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ALTERNATIVE MOTOR VEHICLE CREDIT
(Effective December 31, 2005 – January 1, 2011)
The vehicle tax credit for the purchase of a new qualified alternative motor vehicle (e.g., a new dedicated propane vehicle) is 50 percent of the incremental cost (the difference in purchase price between a gasoline- or diesel-fueled vehicle and a propane-powered version of the same model). An additional credit of 30 percent of the maximum allowable incremental cost may be given if the vehicle meets certain emissions standards. The credit may not exceed $4,000 to $32,000, with the maximum allowable credit based upon the vehicle’s weight as the following table outlines:
A new qualified alternative fuel motor vehicle, for the purposes of this section, means any motor vehicle that is only capable of operating on an alternative fuel, the original use of which commences with the taxpayer; is acquired by the taxpayer for use or lease, but not for resale; and which is made by a manufacturer or converted with an approved EPA system. The credit applies to vehicles that will be used predominately in the U.S. and are placed in service after December 31, 2005 and before January 1, 2011.
IRS Notice 2006-54
On June 2, 2006, the IRS released IRS Notice 2006-54, which outlined the procedures a vehicle manufacturer must use to certify that a vehicle meets the specified requirements
in order to qualify for the alternative fuel vehicle credit. Most importantly, the Notice makes clear that new or used gasoline and diesel vehicles that are converted to
propane will qualify for this credit as well.
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