Energy Policy Act of 2005

Establishes a competitive grant program, administered by Clean Cities, to fund up to 30 geographically dispersed advanced vehicle demonstration projects. Authorizes $200 million (until expended) for this program.

Grant recipients will be limited to state and local government agencies and metropolitan transportation authorities. Applications must include a designated Clean Cities coalition. Participants can be public or private entities.

Projects are limited to $15 million each and require a 50% cost share. Grant funds may be used for:

• AFVs (including neighborhood electric vehicles)
• Fuel cell vehicles
• Ultra low sulfur diesel vehicles
• Fueling infrastructure acquisition and installation
• Vehicle infrastructure and equipment operation and maintenance of vehicles

See the Clean Cities Funded Projects website for more information.

Provides a tax credit for the purchase of a new dedicated AFV. The tax credit is for 50% of the incremental vehicle cost, plus an additional 30% of the incremental cost for vehicles that meet or exceed the most stringent emissions standards available for certification under the Clean Air Act (other than a zero emission standard), or that meet or exceed California's Super Ultra Low Emission Vehicle standards. The credit is available for the purchase of qualified light-, medium-, and heavy-duty dedicated AFVs that operate on natural gas, propane, hydrogen, or a fuel blend of at least 85% methanol. Mixed fuel vehicles may also qualify for reduced credit amounts.

For tax exempt entities, the credit can be passed back to the vehicle seller. The tax credit is available for vehicles purchased between January 1, 2006 and December 31, 2010.

Provides a base tax credit of $8,000 for the purchase of light-duty fuel cell vehicles. The $8,000 credit is valid until December 31, 2009. After that, the credit is $4,000. To qualify, the vehicles must meet or exceed Bin 5 Tier II emission levels. Base tax credits are also available for medium- and heavy-duty fuel cell vehicles. The Internal Revenue Service will determine the credit amount based on a sliding scale by vehicle weight.

For tax-exempt entities, the credit can be passed back to the vehicle seller. The credit is available until December 31, 2014.

Provides a fuel economy credit of up to $2,400 for light-duty advanced lean burn technology motor vehicles meeting specific fuel economy and emissions standards. The fuel economy credit is based on efficiency gains over MY 2002 baselines. A conservation credit increases the fuel economy credit by up to $1,000 based on lifetime fuel savings.

Provides a fuel economy credit of up to $2,400 for light-duty hybrid electric vehicles and trucks. The fuel economy credit is based on efficiency gains over MY 2002 baselines. A conservation credit increases the fuel economy credit by up to $1,000 based on lifetime fuel savings. To qualify for the credits, the vehicles must meet certain emissions standards based on gross vehicle weight rating (GVWR).

The credit will phase out after a manufacturer has sold 60,000 qualified vehicles.

Provides a tax credit equal to 30% of the cost of alternative fueling equipment, up to $30,000. Qualifying equipment includes fueling equipment for natural gas, propane, hydrogen, E85, or biodiesel blends of 20% (B20) or more. Consumers who purchase qualified residential fueling equipment may receive a tax credit of up to $1,000. For tax exempt entities, the credit can be passed back to the equipment seller. The credit is effective for equipment placed into service after December 31, 2005. The credit for natural gas, propane, E85, and biodiesel equipment expires December 31, 2009. The credit for hydrogen equipment expires in 2014.

This legislation replaces the Tax Deduction Timeline for the refueling property tax deduction extended by the Working Families Tax Relief Act of 2004.