La. revenue dept. issues proposed tax break rule
BATON ROUGE, La. (AP) — The Department of Revenue is proposing new regulations governing Louisiana's alternative fuel tax credit to limit estimated program costs to $10 million a year, far higher than initial projections of the tax break's price tag.
But the move to eliminate "flex-fuel vehicles" — which had been swept into eligibility with a rule later rescinded by Gov. Bobby Jindal — will keep the tax break from costing the state up to $250 million a year, according to an estimate included with the proposed regulations.
"The proposed rule will result in fewer alternative fuel credits," says the financial impact review statement signed by interim Revenue Secretary Jane Smith and Greg Albrecht, chief economist for the Legislative Fiscal Office.
However, since the regulations wouldn't take effect until Dec. 20, the state could still be hit with tax credit claims for hundreds of thousands of flex-fuel vehicle sales, leaving the state exposed to as much as $400 million in possible back tax credits that could be filed, Albrecht's analysis says.
The financial review says claims have been filed by about 8 to 10 percent of those eligible to get the credit, so it is unlikely alternative fuel tax break requests would hit that maximum exposure mark.
The credit can be 10 percent of the cost of vehicle or $3,000, whichever is less.
The regulations governing the tax credit, passed in 2009 to encourage the purchase of alternative fuel vehicles, have been mired in controversy since April.
The tax break was designed as an incentive for buying "clean-burning" vehicles or converting cars and trucks to lessen the reliance on gasoline and diesel and encourage alternative fuels, like compressed natural gas and ethanol.
No specific list of vehicles that qualified for the tax credit was posted until April, when the Department of Revenue issued a rule that included on the list of qualifying vehicles flex-fuel cars and trucks with the ability to burn ethanol but that also use gasoline.
Jindal scrapped the rule in June amid complaints it could be a budget-buster, though he didn't cite financial concerns. Instead, his office said the rule was jettisoned because the law governing issuance of an emergency rule was not followed.
The state's former revenue secretary, Cynthia Bridges, abruptly resigned a day after Jindal rescinded the rule without explanation.
But the new regulations proposed by Jindal's current revenue secretary go right at the heart of the dispute, spelling out that flex-fuel vehicles wouldn't be eligible for the credit.
Flex-fuel vehicles make up the overwhelming number of alternative fuel vehicle sales in Louisiana, an estimated 96 percent over the last four years, according to state Department of Public Safety statistics cited in the financial analysis.
A public hearing on the rule proposal is slated for October.
Before the flex-fuel vehicle list approved by Bridges was rescinded by the governor, it appears hundreds of people took advantage of the list, likely costing the state millions.
More than 2,500 claims for the alternative fuel tax credit — totaling $7.4 million — were paid when the list was in effect, according to Department of Revenue data.
Revenue spokesman Byron Henderson said the department doesn't know how many of the credits involved flex-fuel car and truck models, and he noted that the six-week time period when the list was on the books was also the peak of tax filing season.
However, at least $3.3 million of the credits claimed were for 1,125 amended income tax returns, a likely indication that taxpayers revised their returns when they learned of the flex-fuel vehicle inclusion.