Congress Ratifies Extension of Tax Incentives for Alternative Fuel Investments

By Richard Browne, Vice-President Marketing, Patriot Capital

Congress has given C-store owners and fuel marketers at least one more year to take advantage of significant tax savings on the purchase and installation of alternative fueling equipment.

The Alternative Fuel Infrastructure Tax Credit – which has been extended through December 2016 -- enables a 30% tax credit for eligible alternative fueling equipment. Eligible fuels under this credit include E85, propane, biodiesel (20% minimum) and liquefied hydrogen. 

The U.S. Department of Energy reports that more than 37,000 fueling stations offer alternative fuels. As fuel marketers continue to seek enhancements that keep their stations competitive and differentiated, the consideration of adding alternative fuels dispensing equipment represents a potential path of differentiation and margin enhancement.

The value of  a tax credit, including this one, is that they offer a straight deduction from taxes owed, and therefore is of significantly higher value than a tax deduction.  For example, if a retailer installed $100,000 of eligible E-85 pumps, POS and tank upgrades, they could potentially be able to deduct $30,000 from their 2016 tax bill.

The Alternative Fuels Infrastructure Tax Credits may also be carried backwards one year and forward 20 years.

This credit, like other tax incentives, constitute just one element of a broader approach to capital equipment purchasing that allows you to maximize your business profitability. Leveraging the value of the equipment in an equipment financing transaction – like that which is facilitated by Patriot Capital – can help to further align cash flows with the purchased equipment, in a term of up to five years.  The current Gilbarco Accelerate Your Savings program provides attractive financing rates for a range of Encore 700 dispensers.  Combining this program with the Federal Tax Incentives can provide an attractive cash flow model.

Further information on the alternative fuels credit is available at this government website - http://www.afdc.energy.gov/fuels/laws/NG/US.