Louisiana Alternative Fuel Tax Credit Update
By Lauren Stuart, GBRCCC Executive Director
The Louisiana Department of Revenue (LDR) is administrator of the state Alternative Fuel Tax Credit, which can be claimed by owners of alternative fuel vehicles or infrastructure. In June, the LDR came under scrutiny by the Division of Administration due to an emergency ruling made on April 30 that allowed the credit to be applied to the purchase of flex-fuel vehicles.
Revised Statutes 47:6035, originally enacted by the Louisiana Legislature in 2009, was clarified by emergency ruling LAC 61:I.1912.B, which has since been revoked.[i] The tax credit requirements and eligibility were interpreted by the ruling as including vehicles that operate exclusively on E85 ethanol blend or have the capability for E85 operation through flexible fueling technologies. The problem with this is a potential loophole regarding the incremental cost structure of the credit.
According to the Revenue Information Bulletin No. 12-025 released on May 3, the rule “creates a rebuttable presumption that if a flex fuel or E85 flex fuel vehicle is listed on the website of the Department of Energy, then the vehicle is one that meets the standards set forth in the statue and thereby qualifies it for the credit.”[ii] This list of vehicles operates on a qualified alternative fuel as defined by the national Energy Policy Act of 1992 and includes compressed natural gas, propane, electricity, methanol, ethanol, biofuel, and blends thereof. These fuels have lower tail-pipe emissions, tend to be domestically sourced, and in some cases cost much less than gasoline or diesel. However, in the case of a flex-fuel vehicle, unless it is fueled on an ethanol blend, none of these benefits may be realized.
Since the original legislation provides an option between 50% of the difference between a conventional or alternative fueled vehicle purchase price (incremental cost) OR whichever is lower between flat-rate credit of $3000 or 10% of the purchase price. The flex-fuel ruling creates the potential for a tax benefit without any additional alternative fuel investment being made. This diverges from the intention of the credit, which is to provide an incentive for consumers to spend extra money on their car in order to spur the commercialization of alternative fuel vehicles.
For example, a 2012 Honda Civic standard sedan has an MSRP of $15,955 and alternative models are available in hybrid gas-electric for $24,200 or compressed natural gas for $26,305.[iii] The “incremental cost” between the standard model and the GX is $10,350 so the Louisiana tax credit available is $5,175. In contrast, the 2012 Chevrolet Silverado flex-fuel model comes standard and is priced with an MSRP of $29,100. According to the Chevrolet website, “For 2012, the Vortec® 6.0L V8 engine, standard on Silverado 2500HD, can operate on E85, a blend of 85% ethanol and 15% gasoline.” The 2012 V8 model also has a 6.6L option featuring B20 compatibility, called the Duramax® Diesel.[iv]
As such, the Silverado meets the criteria for a “flex-fuel vehicle” and is included on the U.S. Department of Energy’s list of alternative fueled vehicles.[v] Since there is no difference in cost for the E85 or B20 option, the only way that a Louisiana resident could receive a tax-credit from LDR is by choosing the flat-rate $3,000 option. However, a basic search of alternative fueling station on the AFDC station locator reveals that there are currently no places for Louisiana residents to fuel on E85 and only one location for B20.[vi] Thus the dilemma in providing tax-credits for owners of flexible fuel vehicles.
The final results of Governor Jindal revoking LDR’s emergency ruling will not be released until the end of 2012. Until then, GBRCCC’s best information says that the Louisiana Alternative Fuel Tax Credit remains the same as pre-ruling. The broad eligibility requirements areas are as follows:
- 50% of the cost of equipment installed for conversion to alternative fuel
- 50% of the cost of fuel tank, fuel injection & catalytic converter for a new vehicle which runs on alternative fuel
- 50% of the cost of alternative fueling station equipment
At this time, the Louisiana Department of Revenue materials state “the credit must be claimed on an income tax return for the year in which the property is installed or taxable year in which the vehicle is purchased.” Accordingly, the credit may be claimed retroactively by making a revision to a past income tax statement.
GBRCCC’s suggestion for fixing the Louisiana Alternative Fuel Tax Credit? Close the loophole by requiring a calculation of incremental cost for vehicle purchase or conversion and require proof of fueling with an alternative fuel.
[i] Louisiana Legislature, Revised Statutes 47:6035 http://www.legis.state.la.us/lss/newWin.asp?doc=672160
[ii] State of Louisiana, Department of Revenue, Revenue Information Bulletin