This model state income tax credit legislation is designed to incentivize the purchase of used AFVs, by (i) helping maintain the resale value of AFVs and (ii) making used AFVs more affordable.
The model legislation has been drafted to provide policy makers with several options as to the types of used vehicles that would qualify for the tax credit, so the legislature can decide — based upon market or political considerations — which types of vehicles should qualify for a credit. Under one of the options, the proposed legislation would allow used hybrid electric vehicles (“HEVs”) (in addition to the AFVs listed above) to be eligible for the credits, provided that the vehicles meet a minimum EPA mpg rating for combined city and highway driving, which would be determined on a year-to-year basis by the State’s environmental or transportation commissioner (as determined by the legislature), and would be keyed to the third highest performing HEV on the market during the year in which such vehicle was manufactured.
Additionally, the proposed legislation provides that to qualify for the tax incentive, the used AFV must be a model year that is no less than two and no more than six years earlier than the date of the sale. This is intended to incentivize new purchasers of AFVs to retain the vehicle for a longer period of time than they may otherwise have intended and also tends to lower the underlying resale value. The proposed legislation also limits the tax incentive to lower income households.
As drafted, the tax credit would remain in effect through December 31, 2030. However, following December 31, 2024 and December 31, 2026, respectively, the amount of the tax credit would decrease by Seven Hundred Fifty Dollars ($750) from its then current amount. This reduction balances the aim of stabilizing the resale value of used AFVs, on the one hand, and the goal of incentivizing consumers to take more immediate action to purchase used AFVs. Lastly, the proposed legislation requires that the used AFV be purchased from a qualifying seller – a registered car dealership or business that is primarily involved in the sale of used vehicles.