‘‘(II) 
HEAVY
DUTY
HYBRID 
MOTOR
VEHICLE.—For purposes of 
subparagraph (A)(ii), the term ‘max-
imum available power’ means the 
maximum power available from the re-
chargeable energy storage system, 
during a standard 10 second pulse 
power or equivalent test, divided by 
the vehicle’s total traction power. The 
term ‘total traction power’ means the 
sum of the peak power from the re-
chargeable energy storage system and 
the heat engine peak power of the ve-
hicle, except that if such storage sys-
tem is the sole means by which the ve-
hicle can be driven, the total traction 
power is the peak power of such stor-
age system. 
‘‘(3) NEW
QUALIFIED
HYBRID
MOTOR
VEHI-
CLE.—For purposes of this subsection, the term 
‘new qualified hybrid motor vehicle’ means a motor 
vehicle—
‘‘(A) which draws propulsion energy from 
onboard sources of stored energy which are 
both—
‘‘(i) an internal combustion or heat 
engine using combustible fuel, and 
‘‘(ii) a rechargeable energy storage 
system, 
‘‘(B) which, in the case of a passenger 
automobile, medium duty passenger vehicle, or 
light truck—
‘‘(i) for 2002 and later model vehicles, 
has received a certificate of conformity 
under the Clean Air Act and meets or ex-
ceeds the equivalent qualifying California 
low emission vehicle standard under sec-
tion 243(e)(2) of the Clean Air Act for 
that make and model year, and 
‘‘(ii) for 2004 and later model vehi-
cles, has received a certificate that such ve-
hicle meets or exceeds the Bin 5 Tier II 
emission level established in regulations 
prescribed by the Administrator of the En-
vironmental Protection Agency under sec-
tion 202(i) of the Clean Air Act for that 
make and model year vehicle, 
‘‘(C) which, in the case of a heavy duty hy-
brid motor vehicle, the internal combustion or 
heat engine of which has received a certificate
of conformity under the Clean Air Act as meet-
ing the emission standards set in the regula-
tions prescribed by the Administrator of the 
Environmental Protection Agency for 2004 
through 2007 model year diesel heavy duty en-
gines or ottocycle heavy duty engines, as appli-
cable, 
‘‘(D) the original use of which commences 
with the taxpayer, 
‘‘(E) which is acquired for use or lease by 
the taxpayer and not for resale, and 
‘‘(F) which is made by a manufacturer. 
‘‘(4) HEAVY DUTY HYBRID MOTOR VEHICLE.—
For purposes of this subsection, the term ‘heavy 
duty hybrid motor vehicle’ means a new qualified hy-
brid motor vehicle which has a gross vehicle weight 
rating of more than 8,500 pounds. Such term does 
not include a medium duty passenger vehicle. 
‘‘(d) NEW QUALIFIED ALTERNATIVE FUEL MOTOR 
VEHICLE CREDIT.—
‘‘(1) ALLOWANCE OF CREDIT.—Except as pro-
vided in paragraph (5), the new qualified alternative 
fuel motor vehicle credit determined under this sub-
section is an amount equal to the applicable percent-
age of the incremental cost of any new qualified al-
ternative fuel motor vehicle placed in service by the 
taxpayer during the taxable year. 
‘‘(2) APPLICABLE PERCENTAGE.—For purposes 
of paragraph (1), the applicable percentage with re-
spect to any new qualified alternative fuel motor ve-
hicle is—
‘‘(A) 50 percent, plus 
‘‘(B) 30 percent, if such vehicle—
‘‘(i) has received a certificate of con-
formity under the Clean Air Act and meets 
or exceeds the most stringent standard 
available for certification under the Clean 
Air Act for that make and model year vehi-
cle (other than a zero emission standard), 
or 
‘‘(ii) has received an order certifying 
the vehicle as meeting the same require-
ments as vehicles which may be sold or 
leased in California and meets or exceeds 
the most stringent standard available for
certification under the State laws of Cali-
fornia (enacted in accordance with a waiv-
er granted under section 209(b) of the 
Clean Air Act) for that make and model
year vehicle (other than a zero emission 
standard). 
For purposes of the preceding sentence, in the case 
of any new qualified alternative fuel motor vehicle 
which weighs more than 14,000 pounds gross vehicle 
weight rating, the most stringent standard available 
shall be such standard available for certification in 
2002. 
‘‘(3) INCREMENTAL
COST.—For purposes of 
this subsection, the incremental cost of any new 
qualified alternative fuel motor vehicle is equal to 
the amount of the excess of the manufacturer’s sug-
gested retail price for such vehicle over such price 
for a gasoline or diesel fuel motor vehicle of the 
same model, to the extent such amount does not ex-
ceed—
‘‘(A) $5,000, if such vehicle has a gross ve-
hicle weight rating of not more than 8,500 
pounds, 
‘‘(B) $10,000, if such vehicle has a gross 
vehicle weight rating of more than 8,500 
pounds but not more than 14,000 pounds, 
‘‘(C) $25,000, if such vehicle has a gross 
vehicle weight rating of more than 14,000 
pounds but not more than 26,000 pounds, and
‘‘(D) $40,000, if such vehicle has a gross 
vehicle weight rating of more than 26,000 
pounds. 
‘‘(4) NEW
QUALIFIED
ALTERNATIVE
FUEL 
MOTOR
VEHICLE.—For purposes of this sub-
section—
‘‘(A) IN GENERAL.—The term ‘new quali-
fied alternative fuel motor vehicle’ means any 
motor vehicle—
‘‘(i) which is only capable of operating 
on an alternative fuel, 
‘‘(ii) the original use of which com-
mences with the taxpayer, 
‘‘(iii) which is acquired by the tax-
payer for use or lease, but not for resale, 
and 
‘‘(iv) which is made by a manufac-
turer. 
‘‘(B) ALTERNATIVE FUEL.—The term ‘al-
ternative fuel’ means compressed natural gas, 
liquefied natural gas, liquefied petroleum gas, 
hydrogen, and any liquid at least 85 percent of 
the volume of which consists of methanol. 
‘‘(5) CREDIT FOR MIXED-FUEL VEHICLES.—
‘‘(A) IN
GENERAL.—In the case of a 
mixed-fuel vehicle placed in service by the tax-
payer during the taxable year, the credit deter-
mined under this subsection is an amount equal 
to—
‘‘(i) in the case of a 75/25 mixed-fuel 
vehicle, 70 percent of the credit which 
would have been allowed under this sub-
section if such vehicle was a qualified alter-
native fuel motor vehicle, and 
‘‘(ii) in the case of a 90/10 mixed-fuel 
vehicle, 90 percent of the credit which 
would have been allowed under this sub-
section if such vehicle was a qualified alter-
native fuel motor vehicle. 
‘‘(B) MIXED-FUEL
VEHICLE.—For pur-
poses of this subsection, the term ‘mixed-fuel 
vehicle’ means any motor vehicle described in 
subparagraph (C) or (D) of paragraph (3), 
which—
‘‘(i) is certified by the manufacturer 
as being able to perform efficiently in nor-
mal operation on a combination of an al-
ternative fuel and a petroleum-based fuel, 
‘‘(ii) either—
‘‘(I) has received a certificate of 
conformity under the Clean Air Act, 
or 
‘‘(II) has received an order certi-
fying the vehicle as meeting the same 
requirements as vehicles which may be 
sold or leased in California and meets 
or exceeds the low emission vehicle 
standard under section 88.105-94 of 
title 40, Code of Federal Regulations, 
for that make and model year vehicle, 
‘‘(iii) the original use of which com-
mences with the taxpayer, 
‘‘(iv) which is acquired by the tax-
payer for use or lease, but not for resale, 
and 
‘‘(v) which is made by a manufac-
turer. 
‘‘(C) 75/25 MIXED-FUEL
VEHICLE.—For 
purposes of this subsection, the term ‘75/25 
mixed-fuel vehicle’ means a mixed-fuel vehicle 
which operates using at least 75 percent alter-
native fuel and not more than 25 percent petro-
leum-based fuel.
‘‘(D) 90/10 MIXED-FUEL
VEHICLE.—For 
purposes of this subsection, the term ‘90/10 
mixed-fuel vehicle’ means a mixed-fuel vehicle 
which operates using at least 90 percent alter-
native fuel and not more than 10 percent petro-
leum-based fuel. 
‘‘(e) APPLICATION WITH OTHER CREDITS.—The 
credit allowed under subsection (a) for any taxable year 
shall not exceed the excess (if any) of—
‘‘(1) the regular tax for the taxable year re-
duced by the sum of the credits allowable under sub-
part A and sections 27, 29, and 30, over 
‘‘(2) the tentative minimum tax for the taxable 
year. 
‘‘(f) OTHER DEFINITIONS AND SPECIAL RULES.—
For purposes of this section—
‘‘(1) 
CONSUMABLE
FUEL.—The 
term 
‘consumable fuel’ means any solid, liquid, or gaseous
matter which releases energy when consumed by an 
auxiliary power unit. 
‘‘(2) MOTOR VEHICLE.—The term ‘motor vehi-
cle’ has the meaning given such term by section 
30(c)(2). 
‘‘(3) CITY FUEL ECONOMY.—The city fuel econ-
omy with respect to any vehicle shall be measured in
a manner which is substantially similar to the man-
ner city fuel economy is measured in accordance 
with procedures under part 600 of subchapter Q of 
chapter I of title 40, Code of Federal Regulations, 
as in effect on the date of the enactment of this sec-
tion. 
‘‘(4) OTHER TERMS.—The terms ‘automobile’, 
‘passenger automobile’, ‘medium duty passenger ve-
hicle’, ‘light truck’, and ‘manufacturer’ have the 
meanings given such terms in regulations prescribed 
by the Administrator of the Environmental Protec-
tion Agency for purposes of the administration of 
title II of the Clean Air Act (42 U.S.C. 7521 et 
seq.). 
‘‘(5) REDUCTION IN BASIS.—For purposes of 
this subtitle, the basis of any property for which a 
credit is allowable under subsection (a) shall be re-
duced by the amount of such credit so allowed (de-
termined without regard to subsection (e)). 
‘‘(6) NO
DOUBLE
BENEFIT.—The amount of 
any deduction or other credit allowable under this 
chapter—
‘‘(A) for any incremental cost taken into 
account in computing the amount of the credit 
determined under subsection (d) shall be re-
duced by the amount of such credit attributable 
to such cost, and 
‘‘(B) with respect to a vehicle described 
under subsection (b) or (c), shall be reduced by 
the amount of credit allowed under subsection 
(a) for such vehicle for the taxable year. 
‘‘(7) PROPERTY USED BY TAX-EXEMPT ENTI-
TIES.—In the case of a credit amount which is al-
lowable with respect to a motor vehicle which is ac-
quired by an entity exempt from tax under this 
chapter, the person which sells or leases such vehicle 
to the entity shall be treated as the taxpayer with 
respect to the vehicle for purposes of this section 
and the credit shall be allowed to such person, but 
only if the person clearly discloses to the entity at 
the time of any sale or lease the specific amount of 
any credit otherwise allowable to the entity under 
this section. 
‘‘(8) RECAPTURE.—The Secretary shall, by reg-
ulations, provide for recapturing the benefit of any 
credit allowable under subsection (a) with respect to 
any property which ceases to be property eligible for 
such credit (including recapture in the case of a 
lease period of less than the economic life of a vehi-
cle).