Washington, D. C. LNG and LPG Federal Excise Tax Equalized

As was recently announced, the U.S. Congress passed, and the President signed, legislation that adjusts the federal excise tax on liquefied natural gas (LNG) and propane used in vehicles. These changes are effective January 1, 2016. For the full text of Public Law 114-41, enacted July 31, 2015, see Congress.gov (https://www.congress.gov/bill/114th-congress/house-bill/3236/text).

The following summary highlights the key aspects of the legislation that relate to alternative fuel excise tax changes to help you and your stakeholders understand the implications of this legislation. We have also updated the Alternative Fuels Data Center Laws & Incentives website to reflect the changes; see http://www.afdc.energy.gov/laws/11220.

Feel free to contact kellie@greaterindiana.com for questions or more information.

H.R. 3236, Surface Transportation and Veterans Health Care Choice Improvement Act of 2015

  • Enacted date: July 31, 2015; Public Law 114-41
  • Relevant provision: Section 2008
  • Notable changes:
    • Adjusts the federal excise tax rates for propane and LNG used in vehicles so that, like compressed natural gas (CNG), the fuels are taxed on an energy equivalent basis rather than a volumetric basis.
    • Establishes clear energy equivalencies for each fuel, as follows:

▪  One diesel gallon equivalent (DGE) is equal to 6.06 pounds of LNG

▪  One gasoline gallon equivalent (GGE) is equal to 5.75 pounds of propane and 5.66 pounds of CNG

Effective date: January 1, 2016 (i.e., the amendments apply to any sale or use of these fuel types after December 31, 2015)

 

Summary of Current and Adjusted Excise Tax Rates

Fuel Type Current Excise Tax Rate (through Dec. 31, 2015) New Tax Rate(effective Jan. 1, 2016) Impact of Amendment
Propane $0.183 per liquid gallon $0.183 per GGE Propane is taxed on an energy content basis that is equal to gasoline, rather than a volumetric gallon
LNG $0.243 per liquid gallon $0.243 per DGE LNG is taxed on an energy content basis that is equal to diesel, rather than a volumetric gallon
CNG $0.183 per GGE $0.183 per GGE No change from current tax rates