Report to the Congress

on

Nonhighway Recreational Fuel Taxes

Fiscal Years 1994 and 1995

Department of the Treasury

April 1997
4/15/97

The Honorable Bill Archer 

Chairman

Committee on Ways and Means

U.S. House of Representatives

Washington D. C. 20515

Dear Mr. Chairman:

Section 8003 of Public Law 101-240, the Intermodal Surface

Transportation Efficiency Act of 1991, provides that the Secretary

of the Treasury shall, within a reasonable period after the close

of each of fiscal years 1992 through 1996, submit a report to the

Committee on Ways and Means of the House of Representatives and the

Committee on Finance of the Senate specifying his estimate of the

amount of nonhighway recreational fuel taxes received in the

Treasury during such fiscal year.

Pursuant to that section, I hereby submit "Nonhighway Recreational

Fuel Taxes" for fiscal years 1994 and 1995.

I am sending a similar letter to Representative Rangel.

Sincerely,

/signed/

Donald C. Lubick

Acting Assistant Secretary

(Tax Policy)

Enclosure
4/15/97

The Honorable William V. Roth, Jr.

Chairman

Committee on Finance

United States Senate

Washington D. C. 20510

Dear Mr. Chairman:

Section 8003 of Public Law 101-240, the Intermodal Surface

Transportation Efficiency Act of 1991, provides that the Secretary

of the Treasury shall, within a reasonable period after the close

of each of fiscal years 1992 through 1996, submit a report to the

Committee on Ways and Means of the House of Representatives and the

Committee on Finance of the Senate specifying his estimate of the

amount of nonhighway recreational fuel taxes received in the

Treasury during such fiscal year.

Pursuant to that section, I hereby submit "Nonhighway Recreational

Fuel Taxes" for fiscal years 1994 and 1995.

I am sending a similar letter to Senator Moynihan.

Sincerely,

/signed/

Donald C. Lubick

Acting Assistant Secretary

(Tax Policy)

Enclosure
TABLE OF CONTENTS

page

Section I. Introduction ......................................... 1

Section II. Summary of Findings .................................. 1

Section III. Background ......................................... 1

A. Motor Fuel Excise Taxes ............................. 1

B. Allocation of the Motor Fuel Excise Taxes ............... 2

C. National Recreational Trails Trust Fund ................. 3

Section IV. Non-highway Recreational Fuel Taxes ..................... 3

A. Methodology ..................................... 4

B. Estimate ......................................... 4

Section V. Status of the National Recreational Trails Trust Fund .......... 6

Section VI. Summary and Conclusion ............................... 6

APPENDIX: Sources of Data and Other Organizations Contacted

Regarding Non-highway Recreational Fuels ................. 8

 
REPORT TO CONGRESS ON

NON-HIGHWAY RECREATIONAL FUEL TAXES 

I. INTRODUCTION

This report on non-highway recreational fuel taxes has been prepared by the Office of Tax

Analysis (OTA) pursuant to a Congressional mandate in the Intermodal Surface Transportation

Efficiency Act (ISTEA) of 1991 (P.L. 101-240). 

Section 8003 of the ISTEA, which became effective December 18, 1991, established the

National Recreational Trails Trust Fund, which was to be funded in part by revenues received by the

Highway Trust Fund from non-highway recreational fuel taxes. Section 8003(d) of the ISTEA

requires the Secretary of the Treasury to submit, following each fiscal year from 1992 through 1996,

a report to the Congressional tax-writing committees specifying Treasury's estimate of the amount

of non-highway recreational fuel taxes received in the Treasury each fiscal year. Treasury's report for

fiscal years 1992 and 1993 was submitted to the Congress in June 1994.

II. SUMMARY OF FINDINGS

Non-highway recreational fuel taxes are defined in the ISTEA as taxes imposed under Internal

Revenue Code (IRC) sections 4041, 4081, and 4091 (to the extent attributable to the Highway Trust

Fund financing rate) with respect to fuel used in vehicles on recreational trails or back country terrain,

and fuel used in camp stoves and other non-engine uses in outdoor recreational equipment. Treasury

estimates that these taxes amounted to approximately $65 million and $66 million in fiscal years 1994

and 1995, respectively, or 0.36 percent and 0.31 percent, respectively, of total net Highway Trust

Fund receipts.

III. BACKGROUND

A. Motor Fuels Excise Taxes

Federal excise taxes are imposed under IRC sections 4041, 4081, and 4091 on special motor

fuels, gasoline and diesel fuel, respectively, used for highway transportation and certain other

activities. In fiscal year 1992, the federal excise tax on gasoline and special motor fuels was 14.1 cents

per gallon and the federal excise tax on highway diesel fuel was 20.1 cents per gallon. These rates

became effective December 1, 1990, following passage of the Omnibus Budget Reconciliation Act

of 1990. 

The Omnibus Budget Reconciliation Act of 1993 ( OBRA 93) increased the federal excise tax

on motor fuels by 4.3 cents per taxable gallon, effective October 1, 1993. Thus, in fiscal years 1994
and 1995, the federal excise tax on gasoline and special motor fuels was 18.4 cents per gallon. In

fiscal years 1994 and 1995, the federal excise tax on highway diesel fuel was 24.4 cents per taxable

gallon. 

Partial exemption from the general motor fuels excise taxes are available for various alcoholblended fuels, the most common being gasohol. Motor fuels used in farming, in other non-highway

business, by state and local governments, and by tax-exempt educational organizations are exempt

from taxation. 

B. Allocation of Motor Fuel Excise Taxes

In fiscal years 1994 and 1995, the Highway Trust Fund received 11.5 cents for each taxable

gallon of gasoline or special motor fuel, and 17.5 cents for each taxable gallon of highway diesel fuel.

These rates are known as the Highway Trust Fund (HTF) financing rates. In fiscal years 1994 and

1995, an additional 6.8 cents per taxable gallon of gasoline, special motor fuel, and diesel fuel was

retained in the General Fund for deficit reduction (the deficit reduction rate). An additional 0.1 cents

per gallon was transferred into the Leaking Underground Storage Tank (LUST) trust fund.1

With the exception of gasoline and special motor fuels used in motorboats and small engine

outdoor power equipment, effective October 1, 1995, the deficit reduction rate will become 4.3 cents

per gallon and the Highway Trust Fund financing rate will become 14 cents per taxable gallon of

gasoline and special motor fuel, and 20 cents per taxable gallon of highway diesel fuel. For gasoline

and special motor fuels used in motorboats and small-engine outdoor power equipment the deficit

reduction and HTF financing rates will remain 6.8 cents and 11.5 cents per gallon, respectively.2

The ISTEA extended the HTF taxes, as well as the motorboat and small engine trust fund

taxes, through September 30, 1999, while the LUST trust fund tax expired December 31, 1995. The 3

deficit reduction rate is permanent.
C. National Recreational Trails Trust Fund

Section 8003(a) of the ISTEA added section 9511 to the IRC, establishing the National

Recreational Trails Trust Fund (NRTTF). Amounts credited to the NRTTF are available, as provided

in appropriations acts, to carry out the purposes of ISTEA sections 1302 and 1303, which together

are often cited as the "Symms National Recreational Trails Act of 1991." In general, section 1302

authorizes a program allocating funds to the States for providing and maintaining recreational trails,4

and section 1303 establishes a national recreational trails advisory committee.

Among the revenue sources to be credited to the NRTTF pursuant to section 9511 are

amounts described in IRC section 9503(c)(6). That section requires the Secretary of the Treasury

to pay "from time to time from the Highway Trust Fund into the National Recreational Trails Trust

Fund" amounts equal to the lessor of: (1) 0.3 percent of total HTF receipts for the period for which

payment is made or (2) the amount obligated under ISTEA section 1302 for expenditure from the

NRTTF, during the fiscal year. The percentage that non-highway recreational fuel taxes bear to HTF

receipts was to be adjusted by Treasury within one year of ISTEA's enactment, and may be adjusted

by Treasury in future years, subject to certain restrictions.5

IV. NON-HIGHWAY RECREATIONAL FUEL TAXES

Non-highway recreational fuel taxes are taxes imposed under IRC sections 4041, 4081, 

and 4091 (to the extent attributable to the Highway Trust Fund financing rate) with respect to

fuel used in vehicles on recreational trails or back country terrain, and fuel used in camp stoves

and other non-engine uses in outdoor recreational equipment. Prior to enactment of ISTEA, no

provision existed to transfer these taxes from the Highway Trust Fund, so they were available to

finance authorized highway and mass transit projects. Under ISTEA, these taxes are available to

finance authorized recreational trails programs.
A. Methodology

Comprehensive data on nationwide use of motor fuels on recreational trails or back country

terrain are not readily available from any single source. The Department of Transportation's Federal

Highway Administration (FHWA) annually publishes estimates of non-highway gasoline use by type

of use. For 1994, FHWA estimated that 2.9 billion gallons were used off-highway, of which 2.8

billion gallons were consumed by private (non-government) entities. This represents 2.4 percent of

total FHWA-reported gasoline consumption for that year. However, recreation is not one of the

6

specified non-highway uses.

In developing its estimate of non-highway recreational fuel taxes, OTA contacted a variety

of organizations knowledgeable about recreational fuel use, including the FHWA, state agencies,

trade associations representing vehicle and equipment manufacturers, trail user groups, trade

publications, and others. The consensus that emerged from these discussions was that nearly all of

the federally-taxed fuel consumed in recreational uses was gasoline (rather than special motor fuels

and diesel fuel), and that the major uses of such fuels are in motorcycles, all-terrain vehicles,

snowmobiles, and four-wheel drive vehicles. A very small amount of gasoline is also used in camp

stoves and other outdoor camping equipment.7

OTA's estimate of non-highway recreational fuel taxes was obtained by taking the product of

1) an estimated number of gallons of gasoline used off-highway nationwide for defined recreational

purposes and 2) the fiscal year 1994 and 1995 HTF financing rate of 11.5 cents per gallon. The

estimate of total annual gallons consumed was obtained by summing estimated annual gallons

consumed by each type of vehicle used off-highway for recreational purposes, and then adding a small

estimated amount for camping uses. For each vehicle type, the estimated annual gallons consumed

were derived as the product of three variables: (1) the vehicle population, (2) the estimated percent

of vehicle population used off-highway for recreational purposes, and (3) the estimated average

annual gallons consumed per vehicle in recreational uses.

B. Estimate

For fiscal year 1994, OTA estimates that $65 million in non-highway recreational fuel taxes

were received in the Treasury, based on estimated taxable gasoline consumption for such use of 565

million gallons. For fiscal year 1995, non-highway recreational fuel taxes are estimated to be $66

million, based on taxable consumption for such use of 574 million gallons. This consumption

represents about 0.80 percent of total taxable gasoline consumption. Motorcycles and all-terrain

vehicles combined account for the largest share of estimated annual non-highway recreational fuel
use, followed by light trucks, and then snowmobiles. Camping equipment accounts for a very small

amount and share of the total. For fiscal years 1994 and 1995, total HTF revenues, net of refunds,

were $18,258 million and $21,022 million respectively. Thus, estimated non-highway recreational fuel

taxes represented 0.36 percent and 0.31 percent, respectively, of total HTF revenues. Table I

8

summarizes these findings.

In estimating the relevant vehicle populations, OTA relied primarily on state vehicle

registration information, supplemented by information on the number of vehicles not registered in

any state but used off-highway for recreational purposes. While no definitive information could be

found concerning either the frequency of non-highway recreational use or the average annual

gasoline use per vehicle on a nationwide basis, values were assumed for these parameters based on

discussions with industry representatives, trade publications, and state officials. OTA also consulted

with the FHWA, which had conducted a state-by-state survey of recreational fuel use, for the purpose

of allocating recreational trails funds to individual states.9
Table 1

Non-highway Recreational Fuel Taxes

 

FY 1994 FY 1995

Non-highway Recreational Fuels:

Gallons Consumed 565 million 574 million

HTF Financing Rate $0.115 per gallon $0.115 per gallon

Tax Receipts $65 million $66 million

Highway Trust Fund Net Tax Revenue $18,258 million $21,022 million

Non-highway Recreational Fuel Taxes 

as Percent of HTF Receipts 0.36 percent 0.31 percent

V. STATUS OF THE NATIONAL RECREATIONAL TRAILS TRUST FUND

As mentioned above, IRC Section 9503(c)(6) limits the amount of non-highway

recreational fuel taxes that may be paid into the NRTTF during any fiscal year to the amount

that has been obligated to be spent from the fund that year. However, since no appropriations have 10

ever been made from the NRTTF, no obligations have been incurred, and, as a result, no transfer of

funds has ever been made. At this time, the trust fund has a zero balance. If funds are appropriated

from the NRTTF and obligations against the fund are incurred, Treasury will transfer amounts as

needed to cover anticipated outlays and provide an adequate working balance.

VI. SUMMARY AND CONCLUSION

 The Intermodal Surface Transportation Act of 1991 established the National Recreational Trails

Trust Fund (NRTTF) and directed Treasury to report to Congress annually its estimate of

non-highway recreational fuel taxes. Such taxes are those fuel taxes received in the Treasury (to the

extent attributable to the Highway Trust Fund financing rate) resulting from use of vehicles on

recreational trails and back country terrain, and certain camping activities. Treasury has found that
these taxes amounted to approximately $65 million and $66 million in fiscal years 1994 and 1995

respectively, or 0.36 percent and 0.31 percent respectively of total Highway Trust Fund revenues.

 The NRTTF currently has a zero balance, and no monies have ever been credited to the fund.

Transfers of taxes from the Highway Trust Fund to the NRTTF for any year cannot exceed the

amount obligated to be spent from the trails fund. Since no funds have ever been appropriated from

the NRTTF, no obligations against the fund have been incurred, and no monies have been transferred

to the fund. If an appropriation is made from the NRTTF, Treasury will transfer amounts from time

to time during the year sufficient to cover anticipated outlays and provide an adequate working

balance.
APPENDIX

SOURCES OF DATA AND OTHER ORGANIZATIONS CONTACTED

REGARDING NON-HIGHWAY RECREATIONAL FUELS

Published Data Sources

Fuel Used for Off-Highway Recreation, Oak Ridge National Laboratory,

 U.S. Department of Energy, July 1994. 

Highway Statistics, U.S. Department of Transportation, Federal

 Highway Administration, Washington, DC, various issues.

Motorcycle Statistical Annual, Motorcycle Industry Council, Inc.,

 Irvine, CA, various issues.

 MVMA - Motor Vehicle Facts & Figures, American Automobile

 Manufacturers Association, Inc., Detroit MI, various issues.

1987 Census of Transportation: Truck Inventory and Use Survey,

United States. U.S. Department of Commerce, Washington,

 DC, August 1990.

1985-87 Public Area Recreation Visitor Survey, U.S. Department of 

 Agriculture, Forest Service, Athens, GA, July 1988.

Report of the 1994 Utah Off-Highway Vehicle Users Survey, Utah 

 Department of Natural Resources, June 1994.

Gasoline Consumption of Off-Highway Vehicles in Colorado, Colorado 

 Department of Transportation, Office of Financial Management 

 and Budget, June 1992.

Off-Road Vehicle Study, Washington State Department of 

 Transportation, December 1986.

A Study to Determine Fuel Tax Attributable to Off-Highway and Street Licensed

 Vehicles Used for Recreation Off-Highway, California Department of Transportation,

 November 1990. 

Other Organizations Contacted

State Agencies

Arizona Department of Transportation, Transportation Planning 

 Division, Phoenix, AZ.

California Department of Parks and Recreation, Off-Highway Motor

 Vehicle Recreation Division, Sacramento, CA.

Michigan Department of Natural Resources, Forest Management

 Division, Lansing, MI.
Oregon Department of Transportation, Highway Division, Salem, OR.

User Groups

TREAD LIGHTLY! On Public and Private Land, Ogden UT.

Coalition for Recreational Trails, Washington, DC

American Recreation Coalition, Washington, DC

Colorado Off-Highway Vehicle Coalition, Littleton, CO.

United 4 Wheel Drive Association, Felton, PA.

Trade Publications

Off Road, Argus Publishing Co., Los Angeles, CA.

Four Wheeler, Canoga Park, CA.

4-Wheeler & Off-Road, Petersen Publishing Co., Los Angeles, CA.

Industry Representatives

International Snowmobile Industry Association, Fairfax, VA.

Recreation Vehicle Industry Association, Reston, VA.

Coleman Corporation, Wichita, KS.

Specialty Equipment Market Association, Diamond Bar, CA. 

Association of International Automobile Manufacturers, Arlington, VA. 

Chrysler Corporation.

Ford Motor Company.

General Motors Corporation.