FISCAL NOTE TO


ASSEMBLY, No. 663


STATE OF NEW JERSEY

 

DATED: AUGUST 19, 1997

 

      Assembly Bill No. 663 of 1996 would exempt from taxation sales of fuels, other than gasoline or diesel fuels, used to propel motor vehicles on the public highways. These fuels are known as "alternative fuels." In addition, the bill would create a corporation business tax credit (CBT) for the cost of converting a motor vehicle to operate on alternative fuels. The credit would be equal to 25 percent of the cost of the conversion. It would be allowable only for conversions performed in New Jersey.

      The Division of Taxation has prepared a fiscal note on the bill. It estimates the loss of revenue to the State would be approximately $1.9 million annually for the alternative fuels exemption and approximately $500,000 for the corporation business tax credit. The estimates are derived from conversion costs ranging from $1,500 to $5,000 per unit as reported by the Alternative Fuels Information Center in the U. S. Department of Energy and an assumption of up to 500 vehicles being converted each year in the State. The Division reports the New Jersey Board of Public Utilities believes there are as many as 1,000 vehicles now in the State that are equipped to use alternative fuels and the number is increasing from 200 to 500 each year.

      The Office of Legislative Services (OLS) concurs with the Division of Taxation's estimate. It is consistent with an earlier OLS Legislative Fiscal Estimate. The OLS notes the Division reported that 36.7 million gallons of special fuels, not diesel, were sold in New Jersey in 1996. This produced fuel tax revenue of $1.9 million that would be lost under the bill. The OLS comments fuel tax losses would increase in the future as alternative fueled vehicles replace gasoline fueled vehicles in the state's fleet.

 

This fiscal note has been prepared pursuant to P.L.1980, c.67.