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Question of the Month: What are state and local governments doing to incentivize alternative fuels and alternative fuel vehicles (AFVs)?

March 3, 2017 by Clean Cities

There are many notable incentive activities at the state and local levels. Many states offer incentives for alternative fuels that advance specific environmental and energy security goals, while cities provide even more localized support.

States are targeting vehicles, infrastructure, and other means to encourage AFV adoption. Below are various types of incentives, as well as hyperlinked examples of each:

  • AFV Purchase Incentives: States offer grants, rebates, and tax credits for the purchase of AFVs. While some states may focus vehicle incentives on a particular fuel type, such as electric vehicles, others are more general in their support. States provide AFV purchase incentives to consumers, commercial fleets, and public fleets, such as schools and government agencies. Different incentive mechanisms tend to be more appropriate for different categories of vehicle purchasers; for example, grants are often limited to certain types of entities. Public fleets may not be liable for taxes, so they usually benefit more from grants than from tax credits. Private fleets can benefit from grants, rebates, and tax credits.
  • Fueling Infrastructure Purchase and Installation Incentives: Similar to AFV incentives, states provide grants, rebates, and tax credits for alternative fueling infrastructure. States usually create incentives for the physical fueling infrastructure, but many programs also support installation costs. Some states also offer a tax credit or tax reduction for the production or purchase of alternative fuel itself. Fueling infrastructure incentives may stipulate that the fueling or charging station must be available to the public, which helps to increase the availability of alternative fuels to a broader range of entities.
  • Other Incentives: In addition to financial support for the purchase of AFVs, states may give special benefits to AFV drivers. For example, some states allow high-occupancy vehicle lane access to AFVs, while others provide reduced registration fees, weight restriction exemptions, and emissions inspections exemptions.

Municipalities are also playing a role in supporting AFV deployment. Cities and counties incentivize AFVs in a number of ways, including by offering free or discounted parking, expediting permitting processes, and providing vehicle and infrastructure grants. For example, New Haven, CT, provides free parking on city streets for AFVs, while Los Angeles, CA, offers instant, online residential electric vehicle supply equipment permitting approval. The Alternative Fuels Data Center’s (AFDC) Local Laws and Incentives page provides more information on these and a greater array of other local options; while the page regarding local laws and incentives is not meant to be comprehensive, it provides users an idea of the different municipal programs and policies that exist (http://www.afdc.energy.gov/laws/local_examples). If you are aware of an innovative way that municipalities are supporting alternative fuels and vehicle acquisition, please contact the Clean Cities Technical Response Service at technicalresponse@icf.com to share the details.

For more information about state and local alternative fuel incentives, see the AFDC Laws and Incentives page (http://www.afdc.energy.gov/laws).

Clean Cities Technical Response Service Team
technicalresponse@icf.com
800-254-6735

Volkswagen Partial Consent Decree Overview

January 11, 2017 by Clean Cities

The Clean Cities Technical Response Service, as a result of questions and inquiries related to the 225 page “Volkswagen Partial Consent Decree” released by the U.S. Department of Justice, has produced the following information that provides a general summary of critical information included in the package along with links to important documents:

VW “Clean Diesel” Consent Decree: The Basics

  • Consent Decree between the U.S., California and VW et al. (Settling Defendants) re: VW 2.0L TDI settlement program
  • June 28, 2016, filed with the Court by Dept. of Justice, on behalf of EPA and State of California
  • July 6, 2016 Federal Register Notice set in motion.
  • 3 parts:
    • $10 billion + (estimated) for VW customers; 2.0 L diesel vehicle buyback/lease termination
    • $2.7 Billion Environmental Mitigation Trust Fund
    • $2 Billion ZEV Investment Commitment

$2.7 Billion Environmental Mitigation Trust Fund

  • $900 Million to be deposited by VW et al. into Trust Account not later than 30 days after the effective date.
  • 2 additional $900 Million deposits by VW et al. into Trust Account, not later than the 1st and 2nd anniversaries of the initial deposit.
  • Allocated among states, Indian tribes and Puerto Rico on a % basis to fund actions that will reduce NOx emissions where the 2.0 L Subject Vehicles were, are or will be operated.

$2 Billion ZEV Investment Commitment over 10 years

  • National ZEV Investment Plan
    • Developed by VW et al.; approved by EPA, which has sole authority for making decisions.
    • $1.2 Billion in four 30 month investment cycles for U.S., except California
  • California ZEV Investment Plan
    • Developed by VW et al.; approved by CARB, which has sole authority for making decisions.
    • $800 million in four 30 month investment cycles for California

$2.7 Billion Environmental Mitigation Trust Fund

  • Goal: Achieve reductions of NOx emissions in the United States.
    • (GHG emissions not addressed.)
  • Beneficiaries: States, Indian Tribes, D.C., Puerto Rico
  • $2.7 Billion over 3 years for Eligible Mitigation Actions.
    • Eligible Vehicle Classes/Equipment:
      • Class 8 Local Freight Trucks, Port Drayage Trucks
      • Class 4-8 School, Shuttle or Transit Bus
      • Freight Switchers
      • Ferries/Tugboats (marine)
      • Ocean Going Vessels Shorepower
      • Class 4-7 Local Freight Trucks (Medium Trucks)
      • Airport Ground Support Equipment
      • Forklifts
      • LD ZEV Supply Equipment
        • L1, L2 or fast charging equipment
        • LD hydrogen fuel cell vehicle supply equipment
      • DERA Option – Beneficiaries may use Trust Funds for non-federal match.
        • Use of funds as match for other Federal funding opportunities is uncertain (not mentioned).

Eligible Actions For HD and MD vehicles, freight switchers, ferries, tugboats

  • Repower with:
    • New diesel engine, including costs of installing engine
    • New Alternate Fueled (CNG, propane, Hybrid) engine, including costs of installing engine
    • New All-Electric engine/motor, including costs of installing engine and charging infrastructure*
  • Replace with:
    • New diesel vehicle
    • New Alternate Fueled (CNG, propane, Hybrid) vehicle
    • New All-Electric engine/motor, including costs of installing engine and charging infrastructure*
  • Funding % for each action ranges from 25% – 100% and varies based on ownership (government or non-government owned) and type of action.
  • Funding is allocated by State. See Table on page 207 of Appendix D-1 in the Partial Consent Decree https://www.epa.gov/sites/production/files/2016-06/documents/vwpartialsettlement-cd.pdf

*Infrastructure for other Alternative Fuels not eligible. Other Eligible Actions

  • Ocean Going Vessel (OGV) Shorepower
    • Costs of shore-side system, including cables, cable management systems, shorepower coupler systems, distribution control systems and power distribution components
  • Airport Ground Support Equipment
    • Repower or replace with all-electric engine/motor
  • Forklifts
    • Repower or replace with all electric engine/motor
  • Light Duty ZEV Supply Equipment
    • Beneficiary may use up to 15% of its allocation of Trust Funds for acquisition, installation, operation and maintenance of new LD ZEV supply equipment for specific public applications.
      • L1, L2 or fast charging equipment in a public place, workplace or multi-unit dwelling

Beneficiaries may use Trust Funds for actual administrative expenditures associated with implementing Eligible Mitigation Actions (not to exceed 10% of total cost of such Actions):

  • Personnel, including employee salaries and wages, but not consultants
  • Fringe benefits
  • Travel by program staff
  • Equipment with a useful life of > 1 year and acquisition cost >= $5,000
  • Supplies purchased in support of the Mitigation Action, such as educational publications, office supplies, etc. Contractual
    • Contracts for evaluation and consulting services and contracts with sub-recipient organizations are included. Construction
  • Other costs, including insurance, professional services, printing and publication, training and accounting

Beneficiaries

  • Each Governor’s Office or analogous Chief Executive must file a Certification Form with the Court to become a beneficiary and to receive funding, not later than 60 days after the Trust Effective Date.
  • Failure to file Certification Form will result in that state being an Excluded Entity, permanently enjoined from asserting any right to Trust Assets.
  • Each Beneficiary must notify any Federal agencies that control land within its jurisdiction (Interior, Agriculture, etc.) that they may request Eligible Mitigation Action funds for use on those lands.
  • Beneficiaries may submit request for 1/3 of allocated funds each year, for 3 years.

Beneficiary Mitigation Plan must be submitted not later than 30 days after being deemed a Beneficiary, and must include:

  • Overall goal for use of funds
  • Categories of Eligible Mitigation Actions to be undertaken
  • Description of potential benefit of Eligible Mitigation Actions on air quality in areas that bear a disproportionate share of the air pollution burden within its jurisdiction
  • General description of expected ranges of emissions benefits (NOx) to be realized by implementation of Beneficiary Mitigation Plan
  • Plan must designate a lead agency that will have the delegated authority to act on behalf of Beneficiary.
  • Beneficiary must explain process by which it shall seek and consider public input on its Beneficiary Mitigation Plan.
  • DERA Option: A Beneficiary may use its Final Approved DERA Workplan as its Beneficiary Mitigation Plan, and may use Trust Funds for actions not specifically enumerated in the Consent Decree, but otherwise eligible under DERA.

$2.0 Billion ZEV Investment Commitment

Zero Emission Vehicles include:

  • Battery electric vehicles (BEVs) and fuel cell vehicles (FEVs)
  • On-road plug-in hybrids (PHEVs) with zero emission range > 35 miles
  • On-road heavy duty vehicles with electric powered takeoff

Not Included:

  • ZEV off-road equipment and vehicles
  • Zero emission light rail
  • Additions to transit bus fleets using existing catenary electric power
  • Vehicles not capable of being licensed for use on public roads

ZEV Investment

  • Investment of money by VW et al. that promotes and advances the use and availability of ZEVs within the categories of actions set forth in consent decree

ZEV Investments May Include:

  • Design/planning, construction/installation, operation and maintenance of ZEV infrastructure
    • L2 charging at multi-unit dwellings, workplaces and public sites
    • DC fast charging facilities accessible to all vehicles utilizing non-proprietary connectors
    • New heavy-duty ZEV fueling infrastructure (in CA)
    • Later generations of charging infrastructure
    • ZEV fueling stations

ZEV Investments May Also Include:

  • Brand-neutral education or public outreach that builds or increases public awareness of ZEVs
  • ZEV car sharing services, ZEV ride hailing services, including ZEV autonomous vehicles
  • California’s “Green City” initiative
    • Includes operation of ZEV car sharing services, zero emission transit applications and zero emission freight transport projects.
    • Selection of the city will be made by VW et al., in consultation with appropriate local authorities in CA.

Public Comment:

  • Within 15 days after the Effective Date, VW et al. shall submit to EPA for review and approval a National ZEV Outreach Plan that includes a description of how they will provide States, municipal governments, Tribes and federal agencies with notice and opportunities to provide suggestions, observations and offers of assistance or support for actions they may take under the National ZEV Investment Plan.

VW “Clean Diesel” Consent Decree: Recap

Timing and Next Steps

  • 30-day public comment period on Consent Decree ends August 5, 2016.
  • Governors’ Offices and Tribal Governments must do the following:
    • File Certification Form to become Beneficiaries, no later than 60 days after the Trust Effective Date
    • Submit a Beneficiary Mitigation Plan no later than 30 days after being deemed a Beneficiary
  • Stakeholders, local government fleet operators and other interested parties should start working with Governor’s offices and relevant planning agencies as soon as possible, to discuss potential project ideas and partnering opportunities.
  • Selection of Trustee for Environmental Mitigation Trust Fund ($2.7 Billion)
    • Not later than 30 days after the Effective date, California, the States and Puerto Rico and Indian tribes must confer with each other and submit to the U.S. a list of 3-5 recommended trustee candidates. The U.S. may consider additional trustee candidates.
    • The U.S. will file a motion with the Court requesting that the Court select and appoint a trustee from among the recommended candidates.

For more information:

What are the current and future medium- and heavy-duty vehicle fuel efficiency and greenhouse gas emissions standards?

October 10, 2016 by Clean Cities

According to the U.S. Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA), greenhouse gas (GHG) emissions from medium- and heavy-duty vehicles (collectively, HDVs) are expected to surpass light-duty vehicle (LDV) emissions by 2030. The Energy Independence and Security Act of 2007 directed the U.S. Department of Transportation to establish fuel efficiency standards for HDVs. Then, in 2010, President Obama announced a new national program to implement coordinated fuel efficiency and GHG emissions standards for medium- and heavy-duty engines and vehicles. As you may have seen last month, EPA and NHSTA recently finalized the most recent set of requirements under this program.

First promulgated by EPA and NHTSA in 2011, these coordinated standards are being implemented in two separate phases, beginning with Model Year (MY) 2014 to 2018 (Phase 1, which has now been extended through 2020) and followed by MYs 2021 to 2027 (Phase 2), with some exceptions. Under Phase 1, the GHG emissions and fuel efficiency standards generally increase in stringency in MY 2017, then remain steady through MY 2020. GHG emissions and fuel efficiency standards under Phase 2 of the program increase first in MY 2021, and then again in MYs 2024 and 2027. Although the Phase 2 standards do not begin until MY 2021, manufacturers may need to begin compliance measures beforehand in order to be adequately prepared to meet the targets.

Fuel efficiency and GHG emissions standards are determined differently for each of five regulated heavy-duty (HD) engine and vehicle categories: combination tractors; vocational vehicles; HD engines used in combination tractors and vocational vehicles; trailers used with combination tractors; and HD pickup trucks and vans. For more information on these categories, please refer to pages 3 and 4 of the EPA Phase 2 fact sheet (https://www3.epa.gov/otaq/climate/documents/420f16044.pdf).

NHTSA Fuel Efficiency Standards

NHTSA’s fuel efficiency standards are designed to take into account the different functions of each of the regulated vehicle categories. Therefore, the standards are calculated differently for each vehicle category. For HD pickup trucks and vans, there are separate gasoline and diesel target values.

The vehicle-based standards for combination tractors and vocational vehicles are calculated based on weight class, as well as specific characteristics of the vehicle category that affect fuel consumption and emissions, such as roof height for combination tractors and drive cycle for vocational vehicles.

The HD engine standards are determined by the size of the engine, the fuel type (diesel or gasoline), and the characteristics of the respective vehicles into which they are installed. The HD pickup and van standards, engine and chassis included, are fleet-average standards based on fuel-specific (gasoline and diesel) target values that are determined by a “work factor” curve. The “work factor” curve takes into account the payload and towing capacity of the vehicle and whether the vehicle has 4-wheel drive. Like the Corporate Average Fuel Economy (CAFE) program for LDVs, the HD pickup and van targets are production-weighted based on the manufacturer’s total sales volume of all of its different HD pickup and van models.

Compliance Timeline

Manufacturers were required to meet Phase 1 fuel efficiency standards for combination tractors, vocational vehicles, and HD engines beginning either in MY 2016 or 2017. Phase 2 standards apply in MY 2027, with phase-in standards for MYs 2021 and 2024. Trailer fuel efficiency standards are voluntary beginning in MY 2018, and mandatory effective MY 2021. Manufacturers were not required to participate in the Phase 1 HD pickup and van program until MY 2016. At the outset of the program, NHTSA gave manufacturers the option to choose one of the alternative phase-in options for the Phase 1 standards. Phase 2 HD pickup and van standards begin in MY 2021 and increase in stringency by 2.5% each model year through MY 2027.

Fuel Efficiency Standards and Targets

To view the final Phase 1 standards and HD pickup and van targets, please see the Phase 1 Final Rule. For the recently finalized Phase 2 standards and targets, see the Phase 2 Final Rule. You may also reach out to TRS directly (technicalresponse@icfi.com) if you would like specific information about where to find the finalized standards.

EPA GHG Emissions Standards

EPA also takes into account the varying functions of each of the regulated vehicle categories in its GHG emissions calculation. It uses the same factors as NHTSA to determine emissions standards for each vehicle category, except measurements are based on grams of carbon dioxide (CO2) emitted.

Compliance Timeline

EPA’s mandatory Phase 1 GHG emissions standards for combination tractors, vocational vehicles, and HD engines began in MY 2014. The timeline for the Phase 2 standards mirrors that of the NHTSA fuel efficiency standards. However, Phase 2 trailer emissions standards differ in that they are mandatory in MY 2018. For Phase 1 of the HD pickup truck and van program, similar to the fuel efficiency targets, manufacturers were given the option to choose from two alternative phase-in options. As with the Phase 2 fuel efficiency targets, the separate GHG emissions targets for diesel and gasoline HD pickups and vans will increase in stringency under Phase 2 by 2.5% per year from MY 2021 to 2027.

Emissions Standards and Targets

GHG emissions standards and targets for Phase 1 and Phase 2 can be found in their respective final rules. Please refer to the Fuel Efficiency Standards and Targets section above for more information.

Compliance

Manufacturers may employ many different compliance measures to meet the fuel efficiency and GHG emissions standards. These measures vary depending on the vehicle category. Each vehicle category has a different certification testing process to determine its GHG emissions and fuel efficiency values. These values are the baseline to which any additional earned credits can be added. The regulation also offers incentives to encourage advanced vehicle technologies

The credits and incentives available for both the EPA and NHTSA programs include:

  • Advanced Technology Credits: Phase 1 of the program incentivizes manufacturers to produce advance technology vehicles and engines by effectively allowing manufacturers to “count” certain vehicle and engine types as more than one in their compliance calculations. This includes vehicles with hybrid powertrains and Rankine-cycle waste heat recovery systems, as well as plug-in electric vehicles (PEVs) and fuel cell electric vehicles (FCEVs). As the new Phase 2 standards are premised on some use of Rankine-cycle engines and hybrid powertrains, these technologies will not qualify as advanced technologies under Phase 2. From MY 2021 through MY 2027, advanced technology credits (with considerably higher multipliers) will only be offered for PEVs and FCEVs.
  • Innovative Technology and Off-Cycle Credits: Both Phases 1 and 2 of the program allow manufacturers to earn credits for off-cycle technologies that result in benefits that are not captured in certification testing procedures.
  • Early Credit Multipliers: Phase 1 of the program enabled manufacturers to earn credits for early compliance. Phase 2 will not include early credits.

For more information on the medium- and heavy-duty engine and vehicle GHG emissions and fuel efficiency standards, please refer to the following resources:

Clean Cities Technical Response Service Team

technicalresponse@icfi.com

800-254-6735

What are the current and future light-duty vehicle fuel economy and greenhouse gas (GHG) emissions standards

October 3, 2016 by Clean Cities

According to the U.S. Environmental Protection Agency (EPA), light-duty vehicles (LDVs) emit nearly 60% of transportation-related GHG emissions and use more than half of all petroleum transportation fuel in the United States. In 1975, Congress enacted the Energy Conservation and Policy Act, which directed the U.S. Department of Transportation (DOT) to implement the Corporate Average Fuel Economy (CAFE) program. The goal of the CAFE program is to reduce national energy consumption through fuel economy improvements. Specifically, the National Highway Traffic Safety Administration (NHTSA), as part of DOT, develops annual fuel economy requirements for new passenger cars and light-duty trucks. Fuel economy is measured based on the average mileage a vehicle travels per gallon of gasoline, or gallon of gasoline equivalent for other fuels.

In 2009, President Obama announced a new national program to harmonize fuel economy standards with GHG emissions standards for all new light-duty cars and trucks sold in the United States. Under this program, the U.S. Environmental Protection Agency (EPA) develops GHG emissions standards that correspond with NHTSA CAFE standards for each model year (MY). Thus far, the EPA and NHTSA have implemented the program in two parts, beginning with MYs 2012 to 2016 and followed by MYs 2017 to 2025. GHG emissions and CAFE standards have become increasingly stringent from one MY to the next.

In the final rule that established the coordinated standards for MYs 2017 to 2025, the EPA and NHTSA committed to perform a midterm evaluation (MTE) to (i) determine whether any changes should be made to the GHG emissions standards for MY 2022 to 2025, and (ii) set final CAFE standards for those MYs. This past July, the EPA and NHTSA completed the first step of the MTE with their issuance of a draft technical assessment report. For more information on the MTE, please see the EPA Midterm Evaluation of Light-Duty Vehicle GHG Emissions Standards page (https://www3.epa.gov/otaq/climate/mte.htm) and the NHTSA Midterm Evaluation for Light-Duty CAFE page (http://www.nhtsa.gov/Laws+&+Regulations/CAFE+-+Fuel+Economy/ld-cafe-midterm-evaluation-2022-25).

NHTSA CAFE Standards

NHTSA determines CAFE standards based on each vehicle’s size, or its footprint, which is essentially the distance between where each of its tires touches the ground. In general, the larger the vehicle is, the less stringent the fuel economy target will be. NHTSA then calculates each manufacturer’s fleet-wide compliance obligation, which is weighted based on vehicle sales (e.g., if 15% of a manufacturer’s sales are one model, that model gets a “weight” of 0.15 in average fuel economy calculation), each vehicle’s footprint, and the volume of vehicles the manufacturer actually produces.

Based on previous MY sales, NHTSA estimates that by MY 2025, passenger vehicles and light-duty trucks will need to meet an estimated combined average fuel economy of at least 48.7 to 49.7 miles per gallon. This estimate is subject to change based on the actual individual manufacturer fleet composition and production volumes. To view the annual standards, please refer to page 4 of the NHTSA CAFE Regulations for MY 2017 and Beyond fact sheet (http://www.nhtsa.gov/staticfiles/rulemaking/pdf/cafe/CAFE_2017-25_Fact_Sheet.pdf).

EPA GHG Emissions Standards

Similar to the NHTSA CAFE standards, the EPA also uses the footprint-based approach to determine carbon dioxide (CO2) emissions standards in grams per mile (g/mi) for each vehicle manufacturer. The EPA GHG emissions requirements are linked to the CAFE standards, and are also based on individual manufacturer fleet and production volumes. The EPA’s passenger car standards call for CO2 emissions reductions of 5% per year from MY 2017 to 2025. Light-duty trucks will have a bit more time to adjust to the standards, beginning with a 3.5% reduction per year from MY 2017 to MY 2021, then ramping up to a 5% reduction per year from MY 2022 to MY 2025. Refer to page 4 of the EPA GHG Emissions Standards for MY 2017-2025 fact sheet (https://www3.epa.gov/otaq/climate/documents/420f12051.pdf) to see the projected CO2 emissions targets.

Compliance

Manufacturers can meet these standards in a variety of ways. In addition to making direct improvements to vehicle components (e.g., engines and transmission efficiency, light-weighting), manufacturers may also achieve compliance by generating credits. First, manufacturers are required to calculate average fleet-wide tailpipe CO2 emissions and average fleet-wide fuel economy. These values serve as the baseline to which any additional earned credits can be added. The regulation also offers incentives to encourage advanced vehicle technologies.

These credits and incentives include:

  • Air Conditioning and Off-Cycle Improvements (EPA and NHTSA): Manufacturers can earn credits from efforts such as air conditioning efficiency improvements, as well as from off-cycle technologies that result in real-world benefits, like engine start-stop or solar panels on plug-in hybrid electric vehicles (PHEVs).
  • Advanced Technology Vehicles (EPA Only): The EPA regulation also includes incentives to encourage the production of advanced technology vehicles. For MYs 2017 to 2021, manufacturers that produce all-electric vehicles, PHEVs, compressed natural gas vehicles, and fuel cell electric vehicles may “count” these vehicles as more than one vehicle in their emissions compliance calculations.
  • Hybrid Electric Full-Size Pickups (EPA and NHTSA): Manufacturers are encouraged to produce a certain percentage of full-size pickup trucks that are hybrid electric vehicles, as they will receive compliance credits for doing so.

For more information on LDV GHG emissions and CAFE standards, please refer to the following resources:

Stay tuned for next month’s Question of the Month, where we will delve into the medium- and heavy-duty engine and vehicle standards.

Clean Cities Technical Response Service Team
technicalresponse@icfi.com
800-254-6735

Question of the Month: It’s tax time! What are some common questions related to the federal tax credits for alternative fuels and infrastructure?

March 21, 2016 by Clean Cities

Tax season is upon us, and the recent federal tax incentive extensions and changes impact the alternative fuel and infrastructure tax credits.

The Consolidated Appropriations Act of 2016 (H.R. 2029) retroactively extended several tax credits, including the Alternative Fuel Excise Tax Credit and Alternative Fuel Infrastructure Tax Credit. It also included updates to the calculation method for Alternative Fuel Excise Tax Credit amounts, specifically for propane and liquefied natural gas (LNG). Below we discuss three frequently asked questions about these credits.

How have the Alternative Fuel Excise Tax Credit amounts changed for propane and LNG in 2016 and beyond?

The Alternative Fuel Excise Tax Credit applies to alternative fuel sold or used to operate a motor vehicle. Previously, the excise tax credit amount for propane and LNG was based on a volumetric basis ($0.50 per gallon). For fuel sold or used starting January 1, 2016, however, the excise tax credit amount for propane and LNG is based on an energy equivalent basis. This means the credit for propane is now measured per gasoline gallon equivalent (GGE) and LNG is measured per diesel gallon equivalent (DGE). Specifically, the updated Internal Revenue Service (IRS) Form 8849, Schedule 3 defines 2016 tax credit rates for propane and LNG as follows:

  • Propane: One GGE is equal to 5.75 pounds (lbs.) or 1.353 gallons of propane.
  • LNG: One DGE is equal to 6.06 lbs. or 1.71 gallons of LNG.

What does this mean for propane and natural gas retailers and fleets? In short, the tax credit for the same amount of fuel is now less:

  • The propane tax credit was previously $0.50 per gallon and is now $0.50 per GGE (1.353 gallons of propane), which equates to $0.37 per gallon.
  • The LNG tax credit was previously $0.50 per gallon and is now $0.50 per DGE (1.71 gallons of LNG), which equates to $0.29 per gallon.

The tax credit amount for compressed natural gas (CNG) is still based on the GGE, where one GGE is equal to 121 cubic feet.

Natural Gas Vehicles for America (NGVAmerica) provides additional information on federal tax incentives for LNG and CNG, and highlights the impacts of the recent tax credit changes in the article, New Year Rings in Changes for CNG and LNG in 2016. The National Propane Gas Association explains the excise tax equalization for propane.

So, you said the Alternative Fuel Excise Tax Credit was retroactively extended. Does that mean I can claim it for fuels sold or used in 2015?

Yes! Both the federal Alternative Fuel Excise Tax Credit and Biodiesel Mixture Excise Tax Credit were extended to cover 2015, meaning that propane, CNG, LNG, hydrogen, and biodiesel sold or used in 2015 are eligible for the federal tax credit. To file for the tax credit, registered claimants must submit a single one-time 2015 claim with IRS Form 8849, as well as the accompanying Schedule 3. The deadline to submit a claim for fuels sold or used in 2015 is August 8, 2016.

Please note that the tax credit amount for propane and LNG sold or used in 2015 is based on the previous, volumetric rate of $0.50 per gallon.

For additional information on claiming the tax credit for fuels sold or used in 2015, please see IRS Notice 2016-05.

Are tax-exempt entities eligible for the Alternative Fuel Infrastructure Tax Credit?

While a tax-exempt entity, such as a school or state government fleet, may not be eligible to claim the Alternative Fuel Infrastructure Tax Credit directly, the entity selling the fueling infrastructure to the tax-exempt entity can claim the credit and pass the “discount” along to the fleet. According to Title 26 of the United States Code, Section 30C(e)(3), the entity selling the fueling equipment to the tax-exempt entity can be treated as the taxpayer and claim the Alternative Fuel Infrastructure Tax Credit, but only if the seller discloses the amount of the credit allowable to the tax-exempt purchaser in writing. In practice, this means the tax-exempt fleet would have the opportunity to use this information to request a discount. However, the infrastructure seller is not required to pass along any savings associated with the tax credit.

For more information on how tax-exempt entities may be eligible for the Alternative Fuel Infrastructure Tax Credit, please see the IRS Instructions for Form 8911.

Please note that the Technical Response Service recommends consulting a qualified tax professional or the IRS before making any tax-related decisions.

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Alternative Fuel Infrastructure Tax Credit

January 22, 2016 by Clean Cities

NOTE: This incentive originally expired on December 31, 2013, but was retroactively extended through December 31, 2016, by H.R. 2029 (PDF).

Fueling equipment for natural gas, liquefied petroleum gas (propane), liquefied hydrogen, electricity, E85, or diesel fuel blends containing a minimum of 20% biodiesel installed between January 1, 2015, and December 31, 2016, is eligible for a tax credit of 30% of the cost, not to exceed $30,000. Permitting and inspection fees are not included in covered expenses. Fueling station owners who install qualified equipment at multiple sites are allowed to use the credit towards each location. Consumers who purchased qualified residential fueling equipment prior to December 31, 2016, may receive a tax credit of up to $1,000. Unused credits that qualify as general business tax credits, as defined by the Internal Revenue Service (IRS), may be carried backward one year and carried forward 20 years. For more information about claiming the credit, see IRS Form 8911, which is available on the IRS Forms and Publications website. (Reference Public Law 114-113; 26 U.S. Code 30C and 38; and IRS Notice 2007-43 (PDF))

Point of Contact
U.S. Internal Revenue Service
Phone: (800) 829-1040
http://www.irs.gov/

Question of the Month: Are fuel taxes equal for all fuels?

September 22, 2015 by Clean Cities

In theory, if all motor fuels were taxed equitably it would ensure tax consistency among jurisdictions and reduce consumer burdens. In practice, motor fuel taxes vary widely between jurisdictions and across fuel types. This is largely because federal and some state highway excise taxes are based on volume, not on energy content, resulting in significant tax inequity among fuels. As discussed in the July and August Questions of the Month blogs, motor fuel taxes are used to fund transportation infrastructure. The number of vehicle miles traveled on a specific amount of fuel is linked to the amount of energy in the fuel. Therefore, energy content provides a more accurate measure of a vehicle’s impact on a roadway.

Before we go any further, let’s make sure you understand some basic keywords and phrases regarding energy content:

  • Btu: British thermal units, or the unit of measure to show an amount of energy.
  • Heating value: A measure of energy content in Btus, which represents the amount of heat released during combustion. Typically, we use the lower heating value when comparing fuels.
  • Gasoline gallon equivalent (GGE): The amount of fuel that has the equivalent energy to a gallon of gasoline. Similarly, diesel gallon equivalent (DGE) is the amount of fuel that has the equivalent energy to a gallon of diesel. GGE is used for alternative fuels that typically replace gasoline (e.g., ethanol), whereas DGE is used to measure fuels that replace diesel (e.g., liquefied natural gas, or LNG).

Federal Excise Taxes

Last month, the President signed H.R.3236 (Public Law 114-41), the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, which assesses the federal fuel excise tax levied against LNG and propane on a Btu basis relative to diesel and gasoline, respectively, beginning on January 1, 2016. Compressed natural gas (CNG) is already taxed based on an energy content basis relative to gasoline. Prior to Public Law 114-41, the federal excise taxes for LNG and propane were higher than the conventional fuel counterpart. This is still the case for biodiesel and ethanol, leaving these fuels at a tax disadvantage compared to diesel and gasoline, respectively.

State Excise Taxes

Motor fuel tax variations within and between states are even more complex. Many states have some of the same tax equity issues that we see at the federal level. Plus, there are many different fuel definitions and measures, which create an undue burden for interstate fleets that must comply with the International Fuel Tax Agreement. For example, only some states tax CNG and LNG on a GGE or DGE basis. Though a number of states are currently evaluating legislative proposals to tax fuels this way, others states are waiting for a decision by the National Conference on Weights and Measures (NCWM). And if NCWM does adopt a standard, states will still have to individually adopt the standard into their laws or regulations before it can be implemented.

Taxes on Electricity as a Transportation Fuel

Other motor fuels, such as electricity and hydrogen, do not have federal excise tax requirements. Although plug-in electric vehicles (PEVs) and fuel cell electric vehicles (FCEVs) currently represent a very small portion of the total vehicle population, it is likely PEV and FCEV registrations will continue to grow in coming years. Any effort to collect taxes on electricity to pay for highway infrastructure would need to account for the fact that PEVs are capable of fueling at home. In addition, some plug-in hybrid electric vehicle owners pay taxes on their gasoline use. Making the situation even more complicated, electricity is already taxed in ways not tied to highway funding. Some states have implemented annual PEV fees through registration or vehicle decal programs to account for lost revenue from motor fuel taxes, which we discussed in the August Question of the Month blog.

Refer to the following for more information on motor fuel taxes:

 

 

 

 

 

 

 

 

 

blog post written by

Clean Cities Technical Response Service Team
technicalresponse@icfi.com
800-254-6735

Question of the month: What are the alternatives to traditional state fuel taxes?

August 24, 2015 by Clean Cities

As Returns from Gas and Diesel Taxes Decline, States Look to Alternative Models

Nearly all of us regularly use and access public roads, infrastructure, or transit services. As you may have read in the July blog post, Feeling Pain at the Pump? Factors That Affect Fuel Prices, it’s common practice for federal, state, and local governments to tax motor fuels on a per gallon basis to fund transportation infrastructure and increase revenue. Returns from gasoline and diesel taxes are on the decline due to a number of factors, including rising construction costs, general inflation, and greater vehicle efficiency, which reduces fuel use per mile. To make up for this deficit, a number of states are evaluating and implementing alternatives to traditional motor fuel tax models through the use of vehicle miles traveled (VMT) fees, annual fees for vehicles that use certain fuels, such as electricity, or adjusting or establishing fuel taxes for certain alternative fuels.

VMT Fees

VMT fees are designed to charge drivers based on the number of miles they drive, rather than the fuel they consume. The concept seeks to base taxes on use rather than fuel consumption, which provides a fuel neutral approach and offsets decreasing revenue from increased vehicle efficiency. Concerns have, however, been raised over program administration and individual privacy. Several states, including Vermont and Oregon, have studied or implemented VMT fee pilot programs. In July of 2015, Oregon began a road usage charge program for 5,000 volunteers and is encouraging participation by plug-in electric vehicle (PEV) drivers. The Oregon Department of Transportation (ODOT) collects $0.015 per mile and issues gas tax refunds to participants. Vehicle miles will be monitored through a vehicle transponder.

Annual Fees

As alternative fuel use has grown, a number of states have established annual fees or decals to recover revenue that would have normally come from motor fuel taxes. These programs also provide a mechanism to collect revenue from those that charge or fuel at home and, in some cases, are used to incentivize alternative fuel vehicles (AFVs). Fees have traditionally been imposed on fuels such as natural gas and propane, but are now being considered and implemented for PEVs. Establishing the appropriate level for such fees can be tricky, as different vehicle classes use very different amounts of fuel. In addition, some AFVs, such as plug-in hybrid electric vehicles and bi-fuel natural gas vehicles, may already pay motor fuel taxes for their gasoline or diesel use. Examples of fees in place include:

  • Colorado requires a $50 annual fee for a PEV decal.
  • Georgia requires a $200 annual fee for non-commercial PEVs and $300 annual fee for commercial PEVs.
  • Louisiana requires an annual fee of $120 or a percentage of the current special fuels tax rate for compressed natural gas (CNG) and propane vehicles.
  • Nebraska requires a $75 annual fee for PEVs and other AFVs not covered under state motor fuel tax regulations.
  • North Carolina requires a $100 annual fee for all-electric vehicles.

Alternative Fuel Taxes

Many states have passed regulations to either tax certain alternative fuels for the first time or to structure motor fuel taxes to account for energy content variations between alternative fuels and gasoline or diesel. For example, Arkansas, Idaho, Kentucky, New Mexico, Oklahoma, Tennessee, and Utah are among the states that have enacted legislation or regulations in 2015 to define the energy content of CNG and liquefied natural gas on a gasoline gallon equivalent or diesel gallon equivalent basis. Wyoming updated regulations related to alternative fuel excise taxes and dealer license fees for natural gas, propane, electricity, and renewable diesel. Kentucky and Utah enacted excise tax requirements for hydrogen and South Dakota increased excise taxes for certain fuels, including ethanol. Look out for the September Question of the Month blog for further information on efforts to equalize federal fuel taxes across fuels.

Until motor fuel tax revenue shortfalls can be adequately addressed, states risk underfunding our roads and infrastructure. While no single approach has emerged as the preferred choice, creative solutions, such as those discussed above, may help states adequately adjust for continued sales of AFVs and other fuel-efficient vehicles. With the exception of VMT fees, these approaches, however, only address a small portion of the nation’s fleet and are not likely to resolve broader funding issues in the near-term.

Refer to the following Alternative Fuels Data Center websites for more information on alternatives to traditional state motor fuel taxes:

Also watch for an upcoming paper from the National Renewable Energy Laboratory on motor fuel excise taxes.

blog post written by

Clean Cities Technical Response Service Team
technicalresponse@icfi.com800-254-6735

Tax Extenders Legislation Clears Congress: Key Tax Credits Reinstated Through 2014

December 18, 2014 by Clean Cities

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On Tuesday night, December 16, the Senate approved legislation sent from the House that extends the life of a number of tax breaks through tax year 2014. Included in the package are a number of credits important to fleets, of which are outlined below.

Alternative Fuel Excise Tax Credit – $.50 per gallon alternative fuel tax credit for compressed natural gas and propane when used as a vehicle fuel.
Biodiesel Production and Blending Tax Credit – Qualified biodiesel producers or blenders are eligible for an income tax credit of $1.00 per gallon of pure biodiesel or renewable diesel produced or used in the blending process.
Alternative Fuel Infrastructure Tax Credit – A 30 percent credit for installing vehicle refueling property for alternative fuel, such as pumps for ethanol or liquefied natural gas.
Bonus Modified Accelerated Cost Recovery System (MACRS), commonly referred to as Bonus Depreciation – allows extra depreciation to be taken for 50 percent of a truck’s purchase price, with an extra bonus depreciation deduction of up to $8,000 for automobiles, light trucks, vans, and SUVs.
President Obama is expected to sign the tax extenders legislation within days. As mentioned, the measure is only applicable to the 2014 tax year, which means the credits will not be renewed for tax year 2015 unless the new Congress takes the matter up again.

NAFA Fleet Management Association | 125 Village Boulevard, Suite 200 | Princeton, NJ 08540
609.720.0882 | info@nafa.org | www.nafa.org

U.S. House Extends Alternative-Fuel Tax Credits

December 9, 2014 by Clean Cities

The U.S. House of Representatives on Wednesday voted to approve H.R. 5771, the Tax Increase Prevention Act of 2014, which includes an amendment extending the federal 50-cent per gallon alternative fuels excise tax credits through the remainder of 2014, even though the credits had previously expired at the end of 2013.

These tax credits were made available to individuals, businesses, and other entities that use transportation fuel products such as compressed natural gas (CNG), liquefied natural gas (LNG), and propane autogas.

The alternative fuels excise tax credits are part of many business, individual, and energy tax incentives covered in H.R. 5771, which will next be reviewed by the Senate.

From Green Fleet Magazine

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