Archive for category: Policy

It’s Tax Time! Understanding Alternative Fuel and Infrastructure Tax Credits

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A photo of tax forms, a pen, and a calculator.

Recent federal tax incentive extensions and changes impact alternative fuel and infrastructure tax credits.

The Consolidated Appropriations Act of 2016 (H.R. 2029) retroactively extended several tax credits, including theAlternative Fuel Excise Tax Credit and Alternative Fuel Infrastructure Tax Credit. It also included updates to the calculation method for Alternative Fuel Excise Tax Credit amounts, specifically for propane and liquefied natural gas(LNG). Below we discuss three frequently asked questions about these credits.

How have the Alternative Fuel Excise Tax Credit amounts changed for propane and LNG in 2016 and beyond?

The Alternative Fuel Excise Tax Credit applies to alternative fuel sold or used to operate a motor vehicle. Previously, the excise tax credit amount for propane and LNG was based on a volumetric basis ($0.50 per gallon). For fuel sold or used starting January 1, 2016, however, the excise tax credit amount for propane and LNG is based on an energy equivalent basis. This means the credit for propane is now measured per gasoline gallon equivalent (GGE) and LNG is measured per diesel gallon equivalent (DGE). Specifically, the updated Internal Revenue Service (IRS) Form 8849, Schedule 3 defines 2016 tax credit rates for propane and LNG as follows:

  • Propane: One GGE is equal to 5.75 pounds (lbs.) or 1.353 gallons of propane.
  • LNG: One DGE is equal to 6.06 lbs. or 1.71 gallons of LNG.

What does this mean for propane and natural gas retailers and fleets? In short, the tax credit for the same amount of fuel is now less:

  • The propane tax credit was previously $0.50 per gallon and is now $0.50 per GGE (1.353 gallons of propane), which equates to $0.37 per gallon.
  • The LNG tax credit was previously $0.50 per gallon and is now $0.50 per DGE (1.71 gallons of LNG), which equates to$0.29 per gallon.

The tax credit amount for compressed natural gas (CNG) is still based on the GGE, where one GGE is equal to 121 cubic feet.

Natural Gas Vehicles for America (NGVAmerica) provides additional information on federal tax incentives for LNG and CNG, and highlights the impacts of the recent tax credit changes in the article, New Year Rings in Changes for CNG and LNG in 2016. The National Propane Gas Association explains the excise tax equalization for propane.

So, you said the Alternative Fuel Excise Tax Credit was retroactively extended. Does that mean I can claim it for fuels sold or used in 2015?

Yes! Both the federal Alternative Fuel Excise Tax Credit and Biodiesel Mixture Excise Tax Credit were extended to cover 2015, meaning that propane, CNG, LNG, hydrogen, and biodiesel sold or used in 2015 are eligible for the federal tax credit. To file for the tax credit, registered claimants must submit a single one-time 2015 claim with IRS Form 8849, as well as the accompanying Schedule 3. The deadline to submit a claim for fuels sold or used in 2015 is August 8, 2016.

Please note that the tax credit amount for propane and LNG sold or used in 2015 is based on the previous, volumetric rate of $0.50 per gallon.

For additional information on claiming the tax credit for fuels sold or used in 2015, please see IRS Notice 2016-05.

Are tax-exempt entities eligible for the Alternative Fuel Infrastructure Tax Credit?

While a tax-exempt entity, such as a school or state government fleet, may not be eligible to claim the Alternative Fuel Infrastructure Tax Credit directly, the entity selling the fueling infrastructure to the tax-exempt entity can claim the credit and pass the “discount” along to the fleet. According to Title 26 of the United States Code, Section 30C(e)(3), the entity selling the fueling equipment to the tax-exempt entity can be treated as the taxpayer and claim the Alternative Fuel Infrastructure Tax Credit, but only if the seller discloses the amount of the credit allowable to the tax-exempt purchaser in writing. In practice, this means the tax-exempt fleet would have the opportunity to use this information to request a discount. However, the infrastructure seller is not required to pass along any savings associated with the tax credit.

For more information on how tax-exempt entities may be eligible for the Alternative Fuel Infrastructure Tax Credit, please see the IRS Instructions for Form 8911.

Please note that the Technical Response Service recommends consulting a qualified tax professional or the IRS before making any tax-related decisions.

Summary of Alternative Fuel Tax Credit Extensions in the Consolidated Appropriations Act of 2016, H.R. 2029

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On Friday, December 18th, President Obama signed the Consolidated Appropriations Act of 2016 (H.R. 2029). Division Q, the Protecting Americans from Tax Hikes Act (PATH Act), retroactively extends many tax credits.

There are several PATH Act provisions with implications for Clean Cities portfolio items:

  • Alternative Fuel Infrastructure Tax Credit. Section 182 extends the tax credit for alternative fuel infrastructure through December 31, 2016. Fueling equipment for natural gas, propane, liquefied hydrogen, electricity, E85, and biodiesel are eligible for a tax credit of 30%, up to $30,000. Residential fueling equipment may receive a tax credit up to $1,000.
  • Alternative Fuel Mixture Excise Tax Credit. Section 192 also extends the $0.50 per gallon tax credit for alternative fuel used to produce a mixture containing at least 0.1% gasoline, diesel, or kerosene through December 31, 2016. Alternative fuel blenders must be registered with the Internal Revenue Service (IRS).
  • Biodiesel Income Tax Credit. Section 185 extends the biodiesel income tax credit through December 31, 2016. A taxpayer that delivers unblended biodiesel (B100) into the tank of a vehicle may be eligible for a $1.00 per gallon of biodiesel, agri-biodiesel, or renewable diesel tax credit.
  • Biodiesel Mixture Excise Tax Credit.Section 185 also extends the $0.50 per gallon tax credit for biodiesel, agri-biodiesel, or renewable diesel used to produce a mixture containing at least 0.1% gasoline, diesel, or kerosene through December 31, 2016. Alternative fuel blenders must be registered with the IRS.
  • Second Generation Producer Tax Credit.Section 184 extends the tax credit for second generation biofuel producers through December 31, 2016. Second generation biofuel producers registered with the IRS may be eligible for a $1.01 per gallon of biodiesel tax credit.

The changes outlined above are effective immediately. To view the full text of the PATH Act, visit https://www.gpo.gov/fdsys/pkg/BILLS-114hr2029enr/pdf/BILLS-114hr2029enr.pdf. See the Alternative Fuels Data Center Federal Laws and Incentives page for descriptions of each incentive.

Question of the Month

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Question of the Month: What are the new credit allocations that were established under the U.S. Department of Energy’s (DOE)’s Alternative Fuel Transportation Program (Program) earlier this year? How can I help spread the word on these new Energy Policy Act (EPAct) compliance pathways?

Answer: DOE issued a final rule on March 21, 2014, that establishes credit levels for additional means by which covered state and alternative fuel provider fleets operating under the Program’s Standard Compliance(http://www.eere.energy.gov/vehiclesandfuels/epact/state_standard_compliance.html) option may earn credits. These credits may be used toward compliance with a fleet’s alternative fuel vehicle (AFV) acquisition requirements. DOE promulgated the rule pursuant Congress’ direction, set forth in Section 133 of the Energy Independence and Security Act of 2007. 

Vehicles
The new credit allocations address the acquisition of various types of electric drive vehicles and allow covered fleets to earn credits under Standard Compliance for some vehicles that do not meet the EPAct 1992 definition of an AFV. Newly eligible vehicles include the following (with their credit allocations):

  • Certain hybrid electric vehicles (HEVs) – one-half credit
  • Plug-in electric vehicles – one-half credit
  • Fuel cell electric vehicles – one-half credit
  • Neighborhood electric vehicles – one-fourth credit

Medium- and heavy-duty HEVs are also eligible for one-half credit after a fleet has met its light-duty AFV acquisition requirements.

Infrastructure
Acquiring the electric drive vehicles noted above is not the only new way to earn credits under EPAct Standard Compliance. Fleets may now earn credits for investments of their own funds (not grant funds or other monetary awards) in qualified alternative fuel infrastructure. For every $25,000 invested, a covered fleet may earn one credit, with a limit of five credits available per fleet per model year for private infrastructure investment, and ten credits per fleet per model year for public infrastructure investment.

Other Investments

Fleets may also earn credits for investments in alternative fuel non-road equipment and/or emerging technologies associated with the Section 133-identified vehicles. The credits for non-road equipment are similar to infrastructure – one credit for every $25,000 invested and a maximum of five credits may be earned per fleet per model year. Emerging technologies investments will earn a covered fleet two credits for the initial investment of $50,000 and one credit for every $25,000 invested thereafter, with a limit of five credits per fleet per model year.

Fleets may begin taking advantage of these new credit allocations for their efforts undertaken in model year 2014 and future model years.

How Can You Spread the Word?

Are you aware of any covered utility or state fleets that are building new fueling infrastructure?

  • Inform them they can earn EPAct credits.

Do you have an EPAct covered fleet stakeholder that needs an extra push to buy or lease HEVs?

  • Let them know that certain HEVs are now eligible for EPAct credits.

Do you or your stakeholders have questions regarding EPAct compliance?

Note that covered fleets are currently compiling their Program reports for model year 2014 (September 1, 2013 to August 31, 2014) activities, which are due by December 31, 2014.

For more information, refer to the following resources:

Clean Cities Technical Response Service Team

technicalresponse@icfi.com

800-254-6735

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