Alternative Fuel Income Tax Credits FYI – for Your Information
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TAXPAYER SERVICE DIVISION FYI – For Your Information Alternative Fuel Income Tax Credits ALTERNATIVE FUEL VEHICLE Computation of Credit CREDIT The credit is a percentage of Colorado income tax credits are available for the purchase of an alternative fuel a) the difference between the cost of the vehicle, for a motor vehicle that is vehicle and the cost of the same or converted to use alternative fuel, or for most similar vehicle that uses a the replacement of the power source with traditional fuel, or a power source that uses alternative fuel. b) the cost incurred in converting the To qualify, the vehicle must be titled and vehicle to an alternative fuel, or registered in Colorado. (§39-22-516 C.R.S.) c) the difference between the cost of replacing the power source and the The credit is only available in the year cost of the same or most similar during which the vehicle was purchased power source that uses a traditional or converted. If the credit allowed fuel. exceeds the net tax liability for that year, In a) and c) above, if the cost of the any excess credit may be carried forward traditional fuel option is greater than or and claimed on future year returns for up equal to the cost of the alternative fuel to five years until the credit is fully option, the credit will be $0. utilized. Definition of Alternative Fuel Alternative fuel means compressed natural gas, propane, methanol and ethanol, or any mixture thereof containing 85% or more of methanol or ethanol by volume with gasoline or other fuels, electricity, or any other fuels, which Colorado Department may include, but are not limited to, clean of Revenue diesel and reformulated gasoline so long Taxpayer Service Division as these other fuels make comparable 1375 Sherman St. Denver, Colorado 80261 reductions in carbon monoxide emissions and brown cloud pollutants as determined Forms and other services: by the air quality control commission. (303) 238-FAST (3278) Assistance: (303) 238-SERV (7378) www.taxcolorado.com PAGE 1 OF 7 INCOME 9 (12/06) The percentage of the credit depends on the certification level of the vehicle and the year in which the expenditure is made. Certification level Tax year beginning Tax year beginning prior to January 1, 2010 on or after January 1, 2010, but prior to January 1, 2012 Low-emitting vehicle (LEV) 50% 25% Ultra-low-emitting vehicle 75% 50% or Inherently-low- emitting vehicle (ULEV or ILEV) Zero-emitting vehicle 85% 75% (ZEV or SULEV) Certification levels have the same (b) Provide the cost difference used in meaning as set forth in the air quality computing the credit and the basis on control commission regulations governing which it is computed. the clean fuel fleet program. A near zero- The cost difference will usually emitting vehicle shall be treated as a zero- decrease ratably with the decrease in emitting vehicle. At this time the the value of the vehicle. For example, California certified SULEV (Super ultra if the price paid for the used vehicle is low emitting vehicle) is the only vehicle 40% of the original MSRP, then the rating that qualifies as a near zero- credit allowed will be 40% of the credit emitting vehicle. available for that vehicle when new. If a ten-year old vehicle had a new The percentage of the credit is doubled, up alternative fuel engine put in one-year to a maximum of 100%, if the vehicle or ago, then the vehicle must be compared power source permanently displaces (will to the most similar vehicle valued with a never be operated on Colorado highways one year old gas engine, not a ten-year in the future) a vehicle or power source old engine. that is ten years old or older. You must provide a copy of the bill of sale to an out Common Questions of state buyer or salvage yard to claim this extra credit. Does a low emitting vehicle that runs on traditional fuel (gasoline or diesel fuel) qualify for this credit? Non-Qualifying Vehicles "Mild" Hybrid Vehicles No. The low emitting vehicle operates on Mild hybrid vehicles such as the Chevrolet traditional fuel and therefore could not be Silverado, Dodge Ram, GMC Sierra, and distinguished from the same model of car. Saturn VUE, do not qualify for the alternative fuel vehicle credit. Does the purchase of a vehicle that can operate solely on traditional fuel, but can Neighborhood Electric Vehicles (NEV) also operate on alternative fuel at the NEVs do not qualify for the alternative owner’s option, qualify for the alternative fuel vehicle credit because they cannot be fuel vehicle credit? operated on Colorado highways. [§39-22-516(2.5)(a)(III), C.R.S.] No. A vehicle that can operate solely on traditional fuel does not qualify for the alternative fuel vehicle credit. A qualify- Used Vehicles ing vehicle must: A vehicle can qualify for this credit only one time. To claim the credit on the • operate solely on the alternative fuel, purchase of a used vehicle a taxpayer or must: • operate on alternative fuel and (a) Provide a history of the vehicle and traditional fuel at the same time, or receipts indicating the prior owners and • operate on alternative fuel some of PAGE 2 OF 7 why they did not claim this credit. the time and on traditional fuel some INCOME 9 (12/06) of the time. Furthermore, the cost of a flex fuel or ALTERNATIVE FUELS REBATE- dual fuel vehicle is the same as the most GOVERNMENTAL AND CHARITABLE similar vehicle that can operate exclu- ORGANIZATIONS sively on traditional fuel, which results in a credit of $0 (e.g. most vehicles that can If the motor vehicle that qualifies for the use E85 fuel or biodiesel). alternative fuel vehicle credit is owned by the State of Colorado, a political subdivi- Can a leased vehicle qualify for this credit? sion of the state, or a tax exempt organiza- tion, and is used in connection with the Lessees of qualifying vehicles are eligible official activities of the entity, the entity for the alternative fuel vehicle credit. will be eligible for a rebate computed in The available credit is calculated by the same manner as the credit that would subtracting the value of the vehicle when have been calculated under the guidelines the lease expires from the cost of the of the alternative fuel vehicle credit using vehicle to the lessor at the time of the the percentages in the chart on page 4. lease transaction (capitalized cost), and Each qualified entity is limited to $350,000 dividing that amount by the cost of the per state fiscal year in total rebates paid. vehicle to the lessor at the time of the (§39-33-102, C.R.S.). lease transaction. This percentage is then multiplied by the qualifying expenses to determine the amount of the expenditure Qualified entities may apply for this that can be used in computing the amount rebate with the following forms: of the credit. Only the lessor or lessee of • Alternative Fuels Rebate the vehicle may claim the credit. If the Instructions" (DR 0166) vehicle is converted at the factory, the • "Alternative Fuels Rebate Form" lessor has the option of claiming the (DR 0167) credit or passing the right to claim the • "Dealer or Installer Certification Form" credit to the lessee. If the lessee converts (DR 0168) the vehicle, then only the lessee may claim the credit. See Credits Available for Selected Common Vehicles Chart on pages 5 -7. Chart includes: • Ford Escape Hybrid (2005,2006,2007) • Honda Accord Hybrid (2005, 2006, 2007) • Honda Civic GX (2004, 2005, 2006) • Honda Civic Hybrid (2003, 2004, 2005, 2006, 2007) • Honda Insight (2002, 2003, 2004, 2005, 2006) • Lexus RX 400 Hybrid (2006, 2007) • Lexus GS 450 Hybrid (2007) • Mercury Mariner (2006, 2007) • Toyota Highlander Hybrid (2006, 2007) • Toyota Prius (2001, 2002, 2003, 2004, 2005, 2006, 2007) PAGE 3 OF 7 INCOME 9 (12/06) Alternative Fuels Rebate Chart Certification level For costs incurred For costs incurred For costs incurred prior to July 1, 2006 on or after July 1, 2006, on or after July 1, 2009, but prior to July 1, 2009 but prior to July 1, 2011 Low-emitting vehicle (LEV) 50% 25% 0% Ultra-low-emitting vehicle 75% 50% 25% or Inherently-low- emitting vehicle (ULEV or ILEV) Zero-emitting vehicle 85% 75% 50% (ZEV or SULEV) ALTERNATIVE FUEL REFUELING This credit cannot be claimed on a FACILITY CREDIT refueling facility, or on any equipment For tax years beginning prior to January used in connection with that facility, if 1, 2011, Colorado income tax credits are any taxpayer has ever claimed the available for the construction, alternative fuel refueling facility credit reconstruction, or aquisition of an for that facility. alternative fuel refueling facility that is directly attributable to the storage, To the extent the allowable credit compression, charging or dispensing of exceeds the tax liability, the excess may alternative fuels to motor vehicles. [§39- be carried forward for up to five years. 22-516 (2.7), C.R.S.] Common Questions The percentage of the credit is determined by the tax year in which the What percentage of the costs of a new costs are incurred: facility will be eligible for the credit when • Tax year beginning prior to the project includes a convenience store Jan. 1, 2006: 50% and traditional gas pumps? • Tax year beginning prior to Jan. 1, 2009: 35% Only the incremental costs of the • Tax year beginning prior to alternative fuel distribution system will Jan 1, 2011: 20% qualify for the credit.