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IFTA – Dual Fuel Vehicle Tax Reporting. August 14, 2014 Pittsburgh, PA Presented by DUAL FUEL WORKING GROUP. Overview. A Quick Recap on Dual Fuel Vehicles Conversion Issue for LNG Diesel gallon equivalents Short-Track Ballot #05-2014 New Fuel Types for the Clearinghouse

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IFTA – Dual Fuel Vehicle Tax

Reporting

August 14, 2014

Pittsburgh, PA

Presented by

DUAL FUEL WORKING GROUP


Overview
Overview

  • A Quick Recap on Dual Fuel Vehicles

  • Conversion Issue for LNG

    • Diesel gallon equivalents

    • Short-Track Ballot #05-2014

  • New Fuel Types for the Clearinghouse

    • For reporting between jurisdictions


  • Dual fuel working group
    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


    Dual fuel vehicles 101
    Dual Fuel Vehicles - 101

    • Dual fuel vehicles can use two fuels at the same time (i.e., diesel and natural gas)

    • Two types of natural gas are being used:

      • Compressed Natural Gas (CNG)

        • Stored as a gas in high-pressure tanks (e.g., 3,000 to 3,600 psi)

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

    • Liquefied Natural Gas (LNG):

      • Stored as a super-cooled liquid (e.g., -260°F or -170°C)

      • Almost always sold as a liquid measure (e.g., gallons or liters) or by weight


    Dual Fuel Vehicles - 101

    • Expect:

      • At least 5% of long haul vehicles will be dual fuel within the next 5 years

      • LNG will be used more for since the energy content comparable to gasoline and diesel fuels


    Dual Fuel Vehicles - 101

    • Ballot #03-2013:

      • 1 gallon of CNG equals 126.67 cubic feet, and weighs 5.66 pounds

      • 1 liter of CNG equals 1.0 cubic meters, and weighs 0.7316 kilograms

        • (Needed since jurisdictions conversion rates for CNG vary considerably)


    Cng conversion rates
    CNG Conversion Rates

    Source – FTA


    Conversion factors for lng
    Conversion Factors for LNG

    • We told you LNG always sold as a liquid (we were right but there is still a problem)

    • In the United States two different methodologies exist to convert LNG to volume measures:

      • Straight weight - 1 gallon weighs 3.5 pounds

      • Energy equivalent weight - 1 DGE weighs 6.06 pounds


    Conversion Factors for LNG

    • In Canada:

      • The Federal government determines the units of measure and is strongly opposed to energy equivalents:

        • The source of the raw product, the refining/manufacturing process, age of the finished product and season of use can all significantly affect the energy content of diesel and LNG

        • In addition, temperature and pressure greatly affect LNG energy content

        • The result, it is almost impossible to establish a fixed ratio to accurately compare these fuels


    Conversion Factors for LNG

    • In the United States:

      • Retail stations want DGE so the public can compare LNG with diesel

      • National Conference on Weights and Measures is likely to adopt DGE

      • Understand 18 states have DGE legislation (with two more likely before year-end)


    Short track ballot 05 2014
    Short TrackBallot #05-2014

    • As with last years CNG Ballot:

      • We need a consistent process for LNG reporting and disbursement of taxes between jurisdictions

      • There is no impact to sovereignty (a jurisdiction tax rates and units of measure are their responsibility (in the US)

      • Other standards exist to ensure consistent reporting and distribution of taxes between IFTA members (e.g., distances, volumes, and currency)


    Short track ballot 05 20141
    Short TrackBallot #05-2014

    • Are recommending, for IFTA reporting and transmittal purposes, that LNG be reported in energy equivalent measures:

      • diesel gallon equivalent weighs 6.06 pounds; and

      • diesel liter equivalent weighs 0.7263 kilograms

  • As an example:

    • If this ballot does not pass; and

    • I post an LNG tax rate of $0.29 per “gallon” is it…..


  • Short track ballot 05 20142
    Short TrackBallot #05-2014

    $0.29 / straight gallon (3.5 pounds)

    ?

    ?

    $0.29 / Diesel Gallon Equivalent (6.06 pounds)


    Short track ballot 05 20143
    Short TrackBallot #05-2014

    • At a high level:

      • Jurisdictions will send LNG tax rates to IFTA which convert:

        • $C/litre to $US/gallon (for US jurisdictions - but is it a straight gallon or DGE?)

        • $US/gallon to $C/litre (for Cdn jurisdictions - but is it based on a straight gallon or DGE?)

        • IFTA and jurisdictions post LNG tax rates for carriers (straight gallon or DGE?)

      • Carriers submit tax returns, base jurisdiction process and then send to Clearinghouse (straight gallon or DGE?)


    Short track ballot 05 20144
    Short TrackBallot #05-2014

    • Base jurisdictions get Clearinghouse data from other jurisdictions and try to compare with Funds Netting (but will find that difficult because they don’t know if a straight gallon or DGE are being used?)


    Short track ballot 05 20145
    Short TrackBallot #05-2014

    • Proposing:

      P1320 - FUELS NOT MEASURED IN LITERS OR GALLONS

      For IFTA reporting and transmittal purposes, the use of liquefied natural gas shall be reported in energy equivalent measures (i.e., a diesel gallon equivalent in U.S. jurisdictions weighs 6.06 pounds, and a diesel liter equivalent in Canadian jurisdictions weighs 0.7263 kilograms).


    Short track ballot 05 20146
    Short TrackBallot #05-2014

    • Proposing:

      • An effective date of July 2015 but comfortable moving out to July 2016, if additional time is needed to make system changes

    • Key issue is that we:

      • Think about the impact of dual fuels; and

      • Get a consistent unit of measure for LNG reporting and disbursement of taxes between jurisdictions



    Dual Fuel Reporting for IFTA

    • Last year we proposed a methodology for accurately reporting dual fuel activity using the existing IFTA return concept

    • This year I’d like to provide some further thoughts on how carriers, jurisdictions and IFTA could more easily communicate dual fuel activity


    Dual Fuel Reporting for IFTA

    • As background:

      • Dual fuel vehicles must be treated and reported separately (e.g., pure diesel fuel fleet, the Diesel /LNG fleet, and the pure LNG fleet)

      • In addition, each dual fuel fleet must be treated as if two vehicles, separately reporting the:

        • Distances travelled (after pro-rating to void double counting distance travelled); and

        • Fuels purchased (e.g., pure diesel fleet vs. the diesel used in the dual diesel/LNG fleet)


    Duel Fuel Reporting for IFTA

    • This reporting has the potential to create significant problems/complexities for:

      • Carriers reporting to base jurisdictions

      • Base jurisdictions:

        • Processing carrier tax returns;

        • Transmitting data via the Clearinghouse (and non-Clearinghouse jurisdictions), and

        • Desk/field audit activities

    • Think simplest solution is to create several new fuel types to keep dual fleet activity separate


    Duel Fuel

    Reporting for IFTA

    • Recommending four new fuel types so everyone can better understand/see dual fuel activity

    • End result is 3 for Diesel, 2 for LNG, and 2 for CNG as outlined below:

      • D - for pure diesel vehicles (existing)

      • LNG - for pure LNG vehicles (existing)

      • CNG - for pure CNG vehicles (existing)

      • DDL and DLNG - for diesel/LNG vehicles (two new)

      • DDC and DCNG - for diesel/CNG vehicles (two new)


    Duel Fuel

    Reporting for IFTA


    Duel Fuel

    Reporting for IFTA

    • Clearinghouse Advisory Committee:

      • Is aware of the additional fuel types concept;

      • Clearinghouse can accept the additional fuel types; but

      • Based on recent CAC survey 14 jurisdictions have system limitations (i.e., no more than two characters for fuel types)

    • I’m not sure two characters are sufficient but I’d like to leave that for CAC


    General thoughts
    General Thoughts

    • From a tax reporting/transmittal process dual fuel technology is:

      • A significant change in how we operate and will require system changes; and

      • Also places a significant burden on carriers and auditors

      • Assuming everyone is in agreement it will take time for jurisdictions to make system changes to accept/correctly process the incoming dual fuel returns

      • Future Program Compliance Reviews should “note” but not “cite”


    General thoughts1
    General Thoughts

    • Lastly:

      • Natural gas use is growing; and

      • Jurisdictions that currently exempt or tax natural gas at lower rates will likely see a reduction in overall fuel tax revenues as consumers convert to natural gas (e.g., private and commercial vehicles including marine applications etc.)




    FYI - Following slides are from last year’s presentation for reference purposes only/in case questions come up.


    Recommended reporting process
    Recommended Reporting Process for reference purposes only/in case questions come up.

    • 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


    Recommended reporting process1
    Recommended for reference purposes only/in case questions come up. Reporting Process

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

      dD Distance = Total Distance Travelled * Diesel purchase

      Total (Diesel + LNG) purchases

      dL Distance = Total Distance Travelled * LNG purchases

      Total (Diesel + LNG) purchases


    Recommended reporting process2
    Recommended Reporting Process for reference purposes only/in case questions come up.


    Recommended reporting process3
    Recommended Reporting Process for reference purposes only/in case questions come up.

    • 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 process4
    Recommended Reporting Process for reference purposes only/in case questions come up.


    General thoughts2
    General Thoughts for reference purposes only/in case questions come up.

    • Worst Case - US carrier with a dual fuel vehicle in Canada

      • Buys:

        • Diesel in Canadian currency and litres; and

        • LNG in Canadian currency and kilograms

      • Separately track all fuel purchases (e.g., D, DDL, DLNG, DDC, and DCNG):

      • Convert to US currency and converts:

        • Diesel liters to gallons

        • LNG kilograms toa straight gallon or DGE…?

      • Combines with all US activity

      • Then pro-rates distances travelled by dual fuel vehicle to avoid double counting

      • Then completes tax separate tax returns/schedules for each fuel type:

        • DDL - diesel portion of the dual fuel vehicle; and

        • DLNG - LNG portion of the dual fuel vehicle


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