Tax Incentives for Pumping Stations Installing Clean-Fuel Refueling Equipment
by Paul Friedel
Real Estate/Construction Advisor, Summer 2007 Issue

Under a tax provision that became effective in 2006 and will remain effective through the end of 2010, a federal tax credit has been made available for fueling stations that install clean-fuel vehicle refueling equipment. The term “clean-fuel” for this credit is “any fuel that consists of at least 85 percent ethanol, natural gas, compressed natural gas, liquefied natural gas, liquefied petroleum gas or hydrogen, and any mixture of diesel fuel and biodiesel containing at least 20 percent biodiesel.” Under this provision, a tax credit of 30 percent of the cost of installing the equipment is available to offset income taxes. For business-use refueling equipment, the credit is limited to the smaller of 30 percent of the cost of the property or $30,000 for each property placed in service. Other limitations apply if the qualifying refueling equipment is for personal use.

The refueling property costs that can be used for the credit are defined as any property (other than a building or its structural components) used to do either of the following:

• Store or dispense a clean-burning fuel (see above definition) into the fuel tank of a motor vehicle propelled by the fuel, but only if the storage or dispensing is at the point where the fuel is delivered into that tank.
• Recharge motor vehicles propelled by electricity, but only if the property is located at the point where the vehicles are recharged.

As can be seen, the functions of “storing” and “dispensing” the clean fuel is fairly broadly defined and should give ample opportunity to claim a substantial credit.

Some additional requirements can apply in order to qualify for the credit:

• The refueling property was placed in service after 2005.
• You began the original use of the property.
• The property was acquired for your use or to lease to others, and not for resale.
• You use the refueling property primarily in the United States.

Since the provisions for claiming this credit can be a little twisted and murky in some areas, please contact your accountant for additional information if you are interested in this tax incentive. Also keep in mind that this credit can be limited by the dreaded Alternative Minimum Tax, which may limit its usefulness for some taxpayers.