An Overdue Act Of Congress

In the absence of highway bill reauthorization priorities, the 110th U.S. Congress should have ample time to act on other important measures affecting

CP Staff

In the absence of highway bill reauthorization priorities, the 110th U.S. Congress should have ample time to act on other important measures affecting concrete interests. Washington, D.C., observers are uncertain how the Democrat-controlled Congress will respond to proposals for power takeoff fuel tax correction, an equity matter to which the National Ready Mixed Concrete Association has devoted much time and resources for more than a decade. NRMCA is tracking a recommendation the Internal Revenue Service (IRS) is scheduled to present to Congress this month regarding a blanket federal fuel tax rebate of approximately 22 percent for nonpropulsive fuel usage in mixer truck deliveries.

In December, the association finalized and submitted a two-page summary of a more extensive September report to the IRS tracing the history of fuel use, and providing an explanation and results of fuel tests done for the bulk of 2006 on about 250 trucks. The summary also made the case for either a flat $293 per truck tax rebate annually (based on 22 percent of the average amount of fuel used by mixer trucks in off-highway use in a given year) or a system by which each truck receives a 22 percent rebate based on actual fuel use. Stemming from a SAFETEA highway bill provision NRMCA secured, the mixer truck fuel-usage survey was conducted in all climates, with rear- and front-discharge models of all makes and power sources. This gives the IRS a reference point to just how significant [power takeoff] fuel usage is, says NRMCA Vice President of Government & Legal Affairs Bob Sullivan.

Assuming the IRS fully adopts the test data, the 22 percent nonpropulsive fuel use test result figure will form the basis for a tax credit or rebate of roughly $23 million per year across the industry. This sum would be in addition to the rebate amounts 30 states currently allow taxpayers for fuel consumed in an off-highway business use. Some states offer flat rebates varying from 20 to more than 40 percent, and others offer credits or refunds in the 30 to 35 percent range, plus whatever the operator can prove Û boosting the percentage significantly.

According to Sullivan, the recommended 22 percent federal tax credit may seem low to some fleet operators and truck owners, but he is quick to point out that state and federal governments have different definitions of off-highway business use. The federal government does not tax off-highway business use, which is defined as any nonpropulsive fuel use, regardless of what type of road is traveled. Under state laws, off-highway business use is defined such that states not only do not tax the fuel consumed in nonpropulsive operations, they also do not tax fuel consumed during operations off public roads.

Sullivan adds that due to this definitional distinction it is not likely all states will adopt the federal definition for off-highway business use, so at the individual company level, no producer should feel a negative difference in their tax credit. Months ago we looked at the scenario where all states adopt the federal 22 percent standard; the industry would still come out ahead in terms of net tax credits, he says. This is a federal excise tax credit or refund that companies will be eligible for on top of any fuel tax credit or refund a company may be receiving at the state level.

Sullivan remains optimistic about the IRS recommendation, which he hopes will be presented to the new Congress as early in 2007 as possible. We have provided the IRS Study Team every piece of data we have from the industry without alteration or manipulation, he says. And given these factors, they should have a high level of confidence that it will be administratively feasible to provide an exemption for 22 percent of the industry’s fuel use. One encouraging indicator of how the new Congress will respond to the IRS recommendation, he adds, is tied to incoming Senate Finance Committee Chairman Max Baucus (D-MT), who has supported past PTO tax-correction proposals.

Throughout the period NRMCA has pursued power takeoff fuel-tax correction measures on Capitol Hill, regulatory and market factors have boosted considerably the cost of operating mixer trucks. Federal lawmakers’ action on this tax equity issue is long overdue, and might even enable a few more ready mixed producers to accelerate fleet conversions to models running 2007 EPA-compliant power. Producers interested in NRMCA’s government affairs program can contact Sullivan at [email protected], or 240/485-1148.