March 1, 2006

Business tax break plan for hybrids in Congress

By John Crawley

WASHINGTON (Reuters) - The Republican chairman of the
Senate Finance Committee and the panel's ranking Democrat
proposed on Wednesday new tax incentives for businesses that
buy vehicles that run on alternative fuels.

The proposal would cover electric cars, lean burn diesel
and hybrids -- which are powered by gas-electric engines -- and
vehicles that run on other sources, such as compressed natural
gas. Only hybrids have gained a noticeable U.S. market share.

Vehicles powered by ethanol and ethanol-gas blends, which
U.S. vehicle manufacturers are promoting this year, are not
included. Those fuel options are covered in other tax

The Finance Committee proposal would complement certain tax
breaks for small businesses that buy gasoline-only powered
vehicles, such as large sport utilities.

For instance, the proposal would speed depreciation and
allow businesses to expense up to $100,000 for their
alternative fueled vehicles.

"The tax code shouldn't favor SUVs over alternative energy
cars for business owners," said Sen. Charles Grassley, an Iowa
Republican and chairman of the Finance Committee.

Montana Sen. Max Baucus, the panel's top Democrat, said
Congress should do what it can to encourage the purchase and
use of alternative fueled vehicles.

"America's small business owners are looking for ways to
reduce their energy consumption and costs and the tax code
should provide benefits for those who can choose and use clean,
lean alternative fuel vehicles," Baucus said.

President George W. Bush said in January the United States
is "addicted to oil" and needed to boost investment in
alternative fuels to lessen dependence on imported petroleum.

Gasoline demand accounts for roughly 40 percent of U.S.
daily oil consumption. The Natural Resources Defense Council
said gas powered vehicles also account for 27 percent of U.S.
global warming pollution.

Struggling U.S. auto manufacturers, such as Ford Motor Co.
and General Motors Corp. plan to invest more in hybrid and
other alternative fuel technology, but they lag behind foreign
manufacturers in production of popular hybrids.

American car makers have pressed the Bush administration
and Congress for tax and other incentives to facilitate
research and update outmoded plants.

A Consumer Federation of America analysis this week showed
that an increase of 5 miles per gallon in fuel efficiency of
the U.S. domestic fleet would save about 23 billion gallons of
gasoline each year. That would reduce imports of oil and oil
products by an estimated 14 percent.

Hybrids can get more than 50 miles per gallon combined city
and highway driving compared with some large SUVs, which
achieve between 15 mpg and 20 mpg, the CFA said.