Fleets are always looking for ways to save money and cut costs, and one way to make this possible is through tax credits. Businesses take advantage of tax credits all the time, and one significant source in modern times is pursuing eco-friendly options for everyday business operations. For fleets, this means alternative fuel sources that are better for the earth. It’s not only a positive for the environment when fleets use these alternative fuels, but it leads to cost savings that improve the business’s bottom line. What exactly is this fuel tax credit, and how can fleet companies take advantage?
Alternative Fuel Excise Tax Credit
The alternative fuel excise tax credit is an incentive for drivers to use alternative fuel to operate a motor vehicle. It is a $0.50 tax credit per gallon for natural gas, propane, liquid fuel derived from coal through the Fischer-Tropsch process, liquefied hydrogen, P-Series fuel, and compressed or liquefied gas derived from biomass. The amount is based on the gasoline gallon equivalent (GGE) or diesel gallon equivalent (DGE). One GGE is equal to 5.75 lbs of propane and 5.66 lbs of compressed natural gas, while one DGE equals 6.06 lbs of liquefied natural gas.
Who Can Obtain the Tax Credit?
A person or business can obtain this tax credit as long as they report and pay the federal excise tax on the sale or use of fuel in the vehicle. Fleets who wish to take advantage must register with the Internal Revenue Service (IRS).
How Does the Tax Credit Apply?
First, the tax credit is taken as a credit against the fleet’s alternative fuel tax liability. Then, the fleet can claim any additional fuel tax liability as a direct payment from the IRS.
Alternative Fuel Options
If you’re considering alternative fuel options for your fleet, you should first learn a lot about them. Do your research on any fuel alternative that you want to pursue. We will break down a few of the most common alternative fuels for fleets below.
Fischer-Tropsch diesel is an alternative for fleets that have large diesel trucks. It is also known as gas-to-liquid fuel. In the Fischer-Tropsch process, gaseous fuel is converted to liquid and then refined to diesel or gasoline. This process reduces emissions, making it compatible with emission-controlled vehicles. Fischer-Tropsch diesel is one alternative fuel form that is acceptable for a tax credit under the alternative fuel excise tax.
Biodiesel is made from all kinds of matter from vegetable oils, animal fats, and waste cooking oils. It reduces carbon monoxide, particulate matter, and hydrocarbon emissions. The US Postal Service has been using biodiesel in some of their vehicles for a study called Operating Experience and Teardown Analysis for Engines Operated on Biodiesel Blends.
Liquefied Natural Gas
Liquefied Natural Gas is non-toxic and non-corrosive, making it perfect for vehicles and good for the environment. It has reduced emissions and offers similar fuel efficiency as conventional fuel. It is simply natural gas cooled to -260 degrees Fahrenheit until it is in a liquid state. It is increasing the markets for natural gas and making it easier to get.
The Future of Alternative Fuels
With or without tax credits, alternative fuels are likely to increase in popularity. Companies need to go greener with the looming issue of climate change, and customers and clients increasingly demand to work with more environmentally conscious businesses. It is also likely that incentives will increase to use this fuel, such as more tax credits, lower fuel tax rates, and other ways policymakers will encourage fleets and other drivers to consider and use alternative fuels. It may take decades to implement fully, but it is necessary for our planet's future.
Azuga is at the forefront of fleet technology developments and policies that affect fleets every day, such as the alternative fuel excise tax credit. Follow our blog for more tips on saving money and making your fleet greener in the process. Meanwhile, check out our website for technology solutions that will improve your fleet’s overall performance and increase your productivity!