Colorado Adopts Best-in-Nation EV Tax Incentive
DENVER, CO (May 13, 2016)—With only one dissenting vote, Colorado lawmakers improved the state’s incentives for alternative fuel (electric, hydrogen and CNG) vehicles by adopting HB 1332 in the session ended May 11. The incentive intends to boost sales by providing buyers of those vehicles with a $5,000 tax credit that can be assigned to a car dealer or finance company to effectively reduce the sticker price upon purchase.
The law goes into effect on Jan. 1, 2017.
“This is the best incentive for electric vehicle sales in the nation at the moment, and we expect it to have a big impact on EV sales in the state.” said Will Toor, director of transportation programs at the Southwest Energy Efficiency Project (SWEEP).
Toor proposed the concept of assignable tax credits in 2014 and the Colorado Energy Office developed the bill and built a broad coalition for passage in 2016. Gov. John Hickenlooper is expected to sign the bill in a ceremony next week.
Colorado already had an income tax credit in place for alternative fuel cars and trucks. The existing credit was up to $6,000 per car, based upon a complicated formula including battery size, the cost of the car, and the level of federal tax credit received by the buyer. Toor said it was too complicated for consumers to understand – or for auto dealers to communicate to customers. It also meant that people buying more expensive EVs got larger tax credits, even though research shows that tax credits have a bigger influence on consumer purchasing decisions for lower cost EVs. The average consumer ended up getting about $5,000. HB 1332 makes the credit a flat $5,000 for anyone buying an alternative fuel vehicle, and $2,500 for anyone leasing.
The existing credit already had one unusual and attractive feature that is maintained under HB 1332: It was fully refundable, meaning that a consumer gets the full value of the credit even if it exceeds their tax liability. For instance, if a buyer paid $2,000 in state taxes during the year they purchased an EV, they would receive a $5,000 refund under the new law.
The biggest change is making the credits assignable, meaning that the buyer has the option to assign the credit to a car dealer or financing organization and receive a point-of-sale incentive discount of $5,000 off the sticker price of the car minus an administrative fee. The law states that the administrative fee may not exceed $150.
Trucks and buses also qualify for Colorado’s new alternative fuels tax incentives:
Light duty trucks: $7,000 assignable tax credit
Medium duty trucks and buses: $10,000 assignable tax credit
Heavy duty trucks and buses: $20,000 assignable tax credit
Research suggests that the same amount of money offered as a point-of-sale incentive will stimulate significantly more sales than a tax credit that must be claimed the following year.
The bill was supported by a broad coalition including General Motors, Nissan, SWEEP, Colorado Cleantech Industries Association, Colorado Propane Gas Association, Noble Energy, Conservation Colorado, Denver Metro Chamber of Commerce, Colorado Wyoming Petroleum Marketers Association, Alliance of Automobile Manufacturers, Colorado Electric Vehicle Coalition, Colorado Hydrogen Coalition, and the Colorado Natural Gas Vehicle Coalition.
The Southwest Energy Efficiency Project is a public interest organization dedicated to advancing energy efficiency in the Southwest. To learn more, visit http://www.swenergy.org.
Will Toor, director of transportation programs, Southwest Energy Efficiency Project: (303) 447-0078 ext. 6; (303) 591-6669 cell; firstname.lastname@example.org
Shad Balch, communications, General Motors: (310) 463-4757; email@example.com