[Federal Register Volume 63, Number 169 (Tuesday, September 1, 1998)]
[Notices]
[Pages 46408-46409]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-23518]



[[Page 46408]]

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DEPARTMENT OF AGRICULTURE

Office of the Secretary


Alternative Fueled Vehicle Refueling System Program (Refueling 
System Program); Determination of Primary Purpose of Program Payments 
for Consideration as Excludable From Income Under Section 126 of the 
Internal Revenue Code of 1986

AGENCY: Office of the Secretary, U.S. Department of Agriculture.

ACTION: Notice of determination.

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SUMMARY: The Secretary of Agriculture has determined that all cost-
share payments made to individuals by the State of Arizona under the 
Refueling System Program are made primarily for the purpose of 
protecting or restoring the environment. This determination is made in 
accordance with section 126 of the Internal Revenue Code of 1986, as 
amended (26 U.S.C. 126). This determination permits recipients of these 
cost-share payments to exclude them from gross income to the extent 
allowed by the Internal Revenue Service.

ADDITIONAL INFORMATION OR COMMENTS: Jackie Vieh, Director of the 
Arizona Department of Commerce, 3800 North Central Avenue, Suite 1500, 
Phoenix, Arizona 85012, (602) 280-1300; Amanda Ormond, Energy Office 
Director, Arizona Department of Commerce, 3800 North Central Avenue, 
Suite 1200, Phoenix, Arizona 85012, (602) 280-1402; or Conservation 
Operations Division, Natural Resources Conservation Service, USDA, P.O. 
Box 2890, Washington, D.C. 20013, (202) 720-1845.

SUPPLEMENTARY INFORMATION: Section 126 of the Internal Revenue Code of 
1986, as amended (26 U.S.C. 126), provides that certain payments made 
to persons under State conservation programs may be excluded from the 
recipient's gross income for Federal income tax purposes, if the 
Secretary of Agriculture determines that payments are made ``primarily 
for the purpose of conserving soil and water resources, protecting or 
restoring the environment, improving forests, or providing a habitat 
for wildlife.'' The Secretary of Agriculture evaluates these 
conservation programs on the basis of criteria set forth in 7 CFR Part 
14, and makes a ``primary purpose'' determination for the payments made 
under each program. Before there may be an exclusion, the Secretary of 
the Treasury must determine that payments made under these conservation 
programs do not increase substantially the annual income derived from 
the property benefited by the payments.
    One of Arizona's air quality improvement programs is the 
alternative fuel vehicle program. This comprehensive program provides 
various incentives to individuals, businesses, government, and industry 
to encourage the use of alternative fuels. The incentives include tax 
deductions and credits, a reduced vehicle license tax, access to high 
occupancy vehicle lanes, grants to public entities for alternative fuel 
vehicles, and grants to build infrastructure. The Arizona Legislature 
began crafting this program in 1988. In 1994, House Bill 2575 was 
enacted in the Forty-first Legislature Second Regular Session. As part 
of Arizona's State Implementation Plan (SIP) submitted to the 
Environmental Protection Agency, this bill required government fleets 
operating in Arizona to convert a percentage of their vehicles to 
operate on alternative fuels. These fuels were identified as natural 
gas, liquid petroleum gas, hydrogen, electric, and alcohol fuels with 
at least 85 percent alcohol. The percentage of the fleets to be 
converted stated at 18 percent in 1995, and increases to 75 percent by 
the year 2000 and every year thereafter. The mandates apply to State 
fleets, city fleets, county fleets, school districts, and the Federal 
fleets operating in the Phoenix metropolitan area.
    Another part of House Bill 2575, the Refueling System Program, 
provides incentives for individuals to convert or purchase alternative 
fuel vehicles and install refueling facilities on their properties. 
These incentives are in the form of subtractions from adjusted gross 
income, credit on tax liabilities, and grants. One of the grants 
available, provided by Arizona Revised Statute (ARS) 41-1516(c)(2), is 
a grant of up to $1,000 for the purchase and installation of an 
alternative fuel delivery system for use on the individual's property 
in Arizona. The purpose of providing these incentives is to increase 
the use of alternative fuel vehicles, which emit less tailpipe 
emissions of carbon monoxide, hydrocarbons, and oxides of nitrogen, in 
Arizona. There are numerous reports on alternative fuel vehicles that 
indicate a significant reduction in air pollutants versus gasoline 
powered vehicles. The grant is for the cost of the refueling equipment 
and the installation of the equipment, with the total grant not to 
exceed $1,000. The grant will never be awarded for more than the actual 
cost of the refueling system, and the grant is only for use by the 
individual.
    Individuals who want to apply for this grant must complete an 
application form that asks for information about the equipment and 
installation, including the license number of the installing licensed 
contractors and equipment suppliers. Information on the alternative 
fuel vehicle(s) must also be supplied. Any taxpayer wishing to receive 
a tax credit or subtraction on an alternative fuel vehicle must first 
have the vehicle certified by the Arizona Department of Commerce Energy 
Office.
    Several types of home fueling equipment are expected to be 
installed on individuals' properties as a result of this program. One 
possible system is a compressor for natural gas, so that individuals 
with a Compressed Natural Gas vehicle can fill their vehicle tanks 
overnight by connecting to their homes' natural gas lines. A natural 
gas compressor can be purchased for approximately $4,000, plus 
installation. Another type of alternative fueling system that is 
expected to be used as a result of this program is an electric vehicle 
recharging system. A recharging system can be purchased for 
approximately $2,000, and the infrastructure required for the 
recharging system may cost up to $750. The $1,000 grant is designed to 
help offset these costs.

Procedural Matters

    The authorizing legislation, regulations, and operating procedures 
regarding the Refueling System Program have been examined using the 
criteria set forth in 7 CFR Part 14. The U.S. Department of Agriculture 
has concluded that the grant payments made for implementation of best 
management practices under this program are made primarily for the 
purpose of protecting or restoring the environment. A ``Record of 
Decision, Alternative Fueled Vehicle Refueling System Program, Primary 
Purpose Determination for Federal Tax Purposes'' has been prepared and 
is available upon request from the Director, Conservation Operations 
Division, Natural Resources Conservation Service, USDA, P.O. Box 2890, 
Washington, D.C. 20013, (202) 720-1845; or the Director of Commerce, 
Arizona Department of Commerce, 3800 North Central Avenue, Suite 1500, 
Phoenix, Arizona 85012, (602) 280-1300.

Determination

    As required by section 126(b) of the Internal Revenue Code of 1986, 
as amended, I have examined the authorizing legislation, regulations, 
and operating procedures regarding the

[[Page 46409]]

Alternative Fueled Vehicle Refueling System Program. In accordance with 
the criteria set out in 7 CFR Part 14, I have determined that all grant 
payments for implementation of best management practices made under 
this program are primarily for the purpose of protecting or restoring 
the environment. Subject to further determination by the Secretary of 
the Treasury, this determination permits payment recipients to exclude 
from gross income, for Federal income tax purposes,all or part of such 
payments made under said program.

    Signed at Washington, D.C., on August 26, 1998.
Dan Glickman,
Secretary of Agriculture.
[FR Doc. 98-23518 Filed 8-31-98; 8:45 am]
BILLING CODE 3410-16-M