Legislation on Tax Parity for Alternative Fuels Passes House

“Dozens of homegrown companies in my Indiana district have developed and adopted alternative fuel technologies,” said Young. “This provision prevents Washington from picking winners and losers and provides this burgeoning sector of our economy equitable treatment within the federal tax code. It’s important we level the playing field to encourage investments in these up-and-coming industries, especially those finding ways to utilize America’s abundant domestic energy reserves. This provision will spur private-sector innovation that is not just good for economic growth, but is lessening our dependence on foreign energy, thereby enhancing our nation’s overall security.”

Highway use LNG produces 58% of the energy output of diesel, but is taxed at the same 24.3 cents a gallon rate. Similarly, propane produces 72% of the energy output of gasoline, but is taxed at the same 18.2 cents a gallon rate. The alternative fuel fax parity provision recognizes these disparities and sets the energy equivalent rates for LNG at 14.1 cents a gallon and propane at 13.2 cents a gallon.

NPGA comments there are still several steps before the provision becomes law. House and Senate leaders appear to be at an impasse on how to best handle the looming expiration of federal highway funding. But with the House passing its extension by such a large margin, and the White House supporting that effort, there is pressure on the Senate to act. Senate leadership has indicated it will begin to advance a longer-term highway bill. Nonetheless, the association notes that there appears to be bipartisan support in both houses of Congress to adjust the excise tax calculation for propane and LNG based on their energy output.