Grassley, Baucus Bill Offers Businesses Significant Tax Breaks to Buy Fuel-efficient Alternative Energy Vehicles
WASHINGTON – Sen. Chuck Grassley, chairman of the Committee on Finance, and Sen.
Max Baucus, ranking member, today introduced legislation to significantly increase tax incentives
for business owners who buy fuel-efficient alternative energy vehicles. The Grassley-Baucus bill will
make certain that businesses receive tax benefits for buying more efficient, cleaner alternative energy
vehicles just as they now receive for the purchase of sport utility vehicles (SUVs).
If enacted, the proposed changes would be the biggest incentives for the business purchase
of alternative energy vehicles ever to emerge from the Finance Committee and possibly alter the way
businesses approach their vehicle purchases. The alternative energy vehicles include electric cars;
hybrid cars that run on part-fuel, part-electricity; and vehicles that run entirely on alternative fuel
such as compressed natural gas.
“The tax code shouldn’t favor SUVs over alternative energy cars for business owners,”
Grassley said. “Some business owners will want to use SUVs and some will want to use hybrid cars.
The choice should be theirs and the tax code should be consistent. The purchase of either kind of
vehicle will help business growth, especially for small businesses, which create most of the nation’s
Baucus said, “At a time when America needs to shake its oil addiction, Congress needs to
do all it can to encourage the purchase and use of alternative fuel vehicles. America’s small business
owners are looking for ways to reduce their energy consumption and costs, and the tax code should
provide benefits for those who can choose and use clean, lean alternative-fuel vehicles.”
Grassley and Baucus’ bill, the America’s Business Choice (ABC) Act, exempts passenger
vehicles eligible for the alternative motor vehicle credit and the credit for qualified electric vehicles
from the limitation on depreciation for “luxury” automobiles.
Under current depreciation rules, a business owner who buys an SUV gets a deduction for
the depreciation not subject to the limitation for “luxury” automobiles. The Grassley-Baucus bill
will provide the same depreciation deductions for business owners who buy alternative energy
In addition, the Grassley-Baucus bill allows small business owners to use the tax benefit of
expensing of up to $100,000 for their alternative energy vehicles. Under current law, business
owners have not been able to use expensing if they purchased a passenger vehicle that costs more
than $10,585 (adjusted for inflation to $14,800 for 2005 purchases).
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