26 U.S.C. § 30B — Alternative motor vehicle credit

(a) Allowance of credit: If you buy certain vehicles and place them in service during the tax year, you can claim a credit against your taxes. The total credit is the sum of five possible pieces: the new qualified fuel cell motor vehicle credit (subsection (b)), the new advanced lean burn technology motor vehicle credit (subsection (c)), the new qualified hybrid motor vehicle credit (subsection (d)), the new qualified alternative fuel motor vehicle credit (subsection (e)), and the plug-in conversion credit (subsection (i) — though, as explained below, that subsection has since been repealed). (b) New qualified fuel cell motor vehicle credit: (1) In general: If you place a new fuel-cell vehicle in service, your credit starts with a flat dollar amount based on the vehicle's weight. For a vehicle weighing up to 8,500 pounds, the credit is $8,000 — but only $4,000 if you place it in service after December 31, 2009. For a vehicle weighing between 8,500 and 14,000 pounds, the credit is $10,000. Between 14,000 and 26,000 pounds, it's $20,000. Above 26,000 pounds, it's $40,000. (2) Increase for fuel efficiency: If the vehicle is a passenger car or light truck, you add a bonus on top of that amount, based on how fuel-efficient it is compared to a 2002 baseline. Here's how to find your bonus: compare your vehicle's city fuel economy to the "2002 model year city fuel economy" for a vehicle of the same weight class, using the tables described below. If your vehicle reaches at least 150% but less than 175% of that baseline, add $1,000. At least 175% but less than 200%, add $1,500. At least 200% but less than 225%, add $2,000. At least 225% but less than 250%, add $2,500. At least 250% but less than 275%, add $3,000. At least 275% but less than 300%, add $3,500. At least 300% or more, add $4,000. To find the baseline number, the section includes two look-up tables — one for passenger cars, one for light trucks — that match each vehicle weight class to a baseline miles-per-gallon figure from the 2002 model year. The lightest cars have a baseline around 45 miles per gallon; the heaviest trucks, around 11 to 12 miles per gallon. "Vehicle inertia weight class" here means whatever the EPA's regulations under the Clean Air Act say it means. (3) New qualified fuel cell motor vehicle: To count, a vehicle must meet five conditions. It must be powered by fuel cells that make electricity directly by combining hydrogen fuel — stored on board in any form — with oxygen. If it's a passenger car or light truck, it must have a certificate showing it meets or beats the "Bin 5 Tier II" emissions standard set by EPA regulations for its make and model year. Its original use must start with you, the taxpayer. You must have acquired it for your own use or to lease out — not to resell. And it must be built by a manufacturer. (c) New advanced lean burn technology motor vehicle credit: (1) In general: This credit applies to a new advanced lean-burn vehicle you place in service, and its amount comes from paragraph (2). (2) Credit amount: (A) Fuel economy: First, find your vehicle's fuel economy as a percentage of the 2002 baseline (using the same kind of comparison and tables described in subsection (b)(2), measured on a gasoline-gallon-equivalent basis). Then look up your credit: 125% up to 150% of baseline gets $400; 150% up to 175% gets $800; 175% up to 200% gets $1,200; 200% up to 225% gets $1,600; 225% up to 250% gets $2,000; and 250% or more gets $2,400. (B) Conservation credit: Add a second amount on top of that, based on the vehicle's "lifetime fuel savings" in gallons of gasoline (defined in paragraph (4) below). At least 1,200 but less than 1,800 gallons saved adds $250. At least 1,800 but less than 2,400 adds $500. At least 2,400 but less than 3,000 adds $750. 3,000 or more adds $1,000. (3) New advanced lean burn technology motor vehicle: This term means a passenger car or light truck with an internal combustion engine that: is designed to run on more air than needed for complete combustion (that's what "lean burn" means); uses direct fuel injection; reaches at least 125% of the 2002 baseline fuel economy; and, for 2004 and later models, has a certificate showing it meets the right emissions standard — Bin 5 Tier II for vehicles weighing 6,000 pounds or less, or Bin 8 Tier II for vehicles between 6,000 and 8,500 pounds. It also must have its original use start with you, be acquired for use or lease and not resale, and be built by a manufacturer. (4) Lifetime fuel savings: To calculate this, take 120,000 and divide it by the 2002 baseline fuel economy for the vehicle's weight class. Then take 120,000 and divide it by the vehicle's actual city fuel economy. Subtract the second number from the first. The result is the lifetime fuel savings, in gallons. (d) New qualified hybrid motor vehicle credit: (1) In general: This credit applies to a new qualifying hybrid vehicle you place in service, with the amount set by paragraph (2). (2) Credit amount: (A) For passenger cars and light trucks weighing 8,500 pounds or less: add together two amounts — the same fuel-economy amount you'd get under subsection (c)(2)(A), and the same conservation credit you'd get under subsection (c)(2)(B) — as if this vehicle were the kind of vehicle those subsections describe. (B) For other, heavier hybrid vehicles: the credit is a percentage of the vehicle's "qualified incremental hybrid cost" (defined in clause (iii)). The percentage depends on how much better the vehicle's city fuel economy is than a comparable non-hybrid vehicle: a 30% to 40% improvement gets you 20%; a 40% to 50% improvement gets 30%; and a 50%-or-better improvement gets 40%. The "qualified incremental hybrid cost" is how much more the vehicle's manufacturer's suggested retail price is than a comparable vehicle's price — but capped. The cap is $7,500 for vehicles up to 14,000 pounds, $15,000 for vehicles between 14,000 and 26,000 pounds, and $30,000 for vehicles over 26,000 pounds. A "comparable vehicle" is one powered only by a gasoline or diesel engine that's otherwise similar in weight, size, and use. The manufacturer has to certify all of this, following guidance the Secretary sets for calculating fuel savings and incremental costs. (3) New qualified hybrid motor vehicle: A vehicle counts if it draws its power from two onboard energy sources — a fuel-burning engine and a rechargeable battery system — and meets several more conditions. If it's the kind of vehicle described in paragraph (2)(A), it needs a Clean Air Act conformity certificate meeting California's low-emission vehicle standard, plus the same Bin 5 or Bin 8 Tier II standard described above (depending on its weight). It also needs a minimum "maximum available power" from its battery — at least 4% for vehicles under paragraph (2)(A), at least 10% for vehicles between 8,500 and 14,000 pounds, and at least 15% for vehicles over 14,000 pounds. If it's the kind of vehicle described in paragraph (2)(B), its engine instead needs a certificate meeting the 2004–2007 emissions standards for heavy-duty diesel or gasoline engines. As with the other vehicle credits, its original use must start with you, it must be acquired for use or lease and not resale, and it must be made by a manufacturer. Vehicles under 8,500 pounds that aren't passenger cars or light trucks don't count at all. "Consumable fuel" means any solid, liquid, or gas that releases energy when an auxiliary power unit burns it. "Maximum available power" is calculated one way for lighter vehicles under paragraph (2)(A) — the battery's peak power during a standard 10-second test, divided by that peak power plus the engine's peak power — and a different way for heavier vehicles under paragraph (2)(B), where it's the battery's peak power divided by the vehicle's total peak power from both the battery and the engine combined (or just the battery's power, if the battery is the vehicle's only way to move). Finally, if a vehicle already qualifies for the separate clean vehicle credit under section 30D (ignoring that section's subsection (c)), it can't also be counted here. (e) New qualified alternative fuel motor vehicle credit: (1) Allowance of credit: Except for mixed-fuel vehicles (covered in paragraph (5)), this credit equals a percentage of the vehicle's "incremental cost" — the extra amount the vehicle costs, defined in paragraph (3). (2) Applicable percentage: Start with 50%. Add another 30% — for 80% total — if the vehicle has either a federal Clean Air Act certificate meeting the toughest available emissions standard for its make and model year (other than a zero-emission standard), or an equivalent California certification meeting California's toughest available standard. For vehicles heavier than 14,000 pounds, the "toughest available standard" is locked in as of the date the Energy Tax Incentives Act of 2005 was enacted. (3) Incremental cost: This is how much more the vehicle's suggested retail price is compared to an equivalent gasoline or diesel model — capped at $5,000 for vehicles up to 8,500 pounds, $10,000 for 8,500 to 14,000 pounds, $25,000 for 14,000 to 26,000 pounds, and $40,000 for vehicles over 26,000 pounds. (4) New qualified alternative fuel motor vehicle: This means a vehicle that can only run on an "alternative fuel," whose original use starts with you, that you acquired for use or lease and not resale, and that a manufacturer made. "Alternative fuel" means compressed or liquefied natural gas, liquefied petroleum gas, hydrogen, or any liquid that's at least 85% methanol by volume. (5) Credit for mixed-fuel vehicles: A "mixed-fuel vehicle" is certified by its manufacturer to run efficiently on a combination of an alternative fuel and a petroleum-based fuel, has the right emissions certification, and otherwise meets the same original-use, acquisition, and manufacturer conditions as other vehicles in this subsection. A "75/25 mixed-fuel vehicle" runs on at least 75% alternative fuel and no more than 25% petroleum fuel; it gets 70% of whatever credit it would have gotten as a full alternative fuel vehicle. A "90/10 mixed-fuel vehicle" runs on at least 90% alternative fuel and no more than 10% petroleum fuel; it gets 90% of that credit instead. (f) Limitation on number of new qualified hybrid and advanced lean-burn technology vehicles eligible for credit: (1) In general: Once a manufacturer's qualifying vehicles hit a certain sales threshold, the hybrid and lean-burn credits (subsections (c) and (d)) start shrinking for that manufacturer's vehicles. (2) Phaseout period: The shrinking, or "phaseout," starts at the beginning of the second calendar quarter after the quarter in which the manufacturer's total sales of qualifying vehicles — sold for use in the United States since December 31, 2005 — first reach 60,000. (3) Applicable percentage: During the first two calendar quarters of the phaseout, only 50% of the normal credit is allowed. During the third and fourth quarters, only 25% is allowed. After that, the credit drops to zero. (4) Controlled groups: Companies that count as a single employer under certain tax-code control-group rules (sections 52 and 414) are treated as a single manufacturer for this phaseout — including foreign corporations that would otherwise be left out of those rules. (5) Qualified vehicle: For this subsection, "qualified vehicle" means the kind of new hybrid vehicle described in subsection (d)(2)(A), plus any new advanced lean-burn vehicle. (g) Application with other credits: (1) The part of this credit tied to depreciable business property doesn't get claimed directly under subsection (a). Instead, it becomes part of the general business credit under section 38(b). (2) The rest of the credit — the personal-use part — gets treated as a personal credit that fits into subpart A of this chapter. (h) Other definitions and special rules: (1) Motor vehicle: This means any vehicle built mainly for use on public streets, roads, and highways — not a vehicle that only runs on rails — and that has at least four wheels. (2) City fuel economy: This is measured the same way EPA measures it under its own regulations, as those regulations stood when this section was enacted. (3) Other terms: "Automobile," "passenger automobile," "medium duty passenger vehicle," "light truck," and "manufacturer" all mean whatever the EPA's Clean Air Act regulations say they mean. (4) Reduction in basis: If you claim a credit under this section, you have to reduce the property's tax basis by the amount of the credit. (5) No double benefit: You can't double-dip. Any other deduction or credit tied to the same incremental cost used to figure the alternative-fuel-vehicle credit under subsection (e) gets reduced by the amount attributable to that cost. And for vehicles under subsections (b) or (c), any other deduction or credit gets reduced by the amount of credit you claimed under subsection (a) for that vehicle. (6) Property used by tax-exempt entity: If a tax-exempt entity uses the vehicle (without leasing it), the seller — not the tax-exempt buyer — is treated as the taxpayer who placed the vehicle in service, and can claim the credit, but only if the seller clearly tells the buyer, in writing, how much credit was available. For purposes of the business-credit rule in subsection (g), this counts as depreciable property. (7) Property used outside United States, etc., not qualified: No credit is allowed for property used mainly outside the United States, or for the part of a vehicle's cost you already expensed under section 179. (8) Recapture: If a vehicle stops being eligible for the credit — including through a short-term lease — the Secretary must write regulations to recapture, or claw back, the benefit of the credit you already claimed. (9) Election to not take credit: You can choose not to claim this credit for a particular vehicle. (10) Interaction with air quality and motor vehicle safety standards: Unless this section says otherwise, a vehicle isn't eligible for any credit here unless it meets the Clean Air Act's requirements for its make and model year (or the equivalent state air-quality law, for states with an approved waiver), and it meets the motor vehicle safety rules in sections 30101 through 30169 of title 49. (i) Repealed. This subsection — which had provided a plug-in conversion credit — was repealed by Public Law 117–169, section 13401(i)(2)(B), effective August 16, 2022. (j) Regulations: (1) In general: Except as paragraph (2) provides, the Secretary must write whatever regulations are needed to carry out this section. (2) Coordination in prescription of certain regulations: For regulations that decide whether a vehicle meets the eligibility requirements, the Treasury Secretary has to work together with the Secretary of Transportation and the EPA Administrator. (k) Termination: This section stops applying to vehicles purchased after set dates, depending on the type. Fuel cell vehicles (subsection (b)): after December 31, 2021. Advanced lean-burn vehicles (subsection (c)) and the lighter category of hybrid vehicles (subsection (d)(2)(A)): after December 31, 2010. The heavier category of hybrid vehicles (subsection (d)(2)(B)): after December 31, 2009. Alternative fuel vehicles (subsection (e)): after December 31, 2010.