Included in New York State’s recently enacted fiscal plan is a tax credit for electric vehicle recharging equipment equal to the lesser of 50% of the cost and $5,000 for each installation. The credit is valid against corporate tax, corporate franchise tax and personal income tax. The credit expires after December 31, 2017. The credit is not refundable and does not reduce New York alternative minimum tax liability; however, it may be carried forward fifteen years. New Yorkers with electric cars should consider taking advantage of the credit by installing charging stations at their homes. Also, parking garages that seek to improve their “green” status should consider installing electric vehicle charging equipment for their customers and claiming the credit.
The New York tax credit compliments the federal tax credit. The American 2012 Taxpayer Relief Act extended the federal credit for refueling equipment placed in service before January 1, 2014. The federal credit is 30 percent but limited to $50,000 per taxpayer; therefore, the federal credit is not much help to companies that want to install many recharging stations across a region. The federal tax credit is not refundable; it does not reduce a taxpayer’s alternative minimum tax liability, but it may be carried forward for 20 years.
The taxpayer’s adjusted basis in the recharging equipment is reduced by the amount of the federal tax credit. As New York tax law generally follows federal tax law as to basis matters, the adjusted basis for New York tax purposes is reduced by the amount of the New York tax credit.
Both the New York and federal credits have recapture rules. Recapture means the reversal the credit by including an amount in taxable income. The New York recapture rules are relatively liberal. For New York tax purposes, the credit is recaptured only if the equipment ceases to be used as electric vehicle charging equipment or the taxpayer transfer the property with knowledge that the transferee will not use it as electric charging vehicle equipment. The recapture period (i.e., the period for which the equipment must be used as a charging station) is equal to the “recovery period” which is not defined but appears to be the federal recovery period which is five years as provided Treasury Regulation Section 1.179A-1(g), Exs. 3-5.
The Treasury is to issue regulations regarding the application of the recapture rules to the federal tax credit, but it has not done so. One can speculate that the federal recapture rules will be similar to the recapture rules for investment tax credits: a five year vesting period with recapture triggered by a broad category of transfers.
Click here to see a link to the enacted New York legislation. The legislative history for the credit is on pages 13 and 14, and the statutory language is on pages 93 to 97.