Download - NGV Tax Credit Provisions Overview & Status Update

NGV Tax Credit Provisions NGV Tax Credit Provisions Overview & Status UpdateOverview & Status Update

Richard KolodziejNGVAmerica

March 27, 2008March 27, 2008

OutlineOutline

• Fuel Excise Tax Credits

• Vehicle Income Tax Credits

• Fueling Infrastructure Income Tax Credits

• Other federal grants and funding

Natural Gas Fuel Excise Tax CreditNatural Gas Fuel Excise Tax Credit

• In 2004, Congress created the Volumetric Energy Excise Tax Credit (VEETC) for ethanol and biodiesel

• In 2005, SAFETEA-LU (Pub. L. No. 109-59) extended the VEETC tax credit to include:– CNG, LNG, LPG, Hydrogen, CTL, liquid hydrocarbons

derived from biomass

(continued)


• Value of credit:– For CNG: 50 cents per GGE– For LNG: 50 cents per LNG gallon

• This is an excise tax credit – not an income tax credit– Acts like a rebate -- whether entity owes any taxes or not

(continued)


• Credit effective: 10/1/2006• Scheduled to expire: 09/30/09

– Legislation introduced to extend it to 12/31/2010

• Credit goes to the seller of the CNG or LNG• If seller and buyer is the same, seller/buyer

gets the credit– Example: Truck fleet that owns its own CNG station

(continued)

Natural Gas Fuel Excise Tax CreditNatural Gas Fuel Excise Tax Credit• All entities taking the tax credit must register

with the IRS

• The credits must first be used to offset any excise taxes owed

• Excise tax:– CNG: 18.3 cents per GGE– LNG: 24.3 cents per LNG gallon

Motor Vehicle DefineMotor Vehicle Definedd• The tax credits for alternative fuels may be taken

for fuel used in a “motor vehicle” • The IRS regulations define “motor vehicle” in

section 48.4041-8(c) • Definition includes all types of vehicles

propelled by motor designed for carrying or towing loads from one place to another– Regardless of whether vehicle registered for highway use

(continued)

Motor Vehicle DefineMotor Vehicle Definedd• The term includes:

– Forklifts (industrial trucks)– Yard hostlers

• The term does NOT include:– farm tractors, trench diggers, power shovels, bulldozers,

road graders or rollers, and similar equipment which does not carry or tow a load

– Nor does it include any vehicle which moves exclusively on rails

How Tax Exempt Entities Benefit from How Tax Exempt Entities Benefit from Fuel Tax CreditsFuel Tax Credits

• Tax exempt sellers qualify for a payment, not a tax credit

• To qualify, tax exempt entity must:– “Produce” and use fuel for own purposes, or– “Produce” fuel and sell to others, or – Purchase bulk fuel and dispense fuel using their own

refueling equipment

Non-Taxable Uses of FuelsNon-Taxable Uses of Fuels• On farm for farming purposes• Off-highway business use• Boat engaged in commercial fishing• Exclusive use by nonprofit education

organization• Exclusive use by state & local governments• Intra-city urban buses

Natural Gas Fuel Excise Tax CreditNatural Gas Fuel Excise Tax Credit-- IRS Guidance ---- IRS Guidance --

• Guidance released Sept. 2006 – Notice 2006-92

• Clarifies who takes the credit• Unit of measurements to be used:

– 121 cubic feet = GGE for CNG tax credit– 126.67 cubic feet = GGE for CNG excise tax– LNG rate based on gallons

(continued)


• Clarifies ability of state and local government and certain non-profits to take credit (receive payment)

• Identifies appropriate forms to file• Clarifies responsibility for excise tax and rates

to be applied

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• To take credit must register with IRS– Form 637, “Application for Registration”

• Must first use credit against excise tax liability– Form 720, “Quarterly Excise Tax Return”

• Excess credit taken annually as income tax credit – Form 4136, “Credit for Fed. Tax Paid on Fuels”– Offsets tax liability and is refundable– Alternatively, taxpayers can offset Estimated Corp. Tax

during year(continued)


• Tax exempt entities file Form 8849, schedule 6 to receive payment

• The Tax Technical Corrections Act of 2007 ((HR 4839) (Pub. L. No. 110-172) amends tax payment provisions so that corporations also may claim payments during the year – Expect that this will include filing Form 8849, Sch. 6

Motor Vehicle Tax CreditMotor Vehicle Tax Credit• EPAct Sec. 1341 (codified at 26 USC 30B)

includes income tax credits for dedicated Alternative Fuel Vehicles

• Applies to vehicles placed in service after Jan. 1, 2006– Prior to Jan. 1, 2006 some of these vehicles qualified for

clean-fuel vehicle deduction per EPAct 1992 provisions

• Schedule to expire: 12/31/2010– Industry working to extend that

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Alternative Motor Vehicle Tax CreditAlternative Motor Vehicle Tax Credit

• Tax credits go to the purchaser of the vehicle, including:– Businesses– Individuals

• If vehicle leased, the credit goes to the lessor, not the person or business leasing the vehicle

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Alternative Motor Vehicle Tax CreditAlternative Motor Vehicle Tax Credit

• Seller’s may take credit if vehicle sold to tax exempt entity:– Seller must disclose the full tentative value

of the credit to customer• Motor vehicles defined as 4 wheel vehicles

manufactured primarily for use on public streets, roads and highways

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Alternative Motor Vehicle Tax CreditAlternative Motor Vehicle Tax Credit• Only dedicated AFVs qualify for the credit

– Bi-fuel and flexfuel vehicles do not qualify • AFVs that meet “cleanest available emission

standards” qualify for a credit of 80% of incremental cost– All others qualify for credit of 50% of incremental

cost• Mix-fuel CNG or LNG vehicles earn less credit

Alternative Motor Vehicle Tax CreditAlternative Motor Vehicle Tax Credit-- Credit Value ---- Credit Value --

Vehicle Weight Inc. Price 80% Credit 50% Credit

<= 8,500 lbs. gvwr $5,000 $4,000 $2,500

8,501 – 14,000 lbs. gvwr $10,000 $8,000 $5,00014,001 – 26,000 lbs. gvwr $25,000 $20,000 $12,500

> 26,001 lbs. gvwr $40,000 $32,000 $20,000

Alternative Motor Vehicle Tax CreditAlternative Motor Vehicle Tax Credit-- IRS Guidance ---- IRS Guidance --

• IRS issued guidance June 2006 - Notice 2006-54• Establishes voluntary certification process for

manufacturers• Clarifies that aftermarket conversions and repowers

qualify• Does not provide additional guidance on “cleanest

available technology”– LDV - likely requires EPA Bin 2 or CA SULEVII

• IRS certifies vehicles/engines on case-by-case basis(continued)

Alternative Motor Vehicle Tax CreditAlternative Motor Vehicle Tax Credit-- IRS Guidance ---- IRS Guidance --

• Numerous manufacturers have now had tax credit values of their vehicles certified by the IRS

• IRS publication of tax credit values:– http://www.irs.gov/newsroom/article/

0,,id=161076,00.html (LDV values)– http://www.irs.gov/businesses/article/

0,,id=175456,00.html (HD and aftermarket conversion values)

Issues Not Addressed in IRS GuidanceIssues Not Addressed in IRS Guidance• Application to leases

– Although website and tax forms indicate lessor takes credit not the person leasing the vehicle

• Definition or clarification for “cleanest available emission standard”– Has been handled on case by case basis

• Recapture requirements • AMT applicability

– The statute and tax forms indicate vehicle credits are subject to AMT

Fueling Infrastructure CreditFueling Infrastructure Credit• EPAct § 1342 includes income tax credit for

alternative fuel refueling infrastructure• Includes equipment used to dispense:

– CNG, LNG, LPG, hydrogen, E85, biodiesel mixtures of 20% or more

• Credit values:– $30,000 or 30% of cost whichever is less (business

property)– $1,000 or 30% of cost whichever is less (personal

residence property)

(continued)

Fueling Infrastructure CreditFueling Infrastructure Credit• Credits replace the $100,000 tax deduction

provided for certain qualified refueling property allowed under EPAct 1992 (26 USC 179A)

Fueling Infrastructure CreditFueling Infrastructure Credit-- IRS Guidance ---- IRS Guidance --

• Notice 2007- 43 released May 2007 addresses fueling station credits

• Form 8911, “Alternative Fuel Vehicle Refueling Property Credit” – available

• Instructions clarify that credit may be taken for more than one refueling property– Maximum of $30,000 (or $1,000) per property– However, it was not clear from guidance and instructions

whether multiple dispensers at a single location qualify for separate credits

(continued)

Fueling Infrastructure CreditFueling Infrastructure Credit-- IRS Guidance ---- IRS Guidance --

• Tax Technical Corrections Act of 2007 (HR 4839) (Pub. L. No. 110-172)– Clarifies that only 1 credit is allowed each year for

equipment installed at a single location

Other Federal Grants and FundingOther Federal Grants and Funding

• CMAQ– Federal grant program that sends billions of dollars

through MPOs each year– Funding can be used for:

• Alternative fuel vehicle purchase• Upgrades and modifications of transit facilities that go

beyond routine maintenance

• DOE SEP(continued)

Other Federal Grants and FundingOther Federal Grants and Funding

• EPA Clean School Bus Program• FAA VALE• Diesel Emission Reductions Program (DERA)

– EPA program to make grants and loans to State and local government agencies and non-profit organizations for reducing emissions from diesel engines.

– Repowers, retrofits and rebuilds are eligible. . • Congressional Earmarks

Contact InformationContact Information

Jeffrey ClarkeGeneral Counsel & Regulatory Director

NGVAmerica(202) 824-7364

[email protected]

NGV Tax Credit Provisions NGV Tax Credit Provisions Overview & Status UpdateOverview & Status Update

Richard KolodziejNGVAmerica

March 27, 2008March 27, 2008