[Federal Register Volume 63, Number 196 (Friday, October 9, 1998)]
[Notices]
[Pages 54516-54519]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-27231]
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DEPARTMENT OF TRANSPORTATION
Federal Highway Administration
[FHWA Docket No. FHWA 98-4262]
Transportation Equity Act for the 21st Century; Implementation
Procedures for the Approval and Administration of Projects To Reduce
the Evasion of Motor Fuel and Other Highway Use Taxes
AGENCY: Federal Highway Administration (FHWA), DOT.
ACTION: Notice; request for comments.
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SUMMARY: Over the years, funds have been authorized by the Congress for
use by the States and the Internal Revenue Service (IRS) to reduce the
evasion of motor fuel and highway use taxes. This document sets forth
revised procedures, pursuant to sections 1101 and 1114 of the
Transportation Equity Act for the 21st Century (TEA-21) (Pub. L. 105-
178, 112 Stat. 107), for allocating these funds to the States and the
IRS and provides implementation guidance for the approval and
administration of such projects under 23 U.S.C. 143. The FHWA seeks
public comment from all interested parties regarding the revised
funding allocation and administrative procedures described in this
notice. The procedures described in this notice may be modified based
on the comments received.
DATES: Comments must be received on or before November 23, 1998.
ADDRESSES: Your signed, written comments must refer to the docket
number appearing at the top of this document and you must submit the
comments to the Docket Clerk, U.S. DOT Dockets, Room PL-401, 400
Seventh Street, SW., Washington, DC 20590-0001. All comments received
will be available for examination at the above address between 10 a.m.
and 5 p.m., e.t., Monday through Friday, except Federal holidays. Those
desiring notification of receipt of comments must include a self-
addressed, stamped envelope or postcard.
FOR FURTHER INFORMATION CONTACT: Mr. Stephen J. Baluch, Office of
Policy Development, 202-366-0570; or Mr. Wilbert Baccus, Office of the
Chief Counsel, 202-366-0780; Federal Highway Administration, 400
Seventh Street, SW., Washington, D.C. 20590. Office hours are from 7:45
a.m. to 4:15 p.m., e.t., Monday through Friday, except Federal
holidays.
SUPPLEMENTARY INFORMATION:
Electronic Access
Internet users can access all comments received by the U.S. DOT
Dockets, Room PL-401, by using the universal resource locator
(URL):http://dms.dot.gov. It is available 24 hours each day, 365 days
each year. Please follow the instructions online for more information
and help.
An electronic copy of this document may be downloaded using a modem
and suitable communications software from the Government Printing
Office's Electronic Bulletin Board Service at (202)512-1661. Internet
users may reach the Federal Register's home page at: http//
www.nara.gov/fedreg and the Government Printing Office's database at:
http//www.access.gpo.gov/nara.
Background
Sections 1101 and 1114 of the TEA-21 authorize funding for highway
use tax evasion projects under 23 U.S.C 143. This notice sets forth
certain procedures for allocating those funds to the States and
provides guidance for the approval and administration of projects to
reduce the evasion of motor fuel and other highway use taxes. Funding
authorized for highway use tax evasion projects includes $10 million
for fiscal year (FY) 1998 and $5 million per year for FY 1999 through
2003, and up to one-fourth of 1 percent of funds apportioned to the
States for the Surface Transportation Program (STP) for ``initiatives
to halt the evasion of payment of motor fuel taxes'' (23 U.S.C.
143(b)(8)).
In accordance with 23 U.S.C. 143(c), the major part of the funding
authorized in section 1101(a)(14) of TEA-21 for highway use tax evasion
projects will be provided to the IRS for the development and
maintenance of an automated fuel reporting system. The Federal Highway
Administrator, as delegated by the Secretary of Transportation
(Secretary), and the Commissioner of the IRS have approved a Memorandum
of Understanding (MOU) for the purposes of implementing this system. A
copy of the MOU is provided as an attachment to this notice. The MOU
establishes the funding to be provided to the IRS. As long as the IRS
has met the funding needs to establish and operate the automated fuel
reporting system, pursuant to the Secretary's authority under 23 U.S.C.
143(b)(2), the IRS may use a portion of the funds for continuation of
the IRS examination and criminal investigation activities of the Joint
Federal/State Motor Fuel Tax Compliance Project (or Joint Compliance
Project), previously funded under the Intermodal Surface Transportation
Efficiency Act of 1991 (ISTEA), Public Law 102-240, 105 Stat. 1914, or
for any other activity specified in 23 U.S.C. 143(b).
All funds not provided to the IRS will be allocated to the States
for efforts to reduce the evasion of highway use taxes, including
continued participation in regional motor fuel tax enforcement task
forces. Nine such task forces have been organized since 1991 covering
all States, under the coordination and leadership of the IRS district
offices and State revenue agencies in the nine lead States (California,
Florida, Indiana, Massachusetts, North Carolina, Nebraska, New Jersey,
Oregon, and Texas).
The FHWA intends to distribute the available funds so as to
provide, if possible, at least half of the annual funding allocation
that was provided under the ISTEA, that is, $50,000 for lead States and
$25,000 for all other States and the District of Columbia. In each
fiscal year, allocations would be made only to States that have
expended and billed the FHWA for all but 1 year's
[[Page 54517]]
amount of obligated funds. In order for sufficient funds to be
available to meet this target allocation, the following actions are
recommended:
1. State revenue agencies are encouraged to extend the
completion date for current projects utilizing unexpended funds (the
FHWA will grant reasonable extensions of time up to December 2003
for current projects);
2. States should submit timely reimbursement vouchers so the
FHWA can track the balance of unexpended funds for use in making
annual allocations; and
3. Funds not obligated by June 30 would not be restored in
future years.
The reduced allocations to the States will not be sufficient to
fully fund some of the expenditure items previously budgeted, such as,
auditor and investigator salaries, equipment purchases, and
computerization initiatives. Funding for such items would have to be
provided from the one-fourth percent allowable use of STP funds by
mutual agreement between the State transportation and revenue agencies.
But in any event, the $5 million total available for distribution to
the States for FYs 1999-2003 should, by judicious use of remaining
unexpended funds and careful allocation to meet State needs, provide
sufficient minimum funding for all States to continue participation in
the activities of the Joint Compliance Project.
Steering Committee
At the outset of the Joint Compliance Project in 1990, a Steering
Committee was formed to lend guidance to the regional task forces,
serve as a clearinghouse for exchanging information among the task
forces, recommend strategies for expanding the project, review
progress, and resolve differences among project participants. The FHWA
plans to continue using the Steering Committee, with at least one
meeting each year, to assist the States, the IRS, and the task forces
in adapting to the changing funding situation under TEA-21. Lead States
should continue to designate a representative and alternate to serve on
the Steering Committee. In addition, under the MOU to be signed between
the IRS and the FHWA, the IRS has proposed forming a work group
comprised of State, industry, and Federal agency participants that will
develop and monitor an implementation plan for the automated fuel
reporting system.
Project Requirements
The following requirements apply to highway use tax evasion
projects funded from allocated funds under section 1101(b)(14) or from
STP funds:
1. Obligation authority--
a. Allocated funds--Obligation authority will be provided when
funds are allocated by an FHWA Notice. The funds allocated to a State
shall remain available to the State revenue agency responsible for
motor fuel tax enforcement for obligation until June 30 of each fiscal
year, at which time any unobligated funds will be withdrawn.
b. STP funds--Funds are available for obligation at the request of
the State highway agency for the period specified in the law, i.e., for
a period of up to 3 years following the year authorized. Funds
obligated shall be included within the obligation limitation
distributed to the State by the FHWA.
2. Federal share (allocated funds and STP funds)--
As provided in 23 U.S.C. 143(b)(6), funds are available at 100 percent
Federal share.
3. Maintenance of effort certification--
a. Allocated funds--As specified in 23 U.S.C. 143(b), States
wishing to receive allocations for tax evasion projects must certify
that the aggregate expenditure of funds of the State, exclusive of
Federal funds, for motor fuel tax enforcement activities will be
maintained at a level which does not fall below the average level of
such expenditures for its last 2 fiscal years.
b. STP funds--Maintenance of effort certification is not required.
4. Task force participation--
a. Allocated funds--To receive allocations under this program, the
State revenue agency responsible for enforcement of State motor fuel
taxes shall sign the Memorandum of Understanding agreeing to
participate in at least one of the regional task forces. States may
join one or more task forces to best meet their needs for coordinated
fuel tax enforcement.
b. STP funds--Signing the Memorandum of Understanding for
participation in a regional task force is not required.
5. Project agreement--
a. Allocated funds--The State revenue agency shall sign two copies
of the Project Agreement (FHWA-1548 as amended after July 1, 1998).
b. STP funds--The State highway agency shall sign the Project
Agreement (PR-2). (A copy of the Project Agreement forms (FHWA-1548 and
PR-2) may be obtained from the contacts listed in this notice.)
6. Project eligibility--
a. Allocated funds--Funds are available for projects to reduce
evasion of motor fuel and other highway use taxes.
b. STP funds--Funds are available for ``initiatives to halt the
evasion of payment of motor fuel taxes'' (emphasis added) as specified
in 23 U.S.C. 143(b)(8).
7. Allowable costs (allocated funds and STP funds)--An estimate of
costs by category of expenditure shall be attached to the Project
Agreement. Allowable costs shall be determined in accordance with the
Office of Management and Budget Circular A-87, ``Cost Principles for
State, Local and Indian Tribal Governments.'' With respect to travel
costs, the FHWA project funds may be used:
a. To reimburse State travel costs for motor fuel tax examination
and criminal investigation training;
b. For participation at regional task force meetings and other task
force activities, such as, joint audits and investigations;
c. For participation in International Fuel Tax Agreement audit and
enforcement committee activities;
d. For participation at meetings of the work group for the
automated fuel reporting system;
e. For other cooperative State efforts to foster motor fuel tax
compliance, such as, the meetings of the Uniformity Committee and the
annual and regional Federation of Tax Administrators motor fuel
conferences;
f. For participation of lead State representatives at Steering
Committee meetings; and
g. For participation of representatives from other States at
Steering Committee meetings when requested by the Steering Committee or
to participate in other special activities arranged by the Steering
Committee.
8. Intergovernmental review (allocated funds and STP funds)--The
State shall comply with the intergovernmental review requirements of 49
CFR part 17 according to the procedures established by the State.
9. Environmental impacts (allocated funds and STP funds)--With
respect to environmental impact and related procedures (23 CFR 771),
projects are considered to be a categorical exclusion under 23 CFR
771.117(c)(1).
10. Compliance with planning requirements--Highway use tax evasion
projects are deemed to be part of the long range plans discussed in 23
U.S.C. 134 and 135 with respect to enforcement of any highway user
taxes the revenues from which are used to finance the implementation of
projects in the plan. Projects should be included in the Transportation
Improvement Program (TIP) as follows:
a. Allocated funds--Since funds are allocated to State revenue
agencies only for the purpose of fuel tax evasion project activities,
projects are not
[[Page 54518]]
required to be listed in the TIP discussed in 23 U.S.C. 134 and 135.
b. STP funds--Highway use tax evasion projects carried out by State
agencies shall be included in the transportation improvement program
(TIP) described in 23 U.S.C. 135. Highway use tax evasion projects
carried out by local government agencies within the boundaries of
metropolitan areas shall be included in the metropolitan TIP described
in 23 U.S.C. 134.
11. Project approval (allocated funds and STP funds)--The State
shall request FHWA approval for projects by submitting a letter to the
FHWA Division Administrator in the State requesting funds for the
project along with the following items:
a. Evidence of completion of the intergovernmental review
requirements;
b. The cost estimate by expenditure category; and
c. A signed original copy of the Project Agreement.
12. Project modifications (allocated funds and STP funds)--The
State shall request in writing the FHWA's approval of the following
items as necessary:
a. Revised budget whenever the estimate for a single cost category
changes by more than 10 percent of the total agreement amount, i.e.,
$5,000 for a $50,000 project;
b. Proposal for procurement of professional services, including
identification of the contractor and estimated cost, when the estimated
cost exceeds $10,000;
c. Extension of project completion date and reasons for the
extension; and
d. Additional funding if required to complete the project.
13. Progress reports (allocated funds and STP funds)--Annual
narrative and expenditure reports are required to document progress.
The report forms covering motor fuel tax examinations/audits, criminal
investigations, and roadside fuel checks are optional.
14. Audits (allocated funds and STP funds)--The State shall arrange
for audits when required by 49 CFR part 90.
15. Reimbursement--
a. Allocated funds--State revenue agencies may continue to submit
vouchers (PR-20) to the Division Administrator for payment.
b. STP funds--The State transportation agency would submit vouchers
for payment as part of the current billing process, and the State
transportation agency would make interagency fund transfers to other
State (or local) agencies carrying out project activities.
Effective Date
The procedures described in this notice are effective on the date
of publication, and may be modified by a subsequent notice based on the
comments received.
Request for Comments
The FHWA is requesting public comment from all interested parties
concerning the funding allocation, the administrative procedures
described in this notice, or on any suggestions to enhance motor fuel
tax compliance under this program.
Comments should be submitted to the docket by the deadline
indicated in the DATES caption. All comments received before the close
of business on the comment closing date indicated above will be
considered and will be available for examination in the docket room at
the above address. Comments received after the comment closing date
will be filed in the docket and will be considered to the extent
practicable. In addition to late comments, the FHWA will also continue
to file in the docket relevant information that becomes available after
the comment closing date, and interested persons should continue to
examine the docket for new material.
Authority: 23 U.S.C. 315; secs. 1101 and 1114, Pub. L. 105-178,
112 Stat. 107(1998); and 49 CFR 1.48)
Issued on: October 2, 1998.
Kenneth R. Wykle,
Federal Highway Administration, Administrator.
Memorandum of Understanding Between the U.S. Department of
Transportation (DOT) and the Internal Revenue Service (IRS)
Purpose: The purpose of this Memorandum of Understanding (MOU)
is to implement the provisions of 23 United States Code (U.S.C.)143,
relating to highway use tax evasion projects, in particular the
requirement for the development and maintenance for an excise fuel
reporting system.
Background: On June 9, 1998, the President signed the
Transportation Equity Act for the 21st Century (TEA-21), Public Law
105-178, authorizing highway, highway safety, transit, and other
surface transportation programs for the next 6 years. TEA-21, as
amended, builds on the initiatives established in the Intermodal
Surface Transportation Efficiency Act of 1991, and combines the
continuation and improvement of current programs with new
initiatives to meet America's needs through efficient and flexible
transportation. A key part of funding these highway improvements is
the collection of Federal and State revenues used for this purpose.
Recognizing the need to ensure compliance for revenue
collection, section 1114 of TEA-21, amended 23 U.S.C. 143 to require
that the Secretary of Transportation (hereinafter referred to as the
``Secretary'') shall carry out highway use tax evasion projects in
accordance with the provisions therein. Section 143 provides that
the funds made available to carry out highway use tax evasion
projects may be allocated to the IRS and the States, and that the
Secretary shall not impose any condition on the use of funds
allocated to the IRS under this subsection.
Title 23, U.S.C. Section 143, further limits the use of funds,
provides for the establishment and operation of an automated fuel
reporting system, provides for a funding priority, and a MOU between
the Secretary and IRS for the purposes of the development and
maintenance by the IRS of an excise fuel reporting system.
Wherefore, the DOT and the IRS agree that:
I. Automated Excise Fuel Reporting System (the System) a.k.a. Excise
Fuel Information Reporting System (EXFIRS)
(A) The IRS shall develop and maintain the system through
contracts.
(1) The IRS believes that a participative process with all
stakeholders is the best method to use in the design and development
of ExFIRS. By October 1, 1998, the IRS will form a workgroup with
participants representing industry, States, the Federal Highway
Administration (FHWA), and the IRS. The workgroup will be headed by
the IRS Director, Excise Taxes, and will develop an implementation
plan to provide for a basic automated excise fuel reporting system,
and for enhancements that will best serve the stakeholders,
including industry, the States, the FHWA, other government agencies,
the IRS, etc.
(2) Workgroup members will determine the system needs and assist
the IRS in assembling an implementation plan for use in contracting.
(3) The IRS will use the most expeditious method to obtain
qualified contractors to complete the project.
(4) The implementation plan will be a living document. The plan
will be monitored by the workgroup on an ongoing basis with
revisions to the content, scope, timing, as needed.
(B) The system shall be under the control of the IRS.
(C) To allow for a transition of funding for the States, the IRS
projects that the following funding can be made available to the
States for motor fuel compliance projects:
FY99....................................................... $1,500,000
FY00....................................................... 1,250,000
FY01....................................................... 1,000,000
FY02....................................................... 750,000
FY03....................................................... 500,000
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Total.................................................. 5,000,000
(D) The system shall be made available for use by appropriate
State and Federal revenue, tax, and law enforcement authorities,
subject to section 6103 of the Internal Revenue Code of 1986.
II. Limitation on Use of Funds
Funds made available to carry out highway use tax evasion
projects shall be used only:
(A) to expand efforts to enhance motor fuel tax enforcement;
[[Page 54519]]
(B) to fund additional IRS staff, but only to carry out
functions described in this paragraph;
(C) to supplement motor fuel tax examinations and criminal
investigations;
(D) to develop automated data processing tools to monitor motor
fuel production and sales;
(E) to evaluate and implement registration and reporting
requirements for motor fuel taxpayers;
(F) to reimburse State expenses that supplement existing fuel
tax compliance efforts; and
(G) to analyze and implement programs to reduce tax evasion
associated with other highway use taxes.
III. Funding Availability and Priority
(A) The Secretary shall, by Reimbursable Agreement, provide
available funding to the IRS for the automated fuel reporting system
and for highway use tax evasion projects as described in 23 U.S.C.
143.
(B) The Secretary shall make available sufficient funds for each
of fiscal years 1998 through 2003 to the IRS to establish and
operate an automated fuel reporting system as its first priority.
IV. Oversight
The FHWA Director, Office of Policy Development, and the IRS
Director, Specialty Taxes, will review the development and
implementation of highway use tax evasion project activity.
Dated: September 3, 1998
Kenneth R. Wykle,
Administrator, Federal Highway Administration.
Dated: September 10, 1998.
Charles O. Rossotti,
Commissioner, Internal Revenue Service.
[FR Doc. 98-27231 Filed 10-8-98; 8:45 am]
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