H.R. 1293 — Vehicle Energy Performance Act of 2025

This section establishes the short title of the Act as the “Vehicle Energy Performance Act of 2025” and specifies that, unless otherwise stated, its amendments and repeals apply to the Internal Revenue Code of 1986.

This section establishes a new refundable tax credit of up to $5,000 for a new qualified high energy performance motor vehicle placed in service by the taxpayer during the taxable year. The credit applies to a passenger automobile or light truck that is treated as a motor vehicle under the Clean Air Act, achieves vehicle energy performance above the median for the prior model year, is subject to fuel economy standards under 49 U.S.C. § 32902, is acquired for use or lease and not for resale, and is manufactured beginning with model year 2027. The credit amount is scaled based on the vehicle’s performance relative to the prior model year’s median and best combined fuel-economy ratings, and the provision treats the credit as a business credit for depreciable property or as a refundable personal credit otherwise. It also permits a taxpayer to transfer the refundable credit to the selling dealer, provided the dealer reduces the vehicle price by the full credit amount and complies with certification and anti-retransfer requirements.

This section revises the existing gas guzzler tax under 26 U.S.C. § 4064 and renames it the low vehicle energy performance fee. It imposes a tax of $5,000 multiplied by a formula based on the vehicle’s combined fuel-economy rating relative to the median and best ratings for the prior model year, rather than the prior flat tax structure. The fee applies to the sale by the manufacturer of each low energy performance vehicle, defined as a passenger automobile or light truck that is treated as a motor vehicle under title II of the Clean Air Act, has vehicle energy performance below the median for the model year, and is made beginning with model year 2029. It excludes certain vehicles, including vehicles with a gross vehicle weight rating of more than 8,500 pounds that the Secretary determines are designed for commercial use, ambulances and combination ambulance-hearses, government vehicles used for police or other law enforcement purposes, and other emergency vehicles prescribed by regulation. The section defines vehicle energy performance, median vehicle energy performance, best vehicle energy performance, combined fuel-economy rating, model year, motor vehicle, and other covered terms by reference to existing law and EPA regulations. It also provides for inflation adjustment beginning with model years starting in calendar year 2030, by increasing each dollar amount in subsection (a)(2) using the cost-of-living adjustment under section 1(f)(3) of the Internal Revenue Code, with amounts rounded to the nearest $100. The section makes conforming changes throughout chapter 32 and related provisions to replace references to the “gas guzzler tax” with the “low vehicle energy performance fee” and to change “Gas” to “Fuel” in the relevant headings and tables.

This section revises fuel economy measurement and consumer information requirements for dual fueled automobiles under 49 U.S.C. §§ 32905 and 32908, and applies the changes to model year 2027 or later vehicles. It requires the Administrator of the Environmental Protection Agency to measure the fuel economy of electric dual fueled automobiles at the manufacturer’s request, rather than at the Administrator’s discretion, and extends the applicable model year from 2015 to 2026. It also requires the Administrator to review and update, every 3 years and using real-world data if possible, the formula for determining the percentage of gasoline or diesel fuel and electricity used in calculating fuel economy. This section also revises the fuel economy label and consumer booklet for dual fueled automobiles. It requires the label to indicate: (1) the automobile’s fuel economy when operated primarily on alternative fuel; and (2) the multi-day average fuel economy when operated on a combination of alternative fuel and gasoline or diesel fuel, using a formula based on real-world data and updated at least every 3 years. It similarly requires the fuel economy information booklet to include information on the multi-day average fuel economy for combined alternative-fuel and gasoline or diesel operation.