Obama Signs Legislation to Lower Propane Excise Tax

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President Obama has signed into law a bill making it easier for Americans to use propane autogas. Included in the extension of the U.S. highway bill is an excise tax equalization provision that permanently reduces the tax rate on autogas and levels the playing field for all alternative fuels, notes the National Propane Gas Association (NPGA). Highway use propane produces 72% of the energy output of gasoline, but was taxed at the same 18.3 cents per gallon rate. The Alternative Fuel Tax Parity provision recognizes this disparity and sets the energy equivalent rate for propane at 13.2 cents per gallon.

Similarly, highway LNG produces 58% of the energy output of diesel, but was taxed at the same 24.3 cents per gallon rate. With Obama’s signature on the highway bill, LNG will now be taxed at 14.1 cents per gallon. The reductions in excise tax rates for propane and LNG go into effect Jan. 1, and henceforth the tax will be based on energy content rather than a volumetric calculation.

“With his provision signed into law, dozens of homegrown companies in my Indiana district will receive equitable treatment within the federal tax code,” said U.S. Rep. Todd Young (R-Ind.), sponsor of the legislation. “The tax code shouldn’t be a tool for Washington to pick winners and losers, and my law guarantees this up-and-coming sector of our economy a level playing field on which to compete.”

“NPGA is very pleased that Congress acted decisively on this issue, making it easier for every American to choose a clean, abundant, and domestic alternative fuel,” said Rick Roldan, NPGA president and CEO. “Propane is the world’s third most common engine fuel, and the United States is producing more of it than ever before. Parity in the fuel tax system will help put more alternative fuel vehicles on the road, which is a good thing for America.”

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