Small school buses might have received the support they needed to fend off IRS attempts in New York to remove them from the list of vehicles that are eligible for receiving federal fuel excise tax exemptions.
Earlier this month, Treasury Secretary Timothy Geithner sent a letter to a number of Congressional Members that outlines his support of the federal fuel tax exemption for small school buses. The overall federal fuel tax exemption has come under scrutiny over the past couple of years as the federal highway fund has teetered on the point of insolvency, especially as the federal transportation bill approaches its eighth month of extensions because Congress was unable to reauthorize SAFETEA-LU last fall.
Meanwhile, local IRS agents in New York determined that Type A school buses weren't eligible for the same fuel tax relief as larger school buses. That's when NSTA got involved. There was some discussion on the issue at the association's mid-winter meeting in La Jolla, Calif., earlier this year, but folks there wished to keep it close to the vest to keep other IRS offices from deciding to do the same, especially since a survey of NSTA members indicated that the fuel tax exemption was being universally applied elsewhere.
Then, in April during the association's annual spring board meeting and lobbying visit to Capitol Hill, NSTA members met with House Ways and Means staff and multiple New York Congressional Members to express their concern over an issue with the IRS in New York. After the meeting, four New York House members and one New York senator forwarded a letter to Geithner asking for clarification on the matter. The resulting letter from Geithner says that school bus operators should continue to receive IRS protection from paying fuel excise taxes for all school bus sizes and models. After all, the exemption should apply regardless of size but by vehicle usage.
The letter "promised that the IRS would be issuing new guidance on the matter soon and promised to address the concern with IRS Commissioner Douglas Shulman." The letter was forwarded to House Ways and Means staff, and the association is seeking a meeting with Treasury tax policy staff to ensure the guidance is clear. In the meantime, the New York bus companies were using Geithner's letter to fend off their local IRS offices.
Still, the some in the industry face some unwelcome future news when it comes to the fuel tax. The highway fund is still bankrupt with no relief in sight. While the exemption will likely still make it through the reauthorization process later this year (the latest extension deadline is Dec. 31), their could be a fuel tax increase. Raising the tax could be the only short-term way to fund state highway and transportation programs. It's the lesser of two evils.
Updated: June 22, 2010, 6:25 p.m. Pacific Time.