On Wednesday, the U.S. House of Representatives passed a highway and transportation funding bill that includes a provision meant to help level the playing field for how certain alternative fuels are taxed in relation to conventional fuels.
H.R.3038, legislation to fund and extend the authorization for the country’s highway and transit programs through the end of 2015, passed the House in a 312-119 vote.
According to U.S. Rep. Todd Young, R-Ind., who sponsored the Alternative Fuel Tax Parity Act with other lawmakers earlier this year, the tax parity provision now included in H.R.3038 would ensure the federal highway excise taxes on liquefied natural gas (LNG) and propane autogas are levied based on the fuels’ energy output, rather than on their volume.
As Young explains, LNG produces 58% of the energy output of diesel, but the two fuels are currently taxed at the same 24.3 cents per gallon rate. Similarly, propane produces 72% of the energy output of gasoline, but those two fuels are taxed at the same 18.3 cents per gallon rate. Young says the tax parity provision recognizes these disparities and sets the energy equivalent rates for LNG (14.1 cents per gallon) and propane (13.2 cents per gallon).
“Dozens of homegrown companies in my Indiana district have developed and adopted alternative fuel technologies,” says Young in a press release. “This provision prevents Washington from picking winners and losers and provides this burgeoning sector of our economy equitable treatment within the federal tax code.”
NGVAmerica has lauded the inclusion of the tax parity provision in the passed House bill.
In a press release, the organization says the legislation would correct a longstanding inequity for LNG, as the alternative fuel is effectively taxed at a rate that is 70% higher than that of diesel.
“We commend the House of Representatives for including this common-sense fix that further strengthens the economic value proposition of natural gas as a transportation fuel,” states NGVAmerica President Matthew Godlewski. “This is great news for current and prospective LNG fleet operators, who will see even greater savings on their fuel costs should this fix become law.”
UPS, whose massive green fleet includes natural gas and autogas vehicles, has also welcomed the tax parity provision.
Young’s press release cites Laura Lane, UPS’ president of global public affairs, as saying, “LNG and propane are both clean, readily available fuels, produced in the United States. Removing this economic disincentive in the tax code will speed the penetration of LNG and propane vehicles into the marketplace, and expand the use of LNG and propane vehicles on America’s roadways.”
NGVAmerica explains that the authorization for federal transportation funding expires at the end of July, which necessitates the passage of an extension by the U.S. Congress. The group says the Senate must still consider H.R.3038 or its own transportation funding legislation, noting that the Senate previously voted to fix the LNG tax inequity as recently as 2014.
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