Learn About Federal Excise Tax Exemption
In the Energy Improvement and Extension Act (EIEA) of 2008 (PL 110-343), Section 206 excludes certain idling reduction devices and advanced insulation from the federal excise tax. This law amends section 4053 of the Internal Revenue Code.
For purposes of section 4053(9)(B) of the Internal Revenue Code, the Administrator of EPA, in consultation with the Secretary of Energy and the Secretary of Transportation, has determined that the devices (listed in the following "Exemption list" tab) reduce the idling of a tractor at a motor vehicle rest stop or other location where such vehicles are temporarily parked or remain stationary. For the purposes of EIEA, the effective date of this list is the first day after the enactment of EIEA (October 4, 2008). Companies interested in adding their technology to this list should contact EPA after reviewing the criteria for product eligibility below.
Motor carriers must ensure that all devices installed on Commercial Motor Vehicles conform to the Federal Motor Carrier Safety Regulations, 49 CFR 393, Parts and Accessories Necessary for Safe Operation. Those regulations of particular concern to users of auxiliary power units are contained in section 393.28, section 393.30, and SubPart E of Part 393. These requirements dictate the specifications of installation of wiring and fuel systems for this equipment.
For more information about the tax exempt status of these idling reduction devices, please refer to the instructions for Form 720, Quarterly Federal Excise Tax Return, found at www.irs.gov. You may also contact the Internal Revenue Service (IRS).
Frequent Questions About Federal Excise Tax Exemption
- When did some idling reduction devices become exempt from the federal excise tax?
On October 3, 2008, the President signed into law the Emergency Economic Stabilization Act of 2008 (Public Law 110-343). This law also enacted the Energy Improvement and Extension Act (EIEA) of 2008. Specifically, section 206 of the EIEA excludes some idling reduction devices and advanced insulation from the federal excise tax.
- Does the excise tax exemption apply to idling reduction devices installed on all vehicles?
No. The exemption is only available for idling reduction devices installed on tractors. A tractor is a highway vehicle designed to tow a vehicle, such as a trailer or semi-trailer (aka an 18-wheeler). A tractor may carry incidental items of cargo when towing or limited amounts of cargo when not towing. (Reference: IRS Publication 510)
- Does the consumer directly benefit from the federal excise tax exemption for idling reduction devices?
The truck excise tax, which is nominally 12% of the sales price, is triggered by an event such as the first sale or use of a taxable vehicle. The tax is destined for the Federal Highway Trust Fund and can be paid by the truck retailer or purchaser, but is generally collected and remitted by the seller. Since the tax is generally paid by the purchaser or lessor in conjunction with the sale or lease, the exemption for idling reduction devices serves to incentivize purchasers to order such devices in conjunction with the purchase or lease of a new taxable truck or tractor.
- Where can I find information about federal excise taxes and how they work?
IRS Publication 510 offers a comprehensive explanation of federal excise taxes. Chapter 6 of Publication 510 offers information about the retail tax on heavy trucks, trailers, and tractors. Publication 510 is available on the IRS website. For more information regarding the tax exempt status of idling reduction devices, please read the instructions for Form 720, Quarterly Federal Excise Tax Return.
- Who can I contact with tax questions about the excise tax exemption for idling reduction devices?
Contact the Internal Revenue Service (IRS) with any tax questions about idling reduction devices.
- What is EPA's role in this federal excise tax exemption?
EPA, in consultation with the Departments of Energy and Transportation, identifies all eligible devices that reduce tractor idling.