[Congressional Record Volume 142, Number 82 (Thursday, June 6, 1996)]
[Senate]
[Pages S5941-S5942]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mrs. BOXER (for herself, Mr, Inouye, Mrs. Feinstein, and Mr. 
        Kennedy):
  S. 1848. A bill to amend the Internal Revenue Code of 1986 to 
encourage the production and use of clean-fuel vehicles and for other 
purposes; to the Committee on Finance.


                   The Clean Fuel Vehicle Act of 1996

  Mrs. BOXER. Mr. President, today I want to talk about choices in 
transportation. Most Americans who travel to work get there by car, 
some perhaps by bus or commuter rail. Some even fly by jet airplane. 
These are all choices in transportation modes, but they all have one 
thing in common: oil.
  As we enter the 21st century, we must expand our choices in how we 
power transportation in this country. The percentage of total energy 
use devoted to transportation is now at its highest level ever. 
Transportation accounts for two-thirds of the country's total petroleum 
use, and transportation is 97 percent dependent on petroleum.
  Americans are traveling by car more and more. The total number of 
vehicle miles traveled in California has increased by 10 percent since 
1991. Meanwhile, fuel economy has decreased for the second year in a 
row.
  This dependence on petroleum puts our economy foolishly at risk. The 
arteries of our economy run on oil; and as we have seen with the latest 
gasoline price hikes, clogged arteries can cause heart problems in this 
economy.
  The cost of our oil addiction is paid not just at the pump but at our 
hospitals and doctors' offices.
  According to the Coalition for Clean Air, diesel exhaust alone has 
been associated with up to 30,000 lung cancer deaths in California. 
Think about this: thirty thousand painful, premature deaths from one 
source in one State.
  In order to develop transportation choices that improve our health 
and wean us from the oil pump, we must develop real incentives for 
buyers to consider alternatively fueled vehicles.
  We began to do that in a real meaningful way in Congress in 1992 with 
the Energy Policy Act. The modest incentives in that law helped to 
almost double the number of alternatively fueled vehicles on the road. 
To continue this trend, we need to build on our current incentives and 
really spur the market for clean-fuel vehicles.
  That is why I am introducing, with Senators Inouye, Feinstein, and 
Kennedy, the Clean Fuel Vehicle Act of 1996. This bill provides a set 
of temporary, targeted tax incentives designed to spur the market for 
clean-fuel vehicles by making them cost competitive with fossil-fueled 
vehicles.
  Increased use of zero-emission or low-emission vehicles will reduce 
the Nation's dependence on foreign oil, reduce harmful transportation 
emissions, and stimulate market demand for high-technology vehicles and 
components.
  First, my bill exempts electric vehicles [EV's] and other clean-fuel 
vehicles from the luxury tax and from the depreciation on luxury 
automobiles. This corrects a ludicrous inconsistency in current tax 
law. The law now provides a 10 percent tax credit of up to $4,000 on 
the purchase of an EV. At the same time, however, a luxury tax is 
imposed if the total price of the car exceeds $32,000. In effect, our 
current stimulus program puts a tax break into one pocket and takes it 
out of the other.
  Second, my bill will allow the entire cost of an EV to be depreciated 
over a 5-year span. Under current law, only the first $3,000 or so of 
the purchase price may be depreciated over 5 years; the remaining cost 
must be recovered over a much longer period.
  Third, the Boxer bill lifts the Government use restriction on tax 
incentives, giving a private business that leases EV's to a Government 
agency the same tax incentives it gets for leasing to a private 
interest. Because of their great size and visibility, Government fleets 
are the initial target market for clean-fuel vehicles.
  Fourth, my bill eliminates an oversight in the 1992 Energy Act that 
allows an electric-powered bus to take advantage of only the existing 
$4,000 tax credit. The bill would make electric buses also eligible for 
the $50,000 tax deduction available to other clean-fuel buses. This tax 
deduction would be greater than the $4,000 tax credit, especially for 
urban transit buses.
  Finally, my bill overturns a 1995 IRS decision to tax liquified 
natural gas [LNG] as a liquid fuel similar to diesel.
  LNG holds the most promise as an alternative fuel for heavy-duty 
transportation such as trucks and locomotives. It is abundant and 
cheaper than oil, and it contains more energy per pound than gasoline 
or diesel fuel. LNG is cooled to an extreme temperature whereas its 
chemical cousin, compressed natural gas [CNG] is pressurized for 
storage. Both perform the same in a vehicle's engine. The advantage for 
LNG is less volume needed for on-board storage, which is important for 
heavy-duty vehicles such as trucks and buses. Lowering the tax on LNG 
is an important step for putting clean-fuel trucks and buses on 
California highways.

  The IRS ruling put LNG at a tremendous cost disadvantage, which might 
well doom the emerging market for this clean-burning fuel. The IRS 
ruled that since LNG was not specifically mentioned in the 1993 
legislation which set the tax rate for CNG, it must be an other liquid 
fuel used in motor vehicle transportation under IRC section 4041(a), 
even though LNG is exactly the same as CNG when it enters an engine. 
The tax on gas is levied on 1 million cubic feet rate. If you do the 
math that provides the per gallon equivalence, it reveals that the IRS 
ruling places an effective tax rate of 31.5 cents per gallon, diesel, 
equivalent on LNG, a disparity of 25.6 cents when compared to the tax 
on CNG. In fact, this tax rate places LNG 7.1 cents above the tax on 
diesel, the very fuel for which LNG is the clean-burning alternative.
  As you can see, the provisions in the Boxer Clean Fuel Vehicle Act 
are based on common sense:
  Don't give clean-fuel vehicles a small tax break and then turn around 
and tax them as luxury vehicles;
  Give electric buses the same tax deduction provided other clean-fuel 
buses; and
  Make the taxes on natural gas fair and consistent and let LNG be a 
real competitor to diesel.
  Finally, this bill says: Let's get serious and provide a significant 
tax credit for those who buy electric vehicles. And let's encourage 
leasing arrangements with local governments by allowing private 
companies to obtain the tax breaks and pass them to the governments 
through lower costs.
  As anyone who has been gouged at the gas pump recently can tell you, 
it is high time to break oil's stranglehold on American consumers. To 
do that, we must help provide them with choices.
  The Boxer bill provides a jump-start for clean-fuel vehicles, not a 
permanent subsidy. All of the tax incentives in my bill will expire at 
the end of the year 2004. By then, the clean-fuel vehicle market will 
be on its own, and we can enjoy a cleaner, healthier 21st century.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1848

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

       (a) Short Title.--This Act may be cited as the ``Clean-Fuel 
     Vehicle Act of 1996''.
       (b) Amendment of 1986 Code.--Except as otherwise expressly 
     provided, whenever in this Act an amendment or repeal is 
     expressed in terms of an amendment to, or repeal of, a 
     section or other provision, the reference shall be considered 
     to be made to a section or other provision of the Internal 
     Revenue Code of 1986.

     SEC. 2. EXEMPTION OF ELECTRIC AND OTHER CLEAN-FUEL MOTOR 
                   VEHICLES FROM LUXURY AUTOMOBILE CLASSIFICATION.

       (a) In General.--Subsection (a) of section 4001 (relating 
     to imposition of tax) is amended to read as follows:
       ``(a) Imposition of Tax.--
       ``(1) In general.--There is hereby imposed on the 1st 
     retail sale of any passenger vehicle a tax equal to 10 
     percent of the price for which so sold to the extent such 
     price exceeds the applicable amount.
       ``(2) Applicable amount.--

[[Page S5942]]

       ``(A) In general.--Except as provided in subparagraphs (B) 
     and (C), the applicable amount is $30,000.
       ``(B) Qualified clean-fuel vehicle property.--In the case 
     of a passenger vehicle which is propelled by a fuel which is 
     not a clean-burning fuel to which is installed qualified 
     clean-fuel vehicle property (as defined in section 
     179A(c)(1)(A)) for purposes of permitting such vehicle to be 
     propelled by a clean-burning fuel, the applicable amount is 
     equal to the sum of--
       ``(i) $30,000, plus
       ``(ii) the increase in the price for which the passenger 
     vehicle was sold (within the meaning of section 4002) due to 
     the installation of such property.
       ``(C) Purpose built passenger vehicle.--
       ``(i) In general.--In the case of a purpose built passenger 
     vehicle, the applicable amount is equal to 150 percent of 
     $30,000.
       ``(ii) Purpose built passenger vehicle.--For purposes of 
     clause (i), the term `purpose built passenger vehicle' means 
     a passenger vehicle produced by an original equipment 
     manufacturer and designed so that the vehicle may be 
     propelled primarily by electricity.''
       (b) Conforming Amendments.--
       (1) Subsection (e) of section 4001 (relating to inflation 
     adjustment) is amended to read as follows:
       ``(e) Inflation Adjustment.--
       ``(1) In general.--The $30,000 amount in subparagraphs (A), 
     (B)(i), and (C)(i) of subsection (a)(2) shall be increased by 
     an amount equal to--
       ``(A) $30,000, multiplied by
       ``(B) the cost-of-living adjustment under section 1(f)(3) 
     for the calendar year in which the vehicle is sold, 
     determined by substituting `calendar year 1990' for `calendar 
     year 1992' in subparagraph (B) thereof.
       ``(2) Rounding.--If any amount as adjusted under paragraph 
     (1) is not a multiple of $2,000, such amount shall be rounded 
     to the next lowest multiple of $2,000.''
       (2) Subparagraph (B) of section 4003(a)(2) is amended to 
     read as follows:
       ``(B) the appropriate applicable amount as determined under 
     section 4001(a)(2).''
       (c) Effective Date.--The amendments made by this section 
     shall apply to sales and installations occurring and property 
     placed in service on or after July 1, 1996.

     SEC. 3. GOVERNMENTAL USE RESTRICTION MODIFIED FOR ELECTRIC 
                   VEHICLES.

       (a) In General.--Paragraph (3) of section 30(d) (relating 
     to special rules) is amended by inserting ``(without regard 
     to paragraph (4)(A)(i) thereof)'' after ``section 50(b)''.
       (b) Conforming Amendment.--Paragraph (5) of section 179A(e) 
     (relating to other definitions and special rules) is amended 
     by inserting ``(without regard to paragraph (4)(A)(i) thereof 
     in the case of a qualified electric vehicle described in 
     subclause (I) or (II) of subsection (b)(1)(A)(iii) of this 
     section)'' after ``section 50(b)''.
       (c) Effective Date.--The amendment made by this section 
     shall apply to property placed in service on or after the 
     date of the enactment of this Act.

     SEC. 4. LARGE ELECTRIC TRUCKS, VANS, AND BUSES ELIGIBLE FOR 
                   DEDUCTION FOR CLEAN-FUEL VEHICLES.

       (a) In General.--Paragraph (3) of section 179A(c) (defining 
     qualified clean-fuel vehicle property) is amended by 
     inserting ``, other than any vehicle described in subclause 
     (I) or (II) of subsection (b)(1)(A)(iii)'' after ``section 
     30(c))''.
       (b) Denial of Credit.--Subsection (c) of section 30 
     (relating to credit for qualified electric vehicles) is 
     amended by adding at the end the following new paragraph:
       ``(3) Denial of credit for vehicles for which deduction 
     allowable.--The term `qualified electric vehicle' shall not 
     include any vehicle described in subclause (I) or (II) of 
     section 179A(b)(1)(A)(iii).''
       (c) Effective Date.--The amendments made by this section 
     shall apply to property placed in service on or after the 
     date of the enactment of this Act.

     SEC. 5. ELECTRIC VEHICLE CREDIT AMOUNT AND APPLICATION 
                   AGAINST ALTERNATIVE MINIMUM TAX.

       (a) In General.--Subsection (a) of section 30 (relating to 
     credit for qualified electric vehicles) is amended by 
     striking ``10 percent of''.
       (b) Application Against Alternative Minimum Tax.--Section 
     30(b) (relating to limitations) is amended by striking 
     paragraph (3).
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1996.

     SEC. 6. RATE OF TAX ON LIQUEFIED NATURAL GAS TO BE EQUIVALENT 
                   TO RATE OF TAX ON COMPRESSED NATURAL GAS.

       (a) In General.--Paragraph (3) of section 4041(a) (relating 
     to diesel fuel and special motor fuels) is amended--
       (1) by striking subparagraph (A) and inserting the 
     following new subparagraph:
       ``(A) Imposition of tax.--
       ``(i) In general.--There is hereby imposed a tax on 
     compressed or liquefied natural gas--

       ``(I) sold by any person to an owner, lessee, or other 
     operator of a motor vehicle or motorboat for use as a fuel in 
     such motor vehicle or motorboat, or
       ``(II) used by any person as a fuel in a motor vehicle or 
     motorboat unless there was a taxable sale of such gas under 
     subclause (I).

       ``(ii) Rate of tax.--The rate of tax imposed by this 
     paragraph shall be--

       ``(I) in the case of compressed natural gas, 48.54 cents 
     per MCF (determined at standard temperature and pressure), 
     and
       ``(II) in the case of liquefied natural gas, 4.3 cents per 
     gallon.'', and

       (2) by inserting ``or liquefied'' after ``Compressed'' in 
     the heading.
       (b) Conforming Amendments.--
       (1) Paragraph (2) of section 4041(a)(2) is amended by 
     striking ``other than a Kerosene'' and inserting ``other than 
     liquefied natural gas, kerosene''.
       (2) The heading for section 9503(f)(2)(D) is amended by 
     inserting ``or liquefied'' after ``compressed''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this 
     Act.
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