TAXES

Senate Mulls Tax Break for Company Cars

New legislation would give businesses deductions on hybrids and other eco-friendly vehicles.
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March 2, 2006--With oil prices remaining high for the foreseeable future, small businesses could receive a significant tax break on environmentally friendly vehicles under a new Senate bill.

The legislation -- introduced on Wednesday by Sen. Chuck Grassley (R-Iowa), chairman of the Committee on Finance, and Sen. Max Baucus (D-Mont.) -- would provide incentive for business owners to purchase hybrids, diesel, and ethanol-powered vehicles.

"The tax code shouldn't favor SUVs over alternative energy cars for business owners," Grassley said in a statement, referring to a bigger break currently given to purchasers of sport-utility vehicles.

Instead of $3,150 in tax credits -- the current amount deductible for both individuals and businesses buying hybrid or electric cars -- the Grassley-Baucus bill allows tax deductions of up to $100,000 for businesses that purchase eco-friendly vehicles.

Unlike the current legislation, this bill allows owners to claim the depreciation value of their alternative energy vehicles over six years -- the same rule that applies to SUVs.

"At a time when America needs to shake its oil addiction, Congress needs to do all it can to encourage the purchase and use of alternative fuel vehicles," Baucus said in a statement.

Environmentalists have criticized the tax deductions of up to $25,000 for SUVs weighing over three tons, saying they reward business owners for purchasing gas-guzzling vehicles like the Hummer and Ford Excursion. Supporters claim the SUV tax breaks help auto-making, which, in turn, boosts the economy.

"It's an egregious tax break," Brendon Bell, clean-vehicle spokesman for the Sierra Club, said of the SUV tax. In a perfect world, Bell said, only large vehicles that have a cargo bed or can carry a large number of passengers would be tax deductible. "We shouldn't encourage small businesses to buy the worst vehicles for the environment," he added, expressing his support of the proposed tax break for hybrids.

Grassley noted that the goal of the proposed legislation is to put the different types of vehicles on more equal footing. "Some business owners will want to use SUVs and some will want to use hybrid cars," he said. "The choice should be theirs and the tax code should be consistent. The purchase of either kind of vehicle will help business growth, especially for small businesses, which create most of the nation's jobs."

Last updated: Mar 2, 2006




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