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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

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


    Ifta dual fuel vehicle tax reporting

    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


    Ifta dual fuel vehicle tax reporting

    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


    Ifta dual fuel vehicle tax reporting

    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


    Ifta dual fuel vehicle tax reporting

    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



    Ifta dual fuel vehicle tax reporting

    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


    Ifta dual fuel vehicle tax reporting

    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)


    Ifta dual fuel vehicle tax reporting

    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


    Ifta dual fuel vehicle tax reporting

    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)


    Ifta dual fuel vehicle tax reporting

    Duel Fuel

    Reporting for IFTA


    Ifta dual fuel vehicle tax reporting

    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.)




    Ifta dual fuel vehicle tax reporting

    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