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Various states and regions throughout the country offer incentives for using propane in agriculture and other applications. Some examples of these incentives are described below. (Such incentives often refer to liquefied petroleum gas, or LPG, a category that includes both propane and butane.)
California
In California, a landmark bill (Assembly Bill 426) became effective on September 1, 2001. It amends the existing Revenue and Taxation Code (RTC). Sections of AB426 that provide significant incentives for using propane and propane-fueled equipment are as follows:
- Sales and Use Tax Exemption for Liquefied Petroleum Gas (LPG)
- Partial Sales and Use Tax Exemption for Farm Equipment and Machinery
- Partial Sales and Use Tax Exemption for Timber Harvesting Equipment, Machinery and Parts
Sales and Use Tax Exemption for Liquefied Petroleum Gas (LPG)
RTC Section 6353(b), Liquefied Petroleum Gas (LPG)
- Incentive: Qualified sales and purchases of LPG for household or agricultural use are exempt from the California sales and use tax. Qualifying sales and purchases of LPG are subject to a full exemption from the statewide sales and use tax rate (currently 7 percent) as well as any applicable district taxes.
- Eligibility:
- LPG must be delivered into a tank with a storage capacity equal to or greater than 30 gallons. Delivery into storage tanks with a capacity less than 30 gallons will not qualify even if the total LPG delivered exceeds 30 gallons.
- Household use: Seller must deliver the LPG to a qualified residence for household use. A "qualified residence" is defined as a primary residence not serviced by gas mains and pipes.
- Agricultural use: LPG must be purchased by a qualified person, defined as a person engaged in the business of producing and harvesting agricultural products as described under Codes 0111 to 0291 of the Standard Industrial Classification (SIC) Manual (1987 Edition) and any other person who assists that qualified person. A complete listing of SIC codes is available from the US Department of Labor OSHA website at www.osha.gov.
Partial Sales and Use Tax Exemption for Farm Equipment and Machinery
RTC Section 6356.5, Farm Equipment, Machinery and Parts
- Incentive: Provides a new partial exemption from the state general fund portion of the sales and use tax (currently 4.75 percent) for qualified sales and purchases (including certain leases) of new or used farm equipment, machinery, and parts purchased by qualified persons for use primarily in producing and harvesting agricultural products. Qualifying sales and purchases are still subject to a statewide tax and any applicable district taxes.
- Eligibility:
- Equipment or machinery must be used 50 percent or more of the time in producing and harvesting agricultural products.
- Person engaged in the business of producing and harvesting agricultural products as described under Codes 0111 to 0291 of the Standard Industrial Classification (SIC) Manual (1987 Edition) and any other person who assists that qualified person.
- Farm equipment and machinery means "implements of husbandry" as defined in RTC Section 411. Such property generally includes any tool, machine, equipment, appliance, device or apparatus used in the conduct of agricultural operations.
Partial Sales and Use Tax Exemption for Timber Harvesting Equipment and Machinery and Parts
RTC Section 6356.6, Timber Harvesting Equipment, Machinery and Parts
- Incentive: Provides a new partial exemption from the state general fund portion of the sales and use tax (currently 4.75 percent) for qualified sales and purchases (including certain leases) of new or used equipment, machinery, and parts designed primarily for off-road use in commercial timber harvesting operations. Qualifying sales and purchases are still subject to a statewide tax rate and any applicable district taxes.
- Eligibility:
- Purchaser must be engaged in commercial timber harvesting
- Equipment or machinery must be designed primarily for off-road use in commercial timber harvesting operations
- Equipment or machinery must be used in harvesting timber 50 percent or more of the time
California Public Utilities Commission Self-Generation Incentive Program
Effective July 2001, customers of major California utilities who install on-site power generation systems to supply all or a portion of their own energy needs may qualify for monetary incentives under a new $13.6 million-a-year rebate program, which runs through December 31, 2004.
Electricity-generation systems covered by the program include microturbines, small gas turbines, non-diesel internal combustion engines, solar power (photovoltaics), wind turbines, and fuel cells, all of which must be interconnected with the utility grid to qualify for the program. Higher incentives-$4.50 per watt, up to a maximum of 50 percent of the project's cost-are tied to the use of these technologies that are renewable or "super-clean."
Texas
Railroad Commission of Texas Alternative Fuels Research & Education Division - Forklift Closed-Loop Rebate Program
The Railroad Commission of Texas offers rebates to companies that operate propane forklifts equipped with closed-loop fuel systems. To qualify, the closed-loop system must meet the following criteria:
- Be equipped with an electronically controlled fuel feedback management system with an oxygen sensor.
- Demonstrate ability to maintain the air-fuel mixture at or near stoichiometric during the operation of the forklift and have a fail-safe warning device (e.g., dashboard light or buzzer) when the stoichiometric air-fuel ratio is not maintained.
Program guidelines are as follows:
- Qualifying equipment must be used on propane forklifts and operate in a Texas county where a U.S. Dept. of Energy Clean Cities organization is either established or planned.
- Official pre-approved forms are required before purchase or installation.
- All applications must be postmarked within 60 days of the installation date.
- Rebate recipient must agree not to remove closed loop equipment permanently from service for the life of the equipment.
- Equipment vendor/manufacturer must have participation form on file with Railroad Commission of Texas.
- The rebate amount shall be 80 percent of the cost of the equipment and installation of the closed-loop system.
- The rebate shall not exceed $500 per unit.
- Rebates will be issued subject to available funds on a first-come, first-served basis
For more information, go to: http://www.rrc.state.tx.us/divisions/afred/rebate_program/rebates.html.
Iowa
Propane Fuel Sales Tax Exemption
On February 5, 2001, a bill was signed into law in Iowa suspending the sales tax collected on home heating fuels including propane, through March 31, 2001. Beyond that date, the bill gradually phases out sales tax on all heating fuels (except kerosene and electricity) over the next five years, beginning January 2002. The tax break is only for fuels used in residential dwellings and does not apply to propane already purchased or to pre-purchase agreements.
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