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COMMITTEE REPORT
May 17, 2006
H. 4312
Introduced by Reps. Merrill, Bailey, Altman, Coates, Brady, Mahaffey, Funderburk, Ballentine, J.E. Smith and Herbkersman
S. Printed 5/17/06--S.
Read the first time April 26, 2006.
To whom was referred a Bill (H. 4312) to amend the Code of Laws of South Carolina, 1976, by adding Section 12-6-3377 so as to allow a state income tax credit equal to twenty percent, etc., respectfully
That they have duly and carefully considered the same and recommend that the same do pass with amendment:
Amend the bill, as and if amended, Page 1, by striking line 28 and inserting:
/ vehicle credit, the new qualified hybrid motor vehicle credit based on the combined city/highway metric or standard set by federal Internal Revenue Code section 30B, the new qualified hybrid motor vehicle credit, and /
Renumber sections to conform.
Amend title to conform.
HUGH K. LEATHERMAN, SR. for Committee.
REVENUE IMPACT1/
This bill, as amended, is expected to reduce general fund income tax revenue by an estimated $1,701,682 in FY2006-07.
Explanation of Amendment (April 18, 2006) - By the House Ways & Means Committee
This amendment would add new, qualified "fuel cell", "advanced lean burn technology", "hybrid", and "alternative fuel" vehicles purchased on or after January 1, 2006 as types of vehicles eligible for a state income tax credit. Fuel cell vehicles are hydrogen-powered, advanced lean burn technology vehicles use combustion engines, hybrid vehicles use both gas and electricity, and alternative fuel vehicles (AFV's) use alternative fuels. Currently, of these vehicles, only hybrid and alternative fuel vehicles are largely on the market. The federal tax credit only applies to AFV's using compressed natural gas, liquefied natural or petroleum gas, hydrogen, and any liquid that is at least 85 percent methanol. The federal credit for AFV's is an amount equal to fifty percent of the incremental cost of purchasing a new qualified AFV over its gasoline or diesel counterpart. According to the U.S. Department of Energy, there are approximately three qualifying AFV's on the 2006 market. Based upon manufacturer-reported MSRP's for these AFV's and their gasoline/ diesel counterparts, the average incremental cost is $2,866 per vehicle. Based on this amendment, the average federal tax credit would equal $1,433 and the average state tax credit would equal $287 per vehicle. Using the Energy Information Administration's data on U.S. AFV use and growth rates, we estimate that 486 AFV's will be sold in South Carolina in 2006. Multiplying 486 AFV's sold by an estimated state tax credit of $287 per vehicle would total an estimated $139,482. This bill, as amended, would therefore reduce general fund income tax revenue by an estimated $1,701,682 in FY2006-07.
Explanation of Bill filed November 11, 2005
This bill would provide South Carolina taxpayers claiming the new qualified hybrid motor vehicle tax credit on their federal returns a tax credit on their state returns as well. The state credit would equal 20 percent of the credit claimed on a taxpayer's federal return. The new federal credit for hybrid vehicle purchases, signed into law by President Bush in August 2005, can be taken against qualified hybrid vehicles purchased on or after January 1, 2006. The federal credit is a combination of a "fuel economy" credit and a "conservation" credit. The credit amounts will vary by vehicle based on certain fuel economy and savings guidelines, but cannot exceed a combined $3,400 per vehicle. As such, applying a 20 percent state tax credit to this amount yields a maximum state tax credit of $680 per vehicle. According to information from various sources, including the federal government, automotive research associations, and energy policy advocacy groups, we estimate the average federal tax credit for hybrid vehicles is expected to be $2,675 in 2006, $725 less than the $3,400 maximum. This estimate is based on the performance specifications of each of the 11 hybrid vehicles on the market today weighted by the market share of the 5 manufactures producing hybrid vehicles. Applying a 20 percent state tax credit to the estimated federal tax credit for hybrid vehicles of $2,675 yields an average state tax credit of $535. Based on information regarding estimated hybrid sales in the US, we estimate that 292,000 hybrid vehicles will be sold nationwide in FY2006-07. Of this amount, we estimate that 2,920 will be sold in South Carolina. Multiplying an estimated 2,920 hybrid vehicle sales by an estimated state tax credit of $535 per vehicle would reduce general fund income tax revenue by an estimated $1,562,200 in FY2006-07.
Approved By:
William C. Gillespie
Board of Economic Advisors
1/ This statement meets the requirement of Section 2-7-71 for a state revenue impact by the BEA, or Section 2-7-76 for a local revenue impact or Section 6-1-85(B) for an estimate of the shift in local property tax incidence by the Office of Economic Research.
TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING SECTION 12-6-3377 SO AS TO ALLOW A STATE INCOME TAX CREDIT EQUAL TO TWENTY PERCENT OF THE NEW QUALIFIED HYBRID MOTOR VEHICLE CREDIT ALLOWED AGAINST A TAXPAYER'S FEDERAL INCOME TAX LIABILITY.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Article 25, Chapter 6, Title 12 of the 1976 Code is amended by adding:
"Section 12-6-3377. (A) A South Carolina resident taxpayer who is eligible for and claims the new qualified fuel cell motor vehicle credit, the new advanced lean burn technology motor vehicle credit, the new qualified hybrid motor vehicle credit, and the new qualified alternative fuel motor vehicle credit allowed pursuant to Internal Revenue Code Section 30B is allowed a credit against the income taxes imposed pursuant to this chapter in an amount equal to twenty percent of that federal income tax credit. The credit allowed by this section is nonrefundable and if the amount of the credit exceeds the taxpayer's liability for the applicable taxable year, any unused credit may be carried forward and claimed in the five succeeding taxable years.
(B) The credit amount allowed by this section must be calculated without regard to the phaseout period limits of Internal Revenue Code Section 30(B)(f) and for purposes of the credits allowed pursuant to this section, the provisions of Internal Revenue Code Section 30(B) are deemed permanent law."
SECTION 2. This act takes effect upon approval by the Governor and applies for taxable years beginning after 2005.
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