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Plug In Hybrid (PHEV) Legislation

Last year's energy bill, HR 6, created a plug in hybrid demonstration program at the DOE, loans for advanced battery production, and other needed incentives for manufacturers of plug in hybrids. Unfortunately, consumer tax incentives for the purchase of plug in hybrids were not included. Although consumer tax credits for PHEVs enjoyed bipartisan support in both houses of Congress, concerns over other tax portions of the energy bill resulted in the entire tax package being removed from the original bill.

Consumer tax credits have helped today’s hybrids compete on dealer showroom floors by lowering the consumer cost of a hybrid significantly. The tax credit also helped manufacturers invest in hybrid technology knowing that consumers would be able to recoup the added cost through a tax credit at the end of the year. This effectively lowers most people’s tax bill by the amount of the credit. The amount of credit depends on the make and model of the vehicle.

In 2008, the House of Representatives will try once again to pass a renewable energy and energy efficiency tax credits bill that will include a tax credit for Plug in Hybrids. The bill, HR 5351 includes a credit for plug-in hybrid electric vehicles. The bill would provide a tax credit of between $4,000 and $6,000 for purchasers of a PHEV. The base credit will be $4,000 for a PHEV with a battery of at least 5kwh. The credit will increase by $200 for every kwh of capacity above 5kwh up to a maximum of 15kwh. A 15 kwh battery would have an approximate all-electric range of between 40 and 60 miles depending on the configuration of the vehicle operating system and many other factors. This is the same bill that the House passed in 2007.

While the House is likely to pass the bill, its prospects in the Senate are murkier. It is not clear that the Senate is interested in having yet another try at an energy tax package for which they have been unable to secure the necessary 60 votes in each previous attempt. Senator Max Baucus, Chairman of the Senate Finance committee, has stated that the House version would have to be revised to move in the Senate.

Should the Senate overcome its obstacles, there still may trouble for an energy tax bill. The White House has an outstanding veto threat against any bill that would change the way oil and gas revenues are taxed to pay for the incentives.

The US House passed a bill that would extend a series of tax credits for renewable energy and energy efficiency and pay for them by eliminating or scaling back oil and natural gas industry tax breaks. The bill (H.R. 5351), would extend a variety of tax credits beyond 2008 and create new ones, including a credit for cellulosic ethanol production and an incentive for plug-in hybrid vehicles.

- Charlie Garlow

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