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Alternative Fuel Tax Credits

Help your customers get a tax rebate.

Have you claimed the federal tax credit for your use of propane or compressed natural gas? If not, you may be missing out on a big opportunity to get “free money” from the federal government.

The federal government passed a law that rewards business, government and non-profit organizations for use of alternative fuels like propane and CNG in off-highway motor vehicles such as forklifts, airport tugs and motor boats. The incentive equates to 50 cents per gallon used, and under the current law, it is available for propane and CNG use during the time period of October 1, 2006, through September 1, 2009. (Distributors who rent propane forklifts may be eligible for the credit if the initial tank of propane is incidental to the rental. There is a ruling which supports such a position, but it really comes down to a case-by-case factual analysis that involves a review of the rental agreement and other factors.)

A credit of 50 cents per gallon used is available for propane and CNG use from October 1, 2006, through September 1, 2009.

A credit of 50 cents per gallon may not sound like much, but if you have already used 100,000 gallons of propane since October 1, 2006, you may be entitled to a cash refund of $50,000 from the federal government. The incentive is in the form of a credit against income tax or a cash refund of 50 cents per gallon used over a 35-month period. This can provide a significant income tax credit or cash refund to a business. Before you are able to claim the credit or cash refund, you must first register with the IRS and be classified as an “Alternative Fueler.” The registration process generally takes one to two months and involves submitting an application for registration with the IRS. Once the IRS reviews and is satisfied with your registration submission, the IRS will provide you with notice of approved registration. Thereafter you can start claiming the tax credit or cash refund.

There are two avenues to claim the credit or cash refund—claims can be made quarterly or annually. Quarterly claims must be filed by the last day of the quarter following the earliest quarter included in the claim. For example, a claim for the third quarter of 2008 must be filed any time prior to the last day of the fourth quarter of 2008. As such, a claim for propane use during July 1, 2008, through September 30, 2008, must be filed by December 31, 2008. It should be noted that government and certain tax-exempt organizations are not eligible to make claims on a quarterly basis. Therefore, an annual claim is the only option for these entities.

For claims made on an annual basis, the claims are generally filed on a special form with the claimant’s federal income tax return. With respect to govern- ment and certain tax-exempt organizations, a special form is used for the annual claim.

For distributors that rent lift trucks or other vehicles powered by propane or compressed natural gas, and for their customers who use them, this is a potential windfall. Don’t miss your opportunity to claim a refund to which you may be entitled.

Material Handling Equipment Distributors Association
Meet the Author
Teig Lawrence is a partner at the Fuel Tax Credit Group, located in Miami, Florida, and on the Web at www.fueltaxcredit.com.


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