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Herbein Blog

15 May
2013

New PA Tax Credit for Natural Gas Vehicles

New PA Tax Credit for Natural Gas Vehicles

Kris Keller, MBA – Herbein + Company, Inc.

Pennsylvania House Majority Whip and members of the Pennsylvania House Republican Caucus have unveiled a package of legislation called “Marcellus Works,” which is designed to secure Pennsylvania’s energy future and create thousands of new jobs by fostering the transition to natural gas as a primary fuel for consumer and commercial vehicles.

Prior to the proposed Marcellus Works legislation package, Pennsylvania natural gas vehicle incentives were only available in the form of grants, not tax credits.

The Marcellus Works legislation package includes nine proposed bills, all passed by The PA House of Representatives on April 16, 2013. Two of them, House Bill 301 and House Bill 309, provide tax credits related to the purchase of natural gas vehicles.

House Bill 301
House Bill 301 provides for a natural gas fleet vehicle tax credit to companies demonstrating their eligibility to the Department of Community & Economic Development (DCED) for natural gas vehicles or retrofit types.

Each fiscal year, DCED may award a maximum of $25 million in tax credits with no more than $1 million in tax credits to a single company in a fiscal year. The company may apply the tax credit to 100% of all or a combination of the following taxes:

  • Corporate Net Income Tax
  • Capital Stock and Franchise Tax
  • Gross Premiums Tax
  • Gross Receipts Tax
  • Bank and Trust Company Shares Tax
  • Mutual Thrift Institution Tax
  • Title Insurance Company Tax; or
  • Personal Income Tax

The tax credit may be utilized by the company wholly in the first year or spread out over a maximum period of 5 years. The company may sell or assign the tax credits but cannot carry back or obtain a refund of the tax credits. The tax credits will not be available after December 31, 2016.

The maximum amount a company may claim is as follows:

  • Up to 60% of the cost for vehicles having a gross vehicle weight rating of at least 14,000 pounds but no more than 26,000 pounds; or
  • 50% of the cost for vehicles having a gross vehicle weight rating over 26,000 pounds; with no more than $1 million in tax credits to a single company in a fiscal year.

Examples of natural gas commercial vehicles that meet the weight restrictions include the Ford Series Cutaway, Kenworth T4400 or Greenkraft 1061.

The incremental cost for vehicles with a gross vehicle weight rating of at least 14,000 pounds but no more than 26,000 pounds is capped at $25,000. For vehicles with a gross vehicle weight rating over 26,000 pounds, the incremental cost is capped at $50,000.

House Bill 309
For individual taxpayers, House Bill 309 amends the Tax Reform Code (Act 2 of 1971) and provides a tax credit for the purchase of a natural gas vehicle with a gross vehicle weight in excess of 33,000 pounds.

Examples include a Ford F-650 Chassis Cab, a Crane Carrier Company COE2 or a Freightliner M2 112 Tractor.

Each fiscal year, DCED may award a maximum of $30 million in tax credits with no more than $1 million in tax credits to a single taxpayer.

To receive the tax credit, the taxpayer must submit an application by September 15 to the Department of Community & Economic Development (DCED) for each qualified expense that was incurred in the taxable year that ended in the prior calendar year.

For each qualified expense, the taxpayer shall receive a tax credit equaling the lesser of 50% of the incremental cost of the natural gas vehicle or $12,500. The incremental cost is the difference between the cost of a natural gas vehicle and the cost of the same or similar motor vehicle, manufactured to operate exclusively on gasoline or diesel fuel.

S-Corporation Shareholders
A shareholder of a PA S-corporation or member of a pass-through entity that is not a PA S-corporation is entitled to a natural gas vehicle tax credit if the business entity does not have an eligible tax liability against which the tax credit may be applied.

Any portion of unused tax credit may be carried over to a succeeding year; for no more than five years following the first year the taxpayer is entitled to the tax credit.

Taxpayers cannot carry back or obtain a refund of any unused tax credit and are permitted to sell or reassign the tax credit.

Both tax credit programs would take effect 60 days after enactment which is pending approval by the State Senate and Governor Tom Corbett.

Herbein’s experience
Navigating the process to acquire an approved PA tax credit can be difficult and confusing. Individuals and businesses are well advised to seek competent tax and accounting counsel before purchasing natural gas vehicles. At Herbein, our experienced tax and accounting professionals can provide invaluable guidance.

For additional information or if you have any questions, please contact the author, Kris Keller at kkeller@herbein.com or 412.392.2345.

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