CLEAN-FUEL VEHICLES AND REFUELING PROPERTY IN THE UNITED-STATES TAX CODE

The comprehensive National Energy Policy Act of 1992 authorized a new tax deduction for U.S. taxpayers using qualified clean-fuel vehicles a nd qualified clean-fuel vehicle refuelling property. Both original equ ipment manufacturers' vehicles capable of burning a clean-fuel and ret rofitted vehicles may be eligible for the deduction. A tax credit, rat her than a deduction, is allowed for electric vehicles. The deduction or credit for clean-fuel vehicles may be claimed by any taxpayer. A de duction for refuelling property may only be claimed if the property is used in a trade or business. In ail cases, the properties must be use d in the U.S. and various limitations are imposed as to the qualifying costs generating the deductions. The deductions are to encourage taxp ayers to switch from conventional fuels to alternative fuels that prom ote a cleaner environment. The effectiveness of the legislation in ach ieving this goal depends largely upon how the vehicles are used, margi nal tax rates, operating costs, and other factors.