27 Sep 2004 HEADLINE

Congress Restores $2,000 Hybrid Car Tax Credit

Washington, D.C., September 24, 2004 - Tens of thousands of taxpayers have purchased hybrid electric vehicles this year, and the thousands more who plan to buy these gas-saving, environmentally-friendly vehicles in coming year will receive a bigger tax incentive than expected for their socially-responsible purchases, thanks to yesterday's action by the U.S. Congress on the middle class tax cut bill.

As part of that measure, Congress restored the alternative-fuel and hybrid vehicle federal income tax deduction to $2,000 for vehicles purchased in calendar years 2004 and 2005. (Under current law, the value of the deduction was to have been reduced by 25 percent, to $1,500 this year, and reduced by an additional 25 percent in 2005.)  The value of the deduction in 2006 remains at only $500, as under current law, and the deduction continues to sunset entirely at the end of 2006.

This congressional action occurs just as the U.S. is poised at the brink of an important evolution in the transportation sector.  Toyota's sales of hybrid electric vehicles in the U.S topped 98,000 at the end of August.  Honda, too, continues to have remarkable hybrid sales, and the Ford hybrid Escape's market launch was met with customer waiting lists.  The offering of different hybrid makes and models will expand significantly in 2005.  Tax incentives, coupled with persistent high prices for gasoline, will help to ensure that the hybrid electric vehicle market matures rapidly.

Callahan noted that while the $2,000 tax deduction is welcome, the Alliance believes Congress should go much further in providing incentives encouraging purchase of hybrids and other clean, advanced vehicles.  "Energy efficiency advocates, environmentalists, consumer groups, and industry have united in a call for generous tax credits for hybrid and other clean-fuel vehicles like those included in the stalled comprehensive energy bill and in the Senate version of the FSC/ETI corporate jobs bill.  Federal tax incentives are an important mechanism for transforming the market quickly to efficient, clean, hybrid technology," she said.  "Now is the time to ensure that the nascent market delivers our country the fuel savings, environmental benefits, and national energy security that are the hallmarks of energy-efficient, hybrid electric technology," said Callahan.