Alternative motor vehicles and the AMT.

• Author: Bruette, Leo
• Position: Alternative minimum tax

Effective for 2006, Congress provided a credit for alternative motor vehicles in an effort to reduce U.S. reliance on fossil fuels and imported oil (Sec. 30B ). This credit replaced the above-the-line deduction under Sec. 179A for clean fuel vehicles and hybrid vehicles.

The types of vehicles that qualify for the alternative motor vehicle credit are:

* Advanced lean burn technology vehicles: These have an internal combustion engine that incorporates direct injection and uses more air than necessary for complete combustion of the fuel and meet certain other requirements.

* Qualified hybrid vehicles: These draw propulsion energy from onboard sources of stored energy that are both an internal combustion or heat engine using consumable fuel and a rechargeable energy storage system and meet certain other requirements.

* Qualified alternative fuel vehicles: These are fueled solely by compressed or liquefied natural gas, liquefied petroleum gas, hydrogen, any liquid that is at least 85% methanol, or a mixture of one of these fuels and a petroleum-based fuel and meet certain other requirements.

* Qualified fuel cell vehicles: These are propelled by power derived from one or more cells that convert chemical energy directly into electricity by combining oxygen with hydrogen fuel and meet certain other requirements.

To qualify for the alternative motor vehicle credit, the following requirements must be met:

* The taxpayer is the owner of the vehicle (for a leased vehicle, only the lessor is entitled to the credit);

* The taxpayer placed the vehicle in service during the tax year;

* The original use of the vehicle began with the taxpayer;

* The taxpayer acquired the vehicle to use or to lease to others and not for resale; and

* The taxpayer uses the vehicle primarily in the United States.

Once a manufacturer has sold 60,000 units, there is a phaseout of the credit for certain qualified hybrid vehicles and advanced lean burn technology vehicles. In the case of a foreign manufacturer, the credit phases out when its U.S. distributor...