Executive Summary

Highway-based excise taxes are paid by highway users, and the tax revenues are distributed to States for supporting highways, safety, and transit programs. The processes for collecting these taxes and redistributing them to the States are very complex. The U.S. Treasury collects most of the taxes from a relatively small number of large corporations located in only a few States. The Internal Revenue Service (IRS) does not have an accurate picture of where the motor fuel is eventually consumed. Because the actual State-by-State contributions are not available, detailed analyses are required to estimate a State's on-highway motor fuel use. The attribution process uses State-reported data and nationally applied statistical models to determine how much fuel is used on highways in each State and the proportion of each State's usage in comparison to the total motor fuel usage for all States.

Apportionment is the distribution of funds by statutory formula. Apportionment of funds to the States for four major highway programs is based on factors from the fuel usage attribution process. Currently, about $12 billion in highway funds is distributed based on motor fuel usage data.

On August 17, 2000, a Federal Register notice was issued (65 Fed. Regist. 50269). The notice, which described proposed revisions to motor fuel reporting and the attribution process, served also as a request for comments on the revised methodology. On the basis of this notice and the resulting comments, certain processes for collecting and reporting on-highway motor fuel data will be revised. These process refinements will take effect when the Federal Highway Administration publishes written guidance, currently scheduled for June 2002. The new procedures will improve consistency in reporting tax revenues among the States and help reduce risks in attribution. This document describes the new processes for collecting data and attributing highway trust funds.

 

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