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Pennsylvania Raises Taxes on Gasoline and Undyed Diesel Fuel

Judith Cassel on December 19, 2013

On November 25, 2013, Governor Tom Corbett signed Act 89 (the “Act”) into law. The Act, predominantly funded by an increase in motor fuel taxes, will provide needed upgrades to Pennsylvania’s transportation infrastructure.

Funding the Act: The Act abolishes the Liquid Fuels and Fuels tax but increases the statutorily fixed average wholesale price on which the Oil Company Franchise tax rate is based. The net effect is a tax increase, starting January 1, 2014, of 9.5 cents per gallon on gasoline and undyed diesel. The new Pennsylvania tax will be 40.7 and 51 cents per gallon on gasoline and diesel respectively. The Pennsylvania USTIF (Underground Storage Tank Indemnification Fund) fee remains at 1.1 cent per gallon on gasoline and the federal tax rate remains at 18.4 and 24.4 cents per gallon on gasoline and diesel respectively. Starting January 1^st Pennsylvanians will pay in total motor fuel taxes, 60.2 cents for every gallon of gasoline and 69 cents for every gallon of undyed diesel. This puts Pennsylvania in the top five states for highest motor fuel taxes in the U.S.

Future Increases: Unfortunately for the motoring public, additional motor fuel tax increases are built into the Act for 2015. Also coming in 2015 are increases to driver license and registration fees.

Spending the Tax: The motor fuel tax increase will generate $2.3 billion per year which will allow a 40% increase in transportation spending. Pennsylvania plans to use the tax increase to upgrade thousands of bridges and roadways across the state. These upgrades are overdue as 4500 out of the 25,000 state owned bridges are currently structurally deficient. The funds will also be used to subsidize public transportation services. Although not thoroughly detailed as of yet, the tax revenue will also be used to set up multi-modal grants which will benefit all forms of transportation from railroads to pedestrian pathways.

Calculating the Tax: The process for determining the gallons that are subject to this tax remains the same as is currently in place. Each distributor will need to provide a starting book inventory and account for all gallons sold after midnight on December 31, 2013 on a monthly basis. Each monthly report, along with receipts and disbursement summaries and appropriate schedules, must be mailed along with remittances on or before the 20^th day of each month to the PA Department of Revenue. If a distributor has questions or is interested in electronic submissions of the monthly report, information can be found on the PA Department of Revenue Motor Fuels Division website at http://www.portal.state.pa.us/portal/server.pt/community/liquid_fuels___fuels_tax/14434.

The Ethanol Credit – Slip Sliding Away

Judith Cassel on August 30, 2011

The Ethanol Blenders’ tax credit, which has existed for decades, is in serious jeopardy of being repealed or at a minimum non-renewed.

The Ethanol Blenders’ tax credit or VEETC (Volumetric Ethanol Excise Tax Credit) provides blenders of ethanol with a $.45 per gallon tax credit for every gallon of motor fuel blended with ethanol. The VEETC was originally intended to protect and incentivize a fledgling industry which held the hopes of a greener energy and a path to energy independence. However, as our federal government continues to wrestle with a budget deficit that exceeds $13 trillion, a tax credit which roughly equates to $1.3 billion annually in potential revenues, is far too attractive to escape being targeted.

Despite its current expiration date of December 31, 2011, the Senate passed a bill in mid June to repeal the VEETC almost immediately (July 31, 2011). The Senate passed the bill 73-27, with major bi-partisan support. The House was not so quick to ring the death knell for VEETC. Having met resistance to the idea of a VEETC repeal in the House, Senators Thune, Klobuchar and Feinstein tried to broker a “House acceptable-repeal” to be included in the Debt Ceiling Bill. This new proposal contained $688 million of new incentives for the ethanol industry. But instead of a blenders’ credit, which goes mainly to refiners, the new incentives would assist gasoline station dealers or distributors in upgrading their station equipment to handle EPA’s new E15 standard including the replacement of underground storage tanks. The new proposal also included extending the tax credits for cellulose ethanol (currently at $1.01 per gallon due to expire 2012) and eliminating the $.54 ethanol import tariff.

Because this new proposal was intended to be part of the Debt Ceiling Bill, it got shelved when all new revenue generation was taken off the table in the debate.

The VEETC will likely be a hot topic when Congress reconvenes in September. Whether the VEETC gets eliminated or significantly reduced, it will not likely alter the demand for corn, the production of ethanol or the growth of this industry. This is true because there are still various incentives in place to encourage and support the ethanol industry. The EPA has increased the ethanol allowable in each gallon of motor fuel to 15% and the Renewable Fuel Standards Act still requires refiners to produce in excess of 12 billion gallons of ethanol product annually. In addition, any decrease in the VEETC will likely be coupled with an increase to the AFVRPC (Alternative Fuel Vehicle Refueling Property Credit).

Pennsylvania Raises Taxes on Gasoline and Undyed Diesel Fuel

The Ethanol Credit – Slip Sliding Away

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