House Passes PHEV Tax Credit

There is not yet a plug-in hybrid electric vehicle (PHEV) tax credit. There are, however, three bills.

The first is H.R. 1331, introduced March 6, 2007 by Rep. Doggett (D-TX) and 108 cosponsors.. The bill would provide a credit up to $6,000 for the purchase of a new PHEV. The bill was referred to the House Committee on Ways and Means where it remains.

The second is S. 1617, introduced June 14, 2007 by Mr. Hatch (R-UT) and cosponsored by Cantwell (D-WA), Obama (D-IL), Kerry (D-MA), Stabenow (D-MI) and Salazar (D-CO). This bill would provide a credit of up to $7,500 for new PHEVs under 10,000lbs and up to $20,000 for larger vehicles. The bill would also provide a credit of up to $4,000 for plug-in conversions. The bill also allows manufacturers of PHEVs to expense the cost of manufacturing facilities instead of having to capitalize and depreciate the cost of such facilities.  (That last one might not make much sense to you unless you are an accountant or tax lawyer.)  The bill was referred to the Committee on Finance where it remains.

The third bill is H.R. 2776, the Renewable Energy and Energy Conservation Tax Act of 2007, introduced June 19, 2007 by Mr. Rangle (D-NY) and 21 cosponsors. The bill would provide a credit of up to $6,000 for new PHEVs. Like the hybrid credit, it is phased out after a manufacturer records a specified number of sale, in this case 60,000. Unlike the hybrid credit, the PHEV credit is available against the alternative minimum tax.  This was an issue with the hybrid credit. Some hybrid buyers found the credit limited by the AMT and were unable to use all of the credit for which they thought they were eligible. It looks like Congress learned from this past mistake.

To view the PHEV credit language in H.R. 2776, see Title II—Conservation, Subtitle A—Transportation, Sec. 201, for details on the PHEV tax credit (page 35 of the .pdf file).

I thought that partisan gridlock would prevent a vote on this before the summer break.  However, H.R. 2776 passed the House (221 to 189) on Saturday night.  We'll see what happens in the Senate.

I'll really dig into the provisions of H.R. 2776 and provide a more detailed analysis in an upcoming post.