U'S' Legislative and Regulatory Update

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U.S. Legislative and Regulatory Update

• Fleet Management Institute
• Grapevine, TX
• April 12, 2005

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Topics for Discussion

• Energy and Environment
• Transportation
• Personal Use
• Tax

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Energy and Environment
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Energy Policy Act

• Flexibility for federal, state and utility fleets
  to comply with mandates

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Energy Legislation

• 2002 -- died in conference
• 2003 died in Senate
• 2004 stalled
• 2005 Here we go again!

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EPACT Flexibility

• Potential modifications
• Multiple credits for dedicated medium/heavy
  vehicles
• Credit for hybrids
• Credits for NEVs
• Petroleum reduction option

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EPACT Flexibility

• Outlook for Biodiesel
• Credit increase unlikely
• Fuel and vehicle providers opposed

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EPACT Flexibility

• NAFAs goals for 2005 legislation
• EPACT credit for hybrid electric vehicles
• Increase credit for use of biodiesel
• Alternative compliance option

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Energy Bill Tax Incentives

• 2005 Outlook
• Little likelihood of meaningful tax incentives
  for acquisition or use of AFVs or advanced
  technology vehicles
• Little likelihood of meaningful tax incentives
  for fuel or infrastructure costs

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Energy Bill Tax Incentives

• Policy issues still to be resolved
• Should a tax credit go to lessor or lessee
• How to structure tax credits to benefit
  government and nonprofit fleets.
• Refundable credit?
• Marketable credit?
• Reflect value of credit in sale or lease price?

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Hybrid Tax Deductions

• The original purchaser of a qualifying hybrid
  gas-electric car may deduct 2,000 for the year
  the vehicle is first used, if that year is before
  2006.
• In 2006, the deduction is scheduled to drop to
  500
• Ford Escape Hybrid Model Year 2005
• Toyota Prius  Model Years 2001 through 2005
• Honda Insight  Model Years 2000 through 2005
• Honda Civic Hybrid  Model Years 2003 and 2005
• Honda Accord Hybrid Model Year 2005

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Energy and the EnvironmentLooking Ahead

• Vehicle technologies
• Fleet mandates
• Diesel
• Global warming

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Vehicle Technologies

• Hydrogen fuel cell
• Medium-duty hybrid truck

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Fleet Mandates

• Los Angeles-area (SCAQMD) adopted rules to limit
  use of diesel
• Engine Manufacturers Association, supported by
  NAFA, challenged the rules in federal court.
• Supreme Court remanded rules to lower court to
  determine if SCAQMD has authority to adopt such
  rules under the Clean Air Act

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Fleet Mandates

• SCAQMD petitioned California Air Resources Board
  to adopt the rules and submit to U.S. EPA
  approval
• California Air Resources Board has initiated a
  proceeding to consider adoption of a portion of
  SCAQMD rules
• Transit buses
• Residential and commercial refuse collection
  vehicles
• School buses
• Street sweepers
• Impact nationally

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Diesel

• Diesel emissions are targeted
• Mandatory retrofits
• 2007 diesel engine emission standards
• Ultra low sulfur diesel fuel
• Idling restrictions

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Diesel Retrofits

• Add particulate traps
• Used with ultra low sulfur diesel fuel
• EPA voluntary program -- recently announced 18
  grants totaling 1.6 million for clean diesel
  retrofit projects
• California mandatory program
• New Jersey considering a mandatory retrofit
  program

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Diesel Retrofits

• Californias plan

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2007 Diesel Emission Standards

• Requires 15 ppm diesel fuel
• Diesel particulate trap
• NOX absorber

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2007 Diesel Emission Standards

• EPA cost estimates
• 4.5 cents to 5 cents per gallon
• 1,200 to 1900 per vehicles

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2007 Diesel Emission Standards

• Incentives to defray costs???

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Ultra Low Sulfur Diesel Fuel

• Starting June 1, 2006, EPA rule requires refiners
  to begin producing ultra low sulfur diesel
  (ULSD)
• September 1, 2006 goes on sale nationally

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Idling Restriction for Diesel Engines

• Goal eliminate long duration idling associated
  emissions
• Idling emissions represent 4 of overall
  vehicular emissions
• EPA National Idle Reduction Program
• Government and industry group working on a
  national voluntary standard

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SmartWay Transport Project

• Collaborative voluntary program between freight
  carriers and EPA
• Goal is to reduce emissions
• Fleets committee to
• Measure the environmental performance of their
  fleet  
• Identify a goal to improve the environmental
  performance of their fleet
• Develop a plan detailing how the goal will be
  achieved
• Report their progress annually to EPA

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Global Warming

• Greenhouse gas emissions result from burning of
  fossil fuels
• From trucks and cars
• Carbon dioxide (CO2)
• Methane (CH4)
• Nitrous oxide (N2o)

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Global Warming

• Options to reduce transportation-related
  emissions
• Operate more fuel efficient vehicles and
  vehicles that use cleaner fuels
• Reduce or modify demand for transportation and
  fuel consumption
• Accelerate scrappage of older vehicles

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Global Warming

• California requires automakers to reduce
  greenhouse gas emissions beginning with 2009
  model year
• 11 other states are set to follow Californias
  lead
• Auto industry has filed lawsuit

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Greenhouse Gas Registries

• What -- a database where companies and states
  that emit greenhouse gases can register and
  record their respective emissions and reductions
  of greenhouse gases

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Greenhouse Gas Registries

• Why
• public recognition
• ensure that voluntary reduction efforts will be
  recognized and credited prior to regulation
• prepare for future

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Greenhouse Gas Registries

• Where
• Regional Greenhouse Gas Registry -- Northeast
  States for Coordinated Air Use Management
• U.S. DOE Guidelines for voluntary reporting
• California Climate Action Registry

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Greenhouse Gas Registries

• How
• Fuel-based method
• Gather fuel consumption data by fuel type
• Collect data on distance traveled by vehicle type
  and fuel type
• Convert distance traveled data into fuel use
  values based on fuel economy factors
• Convert to CO2 emissions
• Distance based method
• Calculations based on distance traveled and
  distance-based emission factors

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U.S. EPA

• Spill Prevention Control and Countermeasures
  (SPCC)
• Applicable to fleets with total aboveground oil
  storage capacity of greater than 1,320 gallons
• Facilities must prepare and implement a SPCC
  Control plan to prevent any discharge of oil
• Plans must be certified by a licensed
  Professional Engineer

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Transportation
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Highway Bill

• Funding for highway and transit systems
• Safety programs
• House has passed HR 3
• Senate bill is pending
• Possible White House veto over funding levels

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Issues

• Increase in gasoline and diesel excise tax
• Hours of service
• Safety requirements for 15-passenger vans

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DOT/FMCSA -- Hours of Service

• Limits the number on-duty and driving hours for
  drivers of commercial motor vehicles gt 10,000 lbs
  gvw,
• Does not apply to bus drivers
• Chronology
• April 2003 -- FMCSA issues final rule April, 2003
• July 2004 -- Federal court directs FMCSA to look
  at issues of driver health
• September 2004 Congress votes to keep HOS rules
  in effect for one year
• January 2005 FMCSA reproposes HOS rules
• Current FMSCA asks Congress to write HOS rules
  into federal statute

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HOS Issue 1

• Short Haul Drivers
• Typically drivers that return to the same
  location daily
• Drivers are permitted 11 hours of driving time
  within a 14-hour period
• The 14-hour period includes off-duty time for
  meals, rest breaks, or waiting for a truck to be
  loaded or unloaded

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Short Haul Drivers

• Proposed amendment
• permit a driver to extend his or her 14-hour
  tour of duty by up to two hours by taking
  off-duty rest breaks during the course of the
  workday

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HOS Issue 2

• Utility exemption
• Included in House-passed highway bill

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Transportation Safety

• OSHA launches motor vehicle safety initiative
• CDC urges employers to enforce a comprehensive
  vehicle safety policy

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Event Data Recorders black boxes

• Issues
• Differing state requirement for auto makers
• Who owns the information?
• Fleet access to data
• Potential liability
• Privacy concerns
• Access by law enforcement

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NHTSA Tires New Rules

• All passenger cars will have tire pressure
  monitoring systems beginning with the 2006 model
  year
• The regulation will require that manufacturers
  install a system that can detect when one or more
  of the vehicles tires are 25 percent or more
  below the recommended inflation pressure
• Phase-in of the new regulation will begin Sept.
  1, 2005
• All new 4-wheeled vehicles weighing 10,000
  pounds or less must be equipped with the
  monitoring system by the 2008 model year

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Tax Issues
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Federal Fuel Excise Taxes

• Issue for government fleets and nonprofit
  educational institutions
• Exempt from the federal excise tax
• Ability of exempt fleets to purchase diesel and
  gasoline with a fleet fuel card and to be billed
  net of the federal excise tax

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Personal Use
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Computing Personal UseTaxable Benefit

• Option 1 Annual Lease Value
• Option 2 Commuting only
• Option 3 Cents per mile
• Dont forget employer provided fuel!

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2005 Standard Business Mileage Rate

• 40.5 cents per mile

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2005 Luxury Value

• Limits depreciation on owned vehicles
• Sets inclusion amounts for leased vehicles
• Sets fair market value for using the
  cents-per-mile valuation option
• Sets the value for using the fleet average rule

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2005 Values

• IRS Revenue Procedure 2005-13
• Sets depreciation limits
• Auto 14,800
• Truck 16,300

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2005 Values

• Pending IRS Revenue Procedure
• Publication within 30 days
• Fleet average values
• 2005
• 19,600 for passenger cars
• 21,300 for trucks and vans
• Cents-per-mile
• 2005
• Auto -- 14,800
• Truck -- 16,300

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Contact Information

• Pat OConnor
• NAFA Legislative Counsel
• 202/223-6222 voice
• 202/785-0687 fax
• patoconnor_at_kentoconnor.com

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U.S. Legislative and Regulatory Update

• Fleet Management Institute
• Grapevine, TX
• April 12, 2005