INTERNATIONAL FUEL TAX AGREEMENT (IFTA) ATTORNEYS SECTION NEWSLETTER September 2012 Volume I, Issue 1 Why Are You Receiving This Newsletter? You are receiving this first-ever IFTA Attorneys Section newsletter because you are listed as the legal contact for your jurisdiction on the Jurisdiction Communication List, Legal Contact, on the IFTA Web site. We hope you will take a few minutes to read the following articles because we believe that it is important for attorneys who handle IFTA matters for their jurisdictions to communicate with each other. So, we invite you to please read on. What Is The IFTA Attorneys Section? The IFTA is an agreement among the 48 contiguous states of the United States and 10 Canadian provinces (the jurisdictions) to collect and distribute to the proper jurisdictions the excise taxes on fuel used by interstate motor carriers that operate in those jurisdictions. The IFTA Attorneys Section is made up of all attorneys who work on IFTA matters for their jurisdictions. If you do not handle IFTA matters and there is another attorney in your jurisdiction who does, or if there are additional attorneys who handle IFTA matters for your jurisdiction, we ask that you please forward this newsletter, as appropriate. The purpose of the Attorneys Section is several-fold: to provide training for jurisdiction attorneys, by assisting them in becoming familiar with their responsibilities as attorneys in administering the IFTA program; to provide a forum for reviewing on-going issues and strategies; to facilitate cooperation among the member jurisdictions and provide a forum for discussing and resolving potential areas of conflict; and to establish a network of contacts with attorneys in other jurisdictions to facilitate communication and encourage cooperation among jurisdictions. In the past, IFTA attorneys from the various jurisdictions met annually, in person, to, among other things, discuss legal issues involving IFTA that arose during the preceding year, including pending litigation and administrative appeals, exchange ideas about addressing IFTA matters (e.g., proposed ballots, dispute resolution), and share expertise in areas relevant to IFTA matters (e.g., bankruptcy). However, due to budget restrictions, the Attorneys Section has not met in person for the past several years. We are hoping that, with a new fiscal year coming up and possible improvement in the economy, money will be more available for IFTA attorneys to travel again in 2013. In the meantime, we are also considering other means of increasing communication among the IFTA attorneys, such as putting on Webinars in which all IFTA attorneys will be invited to participate. To that end, please complete the survey at the end of this newsletter. Who Are We? You have probably been wondering who we are. We are the members of the Attorneys Section Steering Committee (ASSC). Upon the recommendation of the Attorneys Section members, the IFTA Board President appoints the Chair of the Attorneys Section, who is then responsible for selecting the members of the ASSC, subject to approval of the Board. The 1
Attorneys Section and ASSC Chair for 2012 is Clark Snelson (Utah), and the Vice Chair is Collin Davis (Indiana). There are presently nine members of the ASSC, representing all IFTA regions; we are, along with our contact information: Member Jurisdiction Email Address Phone Brock Cole Virginia brock.cole@dmv.virginia.gov (804) 367-2347 Janice Davidson North Carolina janice.davidson@dornc.com (919) 733-4629 Collin Davis (Vice Chair) Indiana CDavis@dor.in.gov (232) 233-5209 Jack Frehafer Pennsylvania jfrehafer@state.pa.us (717) 346-4637 Carolee Johnstone (Ex Officio) California Carolee.Johnstone@boe.ca.gov (916) 323-3142 Mark Osbaldeston Ontario Mark.Osbaldeston@ontario.ca (416) 326-7157 Linda Riordan Rhode Island Linda.Riordan@revenue.ri.gov (401) 574-9139 John Shultz Kansas John.Shultz@kdor.ks.gov (785) 296-3845 Clark Snelson (Chair) Utah csnelson@utah.gov (801) 366-0375 The members of the ASSC meet at least quarterly, by teleconference, to, for example, discuss IFTA issues, respond to IFTA Board and other IFTA committee requests for legal input, and work on ways we can communicate more effectively with IFTA attorneys in the other 49 jurisdictions Voila! This newsletter! The ASSC members also review ballot proposals and provide input regarding possible legal implications that may arise or suggestions for ways to avoid conflict with existing laws, rules, and regulations in particular jurisdictions, and we are responsible for planning and conducting the annual Attorneys Section meeting. Need Help Or Guidance On An IFTA Issue? We encourage all IFTA attorneys, whether you work for your jurisdiction s department of revenue or attorney general s office or the DMV, to contact the ASSC members if you would like to consult on an IFTA issue or question you have. Although ASSC members do not generally provide legal advice as a group, we do provide our individual thoughts on matters that are posed to us, based on our own experiences and knowledge. In order to enhance communication with IFTA attorneys in other jurisdictions, each ASSC member has been assigned a group of jurisdictions that are within the general vicinity of the member s jurisdiction. Brock Cole Arkansas, Kentucky, Louisiana, Tennessee, West Virginia. Janice Davidson Alabama, Florida, Georgia, Mississippi, South Carolina. Collin Davis Illinois, Iowa, Michigan, Missouri, Wisconsin. Jack Frehafer Delaware, Maryland, New Jersey, New York, Ohio. Carolee Johnstone Idaho, Montana, Nevada, Oregon, Washington. Mark Osbaldeston Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland, Nova Scotia, Prince Edward Island, Quebec, Saskatchewan. Linda Riordan Connecticut, Maine, Massachusetts, New Hampshire, Vermont. John Shultz Minnesota, Nebraska, North Dakota, Oklahoma, South Dakota. Clark Snelson Arizona, Colorado, New Mexico, Texas, Wyoming. 2
You are welcome to contact the ASSC member assigned to your jurisdiction, or you may call or email any one of us; we would be happy to help, to the best of our abilities. (Beware, though you may receive more than one opinion!) Information Available On The IFTA Web Site The IFTA Web site, at www.iftach.org, contains a great deal of information that may be useful to you. You do not need a password to access information on all of the topics listed on the lefthand side of the IFTA Home page, including IFTA annual reports, committee information, ballot proposals, and the Articles of Agreement, Audit Manual, and Procedures Manual (all under Manuals ), and those items listed along the bottom of the Home page, including the IFTA Bylaws and a short power-point piece about IFTA ( IFTA 101 ). The IFTA Web site also includes information about up-coming IFTA meetings. In order to log on to the ASSC Web page and access Attorneys Section information about current issues, pending litigation, and other more confidential information (more on this topic below), you will need to obtain a password from the IFTA, Inc. Webmaster, Tom King. Please email him at tking@iftach.org and provide him with your name, title, state agency, and jurisdiction and explain that you are an attorney that deals with IFTA matters for your jurisdiction. Once you log on, you will also be able to access the various Jurisdiction Communication Lists, which provide contact information for individuals involved with IFTA by function (e.g., IFTA Commissioner, Legal Contact) for each jurisdiction or by jurisdiction (e.g., all persons involved with IFTA for a particular jurisdiction). To access these lists, just click on the link labeled View any jurisdiction communication lists under Jurisdiction Communication on the page that will appear once you have logged on. On-Line Attorneys Section/ASSC Information The ASSC plans to begin posting information on current issues, pending litigation, and other matters of interest to IFTA attorneys. This information will be available through the Message Board link under Jurisdiction Communication on the page that appears after you have logged on as a member of the Attorneys Section. Following is an example of what we plan to post. Recent Motor Carrier / IFTA Decision R&R Express v. Pennsylvania On February 8, 2012, the Commonwealth Court of Pennsylvania issued a decision in R & R Express v. Commonwealth of Pennsylvania, 37 A.3d 46 (Pa. Commw. Ct. 2012). Appeals of decisions by the Commonwealth Court are made directly to the Pennsylvania Supreme Court. Please note that R & R Express (Taxpayer) has appealed this decision to the Pennsylvania Supreme Court. This case involves an appeal of an IFTA audit conducted by the Commonwealth that resulted in a significant additional liability as a result of Taxpayer s recordkeeping deficiencies. As determined by the Commonwealth s auditor, Taxpayer s fuel use and mileage reports were 3
inadequate due to lack of documentation. Notably, the auditor did not allow Taxpayer credit for documented trips for which no fuel consumption was reported or for fuel tickets that were entirely deficient. Taxpayer appealed to the Pennsylvania Commonwealth Court. The background and facts of the case and the reasoning of the court are well-stated in the decision; however, for ease of reference, following is a summary of the key issues, Taxpayer s arguments, and the court s holdings. (37 A.3d 46, 50-53.) Credit for Tax-Paid Fuel Taxpayer: The Auditor s use of the sampling method to arrive at estimated miles traveled should also be used to create an estimated credit for tax-paid fuel. Court: IFTA is premised upon the orderly and uniform administration of auditing and accounting. IFTA also requires detailed record keeping, and in the absence of sufficiently specific fuel usage records, each state is directed to apply a uniform estimated fuel use without granting any credits. In light of this, the auditor s methods were reasonable. Double Taxation Taxpayer: Taxpayer and the Commonwealth stipulated that Taxpayer purchases all of its fuel at retail locations, thus implying that fuel tax was paid on all trips and covered all mileage. Therefore, the imposition of tax based upon inadequate records amounts to an unconstitutional double-taxation. Court: IFTA and PA law mandate that taxpayers who present fuel receipts lacking sufficient specificity are to be denied tax credits. This tax system does not utilize a discriminatory tax scheme because it creates a uniform way to distribute tax proceeds when the available information is inadequate to determine the amount of taxes which are owed to each participating member. Use of Post-Audit Period Data Taxpayer: Because IFTA and the Audit Manual require that best evidence available be used to determine the correct amount of tax due, the Auditor should have used the post-audit period data. Presumptively, a Taxpayer would keep better records in the post-audit period and its operations in the post-audit period were similar to the operations during the audit period. Court: IFTA and PA law require that the base jurisdiction apply estimated fuel usage at the statutory rate in the absence of adequate fuel usage documentation. The court agreed with the Commonwealth s position that there is no statutory or regulatory authority to support application of postaudit period data to calculate tax due and such information is irrelevant. Finally, the court concluded with the following guidance: The relevant and controlling law explicitly requires documentation, not estimates of the sort proposed by Taxpayer, no matter how accurate we may believe such estimates to be, nor how sympathetic we may be to Taxpayer s plight. (Id. at 53.) 4
Future Newsletters/Communication The ASSC s primary function is to encourage and enable communication among IFTA attorneys to the fullest extent possible. We hope that this newsletter has been a positive step toward realizing this goal. Please let us know if you have any suggestions for future newsletter articles, and please feel free to contact us if you have any questions or if you are interested in becoming more involved with the IFTA Attorneys Section. It would be great to add a few more members to the ASSC. Until next time, very best regards from the ASSC. We look forward to hearing from all of you. Attorney Section Communications Survey As noted previously, we would appreciate your feedback and input as to what type(s) of communication format you would be interested in for the purpose of communicating with IFTA attorneys from other jurisdictions. To that end, please respond to the following (copy and paste) by email to: Carolee.Johnstone@boe.ca.gov. Thank you. ****************************************************************************** Name: Jurisdiction: 1. I would be interested in meeting in person with other IFTA attorneys. Yes No 2. If the IFTA Attorney Section convenes an in-person meeting in April 2013 (probably the week of April 15 th ) in Chandler, Arizona, I expect that there would be adequate funds budgeted for me to attend. Yes No 3. Whether or not we are able to meet in person, I would be interested in participating in: Webinar presentations on IFTA-related topics. Yes No Webinar/ Skype real-time, round table meetings/discussions. Yes No Teleconference round table meetings/discussions. Yes No Other ideas? 4. I would be interested in information/discussion about the following topic(s): 5. Other comments/suggestions: 5