Fact Sheets on Highway Provisions

HIGHWAY USE TAX EVASION PROJECTS

Program Purpose

The program funds projects to reduce motor fuel tax evasion.

Statutory References

SAFETEA-LU Section(s): 1101(a)(21), 1115, and 11141, 11145

Other: 23 USC 143

Funding

Of the amount authorized $2M annually is for intergovernmental activities relating to preventing tax evasion. Funds are also provided to the Internal Revenue Service (IRS). No funding is specifically provided for the States, although States are permitted to use up to ¼ of 1 percent of their Surface Transportation Program funding for fuel tax evasion activities. [1115]

Eligible Use of Funds

Funds under this section may be used to:

• expand efforts to enhance motor fuel tax enforcement
• fund IRS staff activities related to motor fuel tax enforcement
• supplement motor fuel tax examinations and criminal investigations
• develop fuel tax data processing tools
• evaluate and implement registration and reporting requirements for motor fuel taxpayers
• reimburse States for supplementing existing fuel tax enforcement activities
• analyze and implement programs to reduce other highway use tax evasion
• support efforts between States and Indian tribes to address State motor fuel tax issues
• analyze and implement programs to reduce tax evasion associated with foreign imported fuel [1115]

Program Features

The use of funds to support efforts to address State/Indian tribe motor fuel tax issues, and to implement programs to reduce evasion associated with foreign imported fuel are new eligibilities under this program. In addition, the Secretary and the Commissioner of the IRS are required, within 90 days, to enter into a new memorandum of understanding (MOU) supporting the joint efforts related to motor fuel tax compliance. This MOU is required to address:

• development of new reporting and data base requirements under SAFETEA-LU and the American Jobs Creation Act of 2004 relating to motor fuel enforcement, including recommendations of the Motor Fuel Tax Enforcement Advisory Commission created under section 11141
• completion of the data system relating to electronic reporting of transactions from carriers and terminal operators (ExSTARS)
• operation and maintenance of a terminal reporting system to analyze and track domestic and foreign fuel distribution trends and patterns
• sharing of analyses and information collected relating to fuel tax compliance/noncompliance within the disclosure limitations of section 6103 of the Internal Revenue Code
• development, operation, and maintenance of an electronic claims filing system and database, and an electronic database of heavy vehicle use tax payments.

The IRS is required to develop and maintain these systems under contract. The systems are to be available to State and federal revenue, tax, and law enforcement authorities subject to 26 USC 6103, confidentiality and disclosure of returns and return information. The IRS Commissioner is to provide an annual report to the Secretary on the status of these projects. In addition, the Commissioner and the States are to submit an annual report to the Secretary describing the projects, examinations, and criminal investigations funded under this program, as well as the yield from them.

Federal Share

The Federal share is 100 percent.