Expanded Tax Credit for Businesses Installing Alternative Fuel Refueling, Recharging Equipment by Claribel Velazquez, CPA
The Inflation Reduction Act of 2022 (IRA) includes several tax credits and deductions intended to incentivize taxpayers to adopt alternative energy solutions in their homes and businesses. One such credit applies to the installation of products or facilities that store or dispense alternative fuels to motor vehicles, including electric charging stations and bidirectional charging equipment.
Under the expanded qualified alternative fuel vehicle refueling (QAFVR) tax credit in effect from Jan. 1, 2023, through Dec. 31, 2032, taxpayers who purchase and install equipment that stores and dispenses alternative fuel, including electricity, into motor vehicles during this period may be eligible for a tax credit of 30 percent of the cost of each piece of equipment, up to a maximum of $100,000 per installed refueling/recharging station. For QAFVR equipment placed in service in 2022 or earlier, the available credit remains 30 percent up to a maximum of $30,000.
To qualify for the full 30 percent credit, businesses must meet prevailing wage and apprenticeship requirements as determined by the Secretary of Labor, and the equipment must be installed after Dec. 31, 2022, in a low-income or non-urban census-designated tract. If the QAFVR property does not meet these conditions, the maximum allowable tax credit is reduced to 6 percent.
The law defines QAFVR property as equipment or facilities used to store or dispense alternative fuels into the fuel tanks of motor vehicles propelled by the fuel. It goes on to define alternative fuel as electricity; a qualifying mixture of biodiesel, diesel fuel or kerosene; and products in which 85 percent of its volume is made up of natural gas, liquefied natural gas, liquefied petroleum gas, natural gas, hydrogen and ethanol.
About the Author: Claribel Velazquez, CPA, is an associate director of Tax Services with Berkowitz Pollack Brant Advisors + CPAs, where she provides tax compliance and consulting services to high-net-worth individuals, closely owned businesses and commercial real estate and development businesses. She can be reached at the CPA firm’s Miami office at (305) 379-7000 or info@bpbcpa.com.
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