Congress recently passed the American Taxpayer Relief Act to ease the revenue side of “Fiscal Cliff” concerns. The deal includes energy tax extensions, which is good news for alternative fuels excise tax credits. President Obama is set to sign the bill.
A tax incentive for select alternative fuels sold for use - or used to operate - a motor vehicle is also available as a tax credit of [Article].50 per gallon. For an entity to be eligible to claim the credit, they must be liable for reporting and paying the federal excise tax on the sale or use of the fuel in a motor vehicle. Tax exempt entities such as state and local governments that dispense qualified fuel from an on-site fueling station for use in vehicles qualify for the incentive. Eligible entities must be registered with the Internal Revenue Service (IRS). The incentive must first be taken as a credit against the entity's alternative fuel tax liability; any excess over this fuel tax liability may be claimed as a direct payment from the IRS. The only modification was to eliminate the refundable portion of the excise tax credit for alternative fuel mixture*. The credit applies to the following alternative fuels:
• Compressed natural gas (based on 121 cubic feet)
• Liquefied natural gas
• Liquefied petroleum gas
• P-Series fuel
• Liquid fuel derived from coal through the Fischer-Tropsch process
• Compressed or liquefied gas derived from biomass
There is also a $30,000 infrastructure tax credit. The tax credits are extended until December 31, 2013 and ARE RETROACTIVE FOR ALL OF 2012.
*Per the IRS, the alternative fuel mixture credit applies if an entity uses an alternative fuel (liquefied hydrogen only) to produce an alternative fuel mixture for sale or use in trade or business. An alternative fuel mixture is a mixture of alternative fuel (liquefied hydrogen only) and taxable fuel (gasoline, diesel fuel, or kerosene). The entity must sell the mixture to any person for use as a fuel or use the mixture as a fuel.