While most states reshaped tax policy to promote reliance on alternative-fueled cars and trucks, Kansas sharply curtailed use of its tax credit to forbid claims by individual taxpayers and for vehicles powered by electricity. The Kansas Legislature's audit of the state tax credit indicates it was rarely used since lawmakers adjusted the program to focus on ethanol and biodiesel vehicles. (Justin Sullivan/Getty Images)
By Tim Carpenter, Kansas Reflector
TOPEKA — A Kansas income tax credit created in 1995 to incentivize reliance on alternative-fueled cars and trucks was sabotaged by amendments to state law to exclude electric vehicles and forbid individuals from claiming the tax break.
A state audit said the original goal of the tax program was to encourage supplemental fuel use for economic and environmental purposes in Kansas, but political opposition and market forces gradually deflated interest in the credit.
While Kansas lawmakers weakened state law promoting adoption of nontraditional fuels, 47 states and the District of Columbia went in the opposite direction. Other states reinforced tax policy to stimulate introduction of electric-powered vehicles and encourage individuals and companies to purchase autos that didn’t operate on gasoline.
Oklahoma has excluded electricity as a tax-break eligible fuel for vehicles, but that state’s credit remained available to individual taxpayers.
“Only Kansas excludes both electricity and individual taxpayers,” said Andy Brienzo, an auditor with the Kansas Legislature’s Division of Post Audit. “Those decisions played a major role in how much this has been used in years since.”
He said the audit revealed market forces conspired to undercut interest in Kansas’ tax credit focused on vehicles using biodiesel or ethanol blends. In the past decade, production of vehicles capable of operating on 85% ethanol declined. In 2024, only five models of E85 vehicles were available in the United States. That constituted 2% of the alternative-fuel market.
At this point, 91% of the U.S. alternative-fuel market was tied to electric and hybrid vehicles. There were 292 such vehicles available for sale in the U.S. market.
When the Kansas tax credit was adopted in 1995, Kansas relied on a federal definition of alternative fuel that included vehicles powered by electricity. Individuals and corporations were allowed to claim on state income tax forms a 40% credit that reflected the difference between the cost of a normal gas-operated vehicle and the alternative-fueled version of the
same model.
Likewise, companies could get a state tax credit of 40% on the cost of building alternative-fueling stations up to $100,000 per station. In 1999, the Legislature doubled the tax credit to a maximum of $200,000 per station.
In 2007, Kansas changed the law to exclude electric cars and trucks from the tax credit program. That meant the credit focused primarily on vehicles depending on ethanol or biodiesel, which had production ties raw materials grown by Kansas farmers.
Five years later in 2012, the state repealed the ability of individuals to be recipients of the credit. Since then, it has been open only to corporations.
Use of the tax credit in Kansas peaked in 2007 when 125 claims were filed with the Kansas Department of Revenue. That year’s total represented 20% of the 612 claims submitted in the past three decades. Since 1996, $2.2 million in credits were approved.
The audit presented to a joint House and Senate committee in December said no more than five corporate taxpayers made use of the credit in the last 10 years. This raised questions as to usefulness of having the credit in its current form, the audit report said.
This article was republished with permission from the Kansas Reflector. The Kansas Reflector is a non-profit online news organization serving Kansas. For more information on the organization, go to its website at www.kansasreflector.com.
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