Small Business Taxes & Management

Special Report

Qualified Alternative Fuel Motor Vehicles (QAFMV) and Heavy Hybrid Vehicles


Small Business Taxes & ManagementTM--Copyright 2007, A/N Group, Inc.


Hybrid cars aren't the only vehicles that qualify for a tax credit. The Alternative Motor Vehicle Credit, enacted by the Energy Policy Act of 2005, provides for four separate credits for different types of energy efficient vehicles. The amount of the potential credit varies by type of vehicle and which of the four credits applies. The credit ranges from $4,000 for a Honda Civic GX using natural gas, to $32,000 for a GMC C7500 Topkick using liquid propane gas. In fact there are a number of trucks and some specialty vehicles that qualify for the $32,000 credit. Some step vans qualify for a $20,000 credit. The amount of the credit depends on a number of factors including the vehicle weight and incremental cost of the alternative fuel system. The additional cost is likely to be substantial, and the operating costs could also be higher so whether or not the tax credit provides real savings requires some analysis.

QAFMV vehicles may be either new, original equipment installation vehicles or prior use vehicles which have been repowered to use an alternative fuel by an aftermarket installer. Qualifying Alternative fuels include compressed natural gas, liquefied natural gas, liquefied petroleum gas, hydrogen and any liquid at least 85 percent of the volume of which consists of methanol.

Qualifying Heavy Hybrid vehicles are new vehicles with a gross vehicle weight in excess of 8500 pounds that meet the definition of a qualifying hybrid vehicle. A qualifying hybrid vehicle means a motor vehicle which draws propulsion energy from onboard sources of stored energy which are both an internal combustion or heat engine using consumable fuel, and a rechargeable energy storage system.

Notice 2006-54 provides procedures that a vehicle manufacturer may use if it chooses to certify that a vehicle meets certain requirements that must be satisfied to claim the new QAFMV credit and the amount of the credit allowable with respect to that vehicle Notice 2007-23 provides procedures for a vehicle manufacturer to certify to the Internal Revenue Service that a heavy-duty vehicle meets certain requirements that must be satisfied to claim the new qualified hybrid motor vehicle credit.

The IRS Web site lists the vehicles and details such as weight and engine type where the IRS has received information from the manufacturer and the Service has acknowledged the vehicle's eligibility for the credit and the amount of the qualifying credit. For a complete list of the vehicles that qualify go to,,id=175456,00.html


Copyright 2007 by A/N Group, Inc. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The information is not necessarily a complete summary of all materials on the subject.--ISSN 1089-1536

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--Last Update 12/11/07