Last year, President George W. Bush signed the H.R. 6, Energy Policy Act of 2005 (EPACT). This legislation could affect nearly every fleet in the United States and some individual vehicle purchases. The new legislation also created exemptions for electric utility vehicles used for emergency power restoration covered under earlier EPACT legislation. Who is Affected?
Those affected by previous EPACT legislation include utility and federal- and state-owned fleets. Earlier legislation was mostly related to mandating alternative-fuel vehicle purchases for these fleets, aiming at reducing dependence on imported petroleum. Private and local government fleets were not previously regulated. The 2005 legislation was written more as an incentive (tax credits) to purchase alternative-fuel, hybrid, fuel-cell, and advanced lean-burn diesel vehicles. In addition to tax credits for vehicle purchase, the legislation includes tax credits for building or retrofitting alternative fueling facility infrastructure, including ethanol, CNG, LNG, propane, hydrogen, and at least 20-percent biodiesel. The new legislation allows fleets impacted by previous EPACT legislation to apply to waive the requirement by demonstrating alternative means of reducing petroleum use. This alternative compliance option may not be available until model-year 2007. The 2005 legislation also includes funding to establish a voluntary national grant program for diesel emission-reduction projects to improve air quality. Include Tax Credits
The new EPACT of 2005 affects EPA, DOT, and IRS rules. The legislation is somewhat ambiguous and requires research, including legal and tax expert involvement, to determine the benefits and how the new law affects fleets. The new 2005 legislation does not include changes allowing previously mandated fleets under earlier EPACT rules to use hybrid vehicles for alternative-fuel vehicle credits, or increase the biodiesel credit from 50-percent credit. The tax credits are one of the biggest new legislation benefits and hopefully will achieve the objective of encouraging fleets and individuals to purchase the types of vehicles that help reduce the amount of petroleum used to fuel vehicles. Credit Totals Limited
The tax credit anomalies are that they are only good for the first 60,000 vehicles built by each manufacturer for the type of vehicles that qualify. Legislation covers most 2006-2010 vehicles. Some manufacturers will probably hit this amount in one or two years. This legislation limitation is a means to control the amount of tax revenue lost. Another legislation concern is that government and most non-profits do not pay federal taxes. Included in the new legislation, the seller of a vehicle can take advantage the tax credit. If they decide to use the tax credit, they must disclose it to the government or non-profit vehicle purchaser. This language was added while the legislation was written after recommendations and intervention from organizations such as the National Association of Fleet Administrators (NAFA). The seller, however, is not required to give any portion of the monies saved from utilizing this tax credit to the buyer; they must only disclose their intentions. At this time, it is up to the government or non-profit entity purchasing the qualified vehicle to negotiate a benefit from this tax credit. Click here for Tax Provision