Alternative motor vehicle credit

(a)

In general

Subpart B of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to foreign tax credit, etc.) is amended by adding at the end the following:

30B.

Alternative motor vehicle credit

(a)

Allowance of credit

There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of— (1)the new qualified fuel cell motor vehicle credit determined under subsection (b), (2)the new advanced lean burn technology motor vehicle credit determined under subsection (c), (3)the new qualified hybrid motor vehicle credit determined under subsection (d), and (4)the new qualified alternative fuel motor vehicle credit determined under subsection (e). (b)

New qualified fuel cell motor vehicle credit

(1)

In general

For purposes of subsection (a), the new qualified fuel cell motor vehicle credit determined under this subsection with respect to a new qualified fuel cell motor vehicle placed in service by the taxpayer during the taxable year shall be determined in accordance with the following table: In the case of a The new qualified vehicle which has a grossfuel cell motor vehicle weight rating of—vehicle credit is—Not more than 8,500 lbs$4,000More than 8,500 lbs but not more than 14,000 lbs$10,000More than 14,000 lbs but not more than 26,000 lbs$20,000More than 26,000 lbs$40,000.

(2)

Increase for fuel efficiency

(A)

In general

The amount determined under paragraph (1) with respect to a new qualified fuel cell motor vehicle which is a passenger automobile or light truck shall be increased by the additional credit amount. (B)

Additional credit amount

For purposes of subparagraph (A), the additional credit amount shall be determined in accordance with the following table: In the case of a vehicle which achieves a fuel economy (expressed as a percentage of the 2002 modelThe additional year city fuel economy) of—credit amount is—At least 150 percent but less than 175 percent$1,000At least 175 percent but less than 200 percent$1,500At least 200 percent but less than 225 percent$2,000At least 225 percent but less than 250 percent$2,500At least 250 percent but less than 275 percent$3,000At least 275 percent but less than 300 percent$3,500At least 300 percent$4,000.

(3)

New qualified fuel cell motor vehicle

For purposes of this subsection, the term new qualified fuel cell motor vehicle means a motor vehicle— (A)which is propelled by power derived from one or more cells which convert chemical energy directly into electricity by combining oxygen with hydrogen fuel which is stored on board the vehicle in any form and may or may not require reformation prior to use, (B)which, in the case of a passenger automobile or light truck, has received— (i)a certificate of conformity under the Clean Air Act and meets or exceeds the equivalent qualifying California low emission vehicle standard under section 243(e)(2) of the Clean Air Act for that make and model year, and (ii)a certificate that such vehicle meets or exceeds the Bin 5 Tier II emission standard established in regulations prescribed by the Administrator of the Environmental Protection Agency under section 202(i) of the Clean Air Act for that make and model year vehicle, (C)the original use of which commences with the taxpayer, (D)which is acquired for use or lease by the taxpayer and not for resale, and (E)which is made by a manufacturer. (c)

New advanced lean burn technology motor vehicle credit

(1)

In general

For purposes of subsection (a), the new advanced lean burn technology motor vehicle credit determined under this subsection with respect to a new advanced lean burn technology motor vehicle placed in service by the taxpayer during the taxable year is the credit amount determined under paragraph (2). (2)

Credit amount

(A)

Fuel economy

The credit amount determined under this paragraph shall be determined in accordance with the following table: In the case of a vehicle which achieves a fuel economy (expressed as a percentage of the 2002 modelThe credit year city fuel economy) of— amount is—At least 125 percent but less than 150 percent$400At least 150 percent but less than 175 percent$800At least 175 percent but less than 200 percent$1,200At least 200 percent but less than 225 percent$1,600At least 225 percent but less than 250 percent$2,000At least 250 percent$2,400.

(B)

Conservation credit

The amount determined under subparagraph (A) with respect to a new advanced lean burn technology motor vehicle shall be increased by the conservation credit amount determined in accordance with the following table: In the case of a vehicle which achieves a lifetime fuel savings (expressed inThe conservation gallons of gasoline) of—credit amount is—At least 1,200 but less than 1,800$250At least 1,800 but less than 2,400$500At least 2,400 but less than 3,000$750At least 3,000$1,000.

(3)

New advanced lean burn technology motor vehicle

For purposes of this subsection, the term new advanced lean burn technology motor vehicle means a passenger automobile or a light truck— (A)with an internal combustion engine which— (i)is designed to operate primarily using more air than is necessary for complete combustion of the fuel, (ii)incorporates direct injection, (iii)achieves at least 125 percent of the 2002 model year city fuel economy, (iv)for 2005 and later model vehicles, has received a certificate that such vehicle meets or exceeds— (I)in the case of a vehicle having a gross vehicle weight rating of 6,000 pounds or less, the Bin 5 Tier II emission standard established in regulations prescribed by the Administrator of the Environmental Protection Agency under section 202(i) of the Clean Air Act for that make and model year vehicle, and (II)in the case of a vehicle having a gross vehicle weight rating of more than 6,000 pounds but not more than 8,500 pounds, the Bin 8 Tier II emission standard which is so established. (B)the original use of which commences with the taxpayer, (C)which is acquired for use or lease by the taxpayer and not for resale, and (D)which is made by a manufacturer. (4)

Lifetime fuel savings

For purposes of this subsection, the term lifetime fuel savings means, in the case of any new advanced lean burn technology motor vehicle, an amount equal to the excess (if any) of— (A)120,000 divided by the 2002 model year city fuel economy for the vehicle inertia weight class, over (B)120,000 divided by the city fuel economy for such vehicle. (d)

New qualified hybrid motor vehicle credit

(1)

In general

For purposes of subsection (a), the new qualified hybrid motor vehicle credit determined under this subsection with respect to a new qualified hybrid motor vehicle placed in service by the taxpayer during the taxable year is the credit amount determined under paragraph (2). (2)

Credit amount

(A)

Credit amount for passenger automobiles and light trucks

In the case of a new qualified hybrid motor vehicle which is a passenger automobile or light truck and which has a gross vehicle weight rating of not more than 8,500 pounds, the amount determined under this paragraph is the sum of the amounts determined under clauses (i) and (ii). (i)

Fuel economy

The amount determined under this clause is the amount which would be determined under subsection (c)(2)(A) if such vehicle were a vehicle referred to in such subsection. (ii)

Conservation credit

The amount determined under this clause is the amount which would be determined under subsection (c)(2)(B) if such vehicle were a vehicle referred to in such subsection. (B)

Credit amount for other motor vehicles

(i)

In general

In the case of any new qualified hybrid motor vehicle to which subparagraph (A) does not apply, the amount determined under this paragraph is the amount equal to the applicable percentage of the qualified incremental hybrid cost of the vehicle as certified under clause (v). (ii)

Applicable percentage

For purposes of clause (i), the applicable percentage is— (I)20 percent if the vehicle achieves an increase in city fuel economy relative to a comparable vehicle of at least 30 percent but less than 40 percent, (II)30 percent if the vehicle achieves such an increase of at least 40 percent but less than 50 percent, and (III)40 percent if the vehicle achieves such an increase of at least 50 percent. (iii)

Qualified incremental hybrid cost

For purposes of this subparagraph, the qualified incremental hybrid cost of any vehicle is equal to the amount of the excess of the manufacturer’s suggested retail price for such vehicle over such price for a comparable vehicle, to the extent such amount does not exceed— (I)$7,500, if such vehicle has a gross vehicle weight rating of not more than 14,000 pounds, (II)$15,000, if such vehicle has a gross vehicle weight rating of more than 14,000 pounds but not more than 26,000 pounds, and (III)$30,000, if such vehicle has a gross vehicle weight rating of more than 26,000 pounds. (iv)

Comparable vehicle

For purposes of this subparagraph, the term comparable vehicle means, with respect to any new qualified hybrid motor vehicle, any vehicle which is powered solely by a gasoline or diesel internal combustion engine and which is comparable in weight, size, and use to such vehicle. (v)

Certification

A certification described in clause (i) shall be made by the manufacturer and shall be determined in accordance with guidance prescribed by the Secretary. Such guidance shall specify procedures and methods for calculating fuel economy savings and incremental hybrid costs. (3)

New qualified hybrid motor vehicle

For purposes of this subsection— (A)

In general

The term new qualified hybrid motor vehicle means a motor vehicle— (i)which draws propulsion energy from onboard sources of stored energy which are both— (I)an internal combustion or heat engine using consumable fuel, and (II)a rechargeable energy storage system, (ii)which, in the case of a vehicle to which paragraph (2)(A) applies, has received a certificate of conformity under the Clean Air Act and meets or exceeds the equivalent qualifying California low emission vehicle standard under section 243(e)(2) of the Clean Air Act for that make and model year, and (I)in the case of a vehicle having a gross vehicle weight rating of 6,000 pounds or less, the Bin 5 Tier II emission standard established in regulations prescribed by the Administrator of the Environmental Protection Agency under section 202(i) of the Clean Air Act for that make and model year vehicle, and (II)in the case of a vehicle having a gross vehicle weight rating of more than 6,000 pounds but not more than 8,500 pounds, the Bin 8 Tier II emission standard which is so established, (iii)which has a maximum available power of at least— (I)4 percent in the case of a vehicle to which paragraph (2)(A) applies, (II)10 percent in the case of a vehicle which has a gross vehicle weight rating or more than 8,500 pounds and not than 14,000 pounds, and (III)15 percent in the case of a vehicle in excess of 14,000 pounds, (iv)which, in the case of a vehicle to which paragraph (2)(B) applies, has an internal combustion or heat engine which has received a certificate of conformity under the Clean Air Act as meeting the emission standards set in the regulations prescribed by the Administrator of the Environmental Protection Agency for 2005 through 2008 model year diesel heavy duty engines or ottocycle heavy duty engines, as applicable, (v)the original use of which commences with the taxpayer, (vi)which is acquired for use or lease by the taxpayer and not for resale, and (vii)which is made by a manufacturer.

Such term shall not include any vehicle which is not a passenger automobile or light truck if such vehicle has a gross vehicle weight rating of less than 8,500 pounds.

(B)

Consumable fuel

For purposes of subparagraph (A)(i)(I), the term consumable fuel means any solid, liquid, or gaseous matter which releases energy when consumed by an auxiliary power unit. (C)

Maximum available power

(i)

Certain passenger automobiles and light trucks

In the case of a vehicle to which paragraph (2)(A) applies, the term maximum available power means the maximum power available from the rechargeable energy storage system, during a standard 10 second pulse power or equivalent test, divided by such maximum power and the SAE net power of the heat engine. (ii)

Other motor vehicles

In the case of a vehicle to which paragraph (2)(B) applies, the term maximum available power means the maximum power available from the rechargeable energy storage system, during a standard 10 second pulse power or equivalent test, divided by the vehicle’s total traction power. For purposes of the preceding sentence, the term total traction power means the sum of the peak power from the rechargeable energy storage system and the heat engine peak power of the vehicle, except that if such storage system is the sole means by which the vehicle can be driven, the total traction power is the peak power of such storage system. (e)

New qualified alternative fuel motor vehicle credit

(1)

Allowance of credit

Except as provided in paragraph (5), the new qualified alternative fuel motor vehicle credit determined under this subsection is an amount equal to the applicable percentage of the incremental cost of any new qualified alternative fuel motor vehicle placed in service by the taxpayer during the taxable year. (2)

Applicable percentage

For purposes of paragraph (1), the applicable percentage with respect to any new qualified alternative fuel motor vehicle is— (A)40 percent, plus (B)30 percent, if such vehicle— (i)has received a certificate of conformity under the Clean Air Act and meets or exceeds the most stringent standard available for certification under the Clean Air Act for that make and model year vehicle (other than a zero emission standard), or (ii)has received an order certifying the vehicle as meeting the same requirements as vehicles which may be sold or leased in California and meets or exceeds the most stringent standard available for certification under the State laws of California (enacted in accordance with a waiver granted under section 209(b) of the Clean Air Act) for that make and model year vehicle (other than a zero emission standard).

For purposes of the preceding sentence, in the case of any new qualified alternative fuel motor vehicle which has a gross vehicle weight rating of more than 14,000 pounds, the most stringent standard available shall be such standard available for certification on the date of the enactment of the Volume Enhancing Hardware Incentives for Consumer Lowered Expenses Technology Act of 2005.

(3)

Incremental cost

For purposes of this subsection, the incremental cost of any new qualified alternative fuel motor vehicle is equal to the amount of the excess of the manufacturer’s suggested retail price for such vehicle over such price for a gasoline or diesel fuel motor vehicle of the same model, to the extent such amount does not exceed— (A)$5,000, if such vehicle has a gross vehicle weight rating of not more than 8,500 pounds, (B)$10,000, if such vehicle has a gross vehicle weight rating of more than 8,500 pounds but not more than 14,000 pounds, (C)$25,000, if such vehicle has a gross vehicle weight rating of more than 14,000 pounds but not more than 26,000 pounds, and (D)$40,000, if such vehicle has a gross vehicle weight rating of more than 26,000 pounds. (4)

New qualified alternative fuel motor vehicle

For purposes of this subsection— (A)

In general

The term new qualified alternative fuel motor vehicle means any motor vehicle— (i)which is only capable of operating on an alternative fuel, (ii)the original use of which commences with the taxpayer, (iii)which is acquired by the taxpayer for use or lease, but not for resale, and (iv)which is made by a manufacturer. (B)

Alternative fuel

The term alternative fuel means compressed natural gas, liquefied natural gas, liquefied petroleum gas, hydrogen, and any liquid at least 85 percent of the volume of which consists of methanol. (5)

Credit for mixed-fuel vehicles

(A)

In general

In the case of a mixed-fuel vehicle placed in service by the taxpayer during the taxable year, the credit determined under this subsection is an amount equal to— (i)in the case of a 75/25 mixed-fuel vehicle, 70 percent of the credit which would have been allowed under this subsection if such vehicle was a qualified alternative fuel motor vehicle, and (ii)in the case of a 90/10 mixed-fuel vehicle, 90 percent of the credit which would have been allowed under this subsection if such vehicle was a qualified alternative fuel motor vehicle. (B)

Mixed-fuel vehicle

For purposes of this subsection, the term mixed-fuel vehicle means any motor vehicle described in subparagraph (C) or (D) of paragraph (3), which— (i)is certified by the manufacturer as being able to perform efficiently in normal operation on a combination of an alternative fuel and a petroleum-based fuel, (ii)either— (I)has received a certificate of conformity under the Clean Air Act, or (II)has received an order certifying the vehicle as meeting the same requirements as vehicles which may be sold or leased in California and meets or exceeds the low emission vehicle standard under section 88.105–94 of title 40, Code of Federal Regulations, for that make and model year vehicle, (iii)the original use of which commences with the taxpayer, (iv)which is acquired by the taxpayer for use or lease, but not for resale, and (v)which is made by a manufacturer. (C)

75/25 mixed-fuel vehicle

For purposes of this subsection, the term 75/25 mixed-fuel vehicle means a mixed-fuel vehicle which operates using at least 75 percent alternative fuel and not more than 25 percent petroleum-based fuel. (D)

90/10 mixed-fuel vehicle

For purposes of this subsection, the term 90/10 mixed-fuel vehicle means a mixed-fuel vehicle which operates using at least 90 percent alternative fuel and not more than 10 percent petroleum-based fuel. (f)

Limitation on number of new qualified hybrid and advanced lean-burn technology vehicles eligible for credit

(1)

In general

In the case of a qualified vehicle sold during the phaseout period, only the applicable percentage of the credit otherwise allowable under subsection (c) or (d) shall be allowed. (2)

Phaseout period

For purposes of this subsection, the phaseout period is the period beginning with the second calendar quarter following the calendar quarter which includes the first date on which the number of qualified vehicles manufactured by the manufacturer of the vehicle referred to in paragraph (1) sold for use in the United States after the date of the enactment of this section is at least 80,000. (3)

Applicable percentage

For purposes of paragraph (1), the applicable percentage is— (A)50 percent for the first 2 calendar quarters of the phaseout period, (B)25 percent for the 3d and 4th calendar quarters of the phaseout period, and (C)0 percent for each calendar quarter thereafter. (4)

Controlled groups

(A)

In general

For purposes of this subsection, all persons treated as a single employer under subsection (a) or (b) of section 52 or subsection (m) or (o) of section 414 shall be treated as a single manufacturer. (B)

Inclusion of foreign corporations

For purposes of subparagraph (A), in applying subsections (a) and (b) of section 52 to this section, section 1563 shall be applied without regard to subsection (b)(2)(C) thereof. (5)

Qualified vehicle

For purposes of this subsection, the term qualified vehicle means any new qualified hybrid motor vehicle and any new advanced lean burn technology motor vehicle. (g)

Limitation based on amount of tax

The credit allowed under subsection (a) for the taxable year shall not exceed the excess of— (1)the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over (2)the sum of the credits allowable under subpart A and sections 27 and 30 for the taxable year. (h)

Other definitions and special rules

For purposes of this section— (1)

Motor vehicle

The term motor vehicle has the meaning given such term by section 30(c)(2). (2)

Other terms

The terms automobile, passenger automobile, light truck, and manufacturer have the meanings given such terms in regulations prescribed by the Administrator of the Environmental Protection Agency for purposes of the administration of title II of the Clean Air Act (42 U.S.C. 7521 et seq.). (3)

2002 model year city fuel economy

(A)

In general

The 2002 model year city fuel economy with respect to a vehicle shall be determined in accordance with the following tables: (i)In the case of a passenger automobile: If vehicle inertiaThe 2002 model year weight class is: city fuel economy is:1,500 or 1,750 lbs45.2 mpg2,000 lbs39.6 mpg2,250 lbs35.2 mpg2,500 lbs31.7 mpg2,750 lbs28.8 mpg3,000 lbs26.4 mpg3,500 lbs22.6 mpg4,000 lbs19.8 mpg4,500 lbs17.6 mpg5,000 lbs15.9 mpg5,500 lbs14.4 mpg6,000 lbs13.2 mpg6,500 lbs12.2 mpg7,000 to 8,500 lbs11.3 mpg.

(ii)In the case of a light truck: If vehicle inertia The 2002 model year weight class is:city fuel economy is:1,500 or 1,750 lbs39.4 mpg2,000 lbs35.2 mpg2,250 lbs31.8 mpg2,500 lbs29.0 mpg2,750 lbs26.8 mpg3,000 lbs24.9 mpg3,500 lbs21.8 mpg4,000 lbs19.4 mpg4,500 lbs17.6 mpg5,000 lbs16.1 mpg5,500 lbs14.8 mpg6,000 lbs13.7 mpg6,500 lbs12.8 mpg7,000 to 8,500 lbs12.1 mpg.

(B)

Vehicle inertia weight class

For purposes of subparagraph (A), the term vehicle inertia weight class has the same meaning as when defined in regulations prescribed by the Administrator of the Environmental Protection Agency for purposes of the administration of title II of the Clean Air Act (42 U.S.C. 7521 et seq.). (4)

Fuel economy

Fuel economy with respect to any vehicle shall be measured under rules similar to the rules under section 4064(c). (5)

Reduction in basis

For purposes of this subtitle, if a credit is allowed under this section for any expenditure with respect to any property, the increase in the basis of such property which would (but for this paragraph) result from such expenditure shall be reduced by the amount of the credit so allowed. (6)

No double benefit

The amount of any deduction or credit allowable under this chapter (other than the credits allowable under this section and section 30) shall be reduced by the amount of credit allowed under subsection (a) for such vehicle for the taxable year. (7)

Recapture

The Secretary shall, by regulations, provide for recapturing the benefit of any credit allowable under subsection (a) with respect to any property which ceases to be property eligible for such credit (including recapture in the case of a lease period of less than the economic life of a vehicle). (8)

Property used outside United States, etc., not qualified

No credit shall be allowed under subsection (a) with respect to any property referred to in section 50(b) or with respect to the portion of the cost of any property taken into account under section 179. (9)

Election not to take credit

No credit shall be allowed under subsection (a) for any vehicle if the taxpayer elects to not have this section apply to such vehicle. (10)

Business carryovers allowed

If the credit allowable under subsection (a) for a taxable year exceeds the limitation under subsection (g) for such taxable year, such excess (to the extent of the credit allowable with respect to property subject to the allowance for depreciation) shall be allowed as a credit carryback and carryforward under rules similar to the rules of section 39. (11)

Interaction with motor vehicle safety standards

Unless otherwise provided in this section, a motor vehicle shall not be considered eligible for a credit under this section unless such vehicle is in compliance with the motor vehicle safety provisions of sections 30101 through 30169 of title 49, United States Code. (i)

Regulations

(1)

In general

The Secretary shall promulgate such regulations as necessary to carry out the provisions of this section. (2)

Determination of motor vehicle eligibility

The Secretary, after coordination with the Secretary of Transportation and the Administrator of the Environmental Protection Agency, shall prescribe such regulations as necessary to determine whether a motor vehicle meets the requirements to be eligible for a credit under this section. (j)

Termination

This section shall not apply to any property placed in service after— (1)in the case of a new qualified alternative fuel motor vehicle, December 31, 2007, (2)in the case of a new advanced lean burn technology motor vehicle or a new qualified hybrid motor vehicle, December 31, 2009, and (3)in the case of a new qualified fuel cell motor vehicle, December 31, 2013.

(b)

Conforming amendments

(1)Section 30(d) of such Code (relating to special rules) is amended by adding at the end the following new paragraphs:

(5)

No double benefit

No credit shall be allowed under this section for any motor vehicle for which a credit is also allowed under section 30B.

(2)Section 1016(a) of such Code is amended by striking and at the end of paragraph (30), by striking the period at the end of paragraph (31) and inserting , and, and by adding at the end the following:

(32)to the extent provided in section 30B(h)(5).

(3)Section 6501(m) of such Code is amended by inserting 30B(h)(9), after 30(d)(4),. (4)The table of sections for subpart B of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 30A the following:

Sec. 30B. Alternative motor vehicle credit

(c)

Effective date

The amendments made by this section shall apply to property placed in service after the date of the enactment of this Act, in taxable years ending after such date. (d)

Sticker information required at retail sale

(1)

In general

The Secretary of the Treasury shall issue regulations under which each qualified vehicle sold at retail shall display a notice— (A)that such vehicle is a qualified vehicle, and (B)that the buyer may not benefit from the credit allowed under section 30B of the Internal Revenue Code of 1986 if such buyer has insufficient tax liability. (2)

Qualified vehicle

For purposes of paragraph (1), the term qualified vehicle means a vehicle with respect to which a credit is allowed under section 30B of the Internal Revenue Code of 1986.