Office of Sen.

Mike Johnston
Colorado General Assembly | 200 E. Colfax Avenue | Denver, CO 80203 | 303.866.4864

HB 13-1247 Innovative Motor Vehicle Income Tax Credit Reps. Duran, Singer & Sens. Johnston, Ulibarri Staff Name: Amanda Levin What the Bill Does: Under current law, purchasers of innovative motor vehicles receive state tax credits for such purchases. Innovative motor vehicles include electric, plug-in electric, and compressed natural gas vehicles. The credit extends to those who convert their cars to an alternative fuel. These credits are set to expire in 2015. HB 13-1247 will extend the current tax credit for all currently covered innovative motor vehicles for an additional six years, through 2022. It clarifies that plug-in vehicles are included for the credit after some confusion began in December 2012, and it increases the credit for compressed natural gas vehicles. It also changes the credit calculation to simplify it for administration and make it easier for taxpayers and consumers to understand the credits for which they are eligible by simplifying the definitions and calculations. Colorado Context: The innovative motor vehicle income tax credit law was always intended to include plug-in hybrid vehicles, but was unclear in that regard. For years, the Department of Revenue included such vehicles, but in December of 2012, the DOR decided it had been interpreting the law wrong and drastically reduced the credit for those vehicles. This was shocking to consumers, auto dealers, manufacturers, and businesses converting vehicles to alternative fuels. As of July 2012, there were nearly 1,300 registered plug-in electric vehicles (PEV) and approximately 70 public charging stations in Colorado.1 There are currently 11 PEV models available in the state, the most seen in the history of the market.2 With the tax credits available (through 2015 currently), Coloradans would pay an additional $275-$2,400 for a PEV instead of a comparable internal combustion vehicle (ICE).3 By 2017, the price difference without taxes is expected to be $3,600$11,000.4 The tax credit defined in this bill helps consumers to purchase cars they
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FACT SHEET MEMORANDUM

Colorado Electric Vehicle and Infrastructure Readiness Plan, Project Fever, 2012, at 15, http://denvercleancities.org/Colorado%20PEV%20Readiness%20Plan.pdf. 2 Id. 3 Id. at 21. 4 Id.

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otherwise might not. As a consequence, they can recoup the savings on gasoline by approximately $1,319 per year, and a savings of $244 per year on maintenance costs.5 According to one survey, if the PEV purchase price were the same as a comparable ICE vehicle, 60 percent of consumers would consider purchasing the PEV. When that purchase price is higher, only 26 percent would consider purchasing the PEV.6 National Context: Twenty-seven states and Washington, D.C. have electric vehicle incentives for individuals.7 Thirteen states currently have such legislation pending. For hybrid vehicles, California and Pennsylvania, in addition to Colorado, provide rebates for people who buy them. Maryland, New Mexico, Oregon, South Carolina, and Washington provide tax credits or exemptions. Additionally, at least nine other states provide non-financial incentives for hybrids.8 Bill Provisions: Extends the credit for innovative motor vehicles, including electric, plug-in electric, and compressed natural gas vehicles. In the final four years before the legislations expiration, between 2019-2022, the credit will be phased down based on the assumption that sales are expected to grow after that without requiring support from tax credits. Extends the credit for an additional six years, through 2021. Clarifies that plug-in cars are eligible for credit. Changes the credit calculation to simplify it for administration and makes it easier to dealers and consumers to understand the credit. For purchases of eligible vehicles, the tax credit is determined by a percentage (based on which year the car is purchased) of the actual cost of car minus any federal credits or grants. Increases the credit for compressed natural gas vehicles in 2014, 2015, and 2016. Fiscal Impact: The Colorado Legislative Council estimates there will be a fiscal impact of $2.4 million in FY 2012-13, $5.2 million in FY 2013-14, and $5.9 million in FY 2014-15, because of the tax credit extension.

5 6

Id. at 22. Estimated for a person that drives 11,000 miles per year. Id. at 24. 7 National Conference for State Legislatures, http://www.ncsl.org/issuesresearch/energyhome/state-electric-vehicle-incentives-state-chart.aspx. States include Arizona, California, Connecticut, DC, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, Massachusetts, Maryland, Michigan, Minnesota, Missouri, Nevada, New Jersey, New York, North Carolina, Montana, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, Virginia, Washington, West Virginia, and Wisconsin. 8 National Conference for State Legislatures, http://www.ncsl.org/issuesresearch/energyhome/state-incentives-for-hybrid-vehicles.aspx.

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For a complete list of fact sheets, visit www.mikejohnston.org/in-the-legislature.