Tax Credit for Forklift Propane

2010 Tax Credit Deadline Update

Mark your calendars that the deadline for the Propane Fuel Tax credit for 2010 propane usage for forklifts is August 1, 2011. This credit allows owners of manufacturing, distribution and warehousing facilities to apply for the credit for $0.50 per gallon of propane used to power forklifts during the 2010 operating year. According to Propane Education & Research Council (PERC), this would be the end of the IRS allowed 180-day grace period to submit all retroactive fuel tax credits.

The IRS warns that these claims can only be filed one time, and before it can be claimed, owners must register with the IRS and follow all noted documentation requirements. View more information on the propane fuel tax credit here, or verify up to date tax information on the IRS website here.

2010-2011 Propane Tax Credits

On December 17th 2010, President Obama signed the Tax Relief, Unemployment Insurance Authorization, and Job Creation Act of 2010. This legislation contains many favorable provisions that apply to both individuals and businesses within the propane industry including:

Propane Fuel Tax Credit:

This fuel tax credit was revitalized from when it was left to expire at the end of 2009. It offers a $0.50 per gallon credit through December 31, 2011 and made retroactive to 2010. For both years this credit includes propane for forklifts. The alternative fuel infrastructure tax credit has been extended through the end of 2011 as well. The percentage credit for refueling property reverts back to the pre-stimulus levels of 30%, with a $30,000 cap.

Propane Equimpent Bonus Depreciation Extension:

This legislation allows 100% depreciation for qualifying expenditures or investments from September 8, 2010 through the end of 2011. An additional 50% depreciation above the standard percentage depreciation schedule is also allowed for the 2012 calendar year.

Small Business Propane Expensing:

Businesses with smaller annual investments may deduct the cost of some property placed in service for the year rather than depreciate costs over time. For the taxable years 2020 and 2011, the amount small businesses may expense is temporarily set at $500,000 with a phase-out of the benefit beginning when qualified investments hits $2 million. For 2012, the tax bill just signed into law extends for one year a $125,000 expensing limit, and a $500,000 phase-out, indexed for inflation.

Propane Appliance Credits:

The "non-business" energy property tax credit for propane furnaces, boilers and hot water heaters is extended through 2011, but at the pre-stimulus levels of 10% with a maximum credit of $500. This legislation also reinstates the caps for appliances as they were in the original provision, which are $300 for water heaters and $150 for furnaces.

The National Propane Gas Association (NPGA) has stated plans to with Congress to restore the alternative fuel vehicle tax credit, which was left out of this legislation. Furthermore, the NPGA will be looking for additional opportunities to benefit propane in other areas such as commercial mowing.

If you have ever been considering making the switch to propane, now is the time! Read more about the advantages of propane to learn how you can save money and make your operations a little greener. Already using propane for your forklifts? Check out our that will save your employees time and make your facilities safer.

2008-2009 Tax Credit Extensions

On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act of 2009 into law that contained several positive provisions for propane. On October 3, 2008, former President George W. Bush signed the omnibus financial rescue package that contained three other high priority propane tax credit extensions. Below are the highlights of each. A detailed description of each provision is included in our latest advocacy piece available for download here.

Propane-Specific Provisions

Alternative Fuel Tax Credit
Refueling Infrastructure Tax Credit
Energy Efficient Appliance Tax Credit

General Provisions

Expensing
Net Operating Losses (NOL)
Extension of Bonus Depreciation

In 2005, Congress enacted the Safe, Accountable, Flexible and Efficient Transportation Equity Act of 2005, otherwise known as the Highway Bill (P.L. 109-59). Among other things, the legislation modestly increased excise taxes on alternative fuels while at the same time creating a 50 cent/gallon credit for alternative fuels, including propane, used in motor vehicles. These provisions went into effect on October 1, 2006. The ultimate goal of the legislation was to encourage the use of alternative fuels. Congress did increase the federal excise tax on most fuels, including propane, although propane received the smallest increase – the tax on propane went from 13.6 cents/gallon to 18.3 cents/gallon. Moreover, it should be emphasized that sales of propane for use in forklifts remain exempt from the federal excise tax on motor fuels.

In providing further guidance regarding the legislation, the Internal Revenue Service (IRS) made clear that forklifts fit the definition of an off-highway business motor vehicle and hence fuel used in a forklift is eligible for the 50 cent/gallon credit. Moreover, the IRS indicated that in this instance it is the end user, namely the forklift operator, who is entitled to apply for the credit, not the propane marketer. Therefore, forklift operators should be aware that the fuel they use for forklift operation will be eligible for a 50 cent/gallon credit assuming they take appropriate steps to properly register with the IRS.

As a first step, forklift operators need to file Form 637 with the IRS in order to be registered as an “Alternative Fueler.” IRS will then issue a registration number identifying the forklift operator as an Alternative Fueler. After receiving a registration number, the forklift operator can file a claim for the credit at the end of the year by filing Form 4136. If the alternative fuel excise tax credit exceeds the excise tax liability, the forklift operator may be able to claim an alternative fuel income tax credit (or refund) under certain circumstances.

This discussion is for information purposes. The discussion is not intended, and cannot be relied upon, as tax advice. We urge forklift operators to consult their own tax advisers regarding claims for credits or refunds. Relevant IRS forms may be viewed and downloaded from the IRS website by clicking here.