Governor Cuomo released his 2013-2014 New York State Executive Budget proposal for the coming fiscal year. The budget proposal contains two items of interest for those in the clean energy industry. First, the proposed legislation creates an “electric vehicle recharging equipment” tax credit. Second, the budget proposal clarifies that natural gas in any form may be purchased exempt from sales tax provided that it is converted into “compressed natural gas” for use in the engine of a motor vehicle.
Electric Vehicle Recharging Equipment Credit
The governor is proposing to replace the expired “alternative fuels refueling property” tax credit with a new tax credit for “electric vehicle recharging property.” The alternative fuels refueling credit expired in 2010 and was intended to create an incentive for business to install certain refueling property for vehicles that utilized various “clean-burning” fuels (e.g., certain biodiesel, ethanol, compressed natural gas, etc.).
This new credit is intended to create a similar economic incentive for electric vehicle recharging property. If the legislation becomes law, the new credit could be applied against a taxpayer’s Article 9 corporation tax, Article 9-A franchise tax, or Article 22 personal income tax. For each installation of electric vehicle recharging property, the credit is equal to the lesser of $5,000 or 50 percent of the cost of the installed property. None of the costs of the electric vehicle recharging property can be paid for by grants from the New York State Energy Research and Development Authority or the New York Power Authority. Also, it is unclear exactly what constitutes an “installation” for purposes of the credit.
The term “electric vehicle recharging property” means all equipment needed to convey electric power from the electric grid or another power source to an onboard vehicle energy storage system. The credit is not refundable (unused credit can be carried over to future years) and is subject to certain recapture provisions. This new credit would expire at the end of 2017.
Sales Tax Exemption for Natural Gas
The current sales tax law contains an exemption for various motor fuels, including E85, compressed natural gas and hydrogen. The new legislation clarifies this exemption by expanding it to include “natural gas purchased and converted into [compressed natural gas] for use or for sale for use or consumption directly and exclusively in the engine of a motor vehicle. Thus, the law now explicitly makes clear that natural gas can be purchased tax free if it is going to be converted into compressed natural gas for use in a motor vehicle.
Stay tuned for updates on this proposed legislation. Rarely does a proposed budget get enacted without substantial changes. Thus, it’s unclear whether these proposals will ultimately make it into law.
Joseph Endres is a partner in the State & Local Tax Practice at Hodgson Russ LLP. You can reach him at firstname.lastname@example.org.