Sidebar: Tax Breaks for Clean Cars, August 2003

sidebar:
tax breaks
for clean cars

The Job Creation and Worker Assistance Act of 2002 provides for a 10 percent tax credit, up to $4,000, to businesses and individuals who purchase a battery electric, fuel cell, or hybrid electric motor vehicle "powered primarily" by electricity before Dec. 31, 2006. The credit continues at full strength through the 2003 tax year, then begins phasing out incrementally for 2004 and stops altogether after the 2006 tax year.

Under the same date constraints, the IRS allows individuals and businesses to deduct up to $2,000 of the cost of an engine, tank, plumbing, and exhaust used in a clean-fuel automobile that operates on natural gas, LNG, LPG, H2, or alcohol. Business can take a deduction on refueling property as well.

On April 11, 2003, the U.S. House of Representatives passed H.R. 6, "The Energy Policy Act of 2003," which repeals the incremental phase-out of the existing provisions, allowing the full credit or deduction until Dec. 31, 2006. The legislation includes a few other modest incentives as well.

The Senate is expected to incorporate the $15.4 billion "Energy Tax Incentives Act of 2003," favorably reported by the Senate Finance Committee on April 2 this year, into its comprehensive energy legislation. Among the provisions of the bill are a specific tax credit for neighborhood electric vehicles and a per-gasoline-gallon equivalent credit for alternative fuels.

Assuming the Senate approves a comprehensive energy bill, the two legislative bodies will convene a conference to work through the differences in the two measures, according to Gail Hendrickson of the Electric Drive Transportation Association in Washington, D.C.

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