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Alternative Fuel Tax Credit Now Available
In August, President Biden signed into law the Inflation Reduction Act of 2022. This law extends the Alternative Fuel Tax Credit which is available to individuals and businesses that buy, sell and use propane in their motor vehicles. With the extension, the credit is now available through December 31, 2024 and includes the entirety of the 2022 year.
“Thousands of fleets across the country rely on propane autogas every day for environmental sustainability, and these credits provide another opportunity for fleets to ensure they’re also realizing financial sustainability,” said Steve Whaley, director of autogas business development at PERC. “Even without the credits, propane autogas provides the lowest total cost-of-ownership. As an abundant and available energy source, propane autogas can make a difference in communities around the nation today.”
Who Qualifies for the Credit?
The tax credit is available to those who sell propane or other forms of alternative fuel for use in motor vehicles or motorboats. It is also available to those who use alternative fuels for those same purposes. Both the sale and use of the fuel must take place in the United States. According to the National Propane Gas Association (NPGA), “businesses, tax-exempt entities and individuals that purchase propane in bulk to fuel their own motor vehicles (often by means of a privately-owned fueling station) may also claim the credit, provided that the propane was not previously sold for the specific use as fuel in a motor vehicle or motorboat.”
What Vehicles Qualify?
The IRS definition of “motor vehicle” states that “all types of vehicles propelled by motor that are designed for carrying or towing loads from one place to another, regardless of the type of load or material carried or towed and whether or not the vehicle is registered or required to be registered for highway use.” The regulation excludes farm tractors, trench diggers, power shovels, bulldozers, road graders or rollers, and similar equipment which does not carry or tow a load.
How Much is the Credit?
The alternative fuel tax credit is worth the gasoline gallon equivalent of propane. At $0.50 per gallon of gasoline, would equate to about $0.37 per gallon of propane. Individuals with qualifying nonbusiness uses of their propane are limited to using the credit to offset their Section 4041(a) fuel excise tax liability.
The new law also extends the Alternative Fuel Vehicle Refueling Property Credit, which allows operators to claim up to six percent or $100,000 of the cost of installing qualified alternative fuel vehicle refueling property, including propane autogas refueling equipment.
All fleets should consult their tax advisers regarding any claims for credits or refunds.