RSF 113, HVUT Evasion Analysis and Verification Innovation

HVUT tax filing and verification is a complex process that involves multiple stakeholders, including carriers, electronic filing vendors, and several taxation and credentialing agencies – sometimes more than one in a single state. Given the complexity, the challenges associated with verification of HVUT filings, as well as inadequate data quality, state and federal administrators have concerns about tax evasion stemming from these issues. In spite of federal compliance reviews that could result in a reduction in FHWA highway funds, some federal and state stakeholders believe the program should be generating more revenue.1 According to FHWA, HVUT revenue for FY 2008 was $1.04 billion before declining for several years after the onset of the Great Recession.2 Revenues since have rebounded and expanded somewhat, with 2018 revenues at $1.25 billion – an increase of about 20 percent over the decade. However, the increase in the number of trucks on the road was far greater.3 IRP historical records show just over 2.1 million power units registered with its jurisdictions for the 2008 calendar year, growing to just over 2.9 million power units registered to its jurisdictions for the 2018 calendar year – a 37 percent increase in registered IRP vehicles. Even accounting for other factors (e.g. changes in intrastate commercial vehicle numbers, the share of vehicles registered with Canadian provinces, the distribution of vehicles by weight class, the share of exempt vehicles, etc.) there is a high probability that HVUT evasion has become more prevalent during the last 10-12 years, and that the Highway Trust Fund is losing millions in potential revenue. Given the challenges to this program, the Kentucky Transportation Cabinet (KYTC) would like to partner with the Kentucky Transportation Center (KTC) at the University of Kentucky to analyze current HVUT verification processes for interstate and intrastate vehicles, conduct an HVUT estimation analysis, and investigate innovative technology and policy solutions that would enhance enforcement of HVUT requirements and reduce evasion nationally. • Work with stakeholders to collect data and document HVUT processes for validating and enforcing HVUT requirements for interstate and intrastate vehicles • Collect data on IRP registrations, state intrastate vehicle registrations, and HVUT revenue and audits data to estimate HVUT evasion • Research potential policy and technology solutions based on review of tax evasion literature, process documentation and evasion analysis • Document and report best practices for mitigating HVUT evasion and enhancing revenue