ASSEMBLY, No. 663

STATE OF NEW JERSEY

Introduced Pending Technical Review by Legislative Counsel

PRE-FILED FOR INTRODUCTION IN THE 1996 SESSION

By Assemblyman BAGGER

An Act concerning alternative fuels, amending R.S.54:39-2, supplementing P.L.1945, c.162 (C.54:10A-1 et seq.) and repealing section 1 of P.L.1971, c.52 (C.54:39-27.1).

    Be It Enacted by the Senate and General Assembly of the State of New Jersey:

    1. R.S.54:39-2 is amended to read as follows:

    54:39-2. a. "Fuels" means (1) any liquid or gaseous substance commonly or commercially known or sold as gasoline, regardless of its classification or use; and (2) any liquid or gaseous substance used, offered for sale or sold for use, either alone or when mixed, blended, or compounded, which is capable of generating power for the propulsion of motor vehicles upon the public highways, except that "fuels" shall not include any alternative fuel as defined in subsection b. of this section; and shall include:

    (a) All grades of motor gasoline, natural gasoline, marine gasoline, aviation gasoline, motor fuel blending naphthas, motor grade benzol and motor grade toluol; and

    (b) Any liquid prepared, advertised, offered for sale or sold for use as or commonly and commercially used as a fuel in internal combustion engines, which when subjected to distillation in accordance with the latest revised standard method of test for distillation of gasoline, naphtha, kerosene, and similar petroleum products (American Society for testing materials Method D-86) shows not less than 10% distilled (recovered) below 347 degrees (347̊) Fahrenheit and not less than 95% distilled (recovered) below 464 degrees (464̊) Fahrenheit; and

    (c) All combustible gases which exist in a gaseous state at 60 degrees (60̊) Fahrenheit and at 14 7/10 (14.7) pounds per square inch absolute pressure, industrial naphthas and solvents, aromatic distillates, diesel fuel, additives, and all other products not included within the foregoing provisions of this section; provided, however, that any person dealing therein, shall at any time, and from time to time, upon written request of the director, report his receipts, sales, use and distribution of said combustible gases and said other products in a manner prescribed by the director; and any other liquids that are used or sold for use as a quantity extender to motor gasoline; and

    (d) (Deleted by amendment, P.L.1992, c.23).

    b. "Alternative fuel" means methanol, ethanol, or other alcohols, natural gas, compressed natural gas, propane, liquefied petroleum gas, hydrogen, coal-derived liquid fuels, electricity, or any other fuel substantially composed of nonpetroleum substances that is used in a clean-fuel vehicle that complies with the standards and requirements applicable to such vehicles under the federal "Clean Air Act," 42 U.S.C.§7401 et seq.

    c. The Director of the Division of Taxation in the Department of the Treasury, in consultation with the Commissioner of Environmental Protection, shall adopt, pursuant to the provisions of the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), rules and regulations establishing technical criteria for the exemption of alternative fuels from the tax imposed pursuant to R.S.54:39-1 et seq. as set forth in this section.

(cf: P.L.1992, c.23, s.1)

    2. (New section) a. A taxpayer shall be allowed a tax credit against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5) equal to 25% of the cost of converting in this State a motor vehicle, as defined pursuant to R.S.39:1-1, to enable the motor vehicle to operate solely on alternative fuels or on both alternative fuels and traditional motor fuels. As used in this section, "alternative fuel" means methanol, ethanol, or other alcohols, natural gas, compressed natural gas, propane, liquefied petroleum gas, hydrogen coal-derived liquid fuels, electricity, or any other fuel substantially composed of nonpetroleum substances that is used in a clean-fuel vehicle that complies with the standards and requirements applicable to such vehicles under the federal "Clean Air Act," 42 U.S.C. §7401 et seq.

    b. To receive the credit established pursuant to this act, the taxpayer shall apply for and receive a certificate of eligibility from the Director of the Division of Motor Vehicles in the Department of Law and Public Safety. The certificate shall state that the motor vehicle has been converted to enable it to operate on alternative fuel or on both alternative fuels and traditional fuels.

    c. The tax imposed for a fiscal or calendar accounting year pursuant to section 5 of P.L.1945, c.162, shall first be reduced by the amount of any credit allowed pursuant to section 19 of P.L.1983, c.303 (C.52:27H-78), and then by any credit allowed pursuant to section 42 of P.L.1987, c.102 (C.54:10A-5.3), prior to applying any credits allowable pursuant to this section. Credits allowable pursuant to this section shall be applied in the order of the credits' tax years. The amount of the credits applied under this section against the tax imposed pursuant to section 5 of P.L.1945, c.162, for an accounting year shall not exceed 50% of the tax liability otherwise due and shall not reduce the tax liability to an amount less than the statutory minimum provided in subsection (e) of section 5 of P.L.1945, c.162. The amount of tax year credit otherwise allowable under this section which cannot be applied for the tax year due to the limitations of this subsection may be carried over, if necessary, to the ten accounting years following a credit's tax year.

    d. The Director of the Division of Motor Vehicles, in consultation with the Commissioner of Environmental Protection and the Director of the Division of Taxation in the Department of the Treasury, shall adopt, pursuant to the provisions of the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), rules and regulations establishing technical criteria concerning the conversion of a motor vehicle for the purpose of qualifying for the tax credit provided for in this section.

    3. Section 1 of P.L.1971, c.52 (C.54:39-27.1) is repealed.

    4. This act shall take effect immediately.

STATEMENT

    This bill would amend the definition of "fuels" as set forth in the motor fuels tax law (R.S.54:39-1 et seq.) to exempt alternative fuels from the motor fuels tax. Under current law (C.54:39-27.1), natural gas and liquefied petroleum gas used to power motor vehicles are taxed at one-half the rate of taxation assessed traditional motor vehicle fuels such as gasoline, and other alternative fuels fitting within the statutory definition of "fuels" are taxable at the full rate of taxation established for traditional motor fuels. In providing for a total motor fuels tax exemption for alternative fuels, the bill would also thereby eliminate the double taxation of natural gas (and potentially electricity in the future) when this energy source is used to power motor vehicles. Currently, natural gas used to power vehicles is subject both to public utility taxes imposed pursuant to P.L.1940, c.5 (C.54:30A-49 et seq.) and to the motor fuels tax.

    Because the legislation would totally exempt alternative fuels from the motor fuels tax, the bill would thus repeal section 1 of P.L.1971, c.52 (C.54:39-27.1).

    The bill would also create a new corporation business tax credit for the cost of converting a motor vehicle to operate on alternative fuels, or on both alternative fuels and traditional fuels. To be eligible for the tax credit, a taxpayer must receive a certificate from the Division of Motor Vehicles stating that the motor vehicle has been converted to enable it to operate on alternative fuels. Eligible taxpayers would be allowed a tax credit against the tax imposed pursuant to section 5 of P.L.1945, c.162, equal to 25 percent of the cost of converting the motor vehicle.