Oklahoma Alternative Fuel Tax Incentives

Alternative Fuel Vehicle (AFV) Tax Credit

Prior to January 1, 2010, Oklahoma provides a one-time income tax credit for 50% of the cost of converting a vehicle that is propelled by gasoline or diesel to be propelled by compressed natural gas (CNG), liquefied natural gas (LNG), liquefied petroleum gas (LPG, also known as "propane"), methanol or M-85, and for investments in qualified electric property. This credit also applies to the incremental cost of purchasing a new Original Equipment Manufacturer (OEM) AFV that is propelled by CNG, LNG, LPG, M-85 or electricity.

If the incremental OEM cost or the conversion cost of an AFV cannot be determined, or if an AFV is resold and the incremental cost or conversion cost cannot be determined, the state will allow a capped tax credit of 10% of the total vehicle cost, or $1,500, whichever is less, as long as a tax credit has not been previously taken on the vehicle.

This tax credit does not extend to flexible fuel vehicles (vehicles capable of burning E85 ethanol). Additionally, this tax credit does not extend to any vehicles that have been converted to run on E85. See Oklahoma Income Tax Form 511CR (Credit for Conversion of Motor Vehicles to Clean Burning Fuel or Investments in Qualified Electric Motor Vehicle Property).

Oklahoma's alternative fuel vehicle tax credit also extends to low-speed electric vehicles as defined by NHTSA in 49 C.F.R. 571.500, to forklifts and other similar self-propelled vehicles, and to qualified electric and hybrid electric vehicles. For qualified electric vehicle property propelled by electricity only, the basis for the credit is the full purchase price of the vehicle. For vehicles also equipped with an internal combustion engine, the basis for the credit is limited to the portion of such motor vehicle which is attributable to the propulsion of the vehicle by electricity. (Reference 2008 Oklahoma Senate Bill 1558, amending Oklahoma Statutes Section 68-2357.22 and extending credit from January 1, 2009 to January 1, 2010.) See Oklahoma Income Tax Form 511CR.

Alternative Fuel Refueling Infrastructure Tax Credit

The state provides a tax credit of up to 50% of the cost of installing refueling infrastructure for AFVs. These tax credits may be carried forward for up to three years. The alternative fuels eligible for the credit include compressed natural gas (CNG), liquefied natural gas (LNG), liquefied petroleum gas (LPG), methanol, and electricity.

Ethanol or E85 is not included in the fuels eligible for the refueling infrastructure tax credit. (Reference 2008 Oklahoma Senate Bill 1558, amending Oklahoma Statutes Section 68-2357.22 and extending credit from January 1, 2009 to January 1, 2010.) See Oklahoma Income Tax Form 511CR.

Biodiesel Production Facility Tax Credit

For tax years beginning after December 31, 2004, and before January 1, 2012, a biodiesel (B100) production facility shall be allowed a credit of $0.20 per gallon of biodiesel produced. Any biodiesel facility producing at least 25% of its nameplate design capacity for at least 6 months after the first month for which it is eligible to receive the credit, on or before December 31, 2007, is eligible. The credit shall be allowed for 60 months beginning with the first month for which the facility is eligible to receive the credit and ending not later than December 31, 2011. Eligible facilities can also receive a credit of $0.20 per gallon for biodiesel produced in excess of the original nameplate design capacity which results from expansion of the facility completed on or after the effective date of this act and before December 31, 2007. Beginning January 1, 2012, a biodiesel facility shall receive a credit of $0.075 per gallon of biodiesel, for new production for a period not to exceed 36 consecutive months. Additional restrictions apply. (Reference Oklahoma Statutes Section 68-2357.67)

Ethanol Production Tax Credit

For tax years beginning after December 31, 2003, and before January 1, 2011, an ethanol production facility is allowed a tax credit in the amount of $0.20 per gallon of ethanol produced, for 60 months beginning with the first month for which the facility is eligible to receive such credit. The credit may only be claimed if the ethanol facility maintains an average production rate of at least 25% of its nameplate design capacity for at least six months after the first month for which it is eligible to receive the credit. Producers are also eligible for an expansion credit of $0.20 per gallon of ethanol produced in excess of the original nameplate capacity. Beginning January 1, 2011, an ethanol facility is eligible for a credit of $0.075 per gallon of ethanol, before denaturing, for new production for a period not to exceed 36 consecutive months. (Reference Oklahoma Statutes Section 68-2357.66)

Ethanol Motor Fuel Tax Credit

Beginning January 1, 2006, retailers of ethanol-blended fuel (a blend of gasoline and ethyl alcohol consisting of not more than 15% ethyl alcohol by volume) may claim a motor fuel tax credit of $0.016 for each gallon of ethanol fuel sold in Oklahoma, if the retailer provides a price reduction to the purchaser of the ethanol fuel in the same amount. This incentive is effective unless the federal government mandates the use of reformulated fuel in an area within the State of Oklahoma that is in non-attainment with the National Ambient Air Quality Standards. (Reference Oklahoma Statutes Section 68-500.10-1)