Incentives, tax credits can help companies, governments transition to electric fleets

By 2040, Michigan plans to convert its entire state-owned fleet to zero-emission vehicles (ZEV) to reduce greenhouse gas emissions. It’s a similar goal seen in nearly half of the states related to zero-emissions and clean and renewable energy.

“As a state government, the state of Michigan has committed to powering itself with 100% clean energy by 2025 and having all state-owned buildings be carbon neutral by 2040,” Gov. Gretchen Whitmer wrote in a Dec. 5 executive order. “Now, we are building on that leadership by tackling state government transportation emissions. Lowering transportation-related greenhouse gas emissions – which account for a third of total emissions – is essential.”

Days later, the state announced new incentives of up to $2,500 for those who purchase new battery electric or hybrid vehicles that can also be combined with federal tax credits.

The announcements came as many companies and entities seek to replace aging gas- and diesel-powered fleets.

The state of New York also recently doubled down on spending to accelerate building an electric vehicle (EV) charging network. The increased funds add incentives to encourage buy-in from the private sector to install EV charging infrastructure and make the switch to EVs. The state also seeks to have all school buses be zero-emission by 2035 and is offering $100 million in incentives to help school districts cover the transition costs.

Throughout the U.S., state governments are following federal cues for ZEV goals, including prioritizing electric vehicles. To help with the transformation of the transportation sector, federal and state governments are investing in new programs and incentives to help public and private entities electrify their fleets.

Federal incentives

The U.S. Department of Energy lists the available federal programs and incentives through its Alternative Fuels Data Center (AFDC), which has tracked data and information about alternative and renewable fuels and vehicles since 1991.

Many of these incentives are funded through the Inflation Reduction Act (IRA) of 2022 and the Bipartisan Infrastructure Law (BIL). Some key funding opportunities include:

Clean School Bus Program: The U.S. Environmental Protection Agency (EPA) provides rebates for districts to purchase zero- or low-emissions buses. The BIL authorized $5 billion from 2022 to 2026 to help districts convert their fleets. School districts have until Jan. 31 to apply for the next round of funding to help purchase new battery-electric vehicles (BEVs).
Clean Heavy-Duty Vehicle Program: The IRA provides $1 billion in grants and incentives to help companies replace existing Class 6 and 7 vehicles – which includes certain trucks and buses – with new ZEVs or build infrastructure for ZEVs. The EPA anticipates funding will be available in early spring 2024 for applicants.
Climate Pollution Reduction Grants program: The EPA offers grants for planning and implementing efforts to reduce greenhouse gasses. Applications for $4.6 billion close April 1. Examples of projects that could be funded include increasing an entity’s share of EV vehicles or expanding charging infrastructure incentive programs for purchasing ZEVs to replace heavy-duty diesel vehicles.

The AFDC also provides guidance to businesses and entities that operate fleets to help them with rightsizing to conserve fuel.

State incentives

Twenty-three states have set various clean energy and emissions goals for the next couple of decades. But most states offer incentives and programs to meet state or federal goals. The National Conference of State Legislatures tracks these programs:

California: The state’s Clean Truck Fund has $60 million available for truck operators to purchase new ZEVs through the Ports of Los Angeles and Long Beach. The funding comes from the Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project (HVIP) and is awarded on a first-come, first-served basis. Additionally, utility company PG&E offers rebates for fleet operators of up to $9,000 for certain trucks, buses and other heavy-duty vehicles.
Colorado: The Colorado Energy Department offers incentives each year from $4,500 to $70,000 per project for constructing charging stations. Eligible applicants include public, private and nonprofit organizations; school districts, multifamily housing groups and businesses.
Massachusetts: The state offers fleet incentives for up to $7,500 per vehicle for the purchase of BEVs through its Electric Vehicle Incentive Program. Funding is available on a first-come, first-served basis for municipalities, state agencies and public colleges and universities.

Tax credits

The Internal Revenue Service (IRS) has several credits and deductions that residents and business owners can apply for after buying an EV or fuel cell vehicle (FCV) or installing infrastructure for their home or business. Some key credits include:

Commercial Clean Vehicles Credit: Businesses and entities can qualify for up to $7,500 in tax credits for vehicles under 14,000 pounds or up to $40,000 for larger vehicles, such as delivery trucks, school buses, tractor-trailers and cement trucks. Businesses can claim any number of credits for their fleets.
Clean Vehicle Tax Credit: Through the IRA, residents can qualify for up to a $7,500 credit for new EVs or FCVs. The amount of credit depends on the battery capacity of the vehicle, and the cost of the vehicle cannot exceed $80,000 for SUVs and trucks and $55,000 for smaller vehicles. Two caveats of the credit include the vehicle having undergone final assembly in North America and meeting what is called critical mineral and battery component requirements. As of April, at least 40% of the critical minerals contained in the battery must have been either extracted or processed in the U.S. or a free-trade country.
Used Clean Vehicle Credit: Entities that purchased a used EV or FCV for less than $25,000 can apply for the tax credit. This is equal to 30% of the vehicle price, up to $4,000. The tax credit through the IRS can only be applied for vehicles purchased from a dealer that are less than 2 years old and weigh less than 14,000 pounds, which would include cars, SUVs and passenger trucks.
Alternative Fuel Vehicle Refueling Property Credit: Businesses and individuals who install refueling or recharging property at their home or business could also qualify for a credit of 6% of the cost, up to $100,000. Some businesses could qualify for a 30% credit if they offer a prevailing wage and an apprenticeship. New for 2023 is limiting qualifying properties to those located in low-income communities or non-urban census tracts.

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