PRINCETON, NJ - State and local government fleets using clean fuel or low-emission vehicles may be able to take advantage of federal tax credits, with the help of a proposal from NAFA Fleet Management Association.

NAFA's Executive Director Phil Russo, CAE, sent the proposal to the leadership of the U.S. Senate Finance Committee and House Ways and Means Committee last month. It would allow for an Energy and Environmental Vehicle Payroll Tax Credit to be made available to state,  local government, and other tax exempt entities whenever vehicle tax credits are available to regular taxpayers for clean fuel or low-emission vehicles.

"If adopted by the Congress, the tax credits will tip the lifecycle cost analysis to make it possible for government, public utilities and public universities to do the right thing for the environment and still be fiscally responsible," said Russo.

State and local governments do not currently benefit from the federal tax credits provided to purchasers of alternative fuel and hybrid vehicles. The solution that NAFA is proposing is a workable and equitable one that allows state and local governments, and other tax-exempt entities, to claim a vehicle tax credit against the employer's share of the entity's federal payroll tax liability. In turn, the federal government would credit an equivalent amount from the General Fund to the Social Security Trust Fund.  In keeping with traditional tax policy, the credit will not apply to the employee'sshare of FICA and Medicare or their federal tax withholdings.

"If we are to achieve substantial penetration of clean fuel vehicles in the national fleet, it will require a combination of tax incentives that reach all consumers - the individuals, the private sector, and the public sector, including state and local governments," explained Russo.

NAFA is asking Members to bring this matter to the attention of their agency or employer and recommend that they also send a letter to their Senators and Representatives.  If Members or their agency/employer have any questions, they are free to contact NAFA's U.S. Legislative Counsel, Pat O'Connor at patocconor@kentoconnor.com.