PA Tax Law News -- December 2013: Fuel Taxes Increased to Solve Transportation Funding Shortfall

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After years of effort by multiple administrations and after overcoming difficult political hurdles in the Pennsylvania House of Representatives, the Commonwealth has finally addressed its steadily worsening transportation funding problem. Seemingly dead after falling one vote short on November 18th, the House reversed itself on a bipartisan vote of 104-95 on November 19th, in support of increased funding. On November 21st the General Assembly sent HB 1060 to Governor Corbett and on November 25th he signed it into law as Act 89 of 2013.

Under HB 1060/Act 89, the 12 cents per gallon Liquid Fuels and Fuels Taxes will be eliminated and the revenue will be replaced by an increase in the Oil Company Franchise Tax (“OCFT”). Furthermore the current cap on the OCFT will be lifted over a five-year period. In all, PA taxes on gasoline are expected to rise by approximately 28 cents per gallon over that period.

In addition to fuel tax increases, HB 1060/Act 89 provides for numerous fine increases and for registration, license and other fee increases. After December 31, 2014, a county may impose an additional vehicle registration fee of $5 per vehicle, to be collected by the state and distributed to the county for local transportation purposes. An $8 per day fee on vehicle rentals at the Philadelphia International Airport will support construction of a facility to be used by customers of rental car companies.

The “average wholesale price,” which serves as the base for the Oil Company Franchise Tax, will increase as follows:

2013 - $1.25 per gallon
2014 - $1.87 per gallon
2015 & 2016 - $2.49 per gallon
2017 & later - greater of $2.99 per gallon or the actual average wholesale price for the twelve month period ending on prior September 30th

The OCFT millage rate will be as follows: 

                    Gasoline       Diesel
2014               217.5         272.5
2015               202.5         257.5
2016               201.5         256.5
2017               194.5         249.5
2018 & After  192.5         247.5

According to HB 1060/Act 89, approximately 9,000 of the 40,000 miles of Pennsylvania’s state roads are in poor condition and 4,400 of the 25,000 state-owned bridges are structurally deficient. In addition, 2,189 bridges over twenty feet in length owned by counties and local governments are structurally deficient.

PennDOT indicates that by the fifth year of the phase-in, the following additional annual amounts will be generated:

  • $1.3 billion for state roads and bridges
  • $480-495 million for public transportation
  • $237 million for local roads and bridges
  • $144 million for multi-modal funding
  • $30 million for dirt, gravel and low-volume roads
  • $86 million for PA Turnpike expansion