Gas power gets credit
Looking for an alternative to gasoline or diesel-fuel vehicles, many government fleet managers have turned to natural gas-powered vehicles (NGVs), which have a higher initial purchase price but cost less to operate and have a life-cycle cost advantage. New federal tax incentives now in place make NGVs even more affordable. In response, more fleet operators are purchasing NGVs for the first time or are adding more to existing fleets.
A provision in the Transportation Act of 2005 gives sellers of vehicular natural gas a $.50 motor fuels excise tax credit for each gallon of liquefied natural gas (LNG) or gasoline-gallon-equivalent (GGE) of compressed natural gas (CNG) that is dispensed. Where there is no sale of the fuel, the user gets the credit. Also, the credit is calculated without regard to the excise tax paid, if any. Government stations that sell fuel to residents and local businesses only pay a federal excise tax of $.183 per GGE of CNG or $.243 per LNG gallon on fuel sold to the public. So, if a city-owned CNG station dispenses 45,000 GGE of CNG each quarter, 2,000 GGE of which is sold to the public, the agency will be eligible for a $22,500 tax credit, will pay $366 in tax, and receive a net payment of $22,134.
The Energy Policy Act of 2005 says that buyers of alternative-fuel vehicles that were placed in service after Dec. 31, 2005, are eligible for a vehicle tax credit of 50 percent of the vehicle’s incremental cost as well as an additional 30 percent “bonus” credit if the vehicle meets the most stringent emissions standards. Gasoline- or diesel-powered vehicles that are retrofitted or re-powered to run on natural gas also qualify for the credit.
The amount of the available credit is capped based on the gross vehicle weight rating (GVWR). For lighter vehicles, such as cars up to 8,500 pounds, the incremental cost cap is $5,000, while vehicles over 26,000 pounds GVWR have an incremental cost cap of $40,000. For example, a dump truck with a natural gas engine that already meets EPA’s 2010 emission standards could receive a $32,000 credit, which is 80 percent of the incremental cost cap. A natural gas-powered Honda Civic GX, which is in the lowest GVWR grouping and meets its class’ toughest emissions standards, qualifies for an 80 percent, or $4,000, tax credit.
If the vehicle buyer is a tax-exempt entity, the credit may be transferred to the seller, which could be used to negotiate a lower purchase price or add vehicle upgrades. The seller can be a dealer, a third-party lease-finance company or another entity with tax liability that can receive a portion of the credit for assisting in the sale.
Another Energy Policy Act provision gives a tax credit for investment in alternative fueling station equipment. The credit is 30 percent of the cost of equipment placed into service after Dec. 31, 2005, and a cap of $30,000 per property applies. Like the vehicle credit, tax-exempt entities can give the credit to the seller as part of the purchase negotiation.
Because of credits like those, and other tax incentives, government fleet managers can better afford an alternative to traditional gasoline or diesel-powered vehicles while producing fewer emissions and reducing dependence on foreign oil.
For more information, visit NGV America online at www.ngvamerica.org.
The author is director of marketing and communications for Washington-based NGV America.