Overview
Title
To amend the Internal Revenue Code of 1986 to provide tax incentives and fees for increasing motor vehicle fuel economy, and for other purposes.
ELI5 AI
H.R. 1293 is a plan to give money back to people who buy cars that use less fuel and to charge car makers extra money if they sell cars that use a lot of fuel. It's like getting a reward for using a toy that saves batteries and paying more if a toy wastes them.
Summary AI
H.R. 1293 aims to update tax incentives and introduce fees for motor vehicles in the U.S. to encourage higher fuel economy. The bill proposes a tax credit for purchasing new vehicles that perform better than the average in terms of energy efficiency, starting from model year 2027. It also imposes a fee on manufacturers for selling vehicles with below-average energy performance, starting from model year 2029. Additionally, the bill requires manufacturers to report the energy performance of their vehicles, and it mandates updated labeling and reporting of fuel economy for dual-fueled vehicles.
Published
Keywords AI
Sources
Bill Statistics
Size
Language
Complexity
AnalysisAI
General Summary of the Bill
The "Vehicle Energy Performance Act of 2025" aims to amend the Internal Revenue Code of 1986 by introducing tax incentives and fees promoting increased fuel economy for motor vehicles. The legislation proposes a tax credit up to $5,000 for consumers purchasing high-energy-performance vehicles from model year 2027 onward. Simultaneously, it imposes a fee on manufacturers for producing and selling low-energy-performance vehicles from model year 2029. This dual approach is intended to encourage both consumers and manufacturers to prioritize energy efficiency in automobiles. The bill also mandates updates to formulas governing the fuel economy of dual-fueled automobiles, ensuring these are based on real-world data every three years.
Summary of Significant Issues
One of the primary concerns is the complexity of the tax credit and fee calculations. The formulas employed, which are based on vehicle energy performance relative to median and best performances, might be challenging for the average taxpayer and manufacturers to comprehend. This complexity could lead to errors, confusion, or even manipulation.
Moreover, the provision allowing the transfer of refundable credits presents risks of misuse or fraudulent claims. This could result in financial drain if not strictly regulated. Additionally, the coordination required among various governmental agencies could introduce bureaucratic delays, impacting the timely implementation of the bill's provisions.
The use of real-world data for fuel economy assessments lacks clear definition, potentially complicating consistent data collection and enforcement of the standards. Furthermore, adjustments for inflation tied to external indices are intricate and might result in unpredictable costs for taxpayers and the Treasury.
Impact on the Public
Broadly, this bill could drive positive changes by incentivizing the adoption of fuel-efficient vehicles, contributing to environmental conservation and reducing reliance on fossil fuels. Consumers stand to benefit financially through tax credits when purchasing eligible vehicles but might face challenges understanding and accessing these benefits due to the intricate eligibility criteria and calculations.
For consumers purchasing less energy-efficient vehicles, the bill introduces financial disincentives, potentially leading to higher vehicle costs as manufacturers might pass on the assessed fees. However, the intended environmental advantages could benefit the population at large by promoting cleaner air and more sustainable practices.
Impact on Specific Stakeholders
Manufacturers: Vehicle manufacturers face both challenges and opportunities under this bill. Those producing high-energy-performance vehicles could witness increased sales spurred by consumer tax incentives. Conversely, manufacturers of less efficient vehicles might incur higher costs due to imposed fees, pressing them to innovate and improve vehicle efficiency.
Government Agencies: Agencies responsible for implementing and enforcing this legislation may experience increased workloads and need greater inter-agency coordination. This could result in a stretched capacity and potential delays in smooth operational execution.
Consumers: While consumers stand to gain financial rewards through tax credits, they face the hurdle of understanding complex eligibility requirements and claiming processes. Those who prefer or need vehicles with lower energy performances may bear higher costs, driving shifts in consumer purchasing behavior.
In conclusion, while the "Vehicle Energy Performance Act of 2025" poses regulatory and operational complexities, its focus on improving vehicle fuel efficiency aims at significant environmental and economic benefits. However, careful attention to addressing the outlined issues will be crucial to ensure that the legislation effectively achieves its goals without unintended negative consequences.
Financial Assessment
The proposed H.R. 1293 bill is primarily concerned with tax incentives and fees aimed at encouraging higher fuel economy in motor vehicles. It seeks to make financial adjustments to promote energy-efficient vehicles while imposing costs on vehicles that do not meet energy standards.
Financial Incentives for Fuel Efficiency
Tax Credit for Vehicles: The bill introduces a tax credit for individuals or businesses purchasing new vehicles that outperform the previous year's median energy performance. This credit could be as much as $5,000 per vehicle. The actual credit amount is determined by a complex calculation that requires comparing the vehicle's energy performance to median and best performances from the previous year. While this aims to incentivize purchasing more efficient vehicles, the complexity of the calculation method could lead to confusion among taxpayers and potential errors or misuse.
Fees for Low-Efficiency Vehicles
Low-Energy Performance Tax: Conversely, the bill imposes a fee on manufacturers selling vehicles that underperform in terms of energy efficiency. The fee formula also involves a $5,000 base, adjusted similarly through complex calculations involving median and low-performance benchmarks from preceding model years. This fee system is designed to discourage the sale of less efficient vehicles, although its intricate structure could create challenges in implementation and enforcement.
Inflation Adjustments
Both the tax credit and the fee structure include mechanisms for adjusting amounts based on inflation. These adjustments are tied to external cost-of-living indices and can increase the amounts annually after certain model years begin — in 2027 for credits and 2029 for fees. Given that these adjustments depend on economic indicators and are rounded for clarity, they introduce a layer of complexity and unpredictability that could impact long-term financial planning for taxpayers and the government.
Issues with Transfer and Implementation
The ability to transfer the refundable credit, as detailed in the bill, raises concerns about potential misuse or fraudulent claims. The provision allows taxpayers to transfer their credits when buying a new qualified vehicle, primarily to dealers, which could be abused if not monitored strictly. This aspect of credit transfer necessitates tight regulatory oversight to prevent scams and ensure the integrity of the incentive system.
Coordination and Data Collection
The requirement for various government agencies to coordinate the implementation of these tax provisions could lead to bureaucratic delays. Such coordination is essential to determine vehicle eligibility for credits and fees, which might slow down the rollout and effectiveness of the legislation. Moreover, the bill's reliance on 'real-world data' for calculations and adjustments lacks a clear framework for data collection and verification, which poses challenges in maintaining uniform standards and could complicate regulatory enforcement.
Overall Financial Implications
The financial implications of H.R. 1293 involve motivating more energy-efficient vehicle purchases through tax credits and discouraging low-performance vehicles with fees. Both mechanisms are influenced by complex calculations and inflation adjustments, which, while well-intentioned, may lead to varying degrees of complexity in execution. The predictability and ease of financial planning for taxpayers and monitoring by the Treasury might be affected due to the multifaceted nature of these financial references.
Issues
The method of calculating tax credits and fees in Sections 2 and 3 is highly complex, potentially contributing to confusion among taxpayers and opening the door to errors and abuse. Specifically, Section 30E(a)(2) and Section 4064(a) involve intricate calculations for credit and fee amounts based on 'vehicle energy performance', which may not be easily understood by the general public.
The provision in Section 2, Section 30E(c)(2)(B)(i), which allows the transfer of a refundable credit, raises significant concerns about potential misuse or fraudulent claims. The ability to transfer credits could lead to scams or abuse if the regulation is not strictly enforced and closely monitored.
The requirement in Section 30E(g)(2) for coordination among various government agencies to implement the tax credit provisions introduces potential delays and bureaucratic hurdles, which could affect the timely and consistent application of the bill.
The definitions and terms used for criteria such as 'new qualified high energy performance motor vehicle' in Section 30E(b) and 'low energy performance vehicle' in Section 4064(b) are broad and might allow for diverse interpretations, creating legal ambiguities that could be exploited.
The inflation adjustment mechanisms, detailed in Section 30E(e)(7) for tax credits and Section 4064(d) for energy performance fees, are complex and linked to external indices. This complexity could lead to unpredictable future costs for taxpayers and the Treasury, making financial forecasting and planning difficult.
Section 1 of the bill lacks detail regarding what it encompasses beyond its title, which limits transparency and makes it difficult to assess the potential impacts or concerns associated with the proposed legislation.
The reliance on 'real-world data', as mentioned in Section 4 of the bill, is undefined, presenting challenges in uniform data collection and integrity verification. This could lead to inconsistent application of standards related to vehicle fuel economy, complicating regulatory enforcement.
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title Read Opens in new tab
Summary AI
The section gives the official name for the bill as the "Vehicle Energy Performance Act of 2025" and clarifies that any changes or repeals mentioned relate to parts of the Internal Revenue Code of 1986, unless stated otherwise.
2. Tax credit for vehicle energy performance Read Opens in new tab
Summary AI
The section introduces a tax credit for purchasing new high energy performance vehicles starting from model year 2027, with a credit amount up to $5,000 based on the vehicle's fuel efficiency compared to others. The credit can be treated as a refundable credit and transferred to car dealers, and the bill outlines specific conditions, including compliance with environmental and safety standards.
Money References
- “(2) CREDIT AMOUNT.—With respect to each new qualified high energy performance motor vehicle, the amount determined under this paragraph shall be equal to the amount (not greater than $5,000) that bears the same ratio to $5,000 as— “(A) the excess of— “(i) the vehicle energy performance of such vehicle, over “(ii) the median vehicle energy performance for the model year immediately preceding the model year of such vehicle, bears to “(B) the excess of— “(i) the best vehicle energy performance for the model year immediately preceding the model year of such vehicle, over “(ii) the median vehicle energy performance for the model year immediately preceding the model year of such vehicle.
- “(7) INFLATION ADJUSTMENT.—In the case of any model year beginning in a calendar year after 2027, each dollar amount in subsection (a)(2) shall be increased by an amount equal to— “(A) such dollar amount, multiplied by “(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the model year begins, determined by substituting ‘2026’ for ‘2016’ in subparagraph (A)(ii) thereof.
- Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $100.
30E. Vehicle energy performance rebate Read Opens in new tab
Summary AI
The text establishes a tax credit for individuals who purchase new high energy performance vehicles that are more efficient than the median vehicle performance from the previous model year. The credit can be transferred during the purchase if disclosed clearly, and it will not be available if the vehicle is used outside the U.S. or fails to meet air and safety standards.
Money References
- (2) CREDIT AMOUNT.—With respect to each new qualified high energy performance motor vehicle, the amount determined under this paragraph shall be equal to the amount (not greater than $5,000) that bears the same ratio to $5,000 as— (A) the excess of— (i) the vehicle energy performance of such vehicle, over (ii) the median vehicle energy performance for the model year immediately preceding the model year of such vehicle, bears to (B) the excess of— (i) the best vehicle energy performance for the model year immediately preceding the model year of such vehicle, over (ii) the median vehicle energy performance for the model year immediately preceding the model year of such vehicle.
- (7) INFLATION ADJUSTMENT.—In the case of any model year beginning in a calendar year after 2027, each dollar amount in subsection (a)(2) shall be increased by an amount equal to— (A) such dollar amount, multiplied by (B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the model year begins, determined by substituting “2026” for “2016” in subparagraph (A)(ii) thereof.
- Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $100.
3. Low vehicle energy performance fee Read Opens in new tab
Summary AI
The section introduces a "low vehicle energy performance fee" which taxes manufacturers $5,000 for every vehicle sold that has lower energy performance than the median for that model year, using a specific calculation. It also defines terms like "low energy performance vehicle," "vehicle energy performance," and adjusts this fee for inflation starting from model year 2029.
Money References
- “(a) Imposition of tax.—There is hereby imposed on the sale by the manufacturer of each low energy performance vehicle a tax equal to the product of $5,000, multiplied by the quotient of— “(1) the excess of— “(A) the median vehicle energy performance for the model year immediately preceding the model year of such vehicle, over “(B) the vehicle energy performance of such vehicle, divided by “(2) the excess of— “(A) the best vehicle energy performance for the model year immediately preceding the model year of such vehicle, over “(B) the median vehicle energy performance for the model year immediately preceding the model year of such vehicle.
- “(d) Inflation adjustment.—In the case of any model year beginning in a calendar year after 2029, each dollar amount in subsection (a)(2) shall be increased by an amount equal to— “(1) such dollar amount, multiplied by “(2) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the model year begins, determined by substituting ‘2028’ for ‘2016’ in subparagraph (A)(ii) thereof.
- Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $100.”. (b) Conforming amendments.— (1) The heading for part I of subchapter A of chapter 32 is amended by striking “Gas” and inserting “Fuel”.
4064. Low vehicle energy performance fee Read Opens in new tab
Summary AI
The law imposes a tax on manufacturers for selling "low energy performance vehicles," which are passenger cars or light trucks with lower fuel efficiency than the median for their model year, starting in 2029. Exceptions are made for heavy commercial vehicles and those used for emergency services, and tax rates may be adjusted for inflation starting in 2030.
Money References
- (a) Imposition of tax.—There is hereby imposed on the sale by the manufacturer of each low energy performance vehicle a tax equal to the product of $5,000, multiplied by the quotient of— (1) the excess of— (A) the median vehicle energy performance for the model year immediately preceding the model year of such vehicle, over (B) the vehicle energy performance of such vehicle, divided by (2) the excess of— (A) the best vehicle energy performance for the model year immediately preceding the model year of such vehicle, over (B) the median vehicle energy performance for the model year immediately preceding the model year of such vehicle. (b) Low energy performance vehicle.—For purposes of this section— (1) IN GENERAL.—The term “low energy performance vehicle” means a passenger automobile or light truck— (A) which is treated as a motor vehicle for purposes of title II of the Clean Air Act, (B) which achieves vehicle energy performance that is lower than the median vehicle energy performance, and (C) which is made by a manufacturer beginning with model year 2029.
- (d) Inflation adjustment.—In the case of any model year beginning in a calendar year after 2029, each dollar amount in subsection (a)(2) shall be increased by an amount equal to— (1) such dollar amount, multiplied by (2) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the model year begins, determined by substituting “2028” for “2016” in subparagraph (A)(ii) thereof.
- Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $100. ---
4. Fuel economy of dual fueled automobiles Read Opens in new tab
Summary AI
The section outlines changes to how fuel economy is measured and labeled for dual fueled automobiles, which use both electricity and gasoline or diesel. It mandates that the fuel economy formulas be reviewed and updated using real-world data every three years, and requires labels and information booklets to provide details on fuel economy when using alternative fuels or a mix of fuels, starting with cars from model year 2027 or later.