Alternative Fuel Infrastructure Tax Credit

A tax credit is available for the cost of alternative fueling equipment placed into service after December 31, 2005. Qualified alternative fuels are natural gas, liquefied petroleum gas, hydrogen, electricity, E85, or diesel fuel blends containing a minimum of 20% biodiesel. The credit amount is up to 30% of the cost, not to exceed $30,000 for equipment placed into service in 2011. Consumers who purchase qualified residential fueling equipment may receive a tax credit of up to $1,000. The maximum credit amount for hydrogen fueling equipment placed into service before January 1, 2015, is $200,000. Under current law, the credit expires December 31, 2011, for all other eligible fuel types.

Alternative Fuel Tax Exemption

Alternative fuels used in a manner that the Internal Revenue Service (IRS) deems as nontaxable are exempt from federal fuel taxes. Common nontaxable uses in a motor vehicle are: on a farm for farming purposes; in certain intercity and local buses; in a school bus; exclusive use by a nonprofit educational organization; and exclusive use by a state, political subdivision of a state, or the District of Columbia. This exemption is not available to tax exempt entities that are not liable for excise taxes on transportation fuel.

Biodiesel Income Tax Credit

An entity that delivers pure, unblended biodiesel (B100) into the tank of a vehicle or uses as B100 as an on-road fuel in their trade or business, may be eligible for a nonrefundable income tax credit in the amount of $1.00 per gallon of agri-biodiesel (e.g. biodiesel made from soybean oil), or pure biodiesel made from other sources (e.g. waste grease). This incentive expires December 31, 2011.

Biodiesel Mixture Excise Tax Credit

Biodiesel blenders registered with the Internal Revenue Service (IRS) are eligible for a volumetric excise tax credit in the amount of $1.00 per gallon of pure agri-biodiesel (e.g. biodiesel made from soybean oil) pure biodiesel made from other sources (e.g. waste grease) blended with petroleum diesel. Only entities that are registered with the IRS and have produced and sold or used the qualified biodiesel mixture as a fuel in their trade or business are eligible for the credit. This incentive expires December 31, 2011.

Cellulosic Biofuel Producer Tax Credit

Qualified producers may be eligible for an income tax credit of up to $1.01 per gallon of cellulosic biofuel produced and sold or used by the taxpayer. If the cellulosic biofuel also qualifies for alcohol fuel tax credits, the credit amount is reduced accordingly. Cellulosic biofuel is defined as liquid fuel produced from any lignocellulosic or hemicellulosic matter that is available on a renewable basis, and meets U.S. Environmental Protection Agency fuel and fuel additive registration requirements.

Emergency Economic Stabilization Act/Energy Improvement and Extension Act of 2008

The Emergency Economic Stabilization Act (House Resolution 1424) enacted the Energy Improvement and Extension Act of 2008. The bill amends and extends existing biodiesel blending and production tax credits, extends existing alternative fuel excise tax credit, and extends the alternative fueling infrastructure tax credit. The bill also creates a new tax incentive toward the purchase of qualified plug-in hybrid electric vehicles, based on vehicle weight and battery capacity. Additionally, qualified idle reduction devices are exempt for heavy-duty truck retail excise taxes.

Federal Tax Credits for Plug-In Hybrids

Plug-in hybrid-electric vehicles (PHEVs) purchased in or after 2010 may be eligible for a federal income tax credit of up to $7,500. The credit amount will vary based on the capacity of the battery used to fuel the vehicle.

Food, Conservation & Energy Act of 2008

In May, Congress overrode a presidential veto to pass the Food, Conservation, and Energy Act of 2008 (House Resolution 2419), which provides funding for commodity, rural development, conservation, and energy programs. The bill includes language that authorizes $1 billion in funds for renewable energy programs and new feedstock production, and reauthorizes many 2002 Farm Bill programs, including the Biomass Research and Development Initiative, the Biobased Products and Bioenergy Program, and a biodiesel education program. The bill also allows for a cellulosic biofuel production credit.

Fuel Cell Motor Vehicle Tax Credit

A tax credit is available for the purchase of qualified light-duty fuel cell vehicles. On December 31, 2009, the credit was reduced to $4,000. Tax credits are also available for medium- and heavy-duty fuel cell vehicles; credit amounts are based on vehicle weight.

Qualified Plug-in Electric Drive Motor Vehicles (IRC 30D)

A tax credit is available for the purchase of a new qualified plug-in electric drive motor vehicle that draws propulsion using a traction battery that uses an off-board source of energy to recharge the battery, and meets specified emission standards. For vehicles acquired after December 31, 2009, the credit is equal to $2,500 for a vehicle which draws propulsion energy from a battery with at least 5 kilowatt hours of capacity, plus an additional $417 for each kilowatt hour of battery capacity in excess of 5 kilowatt hours. The total amount of the credit allowed for a vehicle is limited to $7,500.