Fleet or per Vehicle?
Licenses for Each Place of Business?
When to Be Renewed: October, December,
January, March, April, or July?
• Vehicle-Specific Cab Cards?
• Account Numbers on the Vehicle?
Credentials (DECALS!)
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1 per Vehicle – or 2?
On Left Side, Right Side – or Front?
Display Dates?
Annual, Biennial – or Permanent?
• Were There Decal Fees?
YOU BETCHA! Charged by 22 states
Bonding
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Required by 19 States
Various Amounts and Limits
Required for Refunds in c. 10 More States
Alternative Security Rarely Allowed
Leases
Who Must Report?
– Lessee?
– Lessor?
– Party Buying Fuel?
– Vehicle Operator?
– Up to the Parties?
– State Permission Needed?
– Depend on the Lease?
Copy of Lease Required in the Vehicle?
Tax Reports
• Frequency: Monthly, Quarterly, Annually?
• Due Date: 20th, 25th, 30th, Last of Month?
Postmark Honored?
• No Uniformity in Format
• Computation of Tax Varied:
Vehicles Covered? Formula? State MPGs?
Individual Vehicle MPGs?
• Supporting Documentation Required?
• Payment in Certified Funds?
Credits & Refunds
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Do Credits Carry Over?
How Long?
Are Refunds Available?
Is There a Minimum Amount?
Have to Be Audited First?
Documentation?
Other Restrictions?
Audit & Admin.
• Record Requirements
– Official Fuel Receipts
– Original Documents
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Frequent Changes in Requirements
Rules Inaccessible to Taxpayers
Multiple Audits Under Different Rules
LOTS of Gotchas
Recap:
Fuel Use Taxes in 1984
• Non-uniform? Definitely
• Burdensome? For Carriers of All Sizes
• Expensive?
US DOT estimated up to
$1 billion a year in administrative
costs for motor carriers
IFTA Began in 1983 with 3 States
Flat Fees
• Charged Mostly for Fuel Use Tax Registration:
– AL, CT, DE, FL, GA, IL, IN, KY, ME, MD, MA, MS, NH,
NJ, NY, NC, PA, RI, SC, VT, VA, WV
– Most Came with Decals – Often Vehicle-Specific
– ME, NH, VT in RFTA – A Composite Sticker!
• Total Over $320 per Truck per Year
ATA Had Begun the Scheiner litigation
Vehicle Registration
• IRP Then 10 Years Old
– 27 Member States, 1 Province
– Reciprocity Miles a Big Issue
– Trailer Apportionment, Other Exceptions
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Uniform (Western) Pro-Rate
Multistate Agreement
Bilaterals Galore
Fees for Reciprocity
Bingo Stamps
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Left-Over Regulatory Enforcement Fees
“Money for Nothing”
39 States Participating
Fees for Regulated Interstate Carriers Only
Enormously Burdensome
– Vehicle-Specific
– Licking & Sticking
– Complex Reciprocity Arrangements
Weight-Distance Taxes
• FHWA: “The Railroad Tax”
• In 1980s Imposed by 11 States:
AZ, AR, CO, ID, KY, NV, NM, NY, OH, OR, WY
• Non-Uniform, Burdensome, Expensive, Rife
with Evasion & Exemptions for Locals
• Active AAR Program to Spread W/D
Sales Taxes
• 22 States Levied Sales Tax on Interstate ForHire Rolling Stock
• TX Levied Apportioned Use Tax
• MI Intermittently Sought Use Tax as Well
• Some Provinces Apportioned Sales Tax
• More States Imposed Sales & Use Tax on Parts
& Labor for Rolling Stock
Property Tax
• 19 States Imposed Property Tax on Interstate
For-Hire Rolling Stock:
– 6 Allowed Apportionment Out
– 4 Required Apportionment for All with Nexus
• 7 States Collected an In-Lieu Fee with
Registration
Regulatory Fees
• Fees for Intrastate Use of Interstate
Equipment ($100 per Vehicle in MI)
• Gross Receipts Taxes (NY, PA, UT)
• Intrastate Authority Still Difficult to Obtain in
Some States
How Far Have We Come?
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Fuel Use Taxes?
IFTA
Vehicle Registration?
IRP
Bingo Stamps?
SSRS  UCR
Flat Fees?
Unconstitutional
Regulatory Fees?
Gone
Sales & Property Taxes?
Number of Exemptions Doubled
More Yet To Do
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Repeal UCR (It’s Still Money for Nothing)
There Are Still 4 W/d Taxes (and Talk of VMT)
Sales Tax Exemptions Aren’t Universal
Property Tax Issues Still Exist
Motor Carrier Nexus Issues Need Federal Fix
Eliminate or Reform Credential Requirements
Eliminate the Paper!
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