National Zero-Emission Truck Coalition letter to the U.S. Senate supporting medium- and heavy-duty vehicle tax incentives for with direct pay option
The Honorable Ron Wyden
|The Honorable Mike Crapo
Ranking Member Committee on Finance
United States Senate
219 Dirksen Senate Office Building
Washington, D.C. 20510
Dear Chairman Wyden and Ranking Member Crapo:
The undersigned members of the National Zero Emission Truck Coalition thank you for your leadership in advancing significant investments in our nation’s infrastructure included in the Infrastructure Investment and Jobs Act. This down payment on our nation’s zero emission infrastructure marks an important step toward transitioning toward a cleaner future. The bill makes critical investments in new zero emission charging and refueling, accelerates the transition to clean school buses, provides funding for communities to become more resilient, and encourages more investment in domestic manufacturing.
These investments will help combat the climate crisis, reduce inequities in health outcomes in underserved communities, significantly reduce harmful emissions, and support good-paying manufacturing jobs. While the Infrastructure Investment and Jobs Act laid the groundwork toward transitioning our transportation sector to zero emission, Congress has an opportunity to rapidly accelerate that transition through budget reconciliation. As Congress considers clean transportation tax incentives and stimulus investments in the reconciliation package, we urge you to incorporate the proposal in the President’s Fiscal Year 2022 Budget Request for a new zero-emission medium- and heavy-duty vehicle (MHDV) tax incentive, with the option for the taxpayer to elect a cash payment in-lieu of the credit (i.e. a direct pay option).1
The FY22 Budget Request calls for new zero-emission MHDV investment tax credits with a direct pay option. The proposed credits would range from $25,000 for purchases of Class 3 vehicles to $120,000 for Class 8 vehicles, starting in 2022 and stepping down according to class through 2027. The credits would also be paired with strong labor standards to encourage good-paying and good-quality jobs. We encourage the Committee to make these zero-emission truck purchase incentives for fleets of all sizes an integral part of the United States’ proposed investment in EV tax incentives.
As we have stated in previous letters, the approach of combining an investment tax credit with the short- term ability to quickly obtain the cash equivalent benefit as a cash payment in-lieu of credit, utilized in the American Recovery and Reinvestment Act of 2009, was proven to be an extremely effective and successful mechanism to stimulate the desired clean technology investments.
The significant upfront incremental cost difference of zero-emission trucks and buses, which are still in the early stages of commercialization, is a key barrier to commercial fleet electrification in goods and people movement.2
The most effective state zero-emission MHDV incentives offer rebates that in practice provide cash payments to offset this incremental cost and higher purchase price close to the time of purchase. Tailoring a tax incentive amount to offset a large portion of the incremental cost with the option to monetize the credit, as the FY22 Budget proposal does, will help aggressively knock down this barrier to deployment. In addition, most U.S. fleets operate six or fewer trucks and are unable to overcome the upfront incremental cost barrier to purchasing cleaner trucks. A cash payment in-lieu of credit would directly benefit these smaller fleets with fewer capital resources.
An analysis conducted by the nonprofit organization CALSTART of a 10-year zero-emission truck tax incentive, made available through a cash payment, for Class 3 through 8 vehicles was projected to support over 478,000 clean trucks and buses deployed nationwide, avoid emissions equivalent to taking 5.4 million cars off the road, and support 55,000 direct and indirect jobs over the incentive’s lifetime.
High-tech zero-emission trucks are in development or early production in most weight classes right now. Zero-emission MHDV product offerings in North America are on track to more than double by the end of 2023. The rising growth of e-commerce, compounded due to the COVID-19 pandemic, means electric delivery vans and trucks will quickly have an outsized role to play in our Nation’s economic recovery because of substantial increases in goods delivery in local-, regional-, and long-haul freight movement segments.
Zero-emission MHDVs also present a significant opportunity to make stimulus investments that both boost this important industry and support economic growth, but also help clean the air of frontline communities and address climate change. Medium- and heavy-duty vehicles represent a small share of all vehicles on U.S. roads but reflect a high level of the Nation’s daily vehicle use in support of critical goods movement. As a result, they contribute to a disproportionate fraction of total transportation sector fuel consumption, greenhouse gas emissions, and air pollution. Decarbonizing these trucks will support the Administration’s goal to invest in environmental justice communities through smart EV investments, with the potential to directly benefit the communities adjacent to where MHDVs often operate or are domiciled.
As the Committee works to balance EV investment priorities, we would welcome the opportunity to work with you to advance clean transportation tax provisions in the budget reconciliation package that includes zero-emission MHDV incentives redeemable as a cash payment in-lieu of tax credit. Thank you for your consideration.
Motiv Power Systems
Phoenix Motor Cars
South Coast AQMD
Southern California Edison
Cc: The Honorable Nancy Pelosi, Speaker of the House, U.S. House of Representatives The Honorable Kevin McCarthy, Minority Leader, U.S. House of Representatives
The Honorable Charles E. Schumer, Majority Leader, United States Senate
The Honorable Mitch McConnell, Minority Leader, United States Senate
1 See: U.S. Department of Treasury, “”General Explanations of the Administration’s Revenue Proposals,” May 2021, https://home.treasury.gov/system/files/131/General-Explanations-FY2022.pdf, pp. 46-47.
2 Incremental cost of a medium- and heavy-duty EV is an amount equal to the excess of the price paid for such vehicle over such price for a comparable vehicle of similar weight and size powered by a gasoline or diesel internal combustion engine and is intended for similar use.