The Internal Revenue Service is still working out how to implement the climate tax provisions in the Inflation Reduction Act.
The tax agency and its parent Treasury Department issued some preliminary guidance in August regarding the electric vehicle (EV) tax changes. The IRS also is seeking public comment on EV rules, as well as the other aspect of the other energy tax benefits in the new law.
Meanwhile, states also are taking steps to deal with how the federal energy tax changes could affect their revenues.
New state-level EV charges: "The increasing popularity of hybrid and electric vehicles is shrinking revenue from gas taxes, prompting more states to consider charging fees based on miles driven to help pay for roads and bridges," writes Elaine S. Povich in a recent Pew Stateline article.
This year, Povich notes that at least eight states — Hawaii, Massachusetts, Minnesota, Tennessee, Utah, Vermont, Virginia, and Washington — considered bills that would modify existing programs or set up new pilot programs to tax drivers of electric vehicles (typically all-electric or plug-in hybrid vehicles) based on the miles they drive.
That's in addition to the 30 states that have laws requiring a special registration fee for plug-in electric vehicles, according to the National Conference of State Legislatures (NCSL). Of those, says the NCSL, 14 states also assess a fee on plug-in hybrid vehicles. These fees are typically in addition to traditional motor vehicle registration fees, and range from $50 to $300.
Check out the NCSL's interactive map — clicking on the screenshot below will take you there — has details on the states' fees on plug-in hybrid and/or EVs.
Paying for miles driven: The charges are to recoup the gas tax money that states, and the federal government, lose because EVs don't use the fuel.
But fees alone apparently aren't cutting it when it comes to replenishing state road construction and repair accounts. So they're turning to road user charges (RUCs), too.
NCSL says at least seven states — Maine, Nevada, New Mexico, Oregon, Utah, Virginia, and Washington — have enacted Vehicle Miles Traveled (VMT) fees or Mileage-Based User Fees (MBUF). Others have authorized studies or pilot programs examining the feasibility of RUCs.
The federal government is supporting such state efforts. The $1.2 billion federal bipartisan infrastructure act that President Joe Biden signed into law in 2021 includes money for multiple pilot programs to test road use fees.
The Biden Administration also is pushing for more EVs on the nation's roads. The infrastructure law also includes money to build more EV charging stations across the country.
Plus, Biden signed an executive order calling for half of the vehicles sold in the United States to be electric by 2030.
If the EV goals are met, expect to see drivers of the environmentally friendly autos spending money they save on fill-ups on fees, at least at the state level, to make up for lost gas tax revenue.
You also might find these items of interest:
- Europe tacks on larger fuel taxes than the United States
- New website has more on inflation act's energy tax breaks
- EV buyers prefer rebates to tax credit; switch could save Uncle Sam money, too
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