California Congressional Delegation Seeks Tax Incentives For Vehicle Conversions.

More than half of the California congressional delegation has signed a letter to IRS Commissioner Margaret Milner Richardson to express concern with clean-fuel vehicle regulations. The representatives are worried that the proposed rules will fail to encourage retrofitting existing vehicles, they will impede domestic production of electric vehicles. Accordingly, they suggest modifying the regs to provide tax incentives both for newly manufactured electric vehicles and for new vehicle conversions.

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August 6, 1993

Ms. Margaret Milner Richardson

Dear Commissioner Richardson:

We are writing to express our concern about the proposed rules on electric vehicles that were released by the IRS on June 9, 1993. Electric vehicle conversions are on the cutting edge of technology, and we believe that any tax credit designed to facilitate the development of environmentally-sound electric vehicles must apply to newly-converted vehicles.

As you may know, the state of California leads the nation in the development of environmental technology. One example of this technology is alternative fuels, and we are very pleased that California is the home to the largest manufacturer of electric vehicles in North America, Solar Electric Engineering, Inc., which currently has manufacturing facilities in both Southern and Northern California. In addition, we have numerous electric vehicle component manufacturers throughout the state.

We are concerned that the proposed regulations would hamper the production of electric vehicles in the United States because they fail to encourage retrofitting existing vehicles. One of the critical purposes of the Energy Policy Act of 1992 is to "accelerate the development and use of electric motor vehicles" (SEC 611(a)(1). For this to take place, it is imperative that the rules implementing the tax credit (Sec 30) include new vehicle conversions (retrofitting of new gas powered vehicles to electric) and not be limited to original manufactured electric vehicles.

In addition, we would like to bring to your attention California's electric vehicle tax credit rules, and encourage you to use them as a guideline. Developed by the California Air Resources Board and the California Energy Commission, this effective tax credit program has been in place for several years. These rules define conversion of a new vehicle to electric power as "a new pure electric vehicle" qualified to receive the state sales tax exemption and tax credit.

Furthermore, we believe that the IRS clean fuel vehicles tax deduction rule (section 179A), should include a deduction for USED vehicles that are retrofitted to clean fuel vehicles, with the maximum deduction limited to the cost of the retrofit kit plus the cost of installation. This would encourage and facilitate the development of electric vehicles.

The intent of the Energy Policy Act is to encourage the design, manufacturing, and consumer acceptance of electric vehicles. From both the point of view of the electric vehicle purchase and the electric vehicle manufacturer, the inclusion of tax credits for new vehicle conversions and deductions for used electric vehicle conversion/retrofits must be included in the law for the intent of the Energy Policy Act to be realized.

Thank you for your attention to this important issue.

Sincerely

Lynn C. Woolsey Ken Calvert