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Tax Incentives for Alternative Fuel and Advanced Technology Vehicles, December 19, 2005 1 (12/19/2005)

handle is hein.tera/crstax0537 and id is 1 raw text is: Order Code RS22351 December 19, 2005 CRS Report for Congress Received through the CRS Web Tax Incentives for Alternative Fuel and Advanced Technology Vehicles Brent D. Yacobucci Specialist in Energy Policy Resources, Science, and Industry Division Summary Alternative fuel and advanced technology vehicles face significant market barriers, such as high purchase price and limited availability of refueling infrastructure. The Energy Policy Act of 2005 (P.L. 109-58) expands and establishes tax incentives that encourage the purchase of these vehicles and the development of infrastructure needed to support them. Among the new provisions are tax credits for the purchase of hybrid vehicles (replacing an existing tax deduction), tax credits for the purchase of advanced diesel vehicles (although it is unclear whether any current vehicles will qualify), and tax credits to expand refueling infrastructure. This report discusses current federal tax incentives for alternative fuel and advanced technology vehicles. It also outlines how the Energy Policy Act of 2005 changes those incentives. This report will be updated as events warrant. Introduction.1 Alternative fuel and advanced technology vehicles face significant barriers to wider acceptance as passenger and work vehicles. Alternative fuel vehicles include vehicles powered by nonpetroleum fuels such as natural gas, electricity, or alcohol fuels. Advanced technology vehicles include hybrid vehicles, which combine a gasoline engine with an electric motor system to boost efficiency.2 Often, these vehicles are more expensive than their conventional counterparts.3 Further, fueling the vehicles is often inconvenient because the number of refueling stations for alternative vehicles is negligible compared with the number of gasoline stations nationwide; in some regions, the infrastructure is nonexistent. However, many of these vehicles perform more efficiently This report supersedes CRS Report RS21277, Alternative Fuel Vehicle Tax Incentives and the CLEAR ACT 2 For more information on these vehicles, see CRS Report RL30758, Alternative Transportation Fuels and Vehicles, and CRS Report RL30484, Advanced Vehicle Technologies, by Brent D. Yacobucci. ' Some opponents of tax incentives argue that market barriers alone do not justify government intervention. Proponents argue that there may be noneconomic reasons (e.g. energy security, clean air) to promote one technology over another. Congressional Research Service oe The Library of Congress

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