Alternative Motor Vehicle Credit
NOTE: Taxpayers are to be advised that provisions of the Alternative Motor Vehicle Credit including the Qualified Hybrid Motor Vehicle Credit, Qualified Alternative Fuel Motor Vehicle Credit (QAFMV), and Advanced Lean Burn Technology Motor Vehicle Credit expire as of December 31, 2010.
The Alternative Motor Vehicle Credit was enacted by The Energy Policy Act of 2005 and provides various tax credit for certain energy efficient vehicles. The tax credits are available for vehicles acquired before January 1, 2011.
The Alternative Fuel Motor Vehicle Credit was enacted by the Energy Policy Act of 2005 and includes separate credits for four distinct categories of vehicles:
Qualified Hybrid Vehicles,
Qualified Fuel Cell Vehicles,
Qualified Alternative Fuel Motor Vehicles (QAFMV) and Heavy Hybrids, and
Advanced Lean-Burn Technology Vehicles.
The amount of the potential credit varies by type of vehicle and which of the four credits applies.
Internal Revenue Code Section 30B provides for the Alternative Motor Vehicle Credit. Notice 2006-9 provides procedures for manufacturers to certify passenger auto and light trucks as Qualified Hybrid Vehicles and Advance Lean Burn Vehicles and Notice 2007-46 provides procedures for heavy hybrid vehicles. Notice 2006-54 provides procedures for manufacturers to certify vehicles as Qualified Alternative Fuel Motor Vehicles (QAFMV). Notice 2008-33 provides procedures for manufacturers to certify Fuel Cell Vehicles.
Each of the four credits under the Alternative Motor Vehicle Credit is addressed individually below.
Qualified Hybrid Vehicles
Hybrid vehicles are a combination of gasoline and electric engines. These vehicles have drive trains powered by both internal combustion engine and a rechargeable battery.
Generally for qualified hybrids, a taxpayer may rely on the manufacturer’s certification that a specific make, model and model year vehicle qualifies for the credit and the amount of the credit for which it qualifies. Taxpayers may claim the full amount of the allowable credit up to the end of the first calendar quarter after the quarter in which the manufacturer records its sale of the 60,000th hybrid passenger automobile or light truck or advance lean burn technology motor vehicle. For the second and third calendar quarters after the quarter in which the 60,000th vehicle is sold, taxpayers may claim 50 percent of the credit. For the fourth and fifth calendar quarters, taxpayers may claim 25 percent of the credit. No credit is allowed after the fifth quarter.
Qualified Fuel Cell Vehicles
A qualified fuel cell motor vehicle is a vehicle that is propelled by power derived from one or more cells which convert chemical energy directly into electricity.
The base amount of the new qualified fuel cell motor vehicle credit varies with the gross vehicle weight rating of the vehicle. Passenger automobiles and light trucks are eligible for an additional fuel economy amount that varies with the rated fuel economy of a qualifying vehicle. A list of qualifying cell vehicles is available.
Qualified Alternative Fuel Motor Vehicles (QAFMV) and Heavy Hybrids
For alternative fueled light and heavy duty vehicles to meet the requirements of QAFMV, the vehicles may be either new, original equipment installation vehicles or prior use vehicles that are converted to use an alternative fuel by an aftermarket installer. Qualified alternative fuel includes compressed natural gas, liquefied natural gas, liquefied petroleum gas (propane) and hydrogen. The vehicles may also operate on certain mixed fuels such as liquefied propane gas or liquefied natural gas and gasoline. For a list of qualified QAFMV see Qualified Alternative Fuel Motor Vehicles (QAFMV) and Heavy Hybrid Vehicles.
Advanced Lean-Burn Technology Vehicles
Advanced Lean-Burn Vehicles are passenger cars or light trucks with an internal combustion engine designed to operate primarily using more air than is necessary for complete combustion of the fuel. The vehicles must also incorporate direct fuel injection technology and achieve at least 125 percent of the 2002 model year city fuel economy rating.
Available credit amounts may vary and include a base credit amount based on fuel economy compared to the 2002 model year city fuel economy rating and an additional amount based on the vehicle’s lifetime fuel savings.
See Advanced Lean-Burn Technology Vehicles for the list of certified qualifying vehicles.