State Incentives for Hybrid Vehicles
By Kevin E. McCarthy, Principal Analyst, Connecticut Legislative Council
Summary | Financial Incentives | Other Incentives
The following incentives are available to those who buy hybrid vehicles or convert conventional vehicles to hybrids.
California, Colorado, and Pennsylvania provide rebates to people who buy hybrids, while Maryland, New Mexico, Oregon, South Carolina, and Washington provide tax credits or exemptions.
In addition, at least nine states provide non-financial incentives for hybrids. The most common approach, adopted in Colorado, Florida, Georgia, New Jersey, New York, and Virginia is allowing hybrids to use some or all high occupancy vehicle (HOV) or high occupancy/toll (HOT) lanes without having to have multiple passengers or pay toll. Maryland, Nevada, and Washington exempt hybrids that meet certain criteria from motor vehicle emissions and inspection testing requirements
In addition to the measures described below, Massachusetts passed legislation this session (2008 Mass. Laws ch. 169) requiring various state and regional agencies to develop a 10-year statewide plan for the development of hybrids and alternative fuel vehicles and related technologies.
Most of the information in this report is taken from a U. S. Department of Energy website, http://www.eere.energy.gov/afdc/incentives_laws.html, which also has information on state incentives for alternative fuels.
The "Driving Alternatives" vehicle rebate program has allocated $ 1. 8 million toward vehicle incentive grants for qualifying alternative fuel vehicles, including plug-in hybrids. Grants of up to $ 5,000 will be made to consumers who purchase or lease such vehicles.
A rebate is available from the Department of Revenue for the purchase of a hybrid or alternative fuel vehicle. Vehicles must be owned by the state, a political subdivision of the state, or a tax-exempt organization, and used in connection with its official activities. The rebate is a percentage of the vehicle's incremental cost. For a purchase that permanently replaces a motor vehicle or power source that is ten or more years old, the percentage specified is doubled, up to a maximum of 100% of the cost of converting the vehicle to alternative fuels. Each qualified entity is limited to $ 350,000 per state fiscal year in total rebates.
A tax credit is allowed against the excise tax for the purchase of qualified hybrids. The credit may not exceed: (1) $ 250 if the vehicle battery provides at least 5% but less than 10% of maximum power available; (2) $ 500 if the battery provides 10% to 20% of maximum power available; (3) $ 750 if the battery provides at 20% to 30% of maximum power available; and (4) $ 1,000 if the battery provides at least 30% of maximum power available. A qualified hybrid must meet the current vehicle exhaust standard set under the federal Tier 2 program for passenger vehicles.
Hybrids with a U. S. Environmental Protection Agency estimated combined fuel economy rating of at least 27. 5 miles per gallon are eligible for a one-time exemption from the motor vehicle excise tax if the original certificate of title for the vehicle is issued through June 30, 2009.
The Oregon Department of Energy offers two income tax credits for hybrids, one for individuals and one for business owners. Oregon residents are eligible for a residential energy tax credit, which provides credits of up to $ 1,500 toward the purchase of qualified hybrids. A credit of up to $ 750 is also available for the cost of converting vehicles to operate on an alternative fuel.
Oregon business owners who invest in new hybrids for business use are eligible for a business energy tax credit of up to 35% of the incremental cost of the hybrid. Business owners with or without an Oregon tax liability, non-profit organizations, and public entities may transfer their tax credit eligibility to a business or individual with an Oregon tax liability in exchange for a cash payment equal to the pass-through rate at the time of application.
Pennsylvania provides a $ 500 rebate for the purchase or lease of hybrid vehicles registered in the state that operate primarily within the state. Rebate request forms and required documentation must be submitted no later than six months after the vehicle is purchased. Rebates are provided only for the purchase of the cleanest and most fuel-efficient “full hybrid” vehicles that use hybrid technology to significantly increase fuel economy while significantly reducing emissions. To be eligible, the vehicle must have a combined city and highway fuel efficiency of more than 55 miles per gallon and emit less than 7. 0 tons per year of carbon dioxide. “Mild hybrids” that use the hybrid technology to increase a vehicle's power and performance rather than significantly reducing emissions do not qualify for the rebates.
The state provides a sales tax rebate of up to $ 300 for the in-state purchase or lease of a hybrid vehicle between June 30, 2008 and July 1, 2013. A hybrid is defined as a gasoline-electric vehicle that is partially powered by a large on-board battery. The credit is phased in over five years, i.e., the credit in 2008 is $ 60.
In addition the state provides, for taxable years beginning after 2007 and before 2011, a $ 2,000 tax credit against the income tax for the in-state purchase or lease of a plug-in hybrid vehicle. A plug-in hybrid vehicle is one that shares the same benefits as an internal combustion and electric engine with an all-electric range of at least nine miles. The credit is nonrefundable and if the amount of the credit exceeds the taxpayer's liability for the applicable taxable year, any unused credit may be carried forward for five years. The total amount of credits is limited to $ 200,000.
All new passenger cars, light-duty trucks, and medium-duty passenger vehicles that use hybrid electric technology and have a U. S. Environmental Protection Agency estimated highway fuel economy of at least 40 miles per gallon are exempt from state sales and use tax. This tax exemption expires January 1, 2011.
Qualified hybrid electric vehicles and alternative fuel vehicles can use HOV lanes regardless of the number of occupants in the vehicle. An identification sticker and FasTrak account must first be obtained from the Department of Motor Vehicles and only 85,000 decals will be made available. Until January 1, 2011, hybrids are eligible for this benefit if they were produced during model year 2004 or earlier, have a fuel economy rating of 45 miles per gallon or greater, and meet specified state vehicle emission standards.
Vehicles that are classified as inherently low emission vehicles by the U. S. Environmental Protection Agency and have a gross vehicle weight rating of 26,000 pounds or less may drive in HOV lanes regardless of the number of occupants and without payment of a special toll or fee. A special sticker must be obtained from the Department of Transportation. Qualified hybrids must obtain and display an HOV lane exemption decal. Initially, only 2,000 decals will be issued. The program is scheduled to expire on September 30, 2009, unless the federal government extends the authorization for hybrids to HOV lanes.
Hybrids that are certified and labeled in accordance with federal regulations may be driven in HOV lanes at any time, regardless of the number of passengers in the vehicle. All eligible vehicles must comply with the minimum fuel economy standards set forth in 23 U. S. Code, section 166(f)(3)(B). The vehicle must display a decal issued by the Division of Motor Vehicles, obtained for a $ 5 fee, and renewed annually. Vehicles with decals may use any HOV lane designated as a HOT lane without requiring payment of the toll. To be eligible, the hybrid must meet or exceed the qualifying California standards for a low emission vehicle.
The departments of Revenue and Natural Resources are authorized to develop a list of hybrid models that qualify for an HOV lane exemption regardless of the number of passengers, pending federal legislative or regulatory approval. The U. S. Environmental Protection Agency (EPA) issued a Notice of Proposed Rulemaking in May 2007 on this issue and a final rule is expected in September 2008, which will include criteria for defining exempt hybrids. The Department of Transportation must determine whether allowing the qualifying hybrids to travel in HOV lanes would degrade the performance of the lanes. Refer to the GDOT Web site for more information.
Qualified hybrids and zero-emission vehicles are exempt from certain motor vehicle emissions and inspection testing requirements for the first three years after the vehicle is originally registered in the state, if the vehicle obtains a rating from the EPA of at least 50 miles per gallon during city fuel economy tests. A qualified hybrid must meet the current vehicle exhaust standard set under the federal Tier 2 program for gasoline-powered passenger vehicles and draw propulsion energy from both gasoline or diesel fuel and a rechargeable energy storage system. This exemption expires September 30, 2012.
Hybrids are exempt from emission inspection testing until the model year of the vehicle is six years old.
The New Jersey Turnpike Authority allows eligible hybrids to travel in the HOV lanes on the New Jersey Turnpike. For a complete list of eligible hybrids see the New Jersey Turnpike Authority Web site.
Through the Clean Pass Program, eligible hybrids may use the Long Island Expressway HOV lanes, regardless of the number of occupants in the vehicle. Vehicles must display the Clean Pass vehicle sticker, available from the Department of Motor Vehicles. A list of eligible vehicles is available on the Clean Pass Program website.
Eligible hybrids displaying the Virginia Clean Special Fuels license plate may use Virginia HOV lanes, regardless of the number of occupants, until July 1, 2009. For HOV lanes serving the I-95/395 corridor, only registered vehicles displaying Clean Special Fuels license plates issued prior to July 1, 2006, are exempt from HOV lane requirements. A Virginia Department of Motor Vehicles Web site has a complete list of qualifying vehicles. The annual fee for Clean Special Fuels license plates is $25 in addition to the prescribed fee for state license plates.
Hybrids with an EPA fuel economy rating of at least 50 miles per gallon of gasoline during city driving are exempt from emission control inspections.