The Car and Truck Fleet and Leasing Management Magazine

Senate Bill Seeks Higher Tax Incentives for Alt-Fuel Fleet Cars

March 09, 2006

WASHINGTON, D.C. --- Chuck Grassley (R-Iowa), chairman of the Senate Finance Committee, and Max Baucus (D-Mont.), a committee member, last week introduced a bill that would increase tax incentives for business owners who buy fuel-efficient alternative energy vehicles. The bill would ensure that businesses receive tax benefits for buying more efficient, cleaner alternative-energy vehicles just as they now receive for the purchase of SUVs. “The tax code shouldn’t favor SUVs over alternative-energy cars for business owners,” Grassley said. “Some business owners will want to use SUVs and some will want to use hybrid cars. The choice should be theirs and the tax code should be consistent." Baucus added: “At a time when America needs to shake its oil addiction, Congress needs to do all it can to encourage the purchase and use of alternative fuel vehicles. America’s small business owners are looking for ways to reduce their energy consumption and costs, and the tax code should provide benefits for those who can choose and use clean, lean alternative-fuel vehicles.” Grassley and Baucus’ bill, the America’s Business Choice (ABC) Act, exempts passenger vehicles eligible for the alternative motor vehicle credit and the credit for qualified electric vehicles from the limitation on depreciation for luxury vehicles. Under current depreciation rules, a business owner who buys an SUV gets a deduction for the depreciation not subject to the limitation for luxury automobiles. The Grassley-Baucus bill would provide the same depreciation deductions for business owners who buy alternative-energy vehicles. In addition, the Grassley-Baucus bill would allow small business owners to use the tax benefit of expensing of up to $100,000 for their alternative energy vehicles. Under current law, business owners have not been able to use expensing if they purchased a passenger vehicle that costs more than $10,585 (adjusted for inflation to $14,800 for 2005 purchases).
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