Does the $2,500 alternative-fuel income tax credit cap apply per vehicle or to all alternative-fueled motor vehicle property?

Plain-English summary

The Department addressed how the Kansas income tax credit for alternative-fueled motor vehicle property under K.S.A. 79-32,201 works — specifically, whether the dollar cap applies per vehicle or per property expenditure. The short version: the cap applies to each qualified alternative-fueled motor vehicle property expenditure, delivery equipment counts as that property, and the credit is taken in the year of the expenditure with no minimum holding period. The Department noted the reply "is an informational letter only and not a private letter ruling pursuant to K.A.R. 92-19-59."

The facts: a city wanted to establish a natural gas facility serving public and private alternative-fueled motor vehicles, and asked (1) whether the $2,500 cap applies only to expenditures for alternative-fueled motor vehicles or to all alternative-fueled motor vehicle property — such as equipment "related to the delivery of an alternative fuel into the fuel tank of a motor vehicle propelled by such fuel, including compression equipment and storage tanks for such fuel" — and (2) how long the property must be owned to qualify.

The Department's opinion:

• The cap is per qualified property expenditure. "It is the opinion of the Kansas Department of Revenue that the intent of K.S.A. 79-32,201 is to apply the $2,500 ($2,000 on or after January 1,1999) cap or limit on the tax credit to each qualified alternative-fueled motor vehicle property expenditure as it is defined in the statute."
• A drafting omission explains the ambiguity. A February 1998 Department Question and Answer document "states that it is believed the word 'property' was inadvertently omitted from the statute where describing the limit of the tax credit." The statute does not define an "alternative-fueled motor vehicle" separately from "alternative-fueled motor vehicle property," which the Department read as a sign the drafters did not intend vehicles to get a distinct credit.
• The delivery equipment qualifies. The compression equipment and storage tanks the city described "falls within the definition of alternative-fueled motor vehicle property contained in the statute," so the cap applies to those expenditures.
• Timing and ownership. "The credit may be deducted for the taxable year in which the expenditure is made by the taxpayer. The taxpayer does not have to own the property for a specific time period in order to qualify for the tax credit."

What this means for you

Businesses and governments building alternative-fuel infrastructure

The credit cap applies to each qualified alternative-fueled motor vehicle property expenditure, and property that delivers alternative fuel into a vehicle's tank — compression equipment, storage tanks — counts as that qualifying property. Plan around the per-expenditure cap ($2,500, dropping to $2,000 for expenditures on or after January 1, 1999).

Timing your credit

Take the credit for the tax year in which you make the expenditure. There is no requirement to hold the property for any set period, so a later sale or disposal does not, under this opinion, cost you the credit.

A caution on the statute's wording

The Department itself flagged that the word "property" appears to have been inadvertently omitted from the statute's cap language. This opinion reflects the Department's reading of the Legislature's intent; anyone relying on it should confirm the current statutory text and any amendments.

Common questions

Q: Does the $2,500 cap apply per vehicle or per property expenditure?
A: Per qualified alternative-fueled motor vehicle property expenditure, in the Department's opinion — not as a distinct credit for the vehicles themselves.

Q: Do compression equipment and storage tanks qualify?
A: Yes. Equipment related to delivering the alternative fuel into a vehicle's fuel tank falls within the statute's definition of alternative-fueled motor vehicle property.

Q: When do I take the credit, and must I keep the property?
A: You deduct the credit in the taxable year you make the expenditure, and you do not have to own the property for any specific time period to qualify.

Citations and references

• K.S.A. 79-32,201 — the Kansas income tax credit for alternative-fueled motor vehicle property expenditures; the Department read its cap ($2,500, or $2,000 on or after January 1, 1999) as applying to each qualified property expenditure, with the word "property" believed inadvertently omitted from the cap language.
• Department Question and Answer document (February 1998) — the Department's contemporaneous guidance stating the belief that "property" was omitted from the statute's cap provision.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: O-1998-09

Original ruling text

Opinion Letter

Body:

Office of Policy & Research

September 1, 1998

XXXX
XXXX
XXXX

Dear XXXXXXX:

I am responding to your letter of August 13, 1998, requesting an opinion regarding K.S.A. 79-32,201 which addresses income tax credits for alternative-fueled motor vehicle property expenditures. This is an informational letter only and not a private letter ruling pursuant to K.A.R. 92-19-59.

You explain that the City of XXXX wants to establish a natural gas facility which would serve public and private alternative-fueled motor vehicles. In this endeavor, XXXXX and the City of XXXXX question whether the maximum tax credit of $2,500 applies only to expenditures for alternative-fueled motor vehicles or to expenditures for all alternative-fueled motor vehicle property. Specifically, you ask if there is a $2,500 cap on the tax credit provided for expenditures on equipment “. . . related to the delivery of an alternative fuel into the fuel tank of a motor vehicle propelled by such fuel, including compression equipment and storage tanks for such fuel.” In addition, you ask how long the alternative-fueled motor vehicle property must be owned by the taxpayer to qualify for the tax credit.

It is the opinion of the Kansas Department of Revenue that the intent of K.S.A. 79-32,201 is to apply the $2,500 ($2,000 on or after January 1,1999) cap or limit on the tax credit to each qualified alternative-fueled motor vehicle property expenditure as it is defined in the statute. A recent (February 1998) Question and Answer document of the Department addresses this issue. The document states that it is believed the word “property” was inadvertently omitted from the statute where describing the limit of the tax credit. In addition, the definition of an alternative-fueled motor vehicle is not delineated in the statute separately from the definition of alternative-fueled motor vehicle property. This is an indication that the drafters of the statute did not intend for alternative-fueled motor vehicles to qualify for a distinct tax credit. The property referred to in your question falls within the definition of alternative-fueled motor vehicle property contained in the statute. Thus, the limit on the tax credit also applies to expenditures for the property you describe.

In response to the latter question, the credit may be deducted for the taxable year in which the expenditure is made by the taxpayer. The taxpayer does not have to own the property for a specific time period in order to qualify for the tax credit.

If you have any further questions please contact this office at (785) 296 - 3081.

Sincerely,

Janet Buchanan
Policy and Program Analyst

Date Composed: 09/14/1998 Date Modified: 10/10/2001

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