COLORADO REVISED STATUTES
*** This document reflects changes current through all laws passed
at the Second Regular and First Extraordinary Sessions
of the Sixty-Eighth General Assembly of the State of Colorado 2012
and Constitutional and Statutory amendments approved at the General Election on November 6, 2012 ***
TITLE 39. TAXATION
ARTICLE 22.INCOME TAX
PART 5. SPECIAL RULES
C.R.S. 39-22-516.5 (2012)
39-22-516.5. Tax credit for innovative motor vehicles - repeal
(1) As used in this section, unless the context otherwise requires:
(a) "Actual cost incurred" means the actual cost paid by the purchaser or lessee for the vehicle, conversion, or idling reduction technologies. The actual cost paid shall be calculated as the net of any credits, grants, or rebates, including federal credits, grants, or rebates for which the purchaser or lessee is eligible, but excluding the credit specified in this section.
(b) "Alternative fuel" means an alternative fuel as defined in section 25-7-106.8 (1) (a), C.R.S.
(c) "Category 1" means a motor vehicle that complies with bin 1 of the federal tier 2 emissions standards published by the federal environmental protection agency in the federal register at 65 FR 6698 (February 10, 2000), as amended.
(d) "Category 2" means light duty passenger vehicle diesel-electric hybrids with a minimum fuel economy of seventy miles per gallon.
(e) "Category 3" means light duty passenger vehicle, light duty truck, and medium duty truck diesel-electric hybrid conversions that increase the fuel economy of the original motor vehicle by forty percent or more.
(f) "Category 4" means light duty passenger vehicle, light duty truck, and medium duty truck compressed natural gas conversions certified by the United States environmental protection agency and original equipment manufacturer compressed natural gas vehicles.
Editor's note: This version of paragraph (f) is effective until January 1, 2014.
(f) "Category 4" means light duty passenger vehicle, light duty truck, and medium duty truck compressed natural gas or liquefied petroleum gas conversions certified by the United States environmental protection agency and original equipment manufacturer compressed natural gas vehicles.
Editor's note: This version of paragraph (f) is effective January 1, 2014.
(g) "Category 5" means any idling reduction technologies.
(h) "Category 6" means a motor vehicle that complies with bin 2 or bin 3 of the federal tier 2 emissions standards published by the federal environmental protection agency in the federal register at 65 FR 6698 (February 10, 2000), as amended, with a minimum fuel economy of forty miles per gallon or miles per gallon gasoline equivalent or greater.
(i) "Gross vehicle weight rating" or "GVWR" shall have the same meaning as set forth in section 42-2-402 (6), C.R.S.
(j) "Hybrid vehicle" means a motor vehicle with a hybrid propulsion system that operates on both electricity and an alternative fuel or traditional fuel.
(k) "Idling reduction technologies" means idling reduction devices or advanced insulation, as those terms are defined in section 4053 of the internal revenue code, as amended, exempt from federal excise tax pursuant to said section 4053.
(l) "Light duty passenger vehicle" means a private passenger vehicle, including vans, capable of seating twelve passengers or less; except that the term does not include motor homes as defined in section 42-1-102 (57), C.R.S., or vehicles designed to travel on three or fewer wheels in contact with the ground.
(m) "Light duty truck" means a truck between zero and fourteen thousand pounds GVWR.
(n) "Medium duty truck" means a truck with a gross vehicle weight rating greater than fourteen thousand pounds up to twenty-six thousand pounds.
(o) "Miles per gallon gasoline equivalent" means the standard unit of measure that measures how many miles an alternative vehicle can travel on the equivalent energy of one United States gallon of traditional fuel.
(p) "Motor vehicle" means any self-propelled vehicle, including a vehicle that uses a hybrid propulsion system, that is:
(I) Titled and registered in the state; and
(II) Required to be licensed or subject to licensing for operation upon the highways of the state.
(q) "Plug-in hybrid electric vehicle" means:
(I) An original equipment manufacturer plug-in hybrid electric vehicle that can operate solely on electric power and that is capable of recharging its battery from an on-board generation source and an off-board electricity source; and
(II) A plug-in hybrid electric vehicle conversion that provides an increase in city fuel economy of seventy-five percent or more as compared to a comparable non-hybrid version vehicle for a minimum of twenty miles and that is capable of recharging its battery from an on-board generation source and an off-board electricity source. A vehicle shall be comparable if it is the same model year and the same vehicle class as established by the United States environmental protection agency and is comparable in weight, size, and use. Fuel economy comparisons shall be made using city fuel economy standards in a manner that is substantially similar to the manner in which city fuel economy is measured in accordance with procedures set forth in 40 CFR 600, as in effect on August 8, 2005.
(r) "Power source" means the engine or motor and associated wiring, fuel lines, engine coolant system, fuel storage containers, and miscellaneous components.
(s) "Traditional fuel" means a petroleum-based motor fuel commonly used on the highways of the state in the year 2008.
(t) "Uses an alternative fuel" or "to use an alternative fuel" means to operate solely on an alternative fuel, to operate on both an alternative fuel and a traditional fuel, or to operate alternately on a traditional fuel and an alternative fuel.
(2) (a) With respect to the tax years commencing on January 1, 2012, but prior to January 1, 2016, there shall be allowed to any person a credit against the tax imposed by this article, not to exceed six thousand dollars, for each motor vehicle purchased or leased by such person that:
(I) Uses or is converted to use an alternative fuel;
(II) Is a hybrid vehicle;
(III) Is a plug-in hybrid electric vehicle;
(IV) Has its power source replaced with a power source that uses an alternative fuel; or
(V) Is modified to include idling reduction technology.
(b) With respect to the tax years commencing on January 1, 2012, but prior to January 1, 2016, there shall be allowed to any person a credit against the tax imposed by this article, not to exceed seven thousand five hundred dollars, for each motor vehicle purchased or leased by such person that is converted to a plug-in hybrid electric vehicle.
(c) If a motor vehicle is leased, the lessee, not the lessor, is allowed to claim the credit allowed pursuant to this section.
(3) The amount of the credit allowed pursuant to this section shall be an amount equal to the percentage, as set forth in subsection (4) of this section, of the following:
(a) The difference between the actual cost incurred by such person during the tax year in purchasing or leasing a motor vehicle that uses an alternative fuel and the cost of the same motor vehicle that uses a traditional fuel or, if the same vehicle is not available, then the cost of the most similar vehicle, taking into account the model, make, engine size, and options, that uses a traditional fuel;
(b) The difference between the actual cost incurred by such person during the tax year in replacing an existing power source in a motor vehicle that uses a traditional fuel with a power source that uses an alternative fuel and the cost of replacing the existing power source in the motor vehicle with the same type of power source that uses a traditional fuel;
(c) The actual cost incurred by such person during the tax year in converting the motor vehicle to a fuel system that uses an alternative fuel;
(d) The actual cost incurred by such person in purchasing or leasing idling reduction technologies; or
(e) (I) The actual cost incurred by such person during the tax year in converting a hybrid vehicle to a plug-in hybrid electric vehicle.
(II) Persons who claimed a tax credit in previous years for the purchase or lease of model year 2004 and newer hybrid vehicles are eligible to claim an additional credit for the conversion of such a hybrid vehicle to a plug-in hybrid electric vehicle.
(4) For the purposes of subsection (3) of this section, the percentage of the difference in actual cost incurred or the percentage of the actual cost incurred that may be claimed as a credit pursuant to subsection (2) of this section shall be as follows:
Income Income Income Income
tax years tax years taxyears tax years
commencing commencing commencing commencing
on or after on or after on or after on or after
January January January January
1, 2012, 1, 2013, 1, 2014, 1, 2015
but prior to but prior to but prior to but prior to
January January January January
1, 2013: 1, 2014: 1, 2015: 1, 2016:
Category 1 75% 75% 75% 75%
Category 2 45% 25% 15% 15%
Category 3 55% 35% 25% 25%
Category 4 55% 35% 25% 25%
Category 5 25% 25% 25% 25%
Category 6 10% 10% 0% 0%
(5) Except as provided in subparagraph (II) of paragraph (e) of subsection (3) of this section, no more than one tax credit shall be granted pursuant to this section for any individual motor vehicle.
(6) If a credit authorized in this section exceeds the income tax due on the income of the taxpayer for the taxable year, the excess credit may not be carried forward and shall be refunded to the taxpayer.
(7) This section is repealed, effective December 31, 2020.
HISTORY: Source:. L. 2009: Entire section added, (HB 09-1331), ch. 416, p. 2299, § 4, effective June 4.L. 2011: (1)(f) amended, (HB 11-1081), ch. 262, p. 1142, § 2, effective January 1, 2014.L. 2012: (1)(a), IP(2)(a), (2)(b), (3)(a), (3)(d), and (3)(e)(II) amended and (2)(c) added, (HB 12-1299), ch. 98, p. 328, § 1, effective April 12.
Editor's note: Section 3 of chapter 262, Session Laws of Colorado 2011, provides that the act amending subsection (1)(f) applies to tax years commencing on or after January 1, 2014.
Cross references: In 2009, this section was added by the "Motor Vehicle Innovation Act". For the short title, see section 1 of chapter 416, Session Laws of Colorado 2009.
Since leasing involves the purchase of only part of the vehicle the DoR adjusts the tax credit, calculated as for a purchase, by the proportion of the capital cost to the total cost of the vehicle. If the federal tax credit is used to reduce that cost it isn't surprising that it is included in the capital cost calculation. Nor is it surprising that the federal tax credit is used to determine the "Incremental Price Difference" of the innovative fuel vehicle and a conventional vehicle. That calculation is just to determine the amount of the state tax credit (they fact that the do it wrong for the 2012 LEAF is another issue entirely). The two calculations are entirely separate. Suppose, for example, that Nissan finance didn't use the federal tax credit to reduce the cost of the car. You would then be paying a lot more for your leased LEAF and would get a larger proportion of the state tax credit because the capital cost of your leased car would be much larger.
The fact that sales tax is charged on the entire vehicle cost has to do with how the sales tax law is written and trying to apply that idea to the income tax credit isn't going to be a viable strategy.
By the way, if you buy a vehicle out of county you will only be subject to the state sales tax of 2.9%, according to my county clerk and recorder. (Perhaps it is different in the metro area with tax districts that span several counties.) Most of the state sales tax for cars stays in the county and is distributed among the taxing entities located in that county as a "specific use tax"; I found this out in my service as a library district trustee.