ACE lobbies for clarification of E85 pump tax credit

By Erin Voegele | November 11, 2009
Report posted Dec. 9, 2009, at 12:51 p.m. CST

The American Coalition for Ethanol is asking federal lawmakers to alter the language of the Alternative Fuel Vehicle Refueling Property Credit, clarifying the credit to allow multi-product and blender fuel pumps to claim the full value of the credit. On Dec. 2, ACE sent a letter to leaders of the Senate Committee on Finance and the U.S. House of Representatives Committee on Ways and Means. In the letter, ACE described how clarifying the credit could have a positive impact on the establishment of E85 fueling infrastructure nationwide.

The credit was originally established in the Energy Policy Act of 2005, and provides a 30 percent tax credit, with a limit of $30,000 per location, to businesses and individuals who install alternative fuel vehicle fueling infrastructure. The American and Reinvestment Act of 2009 increased the credit to $50,000, or 50 percent of the total cost, and extended it to include projects completed prior to Jan. 1, 2011.

According to information provided by ACE in the letter, in promulgating rules to implement the credit, the Internal Revenue Service interpreted the credit in a way that excludes multi-product pumps and blender pumps from receiving the full value of the credit. While the actual language of the Alternative Fuel Vehicle Refueling Property Credit made the tax credit available to equipment that is used to store and/or dispense alternative fuels, ACE said the IRS arbitrarily created a special classification of "duel use property" and limited the credit to be used only to the extent that the costs exceeds the cost of conventional refueling property.

"Allowing the credit it be taken on the entire cost of a single-product E85 dispenser, while disallowing the credit on the exact same equipment on a multi-product or blender pump and only offering it for the additional fuel hoses and piping on a multi-product or blender pump is a disincentive of thousands of dollars per pump, and tens of thousands of dollars per location," said ACE in the letter.

Essentially, under the current interpretation of the tax credit, a fuel marketer can receive credit for 50 percent of the cost all components that made up a dedicated E85 pump. However, if a pump offers four fuel products, including E85, the marketer can only claim the tax credit for 50 percent of one-fourth of the base cost of the pump, or 12.5 percent of the base cost of the pump.

According to ACE, many fuel marketers choose not to install stand-alone E85 pumps because it does not make financial sense for them. This is because a dedicated E85 pump often has a break-even point of more years than the useful life of the pump.

ACE Vice President of Market Development Ron Lamberty said he thinks more petroleum marketers would offer E85 if they could claim the credit for multi-product and blender pumps that distribute the fuel. "If the final goal is to get more E85 pumps out there, I think that is probably the change they need [to implement]," he said. "I think the number of E85 locations would increase dramatically if they make this change."