[Congressional Record Volume 140, Number 60 (Monday, May 16, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]
[Congressional Record: May 16, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]
STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS
By Mrs. BOXER:
S. 2117. A bill to amend the Internal Revenue Code of 1986 to exclude
from the application of the luxury automobile excise tax the value of
components required for a vehicle to be powered by clean-burning fuel,
and for other purposes; to the Committee on Finance.
luxury tax repeal on clean fuel vehicles
Mrs. BOXER. Mr. President, almost 45 million people still live in
counties exceeding the smog standard. More than 90 percent of my fellow
Californians live in areas which do not meet Federal healthy air
standards and over two-thirds of this pollution comes from mobile
sources, primarily cars and trucks. In fact, according to the South
Coast Air Quality and Management District, children in the Los Angeles
air basin suffer a 15-percent reduction in lung function by age 12
because of exposure to smog.
Transportation accounts for 70 percent of carbon monoxide [CO]
emissions, and highway vehicles are the largest single source. The U.S.
transportation sector emits per capital more carbon dioxide, carbon
monoxide, and nitrogen oxides than any other country.
We must do all that we can to promote clean-burning fuels, such as
natural gas, electricity, and hydrogen. That is why today I am
introducing legislation to provide a further incentive to market clean-
fuel vehicles and provide a better environment for our citizens. This
legislation will provide relief from the automobile excise tax for
clean-fuel vehicles to encourage more Americans to purchase clean cars.
Specifically, the legislation will exclude the value of components
required for a vehicle to be powered by clean-burning fuel--the
incremental cost of the vehicle--from the luxury tax imposed by section
4001 of the Internal Revenue Code. Clean-burning fuel means, as defined
under the National Energy Policy Act of 1992; natural gas, liquefied
natural gas, liquefied petroleum gas, hydrogen, electricity, and any
other fuel at least 85 percent of which is one or more of the
following: methanol, ethanol, any other alcohol, or ether.
Section 4001 of the Internal Revenue Code imposes a tax on the first
retail sale of any passenger vehicle equal to 10 percent of the amount
by which the vehicle's sales price exceeds $30,000, the current tax
threshold.
The assessment of this tax against early clean-fuel vehicles, which
only exceed the luxury tax threshold because of the significant
additional costs involved in the use of electricity or other
alternative sources as a vehicle fuel, is inconsistent with our
national policy to support and encourage alternative fuel
transportation. The tax on clean fuel vehicles is also inconsistent
with the favorable tax treatment afforded electric and other clean fuel
vehicles under the provisions of the Energy Policy Act of 1992. For
example, a 10-percent tax credit up to $4,000 is available on the
purchase of an electric vehicle, but that same vehicle can then be
subject to the luxury tax.
The code does not provide a basis for distinguishing between an
automobile that exceeds the luxury tax cost threshold because of
special equipment or performance characteristics and an automobile that
exceeds the threshold solely because it operates on a nonconventional
fuel source, such as electricity. Because of the new technologies
involved and the lack of economies of scale in low-volume production,
initially the price of some clean-fuel vehicles will exceed the luxury
tax threshold. For example, Chrysler recently announced that it would
offer an electric minivan for about $40,000. The vehicle would be
subject to a luxury tax of about $1,000.
This tax falls most heavily on the electric vehicle [EV], which is
the only practical form of transportation that has zero emissions.
Efforts to assure a successful commercial launch for new electric
vehicle technologies require that market demand for EV's be created.
Demonstration programs, including programs funded by industry and
industry-government cost shared programs as authorized in the Energy
Policy Act of 1992, are an important part of the EV commercialization
effort, designed to increase user familiarity with electric vehicles to
stimulate market demand. With respect to early EV demonstration
programs that are in the process of being implemented today, the high
costs already being borne by vehicle users would be further exacerbated
by the imposition of the luxury tax.
Early electric vehicles which have none of the features typically
associated with luxury automobiles. Until the technology evolves, EVs
are unlikely to be equipped with many of the optional features
characteristic of luxury vehicles. Rather than being high-performance
vehicles, the range and performance characteristics of early EV's are
likely to be more limited than even those of conventional, nonluxury
vehicles. Adding a luxury tax thus imposes an added economic burden on
a customer who has already made sacrifices in choosing an electric
vehicle. Because in some cases this cost burden will be significant,
the luxury tax threatens to penalize consumers of initial EV's, and to
delay or deter EV market development efforts.
In the longer term, for the market to accept EV's, the ultimate costs
of electric vehicles will have to be competitive with comparable
conventionally fueled vehicles, which are unlikely to exceed the luxury
tax threshold. Therefore, the consumer-ready EV will likely not
continue to trigger luxury tax concerns. But prices will continue to be
high while market demand is small, and if the imposition of a luxury
tax dampens demand or delays or limits the effectiveness of early
commercial demonstration programs, the pace at which EV prices will
decline is likely to be slowed.
Due to the relatively small production of electric vehicles
anticipated in the early demonstration phase of EV commercialization,
the proposed exclusion of EV incremental costs from the luxury tax is
unlikely to result in a significant decrease in revenue collections.
Meanwhile, the advancement of electric transportation technologies
presents opportunities for U.S. technological innovation and worldwide
leadership. In particular, the development and advancement of electric
vehicles offers significant opportunities for the defense and aerospace
industries heavily impacted by reductions in defense spending. The
electric vehicle industry could top $10 billion annually by 2005,
creating hundreds of thousands of jobs in the United States, according
to the California Council on Science and Technology.
The Clean Air Act and the Energy Policy Act of 1992 mandate the
greater use of alternative transportation fuels. The promotion of
electric vehicles is an integral part of the effort to improve air
quality and enhance national energy and economic security by increasing
energy diversity in the transportation sector.
With consumer familiarity and acceptance of electric vehicles, and
continued technological advancements and economies of scale, the
incremental costs of electric vehicles will decrease. Imposing a tax on
top of any incremental cost that early purchasers are forced to bear by
subjecting early electric vehicles to a luxury tax will send a strong
negative signal to the marketplace that could delay or deter the
introduction of these vehicles and the development of a self-sustaining
market.
Consumers will buy electric cars if we provide the right incentives.
GM's own survey last year of 1,000 potential new car buyers in San
Francisco and Los Angeles found that the number of people who would
definitely or probably purchase an electric vehicle increased from 17
to 68 percent if provided a mix of price and ownership incentives.
This legislation repealing the luxury tax will expire on January 1,
2005, conforming with the sunset of other tax incentives provided under
the Energy Act. By early next century, we should be well on our way to
a clean air future. I ask unanimous consent that the full text of the
bill be printed in the Congressional Record at this point.
There being no objection, the bill was ordered to be printed in the
Record, as follows:
S. 2117
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. EXCLUSION OF CLEAN-FUEL VEHICLE COMPONENTS FROM
APPLICATION OF LUXURY AUTOMOBILE EXCISE TAX.
(a) In General.--Subparagraph (B) of section 4002(d)(1) of
the Internal Revenue Code of 1986 (relating to determination
of price) is amended by striking ``and'' at the end of clause
(ii), and by inserting after clause (iii) the following new
clause:
``(iv) the value of--
``(I) any qualified clean-fuel vehicle property (within the
meaning of section 179A(c)) to the extent of the basis
described in paragraph (1)(B) of such section, or
``(II) any component of such passenger vehicle to the
extent such component enables such vehicle to qualify as a
qualified electric vehicle (as defined in section
30(c)(1)(A)), and''.
(b) Separate Purchase of Parts and Accessories.--Paragraph
(3) of section 4003(a) of the Internal Revenue Code of 1986
(relating to separate purchase of vehicle and parts and
accessories therefor) is amended by striking ``or'' at the
end of subparagraph (B), by redesignating subparagraph (C) as
subparagraph (D), and by inserting after subparagraph (B) the
following new subparagraph:
``(C) the part or accessory installed--
``(i) is described in paragraph (1)(A) of section 179A(c)
with respect to a qualified clean-fuel vehicle property
(within the meaning of section 179A(c)), or
``(ii) enables the vehicle to qualify as a qualified
electric vehicle (as defined in section 30(c)(1)(A)), or''.
(c) Effective Date.--The amendments made by this section
shall apply to sales and installations occurring--
(1) on or after the date of the enactment of this Act, and
(2) before the earlier of--
(A) the date the tax imposed under section 4001 of the
Internal Revenue Code of 1986 no longer applies, or
(B) January 1, 2005.
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