A much-anticipated Internal Revenue Service (IRS) report on Power Take-Off (PTO) fuel use required by SAFETEA-LU has been completed and delivered to Congress
Source: National Ready Mixed Concrete Association, Silver Spring, Md.
A much-anticipated Internal Revenue Service (IRS) report on Power Take-Off (PTO) fuel use required by SAFETEA-LU has been completed and delivered to Congress. Section 11144 of the highway bill directs the IRS to estimate the amount of tax paid on fuel consumed due to the PTO operations of ready mixed concrete trucks and to determine if it is technically and administratively feasible to exempt PTO-related fuel use from the federal excise tax.
Using a weighted average of state allowances for mixer trucks, the IRS determined that PTO off-highway operation accounts for 30.2 percent of vehicles’ fuel consumption. Applying this percentage to data derived from the Department of Commerce’s 2002 Vehicle Inventory and Use Survey (VIUS), the IRS determined that the industry annually consumes nearly 88 million gallons of diesel in mixer PTO operations, or 1,142 gallons/truck/year. Multiplying the 1,142 gallons by the current tax rate of $0.244 would provide an average per-truck credit of $278/year.
Under current law, the report adds, all fuel used in the propulsion engine of a registered highway vehicle is subject to tax, and a credit or refund is not allowed, even if that engine also provides power for a PTO. By contrast, a credit or refund is allowed for fuel used in a separate motor on the vehicle, even if that motor draws fuel from the same tank that supplies the propulsion engine of the vehicle. Exempting fuel used for PTO use from taxation at a minimum would have the potential to decrease the Highway Trust Fund or the general Treasury by $275 million/year.
While there are several options to exempt PTO fuel usage, NRMCA Government Affairs staff notes, each presents the IRS with a unique set of challenges. Some primary concerns are the additional agency resources needed to ensure compliance, the potential need for IRS SB/SE to register more than 10,000 ultimate vendors, and the validation and determination of equitable PTO allowance rates by vehicle type.