Clean Alternative Fuel Commercial Vehicle and Vehicle Infrastructure Tax Credit

Summary

The Clean Alternative Fuel Commercial Vehicles and Vehicle Infrastructure Tax Credit offers a credit against the business and occupation (B&O) tax or public utility tax (PUT) for those who purchase or lease a clean alternative fuel commercial vehicle, pay to have a commercial vehicle converted to mainly operate on clean alternative fuel, or purchase alternative fuel vehicle infrastructure component parts, as well as related installation and construction. Eligible clean alternative fuels include electricity, dimethyl ether, hydrogen, methane, natural gas, liquefied natural gas (LNG), compressed natural gas (CNG), or propane. First made available on July 15, 2015, Washington has set an overall program limit of $32.5 million, with an annual limit of $6 million (annual limits based on credit type exist). The credit will remain available until the overall program limit has been met.

Credits may be applied to either B&O tax or PUT, the same credit cannot be applied to both. Credits are only applicable to returns for periods after the credit’s issue date and may be carried forward up to one calendar year.

Vehicles: 

To be eligible, commercial vehicles must be used exclusively in providing commercial services or transporting commodities, merchandise, produce, refuse, freight, animals, or passengers. Credits are based on the vehicle class (gross vehicle weight) and whether it’s purchased, leased, or converted (see below). Credits for vehicles bought or leased are limited to the lesser of $250,000 or 25 vehicles per person per calendar year. 

Purchased Vehicle Maximum Credit Amount by Gross Weight:

Up to 14,000 lbs: 75% of incremental cost or $25,000

14,001 - 26,500 lbs: 75% of incremental cost or $50,000

Above 26,500 lbs: 75% of incremental cost or $100,000

Leased Vehicles:

75% of incremental cost or $25,000, whichever is less. Then multiply by the lease reduction factor.

Converted Vehicles:

50% of the conversion costs or $25,000, whichever is less.

*The incremental cost amount is the difference in price between the commercial vehicle purchased and a comparable conventionally fueled vehicle.

**The lease reduction factor is the vehicle gross capitalized cost less the residual value, divided by the gross capitalized cost. The gross capitalized cost is the value of the vehicle including any other items a person pays over the lease term that are included in such cost. The residual value is the lease-end value of the vehicle as determined by the lessor, at the end of the lease term included in the lease contract.

***There is no individual annual credit limit for the conversion of vehicles.

Infrastructure:

Eligible infrastructure includes structures, machinery, and equipment necessary and integral to support a clean alternative fuel vehicle. Credit is available for up to 50% of the cost to purchase tangible personal property that will become a component of alternative fuel vehicle infrastructure, and installation and construction of such infrastructure. There is no per person individual credit limit. Property acquisition and site improvement related to installation of infrastructure is not eligible for credit.