Full Reciprocity Plan (FRP)

• The Full Reciprocity Plan (FRP) is a relatively new fee structure for first year registrations of a fleet.
• Vehicles apportioned under the International Registration Plan (IRP) FRP are considered fully registered for both intra-jurisdictional and inter-jurisdictional travel.
• Because an apportioned vehicle is registered in all IRP jurisdictions, trip permits for IRP-plated vehicles are no longer required.

On January 1, 2015, the International Registration Plan (IRP) fee process changed with the implementation of a new fee structure known as the Full Reciprocity Plan (FRP). The FRP changed the IRP so that all apportioned vehicles were granted full reciprocity in all member jurisdictions. FRP provisions changed the fee structure for first year registrations of a fleet to a system in which the registrant pays based on the estimated distance chart composite fee derived from the average distance traveled in each jurisdiction by all current registrants in the fleet’s base jurisdiction.

Vehicles apportioned under the IRP FRP are considered fully registered for both intra-jurisdictional and inter-jurisdictional travel. The vehicle cab cards issued to apportioned registrants list the weight or number of axles for which the vehicles are registered in all jurisdictions.

Because an apportioned vehicle is registered in all IRP jurisdictions, trip permits for IRP-plated vehicles are no longer required. The FRP also eliminated the need to add jurisdictions during a registration year.

FRP was rolled out throughout 2015 and is currently in effect for all carriers.

Eligibility

• A “qualified” or “apportionable” vehicle under the International Registration Plan (IRP) is any vehicle used or intended for use in two or more member jurisdictions and meeting certain other criteria.
• Trucks and truck tractors, and a combination of vehicles having a gross vehicle weight of 26,000 pounds or less may be proportionally registered at the option of the registrant.
• Some states may require vehicles at 26,000 pounds or less to have trip permits before operating interstate or intrastate within a state.

A “qualified” or “apportionable” vehicle under the International Registration Plan (IRP) is any vehicle (except recreational vehicles, vehicles displaying restricted plates, city pick-up delivery vehicles, and government-owned vehicles) used or intended for use in two or more member jurisdictions that allocate or proportionally register vehicles and is used for the transportation of persons for hire, or designed, used, or maintained primarily for the transportation of property and:

1. Is a power unit having two axles and a gross vehicle weight or registered gross vehicle weight in excess of 26,000 pounds or 11,793.401 kilograms; or
2. Is a power unit having three or more axles, regardless of weight; or
3. Is used in combination, when the weight of such combination exceeds 26,000 pounds or 11,793.401 kilograms gross vehicle weight.

Trucks and truck tractors, and a combination of vehicles having a gross vehicle weight of 26,000 pounds or 11,793.401 kilograms or less may be proportionally registered at the option of the registrant.

Carriers operating vehicles 26,000 pounds or 11,793.401 kilograms or less may apportion under the IRP if they wish, but do not have to do so. Some states allow such vehicles to travel interstate or intrastate, but some do not. Some states may require vehicles at 26,000 pounds or less to have trip permits before operating interstate or intrastate within a state.

Carriers should verify the requirements of the jurisdiction before entering the jurisdiction.

Base jurisdiction

• The International Registration Plan (IRP) defines “base jurisdiction” as the jurisdiction where the registrant has a place of business, where mileage is accrued by the fleet, and where operational records are maintained.
• A jurisdiction may require whatever information the jurisdiction deems pertinent to show that the registrant has an established place of business within the jurisdiction and that all proper fees and taxes are paid.
• A registration cab card identifies the vehicle for which it is issued and reflects the gross weight the vehicle can operate in each jurisdiction.

Determining base jurisdiction

Under the International Registration Plan (IRP), “base jurisdiction” means the jurisdiction where the registrant has an established place of business, where mileage is accrued by the fleet, and where operational records of the fleet are maintained or can be made available.

The physical structure must be designated by a street number or road location, be open during normal business hours, and have located within it:

• A telephone or telephones publicly listed in the name of the fleet registrant,
• A person or persons conducting the fleet registrant’s business, and
• The operational records of the fleet (unless such records can be made available).

The trucking-related business within the base jurisdiction must constitute more than just credentialing, distance and fuel reporting, and/or answering a telephone. Employees in the permanent employment of the registrant--not contractual labor--must be performing the trucking-related duties. A jurisdiction may require whatever information the jurisdiction deems pertinent to show that the registrant has an established place of business within the jurisdiction and that all proper fees and taxes are paid.

Apportioned registration under the IRP applies only to the vehicle licensing; it does not satisfy operating authority, Unified Carrier Registration (UCR), fuel tax (IFTA), or any other taxes required by other federal or state agencies.

Base jurisdiction application

Upon receipt of carrier’s application and payment of apportioned fees, a license plate and registration (cab) card is issued for each vehicle registered. The cab card will appropriately identify the vehicle for which it is issued. The cab card reflects the registered gross weight the vehicle can operate in each jurisdiction. This is required for enforcement purposes, because even though a vehicle is properly registered in its base jurisdiction with regard to declared gross weight, the vehicle must also comply with existing weight laws or regulations in the other jurisdictions it is expected to operate. Therefore, a vehicle can be registered for different weight classes in various jurisdictions, and it is important that the vehicle not operate in any jurisdiction at a heavier weight than that listed on the cab card.

Such registration cards must be carried in or upon the vehicle for which it has been issued at all times. Only the base jurisdiction can issue the registration cab card. The base jurisdiction, however, has the option of not issuing plates and cab cards until it has received proof of payment due all member jurisdictions. It should also be noted that all plates and cab cards may be subject to cancellation and revocation in the event the registrant’s apportioned fees are not paid.

For International Registration Plan (IRP) registration purposes, “base jurisdiction” is the state or province where carrier has an established place of business and where distance and operations records are maintained and can be made available for audit purposes. For registration purposes, an “established place of business” is a physical structure that is owned, leased, or rented by the motor carrier or registrant. The structure address must be denoted by an actual street number or road location (just a P.O. Box is not sufficient), have at least one employee working there during normal business hours, and keep the vehicle operating records at the location. Some jurisdictions require proof of an actual working place of business by requiring the registrant to provide a copy of the phone bill, rental contract, or even proof of paid real estate taxes.

Vehicle registration exemptions under International Registration Plan (IRP)

• Recreational vehicles do not fit the definition of apportionable.
• Commercial vehicles displaying “restricted” plates do not fit the definition of apportionable.
• Government-owned vehicles do not fit the definition of apportionable.

The definition of an apportionable vehicle does not include:

1. Recreational vehicles,
2. Commercial vehicles displaying “restricted” plates, or
3. Government-owned vehicles.

A power unit, or the power unit in a combination of vehicles, having a gross vehicle weight of 26,000 pounds (11,793.401 kilograms) or less may be registered under International Registration Plan (IRP) at the option of the registrant.

Leased/Rental vehicles

• Owner-operator vehicles that qualify for International Registration Plan (IRP) registration, and which are long-term leased to a motor carrier, have the option of being registered either under the lessor or the lessee’s name.
• For trip leases, it is the responsibility of the lessor to make sure that their vehicle is properly registered to operate in any International Registration Plan (IRP) jurisdiction required by a trip lease.
• Special requirements apply to registration of rental vehicles.

Drivers and motor carriers must ensure their vehicles are ready for action, and that includes making sure all the proper documentation is in place. When it comes to vehicle registration, it’s important to understand the options and requirements for leased or rented vehicles.

Owner-operator vehicles

Owner-operator vehicles that qualify for International Registration Plan (IRP) registration, and which are long-term leased to a motor carrier, have the option of being registered either under the lessor or the lessee’s name. First, as the lessor, the vehicle can be registered under the owner-operator’s name who will be responsible for all apportioned fees due. The owner-operator (lessor) would receive the license plate and registration cab card issued in the lessor’s name and would be responsible for maintaining all operational records of such vehicle.

The second option is to have the registration handled by the lessee, but with the registration reflecting both the lessor and lessee name. The lessee (carrier) would be responsible for maintaining the operational records of the vehicle and would be considered the owner of the plate and cab card, which in turn gives the lessee the right to transfer the plate or apply for a credit refund on it, should the lease agreement be cancelled.

Normally it is agreed between the lessee and the lessor that if the lease agreement is cancelled, the lessee will refund any credit received for unused fees to the lessor but only if the lessor had paid any portion of the original registration fees.

Trip leased vehicles

Should an owner-operator’s apportioned vehicle be trip leased on to another apportioned fleet, or even a non-apportioned fleet, it is the responsibility of the lessor to make sure that their vehicle is properly registered to operate in any International Registration Plan (IRP) jurisdiction required by the trip lease. If the vehicle is not registered for the appropriate IRP jurisdictions, with such jurisdictions listed on the cab card and all registration fees paid, trip permits will be required. Also, it should be noted that it is the responsibility of the lessor to report distance traveled by the leased equipment on the IRP application, even though it is the lessee who uses and operates the equipment under the trip lease agreement.

Registration of rental vehicles

In most cases, all vehicles that are leased out under a long-term lease by the owner of a “rental fleet,” are registered or apportioned in the name of the carrier or lessee. However, under the International Registration Plan (IRP) agreement, vehicles that are part of a rental fleet may be apportioned in the name of the rental company as part of the rental fleet regardless of whether the vehicles may be under long term lease to an apportioned carrier. If the vehicle is registered in this way, the registration cab card should also list to whom the vehicle is leased. The lessor, if the lessor elects to be the registrant of a vehicle leased for greater than 60 days, is allowed to select a base jurisdiction of registration (effective July 1, 2016).

A “rental owner” is explained as an owner of one or more rental fleets whose primary business is renting their rental fleets to another person or company, either with or without the drivers.

Base jurisdiction of a rental vehicle means the jurisdiction from or in which the vehicle is most frequently dispatched, garaged, serviced, maintained, operated, or otherwise controlled.

“Renting and leasing” means the giving of possession and control of a vehicle for valuable consideration for a specified time period.

One-way rental vehicles

One-way vehicles are those which are rented in one place and usually left in another. Fleets of one-way rental vehicles (trucks of less than 26,000 pounds/11,793.401 kilograms gross vehicle weight) are apportioned in much the same way as other apportioned fleets (those over 26,000 pounds/11,793.401 kilograms). Records of total distance and all individual jurisdiction distance on one-way vehicle operations must be retained, as they are a determining factor in how and where the one-way rental vehicles are apportioned. Fees due on one-way rental vehicles are apportioned by the number of units to be licensed and registered in each jurisdiction.

For example, when the distance is totaled for a one-way rental fleet and apportioned out to each jurisdiction operated, if two percent of the total fleet distance was operated in Missouri, then two percent of the one-way vehicles in the fleet must be fully plated in Missouri. All trucks of an identifiable one-way fleet so registered are authorized to perform both interjurisdiction and intra-jurisdiction movements in any International Registration Plan (IRP) jurisdiction, even those vehicles licensed in a jurisdiction that is not an IRP jurisdiction.

Registration of household goods carriers (HGC)

• Household goods carriers (HGC) using equipment leased from service representatives have the option to base such equipment in the base jurisdiction of the service representative, or that of the carrier.
• A “service representative” is one who provides facilities and services including sales, warehousing, and drivers under contract or other arrangements to a carrier for transportation of property by a household goods carrier.
• For equipment owned and operated by owner-operators, (not a service representative), and used to transport cargo for an HGC only, the equipment must be registered by the HGC in their base jurisdiction.

Household goods carriers (HGC) using equipment leased from service representatives have the option to base such equipment in the base jurisdiction of the service representative, or that of the carrier. A “service representative” is one who provides facilities and services including sales, warehousing, and drivers under contract or other arrangements to a carrier for transportation of property by a household goods carrier.

If the HGC decides to register the equipment in the base jurisdiction of the service representative, the equipment must be registered in both the service representative’s name and that of the carrier as lessee. The apportionment of the fees is determined by the combined records of the service representative and those of the carrier, but should the records need to be audited, they all must be available at the service representative’s base jurisdiction.

If the HGC elects to register vehicles in HGC base jurisdiction, the equipment should be registered to reflect the name of the carrier as lessee. Here too, the combined records of both the lessee and lessor are used to determine the apportioned fees, and in the case of an audit, the records must be available in the base jurisdiction of the carrier as lessee.

For equipment owned and operated by owner-operators, (not a service representative), and used to transport cargo for an HGC only, the equipment must be registered by the HGC in their base jurisdiction, however, the registration should reflect both the owner-operator’s name as lessor, and the HGC as lessee. The apportionment of fees in this case is determined by the records of the carrier.

Credentials

• Vehicles that are properly registered under the International Registration Plan (IRP) receive one apportioned license plate and a cab card from the base jurisdiction.
• Cab cards are vehicle-specific, and the original cab card must be carried in the vehicle for which it was issued.
• Vehicles registered under the IRP are authorized to travel either interstate or intrastate in all jurisdictions.

Vehicles that are properly registered under the International Registration Plan (IRP) receive one apportioned license plate and a cab card from the base jurisdiction. The cab card lists the registered weight the vehicle must comply with to operate in each jurisdiction.

Cab cards are vehicle-specific, and the original cab card must be carried in the vehicle for which it was issued. Copies are usually not allowed. Starting in January 2019, carriers are allowed to carry their IRP cab cards electronically.

Vehicles registered under the IRP are authorized to travel either interstate or intrastate in all jurisdictions. No additional vehicle registration is required for intrastate travel.

Forms

• The base jurisdiction registers an apportionable vehicle and issues credentials.
• Credentials are issued once an applicant has provided all required information and paid all fees.
• The distance schedule and supplemental application forms provide necessary information.

Under the International Registration Plan (IRP), the base jurisdiction registers an apportionable vehicle and issues credentials when an applicant has provided all information required and has paid all fees. The distance schedule and supplemental applications provide necessary information to receive and maintain registration.

Distance schedule: Average per-vehicle distance

When filing the distance schedule for a carrier’s initial application, an average per-vehicle distance chart is used to determine the fees.

Base jurisdictions calculate their average per-vehicle distance by:

1. Determining the total actual distances reported to the base jurisdiction as having been operated in each member jurisdiction by fleets for which the base jurisdiction served as the base jurisdiction during the previous registration year;
2. Determining the number of apportioned vehicles for which the base jurisdiction served as base jurisdiction during the previous registration year that accrued distance in each respective member jurisdiction; and
3. For each jurisdiction, dividing the distance determined under item 1 above by the number of apportioned vehicles determined under item 2 above.

Jurisdictions are required to provide an updated average per-vehicle distance chart by March 31 of each year.

When a registrant renews the registration, the distance percentage for the base jurisdiction is computed by adding the reciprocal jurisdiction distance (jurisdictions which are not members of the IRP) to the base jurisdiction distance and dividing that sum by the total fleet distance. Then, the distance percentage is computed for the other International Registration Plan (IRP) member jurisdictions which the registrant is operating into and apportioning with, by dividing each jurisdiction’s distance by the total fleet distance (carry to six decimal places and round back to five). Upon completion, all percentages added together should total 100 percent of the fleet’s all jurisdiction total distance.

For reporting purposes, the distance year runs from July 1 through June 30 of the following year — regardless of when the jurisdiction’s actual registration year began.

Supplemental applications

After the original application has been filed, carriers can make changes to their fleets by filing a supplemental application to add units, delete units and transfer credentials, or even change weight classifications. To make any of these changes, the carrier uses the original distance schedule as filed at the beginning of the year, since none of the jurisdiction percentages used to compute additional fees need to be changed. Vehicles added to the fleet after the commencement of the registration year shall be registered by applying the distance percentage used in the original application for such fleet, based on the remainder of the registration year.

Performance and Registration Information Systems Management (PRISM)

• The Performance and Registration Information Systems Management (PRISM) program is a federal-state partnership that makes safe performance a requirement for obtaining and keeping commercial vehicle registration.
• The PRISM program links the Commercial Vehicle Registration Process (CVRP), and the Motor Carrier Safety Improvement Process (MCSIP).
• The Motor Carrier Safety Improvement Process (MCSIP) is designed to improve the safety performance of motor carriers with demonstrated poor safety performance.

The Performance and Registration Information Systems Management (PRISM) program is a federal-state partnership that makes safe performance a requirement for obtaining and keeping commercial vehicle registration. The program links the Commercial Vehicle Registration Process (CVRP), and the Motor Carrier Safety Improvement Process (MCSIP). In this way, PRISM prevents motor carriers with significant safety deficiencies from registering their commercial motor vehicles.

The commercial vehicle registration process of the states provides the framework for the PRISM program by ensuring that all interstate carriers have a United States Department of Transportation (US-DOT) number when they register their vehicles. A license plate isn’t issued by the state until the carrier responsible for the safety of the vehicle is identified and the safety fitness of the carrier is verified.

Carriers registering vehicles in a PRISM state are required to obtain a USDOT number and complete biennial updates to their MCS-150 information before registration will be granted.

As a member of PRISM, a state can refuse to register vehicles of an unfit carrier (as determined by the Federal Motor Carrier Safety Administration). Registration sanctions are available to the states, including denial of registration, suspension, or revocation.

How does Performance and Registration Information Systems Management (PRISM) affect registration?

For many International Registration Plan (IRP) accounts, the registrant that maintains the IRP account and the carrier that is responsible for safety are the same entity. The carrier must provide updated MCS-150 information and enter their United States Department of Transportation (USDOT) number on the vehicle registration form.

Owner/operators often register their vehicle in their own name, but lease to a motor carrier. These owner/operators must provide the USDOT number of the carrier they are leasing to and update this information with the state registration office if the USDOT number changes. If the owner/operator is not leased to a company and does not have a lessee USDOT number to provide, the owner/operator must obtain their own USDOT number as a motor carrier.

Is there enforcement?

The Motor Carrier Safety Improvement Process (MCSIP) is the means by which a motor carrier’s safety is systematically tracked and improved. The process is designed to improve the safety performance of motor carriers with demonstrated poor safety performance. Once the carrier exceeds the bounds of the established safety threshold, the motor carrier enters MCSIP, which provides opportunities for carriers to improve operations and return to a safe condition. MCSIP carriers that do not improve their safety performance face progressively more stringent penalties that may result in a Federal “unfit” or “imminent hazard” determination and the possible suspension of vehicle registrations by the state.

International Registration Plan (IRP) recordkeeping

• When a licensee is apportioned under the International Registration Plan (IRP), they must keep track of all mileage by jurisdiction with an individual vehicle mileage record (IVMR) or other electronic recording devices, such as a Global Positioning System (GPS) or Electronic Logging Device (ELD).
• The IRP requires the licensee to preserve the records the apportioned registration application is based upon for the current application year, plus the three preceding mileage years.
• There are numerous requirements to abide by under the International Registration Plan (IRP) when documenting in an Individual Vehicle Mileage Record (IVMR) or Individual Vehicle Distance Record (IVDR).

When a licensee is apportioned under the International Registration Plan (IRP), they must keep track of all mileage by jurisdiction with an individual vehicle mileage record (IVMR) or other electronic recording devices, such as a Global Positioning System (GPS) or Electronic Logging Device (ELD). The IRP clearly states what is expected regarding recordkeeping requirements and should be consulted for more details. The Individual Vehicle Mileage Record (IVMR) or other distance data that is captured and used for International Fuel Tax Agreement (IFTA) can be shared and used for IRP annual reporting.

The IRP requires the licensee to preserve the records the apportioned registration application is based upon for the current application year, plus the three preceding mileage years. Depending on when registration renewal is required, this time period may be over six years. It’s recommended to keep the mileage data for six and one-half years for this reason.

The licensee must maintain monthly and quarterly summaries and must also maintain a summary of the quarterly summaries. The monthly summary must include both:

• The distance traveled by each apportioned vehicle in the fleet during the calendar month, and
• The distance traveled in the month by each apportioned vehicle in each jurisdiction.

Individual vehicle mileage report (IVMR)

• Source documents under the International Registration Plan (IRP) include Individual Vehicle Mileage Records (IVMR) or Individual Vehicle Distance Records (IVDR).
• IVMRs can be created using a paper form or may be electronic.
• Monthly, quarterly, and yearly summaries are prepared from the IVMR information.

A recommended source document under the International Registration Plan (IRP) is an Individual Vehicle Mileage Record (IVMR) or Individual Vehicle Distance Record (IVDR). IVMRs can be created using a paper form or may be created using an Electronic Logging Device (ELD) or Global Positioning System (GPS).

If an IVMR is captured on paper, it must include:

1. The beginning and ending dates of the trip to which the records pertain;
2. Trip origin and destination;
3. Route of travel;
4. Beginning and ending reading from the odometer, hubometer, engine control module (ECM), or similar device for the trip;
5. Total trip miles or kilometers;
6. Miles/kilometers by jurisdiction; and
7. Unit number or vehicle identification number.

Distance records produced wholly or partly by a vehicle-tracking system, including a system based on a GPS, must contain:

1. The original GPS or other location data for the vehicle to which the records pertain;
2. Date and time of each GPS or other system reading, at intervals sufficient to validate the total distance traveled in each jurisdiction;
3. Location of each GPS or other system reading;
4. Beginning and end reading from the odometer, hubodometer, ECM, or any similar device for the period to which the records pertain;
5. Calculated distance between each GPS or other system reading;
6. Route of the vehicle’s travel;
7. Total distance traveled by the vehicle;
8. Distance traveled in each jurisdiction; and
9. Vehicle identification number or vehicle unit number.

IVMRs should be accurately and legibly prepared. IRP requires reported distance for the actual routes traveled by each vehicle for each trip. When recording the mileage of an apportioned vehicle, all movement such as interstate, intrastate, interprovincial, and intra-provincial, must be included, as well as loaded, empty, dead-head and/or bobtail miles or kilometers.

Monthly, quarterly, and yearly summaries are prepared from the IVMR information. Computer summaries are not acceptable at face value and must always be supported by IVMRs or original ELD/GPS data during an audit.

Non-apportionable vehicles

• Although not required, some vehicles having a gross vehicle weight of 26,000 pounds or less may be registered under the International Registration Plan (IRP).
• Some jurisdictions will grant reciprocity to non-IRP apportionable vehicles while others will require a trip permit or apportioned registration.
• It is important to verify the requirements of the jurisdiction of travel before entering the jurisdiction.

Although exempt from the requirement to obtain apportioned plates, a two-axle truck or truck-tractor or a power unit in a combination of vehicles having a gross vehicle weight of 26,000 pounds or less may be registered under the International Registration Plan (IRP).

There may be good reason to apportion a vehicle even though it is not required to be apportioned under the IRP. If a vehicle is not apportioned, the vehicles become subject to individual jurisdiction registration laws. Some jurisdictions will grant reciprocity to non-IRP apportionable vehicles while others will require a trip permit (or would accept full apportioned registration). Frequent interstate travel, or intrastate travel within a jurisdiction, may be a reason to apportion a non-apportionable vehicle.

It is important to verify the requirements of the jurisdiction of travel before entering the jurisdiction.

Audits

• Audits may be conducted to ensure and encourage compliance, to carefully review the recordkeeping system in place, and to offer suggestions to improve the system and/or compliance.
• Audit selection occurs in several ways including random selection, targeting delinquent taxpayers, or targeting jurisdictions with consistently late or delinquent reports.
• Motor carriers can typically expect to receive notification of an impending audit in advance, either by telephone or through written correspondence.

In some cases, a motor carrier may be subject to a combination of two or more audits, such as International Registration Plan (IRP) and International Fuel Tax Agreement (IFTA), at the same time. A jurisdiction will normally notify the registrant ahead of time what the audit will cover.

When conducting audits of any nature, jurisdictions will generally have a predetermined purpose before beginning. They can be conducting the audit to primarily ensure and encourage compliance; in this case they will be looking very carefully at the recordkeeping system in place, and may be offering suggestions to improve the system, and/or compliance. Such an attitude indicates that the jurisdiction believes that through motor carrier compliance, revenue will be received fairly and in a timely fashion.

Audit selection occurs in several ways. Jurisdictions may employ a system of random selection, in which a specified number of taxpayers are chosen for audit during a specific year. Delinquent taxpayers are often targeted for an audit. Consistently late or delinquent reports will cause the jurisdiction to believe a problem exists with the account, and an audit will be conducted to investigate the situation. Some jurisdictions perform audits on all entities that close out their IFTA/IRP accounts.

The registrant can usually expect to be audited by the base jurisdiction only. Sometimes, joint IFTA and IRP audits may occur. An accurate and reliable distance accounting system is an important element in both plans, and the jurisdiction is encouraged to perform both audits simultaneously.

Notification of audit

Motor carriers can typically expect to receive notification of an impending audit in advance, either by telephone or through written correspondence. Usually, a telephone notification will be followed by some type of letter from the jurisdiction. Jurisdictions try to provide enough notice to allow the motor carrier adequate time to prepare records. The International Fuel Tax Agreement (IFTA) requires a 30-day notification in writing prior to conducting a routine audit.

When notice is received by the taxpayer, immediate attention should be given to communicating with the jurisdiction. The communication should be prompt and cooperative; the earlier a positive relationship is established with the jurisdiction, the easier the audit process is likely to be.

The request from a jurisdiction for preliminary information should also be given prompt and careful consideration. Most jurisdictions have a questionnaire of some kind that is used to inform the jurisdiction of the taxpayer’s record keeping system, organization of records, information available, and other general information. These pre-audit questionnaires vary in length; some jurisdictions send requests several pages in length, while others limit questions to one page. Regardless of the length, the response should be as complete as possible, and submitted in a timely fashion.

The date of audit stated by the jurisdiction should be examined carefully; if it is obviously going to pose a problem (due to another audit, a company move or reorganization, for example), the jurisdiction should immediately be contacted about the possibility of a change. Jurisdictions are usually somewhat flexible about the date if a carrier demonstrates a valid reason for the request. Taxpayers are cautioned against attempting to change the date without a very good reason, or simply to delay the audit. A good relationship with the jurisdiction should be maintained whenever possible.

At this point in the audit process, it is very important to clarify details of the audit with the jurisdiction. The type of audit to be performed should be verified. It is a good idea to verify the account being audited if the operational records of several accounts are housed at the same location. The location of the audit should be defined. Usually, the audit is conducted at the taxpayer’s principal place of business. However, the audit could take place at the office of a service agency, leasing company, or in the office of the auditing jurisdiction.

The anticipated arrival date of the auditor should also be clearly determined to ensure that required records are available and adequate preparations may be completed. Thorough preparation and organization before the auditor arrives means a faster audit completion and departure by the auditor.

An extremely important element of the pre-audit communication process is the choice of the sample audit period. Usually, the jurisdiction will provide notification of what year(s) or time period the audit will cover. Sometimes, however, the taxpayer is permitted to choose the sample period, or the units for the sample. Be sure to determine immediately from the jurisdiction if this is possible. If so, this provides the opportunity to use a representative time period that will result in an accurate audit. Most jurisdictions will be somewhat flexible because they want the sample period to be representative of the licensee’s operations.

A sample period that is not a typical representation of company operations should be avoided. For example, a period of lower-than-normal activity may seem as though it would be fast and easy to audit; however even a small number of missing or undocumented distances in this case can result in an assessment that is proportionally higher than the same number of missing distances in a period of normal or high activity.

The jurisdiction may request the motor carrier to sign a waiver stating that the carrier will accept the results of the sample period, so it is important to be comfortable with the sample period agreed upon.

A final matter to clarify prior to the audit is the issue of audit expenses. The IRP and IFTA guidelines state that if the auditor must travel out of the jurisdiction to gain access to the records, the licensee may be required to pay the travel and per diem expenses incurred by the auditor. If there will be any audit fees, or expenses to be billed to the carrier, it is wise to discuss these in advance, and be aware of them. Expenses are usually billed after the audit and should be examined at that time by the licensee. A few jurisdictions require payment of auditor fees in advance; these payments should also be reviewed after the audit is completed.

To prevent confusion and misunderstanding, all of the above items that are discussed with the jurisdiction prior to the audit should be confirmed in writing.

The Canadian Agreement on Vehicle Registration (CAVR) and the International Registration Plan (IRP)

• The Canadian Agreement on Vehicle Registration (CAVR) is a prorated vehicle registration agreement between the Canadian provinces.
• Interjurisdictional motor carrier vehicle registration in the United States and Canada has been handled under the International Registration Plan (IRP) for the past several years.
• Under IRP, all prorated vehicles over 26,000 pounds (11,794 kilograms) and are traveling interstate would need to be registered in the IRP program (or operate on trip permits).

The Canadian Agreement on Vehicle Registration (CAVR) is a prorated vehicle registration agreement between the Canadian provinces. The CAVR allows vehicle registration reciprocity for vehicles under 11,794 kilograms (26,000 pounds) between the provinces.

The CAVR originally started as a prorate vehicle registration agreement for all vehicles operating between the Canadian provinces. When the International Registration Plan (IRP) came about, there was no longer a need for CAVR. However, the provinces have kept the CAVR active for registered vehicles under 11,794 kilograms and operating interprovincially. All 10 provinces are members, with the three territories excluded from the plan.

Interjurisdictional motor carrier vehicle registration in the United States and Canada has been handled under the IRP for the past several years. The IRP member jurisdiction listing currently consists of all 48 lower U.S. states and the District of Columbia, plus all 10 Canadian provinces.

Under IRP, all prorated vehicles over 26,000 pounds (11,794 kilograms) and traveling interstate would need to be registered in the IRP program (or operate on trip permits).

Motorcoach vehicle license or registration

• All charter buses must be registered in their base jurisdiction for a vehicle license.
• Charter buses may be registered either under the International Registration Plan (IRP) or under a regular base plate.
• Interstate charter buses that meet the definition of an apportionable vehicle are subject to the IRP requirements.

All charter buses must be registered in their base jurisdiction for a vehicle license, either under the International Registration Plan (IRP) or under a regular base plate. As of January 1, 2016, interstate charter buses that meet the definition of an apportionable vehicle are subject to the IRP requirements as the result of the IRP’s implementation of the Full Reciprocity Plan (FRP).

Vehicle registration trip permits

• Motor carriers are required to have the proper authorization permits—either permanent, trip, or temporary—before operating in a jurisdiction.
• There are several different circumstances under which a trip permit may be needed to satisfy the vehicle registration obligations for interstate travel.
• If a vehicle has three or more axles regardless of its weight, counting axles on the power unit or truck only, then it is subject to both the International Registration Plan (IRP) and the International Fuel Tax Agreement (IFTA).

Motor carriers are required to have the proper authorization permits before operating in a jurisdiction. Usually, carriers obtain “permanent” permits annually for operating authority, vehicle registration (IRP) and fuel use (IFTA). If travel is required in a jurisdiction for which the carrier does not have permanent permits, a trip, or temporary, permit must be obtained.

Trip permits are authorized by the state agencies responsible for regulatory oversight and can be obtained through wire services.

Depending upon the state, trip permits are valid for a defined period of time or for a single trip. The fee is determined by the state, and wire services charge an additional fee.

Trip permits are generally purchased individually by state and are needed before the travel takes place and must be obtained from the intended state(s) of operation.

Interstate motor carriers are required to have proper vehicle license/registration for each jurisdiction of travel. Unlike cars, which can travel freely anywhere in the United States and Canada with a legally valid license plate from any state or province, commercial motor carriers must register their vehicles and pay fees in every jurisdiction in which they will travel.

When operating a commercial vehicle in a jurisdiction in which it is not properly registered, a trip permit is necessary. The trip permit serves as a “temporary license plate.”

When is a trip permit required?

There are a few different circumstances under which a trip permit may be needed to satisfy the vehicle registration obligations for interstate travel:

1. Intrastate qualified commercial motor vehicles that do not have credentials under the International Registration Plan (IRP) but need to travel on an interstate trip. A “qualified” or “apportionable vehicle” under the IRP is: a power unit having two axles and a GVW or RGVW in excess of 26,000 pounds; or a power unit having three or more axles, regardless of weight; or a power unit used in combination, when the weight of such combination exceeds 26,000 pounds.
2. Interstate trucks and truck tractors, and combinations of vehicles having a gross vehicle weight of 26,000 pounds or less. Such vehicles are not required to apportion under the IRP; however, they may be proportionally registered at the option of the registrant. When a vehicle is not apportioned, it is subject to individual jurisdiction registration laws and automatic reciprocity is not granted. Depending upon the jurisdictions of travel, a trip permit may be required for interstate travel and/or intrastate travel.
3. Vehicles operating interstate on restricted plates. Restricted plates have some restriction on their use, such as commodity, mileage, geographic area, or time (under one year). Transporter plates, dealer plates, and farm plates are examples of restricted plates. These plates are valid for travel in the state of issue under the terms and conditions accompanying the plate. However, they do not receive automatic reciprocity for travel outside the state of issue. Before traveling interstate with a restricted plate, contact the jurisdictions of travel to determine whether reciprocity is granted or a trip permit is needed.

A handful of states will limit the number of trip permits issued to a carrier or vehicle within a certain timeframe established by the state.

Trip permit requirements for vehicles under 26,000 pounds

While a two-axle vehicle with a gross weight or registered weight that is equal to or under 26,000 pounds is exempt from the International Registration Plan (IRP) (but may be registered under IRP at the registrant’s option), several states require trip permits or IRP plates for these vehicles.

Reminder: if a vehicle has three or more axles regardless of its weight, counting axles on the power unit or truck only, then it is subject to both the IRP and the International Fuel Tax Agreement (IFTA).

Interstate refers to operation through the state while intrastate refers to point-to-point operations, or work “within” the state.

Preliminary audit

• In order to have a smooth audit process, records should be organized in advance and a preliminary audit meeting should be held.
• Proper organization of the records to be used by the auditor means matching up the fuel receipts with the trip reports and arranging items in chronological or unit order.
• The initial meeting with the auditor should include an introduction to a company liaison or contact and communication procedures should also be discussed.

Organization of audit records

The advance organization of the records required to conduct the audit will permit the audit to be conducted efficiently and quickly. The audit will be concluded more quickly with good pre-audit preparation.

The records required by the jurisdiction should be determined as soon as possible. The basic records will be required, such as International Vehicle Mileage Records (IVMRs) or trip reports, Global Positioning System (GPS)/Electronic Logging Device (ELD) data, fuel receipts, trip permits, fuel and distance listings, recaps, and tax reports. Any records that provide substantiation for the tax reports will be needed. It is not helpful for the licensee to provide records that have not been requested by the jurisdiction; often they simply take extra time for the auditor to examine. Requests by the jurisdiction for records beyond those required to substantiate tax liability should be considered carefully, since they can take time for the licensee to locate, organize and audit.

Proper organization of the records to be used by the auditor means matching up the fuel receipts with the trip reports and arranging items in chronological or unit order. This will certainly make the auditor’s task easier, and further a positive relationship with the jurisdiction.

Preliminary audit meeting

When the auditor(s) arrives, time should be spent to ensure a smooth audit process. A meeting with the auditor should be held, and at this time the audit procedures of the jurisdiction should be reviewed so the licensee has a clear understanding of how the audit will be conducted. The jurisdiction distance and miles-per-gallon/kilometers-per-liter factor can be reviewed at this time. The licensee’s recordkeeping system should also be reviewed with the auditor so the required information may be obtained easily and quickly.

The initial meeting with the auditor should also include an introduction to a company liaison or contact. Designating an individual with whom the auditor may discuss any questions or problems will enable the licensee to provide answers and solutions in an organized manner. If the auditor is interacting with several staff people, they may receive incomplete information or answers that are contradictory. It is much easier to communicate with one contact and maintain a clear picture of the audit progress and any problems.

Communication procedures should also be discussed; how and when will errors or omissions be handled? Will they be discussed and handled as the audit progresses, so that additional documentation may be provided to clear up problems, or will all such issues be mentioned only at the conclusion of the audit? Clearly, the preferred alternative is to develop communication during the audit rather than waiting until the auditor is presenting results.

It is important to continually develop a positive relationship with the auditor. An introduction to the staff and the licensee’s facility will help the auditor feel more comfortable and allow them to proceed more efficiently with the audit.

Audit, post-audit and preliminary assessment

• During the audit, it is important to remain in communication with the auditor and to be aware of any problems that arise.
• A post-audit meeting is used to discuss preliminary audit findings and billing, assessment, penalty, interest, or refund procedures that the jurisdiction follows.
• After the audit is completed and the official results have been presented, the carrier must spend time evaluating and reviewing the findings, which may include a preliminary assessment.

The audit

Once the audit is underway, most of the taxpayer preparation has been completed. There are no uniform guidelines for conducting the audit; each jurisdiction functions somewhat differently. The most important activity during the audit is to remain in communication with the auditor about the progress of the audit. It is also helpful to be aware of any problems that arise. For example, there are sometimes “mileage gaps” at the end of a quarter, simply because the record of these miles appears in the next quarter. If the taxpayer is available to the auditor and communicating during the audit, the necessary records from the next quarter’s report can be immediately provided. It is much easier to provide additional documentation to verify distance or correct an error during the audit, than when it is completed. Periodic and regular communication during the audit may avoid an unnecessary and unwarranted assessment.

Post-audit meeting

The post audit meeting presents a critical opportunity to discuss the preliminary audit findings. This meeting must be scheduled in advance; it is not advisable to wait until the last minute, when the auditor may be in a hurry to catch a plane or to get home for the weekend.

At this time the taxpayer must request a copy of all the auditor’s worksheets and spend time reviewing the preliminary audit results and findings. All questions regarding the audit procedures, methods or findings should be addressed.

The post audit meeting is also the appropriate time to discuss the billing, assessment, penalty, interest or refund procedures that the jurisdiction follows. Useful information to ask about includes assessments, timeline for paying any assessments, and appeal procedures.

If the jurisdiction audit attitude is one of encouraging compliance, the auditor will very possibly offer some recommendations and suggestions for recordkeeping enhancement. There may also be recommendations, from the auditor’s point of view, for audit compliance as well.

Carrier review of preliminary assessment

When the audit is completed and the official results have been presented, the carrier must spend time evaluating and reviewing the findings, which may include an assessment. At this point the taxpayer must make a decision to accept or appeal the findings. An assessment may be appealed if there is disagreement with the decision. If there is no disagreement, the assessment may be accepted.

When the assessment is accepted by the taxpayer, the payment should be made to the jurisdiction in a timely manner. Most jurisdictions have regulations that govern the payment of such assessments, and these regulations should have been reviewed in the post audit meeting and must be carefully followed.

Under the International Registration Plan (IRP), if the records are found to be inadequate, then there will be an assessment as follows:

• First audit, 20 percent;
• Second audit, 50 percent; and
• Third audit and subsequent audits, 100 percent.

The assessment percentages refer to the percent of the total IRP fees paid for the registration period that was audited.

For International Fuel Tax Agreement (IFTA), if the base jurisdiction determines that the records produced by the carrier for audit do not, for the carrier’s fleet as a whole, meet the criterion for the adequacy of records, or after the issuance of a written demand for records by the base jurisdiction, the carrier produces no records, the base jurisdiction may impose an additional assessment by either:

• Adjusting the carrier’s reported fleet miles per gallon (MPG) to 4.00 or 1.70 kilometers per liter (KPL); or
• Reducing the carrier’s reported MPG or KPL, by 20 percent.

Appeals and audit summary

• If a motor carrier disagrees with an assessment by an auditor an appeal may be considered.
• If an informal appeal process is not successful, and the taxpayer still disagrees with the assessment, a formal appeal process may be followed.
• It is important to analyze and review audit findings which will help the motor carrier to use the audit as a learning experience.

Appeals process

When a motor carrier disagrees with the assessment by the auditor, an appeal may be considered. The decision to appeal should include an analysis of the potential appeal costs versus the size of the assessment. In any appeal situation, formal or informal, all documents and correspondence must be submitted according to the jurisdiction requirements.

Before engaging in a formal appeal, the taxpayer may consider an informal appeal procedure. This will involve discussions and negotiation with the auditor. Additional supporting documentation, such as trip reports or fuel receipts that were unavailable during the audit, may be submitted to clarify missing distance data or errors.

The taxpayer may also consider a petition to the jurisdiction to waive any penalties and interest, if there was no intent to defraud. Some jurisdictions require payment of the entire assessment before any petitions may be entered, other jurisdictions may waive the penalty if there was no intent to defraud, but generally not the interest.

The petition to waive penalty or interest must be based upon the premise that there was no intention of defrauding. In most cases this involves missing miles/kilometers or incomplete recordkeeping, and not a deliberate attempt to avoid payment of taxes.

If the informal appeal process is not successful, and the taxpayer still disagrees with the assessment, a formal appeal process may be followed. This usually involves a hearing before an administrative law judge, an appeals commission, a board of appeals, an arbitration board, or whatever system the particular jurisdiction has in place.

The jurisdictions also have differing requirements on representation during the appeal process. There may be a requirement that the representative have certain qualifications, such as a license from the bar in that jurisdiction, or that he/she be a Certified Public Accountant (CPA). Each jurisdiction differs, and when appealing an assessment, the taxpayer should determine what specific representation requirements exist.

Audit summary

Analysis and review of the audit findings for systems and procedures corrections is a very useful and important step in the audit process and provides an opportunity for the motor carrier to use the audit as a learning experience. If the audit focus was primarily compliance, the suggestions offered will probably improve taxpayer compliance. Suggestions for more efficient recordkeeping may reduce assessments in future audits and make the entire process easier.

Regardless of the suggestions, they should be looked at carefully and certainly should not be ignored. In the case of International Fuel Tax Agreement (IFTA) audits, the base jurisdiction may conduct a follow-up visit to determine whether the recommendations have been implemented.

A good recordkeeping system is very important to a motor carrier faced with an audit. Pre-audit preparations can be handled easily, reports can be satisfactorily substantiated, the audit will be completed quickly, and the assessment won’t be a shocking surprise when a taxpayer has such a system in place.

A taxpayer without an adequate record keeping system may find it useful to carefully consider developing one. It is much easier to achieve compliance and avoid painful assessments with proper recordkeeping and organization.

An analysis of audit results will usually indicate that any cost associated with achieving compliance will be more than offset by a reduction in penalty and interest assessments.