Federal NGV Tax Incentives

In an effort to reduce America’s dependence on foreign oil, reduce urban emissions and reduce greenhouse gases, the federal government offers vehicle buyers and owners a number of tax incentives to buy and operate natural gas vehicles. These include the following:

Income Tax Credits of Alternative Fuel Infrastructure
PL 109-58 provides for an income tax credit equal to 30 percent 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 after December 31, 2005 and expires December 31, 2011. 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 percent (whichever is smaller) of the cost for business property and $2,000 or 50% of the cost (whichever is smaller) for a home refueling appliances. The credit was set to expire on 12/31/2010 but was extended by Congress in December of 2010. The extension was included in the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (PL 111-312). PL 111-312 extends the credit for an additional year at 30% or $30,000 ($1,000 for home refueling). That law also includes an incentive allowing companies to expense 100% of the cost of new capital acquisitions in 2011. The bonus depreciation provision also extends to capital equipment placed in service after September 8, 2010. For 2012, bonus depreciation is worth 50% of the cost of property placed in service. Persons intending to take advantage of tax credits and bonus depreciation provisions should consult with their tax advisors to understand how these provisions affect each other and also whether any limitations exist.
NGVAmerica Fact Sheet Alternative Fuel Infrastructure

Excise Tax Credit to the Seller of CNG or LNG
PL 109-59 provides for a tax credit of 50-cent per gasoline-gallon-equivalent of CNG or liquid gallon of 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. This credit was extended as part of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (PL 111-312). This law not only extends the credit for 2011 but makes it retroactive for fuel sales or use during 2010. PL 111-312 includes special instructions directing the Treasury Department to develop procedures allowing for a one-time claim for any fuel used or sold in 2010. The IRS has issued guidance (Notice 2011-10) directing that all claims relating to 2010 fuel use or sales must be made no later than August 1, 2011. For more information on this incentive, click below.
NGVAmerica Fact Sheet Fuel Tax Credit

Income Tax Credits for Alternative Fuel Vehicles (Expires as of 12/31/2010)
PL 109-58 provided for an income tax credit for the purchase of a new, dedicated alternative fuel vehicle of 50 percent of the incremental cost of the vehicle, plus an additional 30 percent if the vehicle meets certain tighter emission standards. These credits ranged from $2,500 to $32,000 depending on the size of the vehicle. The credit was effective after December 31, 2005 and expires on December 31, 2010. The IRS has indicated that simply having a sales contract for a new motor vehicle is not sufficient to claim this credit as the vehicle also must be placed in service in the tax year in order to qualify. While Congress did not extend this credit, it did enact a new bonus depreciation provision that allows companies to expense 100% of the cost of new capital equipment. This provision extends to transportation equipment used to transport persons or goods. This provision will be useful to businesses that acquire NGVs in 2011. The bonus provision also applies to equipment placed in service after September 8, 2010. For 2012, bonus depreciation is worth 50% of the cost of property placed in service. Persons intending to take advantage of the bonus depreciation provisions should consult with their tax advisors to understand how these provisions work and whether any limitations exist. The IRS has issued guidance addressing the limitations that exist with respect to passenger cars, and some trucks and vans. To review Revenue Procedure 2011-21, click here: .
NGVAmerica Fact Sheet Alternative Fuel Vehicles