Natural Gas – Conversions, Vehicles and Technology

Alternative-Fuel Tax Credits for Fleets

September 2013, Green Fleet Magazine - Feature

by Richard Battersby, University of California, Davis

The Internal Revenue Service (IRS) might not be the first agency that springs to mind when seeking funding for alternative-fuel vehicles, but, in reality, the IRS has several programs aimed to directly benefit users of alternative fuels and alternative-fuel vehicles.

In addition to the $7,500 IRS tax credit available for the purchase of certain plug-in electric vehicle as covered in the September/October 2012 issue of Green Fleet magazine, there is also a 50-cents-per-gallon tax credit available for dispensing certain alternative fuels used to operate a motor vehicle.
In essence, this program funds back 50 cents for each gallon of a “qualified alternative fuel” dispensed. This easy-to-apply-for tax credit is available to fleets that qualify even if they are exempt from income taxes with only a minimum expenditure of time and effort. Most fleets will be able to gather the required records and complete the required paperwork in less than one hour.

Fleets dispensing CNG, LNG, LPG/propane autogas, and the less common alternative fuels are all eligible for this tax credit. The operative word here is “dispensing,” as the fleet claiming the tax credit must be what the IRS refers to as an “Alternative Fueler.”
Fleets dispensing CNG, LNG, LPG/propane autogas, and the less common alternative fuels are all eligible for this tax credit. The operative word here is “dispensing,” as the fleet claiming the tax credit must be what the IRS refers to as an “Alternative Fueler.”

What Alternative Fuels are Eligible?

The American Taxpayer Relief Act of 2012 extended the 50-cents-per-gallon federal alternative motor fuel tax credit through Dec. 31, 2013, and also made it retroactive for all of 2012. Qualifying fuels under this program include compressed natural gas (CNG), based on 121 cubic feet; liquefied natural gas (LNG); liquefied petroleum gas (LPG), aka propane autogas; P-Series fuel; liquid fuel derived from coal through the Fischer-Tropsch process; and compressed or liquefied gas derived from biomass.
While this federal program has been around since 2005, many eligible fleets may not be aware of its existence and could be missing out on an opportunity to bring external revenue into their operation.

Who Qualifies?

Fleets dispensing CNG, LNG, LPG/propane autogas, and the less common alternative fuels previously noted are all eligible for this tax credit. The operative word here is “dispensing,” as the fleet claiming the tax credit must be what the IRS refers to as an “Alternative Fueler.”

Simply purchasing or using one of the alternative fuels listed is not sufficient to qualify for the tax credit. For a fleet to be eligible to claim the credit it must be liable for reporting and paying the federal excise tax on the sale or use of the alternative fuel. Tax-exempt fleets (such as state and local governments) that dispense one of the listed alternative fuels from an onsite fueling station for use in multiple vehicles qualify for the incentive.

In addition to alternative fuel dispensed directly into vehicles from fueling facilities, propane autogas in replaceable canisters used to power equipment such as forklifts and airport tugs is also eligible for the tax credit.

In a 1965 ruling, the IRS determined that delivery of fuel in general-purpose, portable containers to an end user does not constitute “delivery into the fuel supply tank of a motor vehicle.”
Therefore, operators of equipment powered by propane autogas supplied in canisters are also eligible to receive the tax credit.

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