An Act [Pub.L. No. 105-178, signed June 9, 1998]
/Amendments in the TEA 21 Restoration Act [Pub.L.No. 105-206, Signed 7-22-98]/

To authorize funds for Federal-aid highways, highway safety programs, and transit programs, and for other purposes.

• Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

• (a) SHORT TITLE- This Act may be cited as the `Transportation Equity Act for the 21st Century'.

...

SEC. 1101. AUTHORIZATION OF APPROPRIATIONS.

• (a) IN GENERAL- The following sums are authorized to be appropriated out of the Highway Trust Fund (other than the Mass Transit Account):

  ...

  • (14) HIGHWAY USE TAX EVASION PROJECTS- For highway use tax evasion projects under section 143 of such title /$10,000,000 for fiscal year 1998/ $5,000,000 for each of fiscal years 1998 /1999/ through 2003.

...

SEC. 1114. HIGHWAY USE TAX EVASION PROJECTS.

• (a) IN GENERAL- Section 143 of title 23, United States Code, is amended to read as follows:

`Sec. 143. Highway use tax evasion projects

• `(a) STATE DEFINED- In this section, the term `State' means the 50 States and the District of Columbia.

  `(b) PROJECTS-

  • `(1) IN GENERAL- The Secretary shall carry out highway use tax evasion projects in accordance with this subsection.

    `(2) ALLOCATION OF FUNDS- Funds made available to carry out this section may be allocated to the Internal Revenue Service and the States at the discretion of the Secretary.

    `(3) CONDITIONS ON FUNDS ALLOCATED TO INTERNAL REVENUE SERVICE- The Secretary shall not impose any condition on the use of funds allocated to the Internal Revenue Service under this subsection.

    `(4) LIMITATION ON USE OF FUNDS- Funds made available to carry out this section shall be used only--

    • `(A) to expand efforts to enhance motor fuel tax enforcement;

      `(B) to fund additional Internal Revenue Service staff, but only to carry out functions described in this paragraph;

      `(C) to supplement motor fuel tax examinations and criminal investigations;

      `(D) to develop automated data processing tools to monitor motor fuel production and sales;

      `(E) to evaluate and implement registration and reporting requirements for motor fuel taxpayers;

      `(F) to reimburse State expenses that supplement existing fuel tax compliance efforts; and

      `(G) to analyze and implement programs to reduce tax evasion associated with other highway use taxes.

    `(5) MAINTENANCE OF EFFORT- The Secretary may not make an allocation to a State under this subsection for a fiscal year unless the State certifies that the aggregate expenditure of funds of the State, exclusive of Federal funds, for motor fuel tax enforcement activities will be maintained at a level that does not fall below the average level of such expenditure for the preceding 2 fiscal years of the State.

    `(6) FEDERAL SHARE- The Federal share of the cost of a project carried out under this subsection shall be 100 percent.

    `(7) PERIOD OF AVAILABILITY- Funds authorized to carry out this section shall remain available for obligation for a period of 3 years after the last day of the fiscal year for which the funds are authorized.

    `(8) USE OF SURFACE TRANSPORTATION PROGRAM FUNDING- In addition to funds made available to carry out this section, a State may expend up to 1/4 of 1 percent of the funds apportioned to the State for a fiscal year under section 104(b)(3) on initiatives to halt the evasion of payment of motor fuel taxes.

  `(c) EXCISE FUEL REPORTING SYSTEM-

  • `(1) IN GENERAL- Not later than April 1/August 1/, 1998, the Secretary shall enter into a memorandum of understanding with the Commissioner of the Internal Revenue Service for the purposes of the development and maintenance by the Internal Revenue Service of an excise fuel reporting system (in this subsection referred to as the `system').

    `(2) ELEMENTS OF MEMORANDUM OF UNDERSTANDING- The memorandum of understanding shall provide that--

    • `(A) the Internal Revenue Service shall develop and maintain the system through contracts;

      `(B) the system shall be under the control of the Internal Revenue Service; and

      `(C) the system shall be made available for use by appropriate State and Federal revenue, tax, and law enforcement authorities, subject to section 6103 of the Internal Revenue Code of 1986.

    `(3) FUNDING /PRIORITY/- Of the amounts made available to carry out this section for each of fiscal years 1998 through 2003, /and prior to funding any other activity under this section,/ the Secretary shall make available sufficient funds to the Internal Revenue Service to establish and operate an automated fuel reporting system.'.

  (b) CONFORMING AMENDMENTS-

  • (1) The analysis for chapter 1 of such title is amended by striking the item relating to section 143 and inserting the following:

    `143. Highway use tax evasion projects.'.

    (2) Section 1040 of the Intermodal Surface Transportation Efficiency Act of 1991 (23 U.S.C. 101 note; 105 Stat. 1992) is repealed.

    (3) Section 8002 of the Intermodal Surface Transportation Efficiency Act of 1991 (23 U.S.C. 101 note; 105 Stat. 2203) is amended--

    • (A) in the first sentence of subsection (g) by striking `section 1040 of this Act' and inserting `section 143 of title 23, United States Code,'; and (B) by striking subsection (h).

[Federal Register: October 9, 1998 (Volume 63, Number 196)]

[Notices]               

[Page 54516-54519]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr09oc98-200]



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DEPARTMENT OF TRANSPORTATION



Federal Highway Administration

[FHWA Docket No. FHWA 98-4262]



 

Transportation Equity Act for the 21st Century; Implementation 

Procedures for the Approval and Administration of Projects To Reduce 

the Evasion of Motor Fuel and Other Highway Use Taxes



AGENCY: Federal Highway Administration (FHWA), DOT.



ACTION: Notice; request for comments.



-----------------------------------------------------------------------



SUMMARY: Over the years, funds have been authorized by the Congress for 

use by the States and the Internal Revenue Service (IRS) to reduce the 

evasion of motor fuel and highway use taxes. This document sets forth 

revised procedures, pursuant to sections 1101 and 1114 of the 

Transportation Equity Act for the 21st Century (TEA-21) (Pub. L. 105-

178, 112 Stat. 107), for allocating these funds to the States and the 

IRS and provides implementation guidance for the approval and 

administration of such projects under 23 U.S.C. 143. The FHWA seeks 

public comment from all interested parties regarding the revised 

funding allocation and administrative procedures described in this 

notice. The procedures described in this notice may be modified based 

on the comments received.



DATES: Comments must be received on or before November 23, 1998.



ADDRESSES: Your signed, written comments must refer to the docket 

number appearing at the top of this document and you must submit the 

comments to the Docket Clerk, U.S. DOT Dockets, Room PL-401, 400 

Seventh Street, SW., Washington, DC 20590-0001. All comments received 

will be available for examination at the above address between 10 a.m. 

and 5 p.m., e.t., Monday through Friday, except Federal holidays. Those 

desiring notification of receipt of comments must include a self-

addressed, stamped envelope or postcard.



FOR FURTHER INFORMATION CONTACT: Mr. Stephen J. Baluch, Office of 

Policy Development, 202-366-0570; or Mr. Wilbert Baccus, Office of the 

Chief Counsel, 202-366-0780; Federal Highway Administration, 400 

Seventh Street, SW., Washington, D.C. 20590. Office hours are from 7:45 

a.m. to 4:15 p.m., e.t., Monday through Friday, except Federal 

holidays.



SUPPLEMENTARY INFORMATION:



Electronic Access



    Internet users can access all comments received by the U.S. DOT 

Dockets, Room PL-401, by using the universal resource locator 

(URL):http://dms.dot.gov. It is available 24 hours each day, 365 days 

each year. Please follow the instructions online for more information 

and help.

    An electronic copy of this document may be downloaded using a modem 

and suitable communications software from the Government Printing 

Office's Electronic Bulletin Board Service at (202)512-1661. Internet 

users may reach the Federal Register's home page at: http//

www.nara.gov/fedreg and the Government Printing Office's database at: 

http//www.access.gpo.gov/nara.



Background



    Sections 1101 and 1114 of the TEA-21 authorize funding for highway 

use tax evasion projects under 23 U.S.C 143. This notice sets forth 

certain procedures for allocating those funds to the States and 

provides guidance for the approval and administration of projects to 

reduce the evasion of motor fuel and other highway use taxes. Funding 

authorized for highway use tax evasion projects includes $10 million 

for fiscal year (FY) 1998 and $5 million per year for FY 1999 through 

2003, and up to one-fourth of 1 percent of funds apportioned to the 

States for the Surface Transportation Program (STP) for ``initiatives 

to halt the evasion of payment of motor fuel taxes'' (23 U.S.C. 

143(b)(8)).

    In accordance with 23 U.S.C. 143(c), the major part of the funding 

authorized in section 1101(a)(14) of TEA-21 for highway use tax evasion 

projects will be provided to the IRS for the development and 

maintenance of an automated fuel reporting system. The Federal Highway 

Administrator, as delegated by the Secretary of Transportation 

(Secretary), and the Commissioner of the IRS have approved a Memorandum 

of Understanding (MOU) for the purposes of implementing this system. A 

copy of the MOU is provided as an attachment to this notice. The MOU 

establishes the funding to be provided to the IRS. As long as the IRS 

has met the funding needs to establish and operate the automated fuel 

reporting system, pursuant to the Secretary's authority under 23 U.S.C. 

143(b)(2), the IRS may use a portion of the funds for continuation of 

the IRS examination and criminal investigation activities of the Joint 

Federal/State Motor Fuel Tax Compliance Project (or Joint Compliance 

Project), previously funded under the Intermodal Surface Transportation 

Efficiency Act of 1991 (ISTEA), Public Law 102-240, 105 Stat. 1914, or 

for any other activity specified in 23 U.S.C. 143(b).

    All funds not provided to the IRS will be allocated to the States 

for efforts to reduce the evasion of highway use taxes, including 

continued participation in regional motor fuel tax enforcement task 

forces. Nine such task forces have been organized since 1991 covering 

all States, under the coordination and leadership of the IRS district 

offices and State revenue agencies in the nine lead States (California, 

Florida, Indiana, Massachusetts, North Carolina, Nebraska, New Jersey, 

Oregon, and Texas).

    The FHWA intends to distribute the available funds so as to 

provide, if possible, at least half of the annual funding allocation 

that was provided under the ISTEA, that is, $50,000 for lead States and 

$25,000 for all other States and the District of Columbia. In each 

fiscal year, allocations would be made only to States that have 

expended and billed the FHWA for all but 1 year's



[[Page 54517]]



amount of obligated funds. In order for sufficient funds to be 

available to meet this target allocation, the following actions are 

recommended:



    1. State revenue agencies are encouraged to extend the 

completion date for current projects utilizing unexpended funds (the 

FHWA will grant reasonable extensions of time up to December 2003 

for current projects);

    2. States should submit timely reimbursement vouchers so the 

FHWA can track the balance of unexpended funds for use in making 

annual allocations; and

    3. Funds not obligated by June 30 would not be restored in 

future years.



    The reduced allocations to the States will not be sufficient to 

fully fund some of the expenditure items previously budgeted, such as, 

auditor and investigator salaries, equipment purchases, and 

computerization initiatives. Funding for such items would have to be 

provided from the one-fourth percent allowable use of STP funds by 

mutual agreement between the State transportation and revenue agencies. 

But in any event, the $5 million total available for distribution to 

the States for FYs 1999-2003 should, by judicious use of remaining 

unexpended funds and careful allocation to meet State needs, provide 

sufficient minimum funding for all States to continue participation in 

the activities of the Joint Compliance Project.



Steering Committee



    At the outset of the Joint Compliance Project in 1990, a Steering 

Committee was formed to lend guidance to the regional task forces, 

serve as a clearinghouse for exchanging information among the task 

forces, recommend strategies for expanding the project, review 

progress, and resolve differences among project participants. The FHWA 

plans to continue using the Steering Committee, with at least one 

meeting each year, to assist the States, the IRS, and the task forces 

in adapting to the changing funding situation under TEA-21. Lead States 

should continue to designate a representative and alternate to serve on 

the Steering Committee. In addition, under the MOU to be signed between 

the IRS and the FHWA, the IRS has proposed forming a work group 

comprised of State, industry, and Federal agency participants that will 

develop and monitor an implementation plan for the automated fuel 

reporting system.



Project Requirements



    The following requirements apply to highway use tax evasion 

projects funded from allocated funds under section 1101(b)(14) or from 

STP funds:



    1. Obligation authority--

    a. Allocated funds--Obligation authority will be provided when 

funds are allocated by an FHWA Notice. The funds allocated to a State 

shall remain available to the State revenue agency responsible for 

motor fuel tax enforcement for obligation until June 30 of each fiscal 

year, at which time any unobligated funds will be withdrawn.

    b. STP funds--Funds are available for obligation at the request of 

the State highway agency for the period specified in the law, i.e., for 

a period of up to 3 years following the year authorized. Funds 

obligated shall be included within the obligation limitation 

distributed to the State by the FHWA.

    2. Federal share (allocated funds and STP funds)--

As provided in 23 U.S.C. 143(b)(6), funds are available at 100 percent 

Federal share.

    3. Maintenance of effort certification--

    a. Allocated funds--As specified in 23 U.S.C. 143(b), States 

wishing to receive allocations for tax evasion projects must certify 

that the aggregate expenditure of funds of the State, exclusive of 

Federal funds, for motor fuel tax enforcement activities will be 

maintained at a level which does not fall below the average level of 

such expenditures for its last 2 fiscal years.

    b. STP funds--Maintenance of effort certification is not required.

    4. Task force participation--

    a. Allocated funds--To receive allocations under this program, the 

State revenue agency responsible for enforcement of State motor fuel 

taxes shall sign the Memorandum of Understanding agreeing to 

participate in at least one of the regional task forces. States may 

join one or more task forces to best meet their needs for coordinated 

fuel tax enforcement.

    b. STP funds--Signing the Memorandum of Understanding for 

participation in a regional task force is not required.

    5. Project agreement--

    a. Allocated funds--The State revenue agency shall sign two copies 

of the Project Agreement (FHWA-1548 as amended after July 1, 1998).

    b. STP funds--The State highway agency shall sign the Project 

Agreement (PR-2). (A copy of the Project Agreement forms (FHWA-1548 and 

PR-2) may be obtained from the contacts listed in this notice.)

    6. Project eligibility--

    a. Allocated funds--Funds are available for projects to reduce 

evasion of motor fuel and other highway use taxes.

    b. STP funds--Funds are available for ``initiatives to halt the 

evasion of payment of motor fuel taxes'' (emphasis added) as specified 

in 23 U.S.C. 143(b)(8).

    7. Allowable costs (allocated funds and STP funds)--An estimate of 

costs by category of expenditure shall be attached to the Project 

Agreement. Allowable costs shall be determined in accordance with the 

Office of Management and Budget Circular A-87, ``Cost Principles for 

State, Local and Indian Tribal Governments.'' With respect to travel 

costs, the FHWA project funds may be used:

    a. To reimburse State travel costs for motor fuel tax examination 

and criminal investigation training;

    b. For participation at regional task force meetings and other task 

force activities, such as, joint audits and investigations;

    c. For participation in International Fuel Tax Agreement audit and 

enforcement committee activities;

    d. For participation at meetings of the work group for the 

automated fuel reporting system;

    e. For other cooperative State efforts to foster motor fuel tax 

compliance, such as, the meetings of the Uniformity Committee and the 

annual and regional Federation of Tax Administrators motor fuel 

conferences;

    f. For participation of lead State representatives at Steering 

Committee meetings; and

    g. For participation of representatives from other States at 

Steering Committee meetings when requested by the Steering Committee or 

to participate in other special activities arranged by the Steering 

Committee.

    8. Intergovernmental review (allocated funds and STP funds)--The 

State shall comply with the intergovernmental review requirements of 49 

CFR part 17 according to the procedures established by the State.

    9. Environmental impacts (allocated funds and STP funds)--With 

respect to environmental impact and related procedures (23 CFR 771), 

projects are considered to be a categorical exclusion under 23 CFR 

771.117(c)(1).

    10. Compliance with planning requirements--Highway use tax evasion 

projects are deemed to be part of the long range plans discussed in 23 

U.S.C. 134 and 135 with respect to enforcement of any highway user 

taxes the revenues from which are used to finance the implementation of 

projects in the plan. Projects should be included in the Transportation 

Improvement Program (TIP) as follows:

    a. Allocated funds--Since funds are allocated to State revenue 

agencies only for the purpose of fuel tax evasion project activities, 

projects are not



[[Page 54518]]



required to be listed in the TIP discussed in 23 U.S.C. 134 and 135.

    b. STP funds--Highway use tax evasion projects carried out by State 

agencies shall be included in the transportation improvement program 

(TIP) described in 23 U.S.C. 135. Highway use tax evasion projects 

carried out by local government agencies within the boundaries of 

metropolitan areas shall be included in the metropolitan TIP described 

in 23 U.S.C. 134.

    11. Project approval (allocated funds and STP funds)--The State 

shall request FHWA approval for projects by submitting a letter to the 

FHWA Division Administrator in the State requesting funds for the 

project along with the following items:

    a. Evidence of completion of the intergovernmental review 

requirements;

    b. The cost estimate by expenditure category; and

    c. A signed original copy of the Project Agreement.

    12. Project modifications (allocated funds and STP funds)--The 

State shall request in writing the FHWA's approval of the following 

items as necessary:

    a. Revised budget whenever the estimate for a single cost category 

changes by more than 10 percent of the total agreement amount, i.e., 

$5,000 for a $50,000 project;

    b. Proposal for procurement of professional services, including 

identification of the contractor and estimated cost, when the estimated 

cost exceeds $10,000;

    c. Extension of project completion date and reasons for the 

extension; and

    d. Additional funding if required to complete the project.

    13. Progress reports (allocated funds and STP funds)--Annual 

narrative and expenditure reports are required to document progress. 

The report forms covering motor fuel tax examinations/audits, criminal 

investigations, and roadside fuel checks are optional.

    14. Audits (allocated funds and STP funds)--The State shall arrange 

for audits when required by 49 CFR part 90.

    15. Reimbursement--

    a. Allocated funds--State revenue agencies may continue to submit 

vouchers (PR-20) to the Division Administrator for payment.

    b. STP funds--The State transportation agency would submit vouchers 

for payment as part of the current billing process, and the State 

transportation agency would make interagency fund transfers to other 

State (or local) agencies carrying out project activities.



Effective Date



    The procedures described in this notice are effective on the date 

of publication, and may be modified by a subsequent notice based on the 

comments received.



Request for Comments



    The FHWA is requesting public comment from all interested parties 

concerning the funding allocation, the administrative procedures 

described in this notice, or on any suggestions to enhance motor fuel 

tax compliance under this program.

    Comments should be submitted to the docket by the deadline 

indicated in the DATES caption. All comments received before the close 

of business on the comment closing date indicated above will be 

considered and will be available for examination in the docket room at 

the above address. Comments received after the comment closing date 

will be filed in the docket and will be considered to the extent 

practicable. In addition to late comments, the FHWA will also continue 

to file in the docket relevant information that becomes available after 

the comment closing date, and interested persons should continue to 

examine the docket for new material.



    Authority: 23 U.S.C. 315; secs. 1101 and 1114, Pub. L. 105-178, 

112 Stat. 107(1998); and 49 CFR 1.48)



    Issued on: October 2, 1998.

Kenneth R. Wykle,

Federal Highway Administration, Administrator.



Memorandum of Understanding Between the U.S. Department of 

Transportation (DOT) and the Internal Revenue Service (IRS)



    Purpose: The purpose of this Memorandum of Understanding (MOU) 

is to implement the provisions of 23 United States Code (U.S.C.)143, 

relating to highway use tax evasion projects, in particular the 

requirement for the development and maintenance for an excise fuel 

reporting system.

    Background: On June 9, 1998, the President signed the 

Transportation Equity Act for the 21st Century (TEA-21), Public Law 

105-178, authorizing highway, highway safety, transit, and other 

surface transportation programs for the next 6 years. TEA-21, as 

amended, builds on the initiatives established in the Intermodal 

Surface Transportation Efficiency Act of 1991, and combines the 

continuation and improvement of current programs with new 

initiatives to meet America's needs through efficient and flexible 

transportation. A key part of funding these highway improvements is 

the collection of Federal and State revenues used for this purpose.

    Recognizing the need to ensure compliance for revenue 

collection, section 1114 of TEA-21, amended 23 U.S.C. 143 to require 

that the Secretary of Transportation (hereinafter referred to as the 

``Secretary'') shall carry out highway use tax evasion projects in 

accordance with the provisions therein. Section 143 provides that 

the funds made available to carry out highway use tax evasion 

projects may be allocated to the IRS and the States, and that the 

Secretary shall not impose any condition on the use of funds 

allocated to the IRS under this subsection.

    Title 23, U.S.C. Section 143, further limits the use of funds, 

provides for the establishment and operation of an automated fuel 

reporting system, provides for a funding priority, and a MOU between 

the Secretary and IRS for the purposes of the development and 

maintenance by the IRS of an excise fuel reporting system.

    Wherefore, the DOT and the IRS agree that:



I. Automated Excise Fuel Reporting System (the System) a.k.a. Excise 

Fuel Information Reporting System (EXFIRS)



    (A) The IRS shall develop and maintain the system through 

contracts.

    (1) The IRS believes that a participative process with all 

stakeholders is the best method to use in the design and development 

of ExFIRS. By October 1, 1998, the IRS will form a workgroup with 

participants representing industry, States, the Federal Highway 

Administration (FHWA), and the IRS. The workgroup will be headed by 

the IRS Director, Excise Taxes, and will develop an implementation 

plan to provide for a basic automated excise fuel reporting system, 

and for enhancements that will best serve the stakeholders, 

including industry, the States, the FHWA, other government agencies, 

the IRS, etc.

    (2) Workgroup members will determine the system needs and assist 

the IRS in assembling an implementation plan for use in contracting.

    (3) The IRS will use the most expeditious method to obtain 

qualified contractors to complete the project.

    (4) The implementation plan will be a living document. The plan 

will be monitored by the workgroup on an ongoing basis with 

revisions to the content, scope, timing, as needed.

    (B) The system shall be under the control of the IRS.

    (C) To allow for a transition of funding for the States, the IRS 

projects that the following funding can be made available to the 

States for motor fuel compliance projects:





FY99.......................................................   $1,500,000

FY00.......................................................    1,250,000

FY01.......................................................    1,000,000

FY02.......................................................      750,000

FY03.......................................................      500,000

                                                            ------------

    Total..................................................    5,000,000



    (D) The system shall be made available for use by appropriate 

State and Federal revenue, tax, and law enforcement authorities, 

subject to section 6103 of the Internal Revenue Code of 1986.



II. Limitation on Use of Funds



    Funds made available to carry out highway use tax evasion 

projects shall be used only:

    (A) to expand efforts to enhance motor fuel tax enforcement;



[[Page 54519]]



    (B) to fund additional IRS staff, but only to carry out 

functions described in this paragraph;

    (C) to supplement motor fuel tax examinations and criminal 

investigations;

    (D) to develop automated data processing tools to monitor motor 

fuel production and sales;

    (E) to evaluate and implement registration and reporting 

requirements for motor fuel taxpayers;

    (F) to reimburse State expenses that supplement existing fuel 

tax compliance efforts; and

    (G) to analyze and implement programs to reduce tax evasion 

associated with other highway use taxes.



III. Funding Availability and Priority



    (A) The Secretary shall, by Reimbursable Agreement, provide 

available funding to the IRS for the automated fuel reporting system 

and for highway use tax evasion projects as described in 23 U.S.C. 

143.

    (B) The Secretary shall make available sufficient funds for each 

of fiscal years 1998 through 2003 to the IRS to establish and 

operate an automated fuel reporting system as its first priority.



IV. Oversight



    The FHWA Director, Office of Policy Development, and the IRS 

Director, Specialty Taxes, will review the development and 

implementation of highway use tax evasion project activity.



    Dated: September 3, 1998

Kenneth R. Wykle,

Administrator, Federal Highway Administration.



    Dated: September 10, 1998.

Charles O. Rossotti,

Commissioner, Internal Revenue Service.

[FR Doc. 98-27231 Filed 10-8-98; 8:45 am]

BILLING CODE 4910-22-P

Download form for Attachment 4

ARTICLE I - AUTHORITY AND PURPOSE

Pursuant to section 143(a) of Title 23 of the U.S. Code and section 1101(a)(14) of the Transportation Equity Act for the 21st Century (Pub. L. No. 105-178), the State and the FHWA, enter into this agreement to enhance compliance with and collection of highway use taxes.

ARTICLE II - OBJECTIVE

The objective of this grant agreement is to increase the amount of revenue available for highway programs by using Highway Trust Fund tax receipts, administered by the FHWA, to expand highway use tax compliance efforts by the Internal Revenue Service (IRS) and the States, with emphasis on motor fuel taxes. This will be achieved by:

• raising the priority given to collecting motor fuel taxes by providing resources to foster coordination among State and Federal tax examination and investigation activities,
• participating in a Federal/State organizational structure, as defined in a Memorandum of Understanding (MOU), to ensure that the fuel tax compliance effort receives priority attention of both Federal and State tax enforcement agencies and to ensure that the increased emphasis on fuel tax compliance will be a continuing part of Federal and State tax agency programs,
• assisting in the development of computerized auditing tools that can be used by State and Federal governments to enhance compliance, and
• evaluating and reporting on the effectiveness of motor fuel tax enforcement activities.

ARTICLE III - STATEMENT OF WORK

The State agrees to use funds made available under this agreement for the following activities:

• 1) expand efforts to enhance motor fuel tax enforcement,

  2) supplement motor fuel tax examinations and criminal investigations,

  3) develop automated data processing tools to monitor motor fuel production and sales,

  4) evaluate and implement registration and reporting requirements for motor fuel taxpayers, and

  5) analyze and implement programs to reduce tax evasion associated with other highway use taxes.

The work to be accomplished under this agreement shall be known as the Joint Federal/State Motor Fuel Tax Compliance Project.

The lead State will serve as the central contact point, within its region of the United States, for this project. The lead State will (1) provide central support staff for the formation of a regional task force; (2) coordinate the individual State and IRS activities; (3) coordinate and submit plans and reports prepared by the individual States; and (4) coordinate all activities which relate to the common concerns of participating States and the IRS.

The participating States will provide a liaison to participate on at least one of the regional task forces. The participating States will: (1) provide staff to participate in meetings and other task force activities; (2) coordinate motor fuel tax enforcement activities with other regional task force members; and (3) prepare and submit reports on the State's motor fuel tax enforcement activities.

ARTICLE IV - ALLOWABLE COST AND PAYMENT

The FHWA shall reimburse the State for allowable costs incurred in carrying out the work described in Article III, up to the project agreement amount shown on the signature page of this agreement. The State shall submit requests for reimbursement on Form PR-20, "Voucher for Work Performed under Provisions of the Federal-Aid and Federal Highway Acts, as amended." A progress voucher represents a claim for costs incurred in a specific period during the progress of the project. In preparing a progress voucher, all eligible costs shall be included, provided that a recorded liability exists or a cash disbursement has been made. A final voucher represents the final claim, submitted by the State for a single completed project accepted by the FHWA. The State shall promptly submit its final claim following termination of the period of performance. A summary of project costs, classified by expenditure type, shall accompany the final voucher.

Allowable costs shall be determined in accordance with the Office of Management and Budget (OMB) Circular A-87, "Cost Principles for State and Local Governments." All allowable items of cost as listed in Attachment B to Circular A-87, are eligible for reimbursement under this agreement. The budget of estimated costs by expenditure category is included as Attachment 1 to this agreement. Signature of this agreement by the FHWA shall constitute grantor agency approval for cost items included in the attached budget.

ARTICLE V - SUBMISSION OF REPORTS

An annual report shall be submitted by December 1 after the end of each Federal fiscal year ending on September 30. The annual report shall include a narrative report of accomplishments and an expenditure summary. The report may be supplemented at the option of the State with data summaries submitted on the reporting forms provided by the FHWA. The final performance and financial summary report (if this agreement is not continued) shall be submitted by the State no later than 60 days after the termination of the period of performance. The final report shall include a discussion of the accomplishments of the project, an expenditure summary by cost category, and a summary of any audit findings or plans to address the audit requirements of Article 3 of the General Provisions. One copy of all reports shall be provided to the regional task force and to the FHWA division office. The lead State shall provide copies of the reports to the project Steering Committee in care of the FHWA, Office of Transportation Policy Studies (HPTS), Washington, D.C. 20590.

The following General Provisions apply to all FHWA grant agreements for the Joint Federal/State Motor Fuel Tax Compliance Project.

1. DEFINITIONS
   1. FHWA - The Federal Highway Administration.
   2. FHWA division office - The office of the FHWA located in each State, which is responsible for the administration of the Federal- aid Highway Program within that State.
   3. IRS - The Internal Revenue Service.
   4. Memorandum of Understanding (MOU) - The document between the IRS and the States which will stand as the overall controlling document for States that wish to participate in the Joint Federal/State Motor Fuel Tax Compliance Project. By signing the MOU, States agree to work on this project and to join in the activities of the Regional Task Force.
   5. Steering Committee - The Committee established to coordinate activities of the Joint Federal/State Motor Fuel Tax Compliance Project. The Committee will oversee project activities, monitor results, and provide progress reports to Federal executive agencies and the Congress. The Committee consists of representatives of the FHWA, IRS, and the lead States.
   6. Lead State - The State designated to coordinate the activities of the Joint Federal/State Motor Fuel Tax Compliance Project within its region of the United States.
   7. Participating State - A State which has signed an MOU, and thereby agrees to participate in the Joint Federal/State Motor Fuel Tax Compliance Project as a member of a regional task force.
   8. Regional Task Force - A multi-State task force consisting of representatives of the lead State, participating States, and the IRS district offices, organized to share information and coordinate regional efforts to enhance motor fuel tax compliance.
   9. Equipment - Tangible non-expendable personal property having a useful life of more than one year and an acquisition cost of $5,000 or more per unit.
   10. OMB - Office of Management and Budget.
   11. DOT - The U.S. Department of Transportation
2. REGULATION REQUIREMENTS

   The State hereby assures and certifies that it will comply with the Federal statutes and regulations cited in this Agreement and 49 C.F.R. Part 18, Uniform Administrative Requirements for Grants and Cooperative Agreements, as they relate to the acceptance and use of Federal funds for this project. The project funded under this agreement is considered to be a categorical exclusion under 23 C.F.R. 771.117(c)(1).

3. AUDITS

   The State shall comply with the audit requirements of 49 C.F.R. Part 90.

4. MODIFICATIONS

   This agreement may be amended at any time by a written modification properly executed by both the State and the FHWA. In accordance with 49 C.F.R. 18.30, the State shall request a budget modification whenever a new cost category is added or the anticipated expenditures for a single cost category are expected to change by an amount greater than 10 percent of the total amount of the agreement. The State must obtain the prior approval of the FHWA whenever any of the following actions is anticipated:

   (1) Any revision of the scope or objectives of the project.

   (2) Extension of the period of performance.

   (3) Contracting out, or otherwise obtaining the services of a third party, to perform activities which are central to the purposes of the agreement.

5. SUBCONTRACTS FOR PROFESSIONAL SERVICES
   1. Prior written approval shall be obtained from the FHWA before any of the work or other substantive project effort is subcontracted or otherwise transferred.
   2. In accordance with 49 C.F.R. 18.36(a), when procuring professional services necessary for the implementation of this agreement, the State will follow the same policies and procedures it uses for procurements from its non-Federal funds. The State will ensure that every contract includes any clauses required by Federal statutes and executive orders and their implementing regulations.
6. STANDARDS FOR FINANCIAL MANAGEMENT SYSTEMS

   In accordance with 49 C.F.R. 18.20, the State must expend and account for funds under this agreement in accordance with State laws and procedures for expending and accounting for its own funds. Fiscal control and accounting procedures of the State, as well as its cost-type contractors and subcontractors, must be sufficient to permit preparation of financial reports of project expenditures, as required by this agreement, and to permit the tracing of funds to a level of expenditures adequate to establish that such funds have not been used in violation of the prohibitions and restrictions of this agreement.

7. RETENTION AND ACCESS REQUIREMENTS FOR RECORDS
   1. In accordance with 49 C.F.R. 18.42(b), financial and programmatic records, supporting documents, statistical records, and other records pertinent to this agreement shall be maintained by the State for a period of 3 years from the date of submission of the annual (or final) expenditure report to the FHWA, with the following exceptions:

      (1) If any litigation, claim, negotiation, audit or other action involving the records has been started before the expiration of the 3-year period, the records must be retained until completion of the action and resolution of all issues which arise from it, or until the end of the regular 3-year period, whichever is later.

      (2) When the records are transferred to or maintained by the FHWA, the 3-year retention requirement is not applicable to the State with respect to those records.

   2. In accordance with 49 C.F.R. 18.42(e), the FHWA and the Comptroller General of the United States, or any of their authorized representatives, shall have the right of access to any pertinent books, documents, papers, or other records of the State, and of its contractors or subcontractors which are pertinent to this agreement, in order to make audits, examinations, excerpts, and transcripts, except that taxpayer records covered by State or Federal disclosure laws need only be made available to the extent permitted by such laws.
8. EQUIPMENT

   As provided in 49 C.F.R. 18.32, the State shall use, manage, and dispose of equipment acquired under this agreement in accordance with States laws and procedures.

9. DEBARMENT CERTIFICATION
   1. In accordance with 49 C.F.R. 29.510, the State certifies to the best of its knowledge and belief, that it and its principals:

      (1) Are not presently debarred, suspended, proposed for debarment, declared ineligible, or voluntarily excluded from covered transactions by any Federal department or agency;

      (2) Have not within a three-year period preceding this agreement been convicted of or had a civil judgement rendered against them for commission of fraud or a criminal offense in connection with obtaining, attempting to obtain, or performing a public (Federal, State, or local) transaction or contract under a public transaction; violation of Federal or State antitrust statutes or commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, or receiving stolen property;

      (3) Are not presently indicted for or otherwise criminally or civilly charged by a governmental entity (Federal, State, or local) with commission of any of the offenses enumerated in paragraph (2) of this certification; and

      (4) Have not within a three-year period preceding this agreement had one or more public transactions (Federal, State, or local) terminated for cause or default.

   2. Where the State is unable to certify to any of the statements in this certification, the State shall attach an explanation to this agreement.
   3. In accordance with 49 C.F.R. 18.35, the State shall not make or permit any award to any party which is debarred or suspended or is otherwise excluded from or ineligible for participation in Federal assistance programs. The State shall require any contractor for professional services under this agreement to submit the certification in 49 C.F.R. Part 29, Appendix B.
10. MINORITY BUSINESS ENTERPRISE REQUIREMENTS
    1. In accordance with 49 C.F.R. 23.43, the State hereby agrees to abide by the following statements and agrees that these statements shall be included in all subsequent agreements between the State and any contractors or subcontractors under this agreement:

       (1) Policy. It is the policy of the Department of Transportation (DOT) that minority and disadvantaged business enterprises (MBE's and DBE's) as defined in 49 C.F.R. Part 23 shall have the maximum opportunity to participate in the performance of contracts financed in whole or in part with Federal funds under this agreement. Consequently, the MBE and DBE requirements of 49 CFR Part 23 apply to this agreement.

       (2) MBE/DBE Obligation. The State or its contractor agrees to ensure that minority and disadvantaged business enterprises as defined in 49 C.F.R. Part 23 have the maximum opportunity to participate in the performance of contracts and subcontracts financed in whole or in part with Federal funds provided under this agreement. In this regard, the State or contractors shall take all necessary and reasonable steps in accordance with 49 C.F.R. Part 23 to ensure that minority and disadvantaged business enterprises have the maximum opportunity to compete for and perform contracts. The State and its contractors shall not discriminate on the basis of race, color, national origin, handicap, religion, age, or sex, as provided in Federal and State law, in the award and performance of DOT-assisted contracts.

    2. If, as a condition of assistance, the State has submitted and the Department of Transportation has approved a minority and disadvantaged business enterprise affirmative action program which the State agrees to carry out, this program is incorporated into this financial assistance agreement by reference. This program shall be treated as a legal obligation and failure to carry out its terms shall be treated as a violation of this financial assistance agreement. Upon notification to the State of its failure to carry out the approved program, the DOT shall impose such sanctions as noted in 49 C.F.R. Part 23, Subpart E, which sanctions may include termination of the agreement or other measures that may affect the ability of the State to obtain future DOT financial assistance.
11. SUSPENSION OR TERMINATION FOR CAUSE
    1. In accordance with 49 C.F.R. 18.43, when it has been determined by the FHWA that the State has materially failed to comply with the terms and conditions of this agreement, the FHWA may:

       (1) Temporarily withhold cash payments pending correction of the deficiency by the State or more severe enforcement action by the FHWA,

       (2) Disallow all or part of the cost of the activity or action not in compliance,

       (3) Wholly or partly suspend or terminate the agreement for cause,

       (4) Withhold further awards for the program.

    2. The FHWA prefers that deficiencies be corrected whenever practicable. Therefore, action to suspend or terminate an agreement normally will be taken only after the State has been informed by letter of the nature of the problem with notification that failure to correct the deficiency may result in suspension or termination of this agreement. However, this policy does not preclude immediate suspension or termination when such action is reasonable under the circumstances and necessary to protect the interest of the Government.
    3. When it is believed that the State has failed to comply with the terms and conditions of this agreement, the FHWA will advise the State by letter of the nature of the problem and that failure to correct the deficiency may result in suspension or termination of this agreement. The State will be requested to respond in writing describing the action taken or the plan designed to correct the deficiency.
    4. If a satisfactory response is not received within the time allowed in such notice letter, the FHWA may issue a notice suspending authority to further obligate funds, in whole or in part. The notice of suspension will be sent by certified mail (return receipt requested) to the State. The notice will set forth the activities covered by the suspension and its effective date and the corrective action required by the State in order to lift the suspension.
    5. In the event the deficiency is not corrected to the satisfaction of the FHWA, the FHWA may issue a notice of termination, in the same manner as described in paragraph d. above. The notice of termination will establish the reasons for the action, and its effective date.
    6. If this agreement is suspended or terminated pursuant to this clause, costs resulting from obligations incurred by the State during the period of suspension or after termination will not be allowable unless the FHWA expressly authorizes them in the notice of suspension or termination or by subsequent correspondence. Other State costs during suspension or after termination which are necessary and not reasonably avoidable are allowable if:

       (1) The costs result from obligations which were properly incurred by the State before the effective date of suspension or termination, are not in anticipation of it, and, in the case of termination, are noncancelable, and,

       (2) The costs would be allowable if the agreement were not suspended or terminated.

    7. Within 90 days of the effective date of termination, the State will furnish an itemized accounting of funds expended for allowable costs prior to the effective date of termination and the unexpended funding balance. In accordance with 49 C.F.R. 18.43(b), the State may request a review of the termination decision in accordance with the procedure described in Article 12 entitled "Termination Review Procedure."
12. TERMINATION REVIEW PROCEDURE
    1. Any request for review of a notice of termination shall be addressed to the Federal Highway Administration Division Office. It must be postmarked no later than 30 days after the receipt of such notice.
    2. The request for review must contain a full statement of the State's position and the pertinent facts and reasons in support of such position.
    3. The FHWA will acknowledge receipt of the request for review and appoint a review committee consisting of a minimum of three persons, none of whom may be either from the FHWA program office providing funding for the project or from the FHWA office that is responsible for monitoring the administrative aspects of the agreement.
    4. The termination review committee will request the FHWA official who issued the notice of termination to provide copies of all pertinent background materials and documents. It may, at its discretion, invite representatives of the State, FHWA program and/or administrative office, to discuss pertinent issues and to submit additional information as it deems necessary. The chairperson of the review committee will insure that all review activities or proceedings are documented.
    5. Based on its review, the committee will prepare its recommendations to the FHWA official who issued the notice of termination who will advise the parties concerned of the final administrative decision.
13. TERMINATION BY MUTUAL AGREEMENT
    1. Circumstances may arise in which either the FHWA or the State wishes to terminate this agreement in whole or in part. If both parties agree that continuation of the project would not produce results commensurate with further expenditure of funds or for any other reason, the agreement may be terminated by mutual consent in accordance with 49 C.F.R. 18.44.
    2. If either party wishes to terminate this agreement, written notification shall be given to the other party, setting forth the reasons for such termination.
    3. Within 30 days after receipt of a request from either party for termination by mutual agreement, the other party will provide an appropriate written response. The two parties shall agree upon the termination conditions, including the effective date, and, in the case of partial termination, the portion to be terminated. The State shall not incur new obligations for the terminated portion after the effective date and shall cancel as many outstanding obligations as possible. Allowable costs shall include the noncancelable obligations properly incurred by the State prior to termination. In the event of disagreement between the parties, the FHWA will make a final determination subject to the review procedures described in Article 12 entitled "Termination Review Procedure."
14. AGREEMENT CLOSE OUT AND COLLECTION OF AMOUNTS DUE
    1. In accordance with 49 C.F.R. 18.50, the FHWA will close out this agreement when it determines that all administrative actions and all required work of this agreement have been completed.
    2. As provided in 49 C.F.R. 18.51, the closeout of this agreement does not affect:

       (1) The FHWA's right to disallow costs and recover funds on the basis of a later audit or other review;

       (2) The State's obligation to return any funds due as a result of later refunds, corrections, or other transactions;

       (3) Records retention as required by Article 7 above.

       (4) Audit requirements of Article 3 above.

    3. In accordance with 49 C.F.R. 18.52, any funds paid to the State in excess of the amount to which it is finally determined to be entitled under the terms of this agreement shall constitute a debt to the Federal Government and shall be paid within a reasonable period of time to the FHWA.
15. NONDISCRIMINATION

    The State hereby agrees that, as a condition of receiving any Federal financial assistance from the Department of Transportation, it will comply with Title VI of the Civil Rights Act of 1964 (78 Stat. 252, 42 U.S.C. §2000d), related nondiscrimination statutes (i.e., 23 U.S.C. 324, Section 504 of the Rehabilitation Act of 1973 as amended, and the Age Discrimination Act of 1975), and applicable regulatory requirements to the end that no person in the United States shall, on the grounds of race, color, national origin, sex, handicap, or age be excluded from participation in, be denied the benefits of, or otherwise be subjected to discrimination under any program or activity for which the State receives Federal financial assistance. The specific requirements of the Department of Transportation Standard Civil Rights assurances (required by 49 C.F.R. 21.7 and 27.9) are incorporated in this agreement.

16. MANDATORY ENERGY EFFICIENCY STANDARDS

    The State and its contractors under this agreement shall comply with mandatory standards and policies relating to energy efficiency which are contained in the State energy conservation plan issued in compliance with the Energy Policy and Conservation Act (Pub. L. 94-163.)

17. CERTIFICATION REGARDING A DRUG-FREE WORKPLACE
    1. Definitions. As used in this certification, "controlled substance" means a controlled substance in Schedules I through V of the Controlled Substances Act (21 U.S.C. 812) and as further defined in regulation at 21 C.F.R. 1308.11-1308.15;

       "Conviction" means a finding of guilt (including a plea of nolo contendere) or imposition of sentence, or both, by any judicial body charged with the responsibility to determine violations of the Federal or State criminal drug statutes;

       "Criminal drug statute" means a Federal or non-Federal criminal statute involving the manufacture, distribution, dispensing, use, or possession of any controlled substance;

       "Employee" means the employee of the State directly engaged in the performance of work under this agreement, including: (1) all "direct charge" employees; (2) all "indirect charge" employees unless their impact or involvement is insignificant to the performance of the grant; and, (3) temporary personnel and consultants who are directly engaged in the performance of work under this agreement and who are on the State's payroll. This definition does not include workers not on the payroll of the State (e.g., volunteers, even if used to meet a matching requirement; consultants or independent contractors not on the State's payroll; or employees of subrecipients or subcontractors in covered workplaces.)

    2. If the State has not certified by an annual certification as provided in 49 C.F.R. 29.630(c) with respect to the State employees engaged in the performance of work under this agreement, then the State hereby certifies that it will or will continue to provide a drug-free workplace by:

       (1) Publishing a statement notifying employees that the unlawful manufacture, distribution, dispensing, possession, or use of a controlled substance is prohibited in the State's workplace and specifying the actions that will be taken against employees for violation of such prohibition;

       (2) Establishing an ongoing drug-free awareness program to inform employees about -

       (i) The dangers of drug abuse in the workplace;

       (ii) The State's policy of maintaining a drug-free workplace;

       (iii) Any available drug counseling, rehabilitation, and employee assistance programs; and

       (iv) The penalties that may be imposed upon employees for drug abuse violations occurring in the workplace.

       (3) Making it a requirement that each employee to be engaged in the performance of this agreement be given a copy of the statement required by paragraph (1);

       (4) Notifying the employee in the statement required by paragraph (1), that, as a condition of employment under this agreement, the employee will -

       (i) Abide by the terms of the statement; and

       (ii) Notify the employer in writing of his or her conviction for a violation of a criminal drug statute in the workplace no later than five calendar days after such conviction;

       (5) Notifying the FHWA in writing, within ten calendar days after receiving notice under subparagraph (4)(ii) from an employee or otherwise receiving actual notice of such conviction. Employers of convicted employees must provide notice, including position title, to every grant officer or other designee on whose grant activity the convicted employee was working, unless the Federal agency has designated a central point for the receipt of such notices. Notice shall include the identification number(s) of each affected grant;

       (6) Taking one of the following actions, within 30 calendar days of receiving notice under subparagraph (4)(ii), with respect to any employee who is so convicted -

       (i) Taking appropriate personnel action against such an employee, up to and including termination; consistent with the requirements of the Rehabilitation Act of 1973, as amended; or

       (ii) Requiring such employee to participate satisfactorily in a drug abuse assistance or rehabilitation program approved for such purposes by a Federal, State, or local health, law enforcement, or other appropriate agency;

       (7) Making a good faith effort to continue to maintain a drug-free workplace through implementation of paragraphs (1) through (6).

    3. The principal place of performance of work in connection with this agreement is the address shown on the signature page. The list identifying any other workplaces involved in the performance of work under this agreement shall be kept on file with the State and be made available for Federal inspection upon request.
18. LIMITATION ON THE USE OF FUNDS FOR LOBBYING (AGREEMENTS OVER $100,000)
    1. The person signing this agreement on behalf of the State certifies to the best of his or her knowledge and belief that:

       1) No Federal appropriated funds have been paid or will be paid, by or on behalf of the State, to any person for influencing or attempting to influence an officer or employee of any Federal agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with the awarding of any Federal contract, the making of any Federal grant, the making of any Federal loan, the entering into of any cooperative agreement, and the extension, continuation, renewal, amendment, or modification of any Federal contract, grant, loan, or cooperative agreement.

       2) If any funds other than Federal appropriated funds have been paid or will be paid to any person for influencing or attempting to influence an officer or employee of any Federal agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with this Federal contract, grant, loan, or cooperative agreement, the State shall complete and submit Standard Form-LLL, "Disclosure Form to Report Lobbying," in accordance with its instructions.

       3) The State shall require that the language of this certification be included in the award documents for all subawards at all tiers (including subgrants, and contracts and subcontracts under grants, subgrants, loans, and cooperative agreements) which exceed $100,000, and that all such subrecipients shall certify and disclose accordingly.

    2. This certification is a material representation of fact upon which reliance was placed when this transaction was made or entered into. Submission of this certification is a prerequisite for making or entering into this transaction imposed by Section 1352, Title 31, U.S. Code. Any person who fails to file the required certification shall be subject to a civil penalty of not less than $10,000 and not more than $100,000 for each such failure.
19. CLEAN AIR AND WATER REQUIREMENTS (AGREEMENTS OVER $100,000)
    1. The State agrees to comply with all applicable standards, orders, or requirements issued under section 306 of the Clean Air Act (42 U.S.C. §7606), section 508 of the Clean Water Act (33 U.S.C. §1368), Executive Order 11738, and the Environmental Protection Agency regulations (40 C.F.R. Part 15).
    2. The State stipulates that any facility to be utilized in performance under or to benefit from this agreement is not listed on the Environmental Protection Agency List of Violating Facilities issued pursuant to the requirements of the Clean Air Act, as amended, and the Federal Water Pollution Control Act, as amended.
    3. The State agrees that it will include this provision in any contract for professional services under this agreement which exceeds $100,000.

AMENDED PROJECT AGREEMENT FOR THE JOINT
FEDERAL/STATE MOTOR FUEL TAX COMPLIANCE PROJECT
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