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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

Should you charge customers for EV charging stations?

November 20, 2014 by Clean Cities

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Courtesy of Oregon Department of Transportation

Is it a prohibited gift of public funds if the agency allows public employees and members of the public to charge their personal vehicle at an agency charging station without imposing a fee?

Can employees be provided with free charging as an employee benefit?
Should an agency require that employees enter into an employee agreement for use of the EV charging stations?

The gift of public funds consideration seems to be the biggest legal concern among government agencies, and there are two ways to analyze the issue. As a reminder, the gift of public funds prohibition in the Washington State Constitution (article 8, section 7) is mandatory and must be strictly observed. It prohibits a local government from giving “any money, or property, or loan[ing] its money, or credit to or in aid of any individual, association, company or corporation, except for the necessary support of the poor and infirm.”

The threshold question under the gift of public funds analysis is whether providing EV charging for personal vehicles is a “fundamental governmental purpose?” If yes, no gift of public funds occurs. If no, then the question turns to whether there is consideration and donative intent.

Charlotte Startup Debuts 100mi, Half-Ton EV Pickup Truck

November 2, 2014 by Clean Cities

IMG_4278.JPGJeff Willhelm/Charlotte Observer

Agnew, 60, recently debuted the Condor 2015, an all-electric pickup designed for fleet service and deliveries, that conserves energy and saves buyers thousands in fuel costs. Capable of hauling 1,000 pounds and reaching up to 80 mph, the truck was produced in Charlotte, N.C., by EV Fleet Inc., a manufacturing startup Agnew formed this year to assemble and sell electric pickups.

The Condor is a strategic response to what Agnew said he didn’t see on the market — pickups built with motors that ran on energy stored in batteries and no gas components. Yet the Condor’s creation comes just as analysts question the long-term viability of the nascent electric vehicle industry.

Federal PEV Credit Phase-Out Summary

October 30, 2014 by Clean Cities

CC logo-Round-Outline

How does the federal plug-in electric vehicle (PEV) tax credit phase-out work, and has it begun for any vehicle manufacturers? What is the status of other federal alternative fuel tax credits?

Florida Expands Natural Gas Fueling-Station Network

October 7, 2014 by Clean Cities

IMG_3591.JPGRich Clement/Bloomberg News

Since Florida passed a natural gas-vehicle rebate program, the amount of fueling stations have increased by more than 200%, according to the Florida Natural Gas Vehicle Coalition.

Since 2012, when the state passed the Natural Fuel Gas Vehicle Rebate program, Florida has added 43 compressed natural gas fueling stations with an additional 29 planned, according to the coalition. Currently, there are 61 active CNG stations.

“The fleets in my legislative district, Jacksonville, and its surrounding area have begun the transition to the clean burning American natural gas,” state Rep. Lake Ray said in a statement

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