NGV Tax Incentives
At the start of 2013, federal NGV tax incentives were included and passed as part of the American Taxpayer Relief Act of 2012 (HR 8; PL 112–240). Included is a 50 cent credit per gallon or gasoline gallon equivalent for the sale of natural gas as a motor fuel and a credit for 30 percent of the cost of installing new natural gas refueling equipment for up to $30,000. The incentives are intended to expand the availability of natural gas refueling stations, increase the use of natural gas as a motor fuel, and reduce demand for petroleum motor fuels. For more information on these tax credits, visit our Federal NGV Tax Incentives page or see the fact sheets below.
LNG Federal Excise Tax
The equitable taxation of liquefied natural gas (LNG) is an import issue NGVAmerica is pursuing this year. The federal highway excise tax on both diesel and LNG is set at 24.3 cents per gallon (IRC 4041). However, LNG has less energy per gallon than diesel fuel. In fact, it takes about 1.7 gallons of LNG to equal the same energy content as one gallon of diesel. This results in LNG being taxed at 170 percent the rate of diesel on an energy equivalent basis. This inequity raises the cost of LNG versus diesel fuel and thereby reduces its natural economic advantages and slows its widespread adoption among heavy duty truckers. NGVAmerica is working with congress to change the way LNG is taxed—from a volume (gallon) to an energy content (diesel gallon equivalent) basis. For more information on this issue, visit the fact sheet below.
Federal Excise Tax on Heavy Duty Trucks
Another legislative goal is eliminating or amending the Federal Highway Excise Tax (FET) on Heavy Duty Trucks (IRC 4051, 4053). IRC 4051 currently imposes a 12 percent excise tax on heavy duty trucks, trailers, and tractors. The tax is a penalty because the 12 percent rate is assessed not only on the base cost of the truck but also on the incremental cost, unnecessarily adding to the already higher cost of these vehicles. The result is added sticker shock for buyers and a longer payback period. This tax makes it harder for many businesses that may be considering natural gas trucks to justify that initial purchase. Congress should do away with this tax or, at a minimum, amend section 4051 so that the incremental cost of natural gas trucks and other advanced technology trucks is exempt from the tax. For more on the FET issue, click on the fact sheet below.
Income Tax Credits for Acquiring NGVs
Reinstating the Income Tax Credits for Acquiring Natural Gas Vehicles (IRC 30B) would help further accelerate the adoption of NGVs. The Energy Policy Act (EPAct) of 2005 (PL 109–58) provided for an income tax credit for the purchase of a new, dedicated natural gas vehicle of up to 50 percent of the incremental cost of the vehicle, plus an additional 30 percent if the vehicle met certain tighter emission standards. Congress should reinstate the incentives for natural gas vehicles and extend them for a period of five years. The credits also should be expanded to provide an incentive for bi-fuel vehicles that operate primarily on natural gas and rely on gasoline or diesel as a backup. To learn more about these legislative goals and others, please reference the document below.
CAFE Standards and NGVs
U.S. Sen. Jim Inhofe (R-OK) has introduced S. 1355 that would increase the production of NGVs by improving parity among alternative fuel vehicles without taxpayer subsidies. S. 1355 encourages the production of more bi-fuel NGVs by amending the requirements imposed on automakers to meet the Corporate Average Fuel Economy (CAFE) standard. Currently, the U.S. Environmental Protection Agency (EPA) and National Highway Traffic Safety Administration (NHTSA) light duty vehicle rules for greenhouse gases and fuel economy (FE) base the FE of dual-fuel vehicles on a 50/50 fuel-use assumption and places limits on the number of credits that can be earned. In contrast, dedicated NGVs assume a 100 percent fuel use and are not subject to limits on credits. S. 1355 expands the definition of dedicated NGVs to include vehicles with a reserve gasoline tank to be used for incidental or emergency fuel use. Additionally, the bill amends CAFE standards to ensure NGVs are given equal treatment with electric vehicles. These amendments will ensure automakers receive the maximum number of credits for the production of natural gas vehicles.
Another important CAFE issue to understand is the inequitable treatment of NGVs under the statutory restrictions included in the Energy Independence and Security Act of 2007. The statutory restrictions have had the unintended effect of causing dual-fuel NGVs to be effectively treated as dedicated gasoline vehicles—effectively a “utility factor” of zero—under the CAFE standards until MY 2020. This statute also groups dual-fuel NGVs with ethanol flex-fuel vehicles (FFVs) and limits the combined credits these vehicles can receive through MY 2019. Since automakers are already receiving the maximum CAFE credits from existing FFV production, there are effectively no credits left for dual-fuel NGVs.
For a more thorough overview of this issue or to review S. 1355, click on the links below.
Information on Current Legislation
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