This report provides: (1) an overview of the IFTA and IRP processes for allocating fuel tax revenues across jurisdictions; and (2) an assessment of these systems in regard to their effectiveness at allocating the tax and fee burden among commercial carriers in an efficient and accurate manner. Three aspects of the system were assessed by answering the following questions: (1) Is the system effectively fostering cooperation among the 58 jurisdictions governed by the IFTA and IRP agreements? (2) Is it effectively promoting the allocation of tax burdens and payments among the jurisdictions? and (3) Is it effectively collecting tax payments and preventing tax evasion? Survey results suggest that the answer to the first question is a qualified yes. Respondents (1) perceived IFTA, Inc. to be very effective in encouraging inter-jurisdictional trust and cooperation; (2) were very satisfied with their communications with IFTA, Inc.; but (3) were less satisfied with communications and coordination of tax reconciliation activities with other jurisdictions. In response to the second question, respondents clearly felt that IFTA, Inc. and IRP, Inc. were well run. In fact, the study found a strong belief that taxes are being collected in a fair and equitable manner. Survey respondents also indicated that the IFTA Clearinghouse and Regional Processing Center were effective tax netting organizations. However, the findings also suggest there may be some problems with tax collection and allocation: (1) The audits uncover many problems with compliance with the rules for mileage reporting; and (2) states with high fuel tax rates may be experiencing revenue shortfalls compared to the low tax rate states. There was no indication that legal issues were a significant problem. Indeed, the legal changes made by the states in order to join IFTA and the IRP appear to have been relatively straightforward with no legal problems of any significance afterward.
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O'Connell, Lenahan; Yusuf, Juita-Elena Wie; and Hackbart, Merl, "The International Fuel Tax Agreement (IFTA) and International Registration Plan (IRP): Allocating Commercial Fuel Tax and Registration Fee Payments across Multiple Jurisdictions" (2007). Kentucky Transportation Center Research Report. 142.