By Andy Light and Shannon McClellan Cohen
Indiana has become a market leader in administering commercial truck International Registration Plan registrations along with corresponding trailers. Hundreds of motor carriers register using Indiana’s system, some of them registering thousands of vehicles. This success equals dollars — IRP registrations reportedly account for over $10 million annually in ancillary fees. Because our model has proven to be so successful, changes to large commercial truck registration fees should be approached carefully by individuals and groups that have a thorough understanding of what entices motor carriers to Indiana to ensure that changes to Indiana’s current system don’t have an unintended consequence that causes motor carriers to register their fleets elsewhere.
On April 27, Indiana Gov. Eric Holcomb signed Indiana House Bill 1002. HEA 1002 matters to every Hoosier, as it seeks a long-term, sustainable infrastructure funding plan to repair and maintain the state’s roads, many of which are in critical need of repair. The trucking industry, a vital part of the state’s economy, had a special interest in the bill, both because the state looked to the industry to bear a significant share of the funding and because the industry relies on well maintained, free-flowing roads. The version of HEA 1002 Holcomb signed supported the idea that structure matters when imposing fees on the motor carrier industry. It recognizes the importance of ensuring the state doesn’t undermine its strong business relationship with the motor carrier industry, which brings dollars to Indiana. As Indiana moves into the next cycle of legislative changes, we must ensure that leaders don’t let the prospect of short-term windfalls undo the good that has come from our current system of long-term recurring revenue that, if lost, would likely never return.
From the outset, the industry made clear that it would accept increased costs to improve Indiana road conditions. While it was willing to pay its fair share, various amendments that were proposed sought to place a large burden on motor carriers that register their vehicles here. As issues developed, key members came to recognize that proposed fee increases might be potentially short-sighted and that a company has significant flexibility in where it chooses to register its vehicles.
As Indiana debated increases in registration fees, states such as Arkansas changed their laws in an effort to attract more motor carrier registrations. Placing increased fees on motor carriers who choose to register in Indiana has the potential to backfire should motor carriers, including Indiana-based motor carriers, choose to change their registrations to other states that are trying to accommodate their business needs. It also has the potential to place a crippling burden on those already registered in the state.
With this in mind, industry stakeholders developed a priority list for the industry, with a focus on limiting location-based fees (fees that apply only to IRP registrants based in Indiana) and ensuring that any fees that were assessed were done so on an apportioned basis (based on how many miles a fleet actually travels in Indiana in a year). This priority list ensured that HEA 1002 reflected the longstanding industry practice of basing fees on miles traveled in a state by all motor carriers, rather than imposing a flat fee on a relatively smaller number of motor carriers based in Indiana regardless of miles traveled here.
One small change with large impact is the specific section that removes the $8.75 annual trailer plate renewal fee for semitrailers with permanent plates (effective for all vehicles July 1, 2017). It also removes vehicles over 26,000 lbs. from application of the annual $15 Transportation Infrastructure Improvement Fee. Vehicles below 26,000 lbs. will be subject to the TIIF for all vehicle registrations occurring after Dec. 31, 2017. Critically, two proposed Senate amendments that would have had a significant, negative impact on motor carriers — the $100 TIIF for commercial vehicles and a 50 percent increase to vehicle registration fees for vehicles over 26,000 lbs. — were removed (the $100 TIIF) or reduced (the increased registration fees), as these presented a real risk of driving carrier registrations from Indiana.
These changes did come at some cost. Motor carriers face increased fuel taxes and the final registration fee increase is 25 percent over the base vehicle registration (but, importantly, does not increase the Commercial Vehicle Excise Tax that accounts for over 25 percent of the registration fee). The total final percentage increase for the largest vehicles, which will take effect at the earliest on July 1, when the CVET is taken into account, is actually an 18 percent increase over the current total cost to register such a vehicle in Indiana. While this increase is certainly noteworthy to motor carriers, the overall increased operational cost in Indiana was held at 18 percent.
In addition to these registration fee changes, the Legislature attempted to resolve a long-standing discrepancy in application of Indiana’s wheel tax by instituting an apportioned wheel tax on all IRP registrants that pay this tax collected after June 30, 2017. This significantly changes the landscape within Indiana, as uniform apportionment makes it more feasible for motor carriers with IRP registered vehicles to consider using one of the 37 counties that previously had an unapportioned wheel tax and ensures fairness by uniformly applying the wheel tax in proportion to the number of miles a motor carrier’s fleet drives in the state each year.
These changes are significant for motor carriers. The reality is that large companies may still choose to migrate registrations away from Indiana to avoid ancillary fees such as county and municipal wheel taxes. Regardless, the changes were a step in the right direction when it comes to striking a balance between the need for infrastructure improvement and retention of businesses within the state.•
• Andy Light, a partner at Scopelitis Garvin Light Hanson & Feary in Indianapolis, represents domestic and international carriers, shippers, third-party intermediaries, leasing companies and private carriers on a full-service basis. Contact Andy at firstname.lastname@example.org. Partner Shannon McClellan Cohen provides legislative counsel services to the firm’s clients. Contact Shannon at email@example.com. The opinions expressed are those of the authors.