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Federal Alternative Fuel and Natural Gas Incentives

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With the government focusing more and more on green energy, many alternative fuel and natural gas incentives have been offered to encourage companies and entities to convert from standard gasoline and diesel to less pollutive fuels like compressed natural gas and biodiesel.

While these credits are quite attractive, companies need to be aware that certain restrictions, regulations, and guidelines apply to these credits and how they are used.

Natural Gas Incentives

Alternative Fuel Infrastructure Tax Credit

The government offers a tax credit toward the cost of alternative fueling equipment installed after December 31, 2005 for those businesses who choose to do so. Fueling station owners installing equipment at more than one site can use the credit toward each location. Consumers purchasing residential fueling equipment may qualify for a tax credit of up to $1,000. Hydrogen fueling equipment installed before January 1, 2015 qualifies for a credit of $200,000.

Time Frame

Equipment installed in 2011 qualifies for alternative fuel and natural gas incentives of up to 30% or $30,000, whichever is less. Companies which installed equipment in 2009 and 2010 may be entitled to a credit in the amount of 50% of eligible costs up to $50,000.

Covered Fuels

  • Natural gas
  • Liquefied petroleum gas
  • Hydrogen
  • Electricity
  • E85
  • 20% or greater biodiesel fuel blends

The credit for all other eligible fuel types expires December 31, 2011. Unused credits that qualify as general business tax credits can be carried back one year or forward 20 years.

Alternative Fuel Excise Tax Credit

Alternative fuel sold for operation of a motor vehicle is also eligible for government alternative fuel and natural gas incentives of $0.50 per gallon for:

  • Compressed natural gas
  • Liquefied natural gas
  • Liquefied petroleum gas
  • P-Series fuel
  • Liquid fuel produced from coal using the Fischer-Tropsh process
  • Compressed or liquefied gas produced from biomass

Qualifying  Companies

In order to receive alternative fuel and natural gas incentives a company must be responsible for reporting and paying federal excise taxes on the sale or use of the fuel. Some tax exempt entities like state and local governments may qualify for alternative fuel and natural gas incentives as well.

Incentive Implementation

Those entities that qualify for alternative fuel and natural gas incentives must be registered with the IRS. Companies must use the credit against tax liabilities. Any remaining funds will be claimed as a direct payment form the IRS. Alternative fuel and natural gas incentives my not be allowed if the fuel in question is found to be under ethanol or biodiesel incentive umbrellas.

Alternative Fuel Mixture Excise Tax Credit

Alternative fuel blenders registered with the IRS could qualify for alternative fuel and natural gas incentives of $0.50 per gallon on the sale or use of the blended fuel for use a fuel in the trade or business of that blender.

Approved blend must have at least 0.1% of:

  • Gasoline
  • Diesel
  • Kerosene

Fuels Covered Under This Incentive

  • Compressed natural gas
  • Liquefied natural gas
  • Liquefied petroleum gas
  • P-Series fuel
  • Liquid fuel made from coal through the Fischer-Tropsch process
  • Compressed or liquefied gas made from biomass

Incentive Implementation

Federal alternative fuel and natural gas incentives credits must first be used against tax liabilities. Any remaining funds can be claimed as from the IRS as a direct payment. Alternative fuel and natural gas incentives are not allowed for those fuels that are found to be covered under ethanol or biodiesel credits.

Alternative Fuel Tax Exemption

If companies use alternative fuel in a way that is recognized as nontaxable by the IRS they are exempt from federal fuel taxes.

Common Nontaxable Alternative Motor Fuel Uses:

  • Farming use
  • Select intercity and local bus use
  • School bus use
  • Not for profit educational use
  • State, political subdivision of state, or District of Columbia use

Improved Energy Technology Loans

Projects that are eligible for federal alternative fuel and natural gas incentives are provided loan guarantees by the U.S. Department of Energy (DOE). This promotes commercial endeavors using green technologies such as biofuel and alternative fuel vehicles. However, it is not for research or development uses.

Loan Guidelines

The DOE can provide loan guarantees of up to 100% for qualifying projects. The Treasury Department’s Federal Financing Bank must issue loans of over 80%.

 

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