Texas May Give $5,000 PHEV Tax Credit

Texas governor Rick Perry is proposing a $5,000 tax credit for state residents who purchase a plug-in hybrid electric vehicle. Not every resident will qualify for the credit, but for buyers who live in areas that the EPA has flagged for poor air quality, the tax windfall could come this year.

The announcement was part of the governor's State-of-the-State address and would apply to residents of the Dallas-Fort Worth, Houston, Galveston, Beaumont, Port Arthur and El Paso areas. The move is an effort to stem criticism of the state's air quality measures by the EPA and to head off further federal government regulation in Texas' "non-attainment" zones - those areas of the state that do not meet the EPA's Clean Air standards.

The $5,000 credit would put Texas on the front end of states offering PHEV credits, but more than 40 states now offer some type of tax incentive for purchasers of hybrid-electric vehicles. The governor also proposes using PHEV batteries to store wind energy produced in Texas. Texas generates more wind energy than any other state in the union but lacks storage and transmission infrastructure needed to make it a highly viable energy source.

The federal government is offering tax credits to purchasers of certain hybrid vehicles, depending upon the maker's hybrid vehicle sales to date. Congress passed legislation to authorize the so-called "Volt" tax break - a minimum $7,500 tax incentive for purchasers of hybrid electric vehicles. The size of the tax credit depends upon the power output of the vehicle's battery pack. Currently, the break is available only to purchasers of the first 250,000 PHEVs sold, but that cap may change under the new administration's stimulus package. Likewise, breaks may be extended to purchasers of all-electric vehicles.

Right now, PHEVs are not in mass production, meaning that few people would actually be able to take advantage of the credit, but within the next two model years, several PHEVs will be offered by major car manufacturers including Toyota, GM and newcomer BYD.

The Texas credit isn't a given. The state's part-time legislature must still take up the issue before its current session ends in late May.