HR 1293119th CongressIn Committee

Vehicle Energy Performance Act of 2025

Introduced: Feb 13, 2025

Standard Summary

Comprehensive overview in 1-2 paragraphs

The Vehicle Energy Performance Act of 2025 creates a new federal framework to reward high energy-efficiency in new motor vehicles and to penalize low energy performance, updates dual-fuel vehicle labeling and measurement, and adds related reporting and regulatory provisions. The core ideas are: (1) a new Vehicle Energy Performance Credit (30E) that provides a refundable or business-credit-style incentive for buyers of new high energy performance vehicles (with amounts tied to how far a vehicle exceeds the model-year median and compares to the best vehicle in that model year); (2) a Low Vehicle Energy Performance Fee (a “gas guzzler”-style tax) on the sale of low energy performance vehicles, scaled by how far below the model-year median the vehicle performs; (3) mandatory reporting of vehicle energy performance by manufacturers and annual publication of model-year medians and best performances; (4) changes to how dual-fuel (electric/gasoline or diesel) vehicles are measured and labeled, with updates every three years; and (5) several conforming regulatory and technical amendments to ensure consistency across the tax code, the Department of the Treasury, the EPA, and DOT. In short, the bill aims to shift market incentives toward higher efficiency vehicles through credits, while imposing fees on less-efficient vehicles, and to improve the way vehicle energy performance is measured and disclosed.

Key Points

1Vehicle Energy Performance Credit (new 30E)
2- Provides a credit against the tax for the purchase of a new qualified high energy performance motor vehicle. The amount is up to $5,000 and is scaled by how far the vehicle’s energy performance exceeds the model-year median relative to how far the best vehicle in the model year exceeds that median.
3- A “new qualified high energy performance motor vehicle” must meet Clean Air Act standards, exceed the model-year median, bear standards under 49 U.S.C. 32902, be new to the taxpayer, be for use or lease (not resale), and be produced by a manufacturer starting with model year 2027.
4- The credit can interact with other credits (treated as part of the general business credit for certain property) and may be refundable for individuals. A transferrable refundable credit is allowed to a dealer or seller in certain circumstances, with disclosure requirements, certification, and limits to prevent multiple transfers per vehicle.
5- The credit is limited to one per vehicle (per VIN), Inflation-adjusted beginning in model years after 2027, and subject to recapture and other standard credit rules (basis reduction, compliance with air/safety standards, and election options).
6Reporting and Administration
7- Vehicle manufacturers must annually report vehicle energy performance data to the Treasury (by November 1, starting 2026) and the Treasury must publish the model-year median and best energy performance by December 1 each year.
8- The Secretary (Treasury) will issue regulations to carry out the program (within about a year of enactment) and coordinate with the DOT and EPA on eligibility determinations.
9Low Vehicle Energy Performance Fee (Gas Guzzler-style)
10- Establishes a new tax on manufacturers for the sale of low energy performance vehicles. The tax is calculated as $5,000 times a ratio that compares the model-year median to the vehicle’s energy performance, divided by the gap between the best and median energy performance for the preceding model year.
11- A “low energy performance vehicle” is a vehicle below the model-year median and produced by a manufacturer beginning with model year 2029; certain vehicles are excluded (e.g., heavy-duty over 8,500 pounds GVWR used commercially, ambulances, police or emergency vehicles, etc.).
12- Inflation adjustments apply to model years beginning after 2029. The proposal also changes certain headings and cross-references in the tax code to reflect the new fee (renaming “Gas Guzzler Tax” to “Low Vehicle Energy Performance Fee”).
13Dual-Fueled Automobiles (Electric/Gasoline or Diesel)
14- Reforms how fuel economy is measured for electric or dual-fueled vehicles. The Administrator must set the default measurement to require real-world data usage and update the calculation every three years.
15- Labeling must indicate the energy performance when operated on alternative fuel and provide multi-day average fuel economy on mixed fuel use, with disclosures based on real-world usage data.
16- Applies to model-year 2027 and later.
17Definitions and Administrative Details
18- Key terms include vehicle energy performance (combined MPGe rating for the model and model year), median energy performance (model-year median of all new U.S. sold vehicles), best energy performance (highest MPGe for the model year), and other standard definitions for model year, motor vehicle, and manufacturer consistent with EPA/DOT definitions.
19- Interaction with existing standards: credits/fees require compliance with Clean Air Act and motor vehicle safety standards.
20- Per-vehicle limitations and recapture provisions, basis reduction rules, and election options are included.
21Conforming Amendments
22- Several cross-references throughout the tax code and related sections are updated to reflect the new energy performance credit and the new fee, including adjustments to the general business credit framework and related sections.

Impact Areas

Primary group/area affected- Buyers of new motor vehicles: potential eligibility for a substantial credit for high energy performance vehicles; possible price considerations for lower-performance options due to the new fee.- Vehicle manufacturers and dealers: new compliance, reporting, labeling, and eligibility requirements; potential shifts in product strategy toward higher efficiency and electrification; administrative burden for compliance and transfer mechanisms for credits.Secondary group/area affected- Tax professionals and taxpayers: new credit mechanics, interaction with existing credits, potential anti-duplication rules, and the refundable/transferable aspects affecting tax planning.- Federal and state regulators (Treasury, EPA, DOT): new data reporting, regulation development, and coordination requirements; updating labeling and measurement protocols.Additional impacts- Market signals for efficiency: the combination of a credit for high-energy vehicles and a fee for low-energy vehicles could steer manufacturers toward higher efficiency fleets and influence vehicle pricing and model mix starting in the late 2020s.- Data and transparency: annual publication of energy performance medians and bests would create public benchmarks that may influence consumer choice and manufacturer competition.- Dual-fuel vehicles: adjustment of measurement and labeling could affect consumer understanding of real-world fuel economy for vehicles with alternative fuels and shift the emphasis in consumer information and marketing.

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