Federal Incentives

Current Incentives for Consumers

Income Tax Credits for Alternative Fuel Vehicles
PL 109-58 provides for an income tax credit for the purchase of a new, dedicated alternative-fuel vehicle of 50% of the incremental cost of the vehicle, plus an additional 30% if the vehicle meets certain tighter emission standards.

To qualify:

• A person or business must be a taxpayer
• The owner must be the original or first user of the vehicle
• The vehicle must be a dedicated NGV

These credits would range from $2,500 to $32,000 depending on the size of the vehicle. The credit is effective on purchases made after December 31, 2005, and expires on December 31, 2010.

Federal Incentives for Alternative Fueled Vehicles Based on Gross Vehicle Weight Rating (GVWR)

In general, the current tax credit values range from a low of $2,500 to a high of $32,000 depending on various factors. The tax code provides a minimum credit equal to 50% of the incremental cost for any new, dedicated NGV that meets federal Environmental Protection Agency (EPA) or California Air Resources Board (CARB) emissions standards. In all cases, purchasers should ask the seller or manufacturer for information on the tax credit value of their NGVs. The table below illustrates the relationship among size of the vehicle, the incremental cost of the vehicle, and the emissions performance of the vehicle.

In addition:

• The Energy Policy Act (EPAct) of 2005 (EPAct 2005, §1341, Pub.L.No. 109-48) provides an income tax credit for businesses and individuals that acquire alternative fuel motor vehicles
• The potential value of the tax credit varies depending on the size of the vehicle, the incremental cost of the vehicle, and the emissions performance of the vehicle
• In order to qualify for the incentive, a person or business must be a taxpayer, be the original or first user of the vehicle and the vehicle must be a dedicated natural gas vehicle

IRS NGV Resources

Find out how the IRS offers credits for purchasing an NGV or other alternative-fuel vehicles (AFVs). Visit these links for more information.

IRS Website: http://www.irs.gov/newsroom/article/0,,id=157632,00.html

IRS Qualified AFVs: http://www.irs.gov/businesses/article/0,,id=175456,00.html

IRS Interim AFV Guidance: http://www.irs.gov/pub/irs-drop/n-06-54.pdf

Current Incentives for Fuel Retailers

Income Tax Credits of Alternative Fuel Infrastructure
PL 109-58 provides for an income tax credit equal to 30% of the cost of natural gas refueling equipment, up to $30,000 in the case of large stations and $1,000 for home refueling appliances. The credit is effective on purchases placed in service after December 31, 2005, and expires December 31, 2010.
 
To qualify, the:

• Fueling equipment generally must be new
• Original use of the equipment must begin with the person claiming the credit
• Fueling equipment also must be used to refuel motor vehicles, which are defined as vehicles that have been manufactured primarily for “use on public streets, roads and highways.” Converted and/or retrofitted equipment will qualify for the tax credit if it previously was not used to refuel alternative fuel motor vehicles.

The American Recovery and Reinvestment Act of 2009 (PL 111-5) increased the value of the credit for property placed in service during 2009 and 2010. The credit value for these years is $50,000 or 50% of the cost (whichever is smaller) for business property and $2,000 or 50% of the cost (whichever is smaller) for a home refueling appliances.

Excise Tax Credit to the Seller of CNG or LNG
PL 109-59 provides for a tax credit of 50 cents per gasoline-gallon-equivalent of compressed natural gas (CNG) or liquid gallon of liquid natural gas (LNG) for the sale of CNG and LNG for use as a motor vehicle fuel. The credit went into effect October 1, 2006, and expired December 31, 2009. Both the House and Senate have proposed extending this provision through the end of 2010. The extension is expected to be retroactive back to the beginning of 2010. In addition, the NAT GAS Act (H.R. 1835, S. 1408), if enacted, would extend the 50-cent credit for CNG and LNG for a number of years.