Tennessee Laws and Incentives

Listed below are the summaries of all current Tennessee laws, incentives, regulations, funding opportunities, and other initiatives related to alternative fuels and vehicles, advanced technologies, or air quality. You can go directly to summaries of:

State Incentives

Natural Gas and Propane Vehicle Grant Program

The Tennessee Department of Environment and Conservation's Office of Energy Programs administers the Natural Gas and Propane Vehicle Grant Program (Program). The Program provides fleets with grants to cover 50% of the incremental purchase cost, up to $25,000 per vehicle, for new original equipment manufacturer dedicated natural gas or propane medium- or heavy-duty vehicles. Public, non-profit, and private Tennessee-based fleets are eligible to apply for funding and must intend to operate vehicles in Tennessee for a minimum of six years. Grant applications are limited to one per applicant, must include at least three vehicles, and are not to exceed $250,000. For more information, including eligibility requirements, see the Program website.

Biofuel Fueling Infrastructure Grants

The Tennessee Department of Transportation (TDOT) engages in public-private partnerships with transportation fuel providers to install biofuel fueling facilities. Fueling facilities include storage tanks and fuel pumps dedicated to dispensing E85 and biodiesel blends of 20% (B20). TDOT administers the Biofuel Green Island Corridor Grant Project (Project) to provide financial assistance for purchasing, preparing, and installing fueling facilities at private sector fuel stations. The goal of the Project is to help establish biofuel stations within 100 miles of each other along Tennessee's interstate system and major highways. There are no open grant solicitations (verified April 2017). For more information, see the TDOT Biofuel Green Island Corridor Grant Project website. (Reference Tennessee Code 54-1-136)

Natural Gas Station Property Tax Reduction

Any public utility, commercial, or industrial property certified to fuel natural gas vehicles may not be valued for property tax purposes at more than 30% of its total installed cost. The Tennessee Department of Environment and Conservation must certify that the station uses compressed or liquefied natural gas for the purpose of fueling motor vehicles and is projected to displace more than 6,000 gallons of petroleum annually. (Reference Tennessee Code 67-5-601 and 67-4-2004).

High Occupancy Vehicle (HOV) Lane Exemption

Vehicles that the U.S. Environmental Protection Agency defines as Inherently Low Emission Vehicles or Low Emission and Energy-Efficient Vehicles and have gross vehicle weight ratings of 26,000 pounds or less are permitted use of HOV lanes regardless of the number of occupants. Such vehicles must display a Tennessee Department of Revenue decal. This exemption expires September 30, 2019. For more information, see the Department of Revenue Smart Pass FAQs website. (Reference Tennessee Code 55-8-188)

Idle Reduction Weight Exemption

Any motor vehicle equipped with qualified idle reduction technology or other emissions reduction technology may exceed the state gross or axle weight limits, by the larger of 550 pounds or the maximum amount allowed by federal law to account for the weight of the technology. The additional weight may not exceed the actual weight of the idle reduction unit. The vehicle operator must also be able to demonstrate that the technology is fully functional. (Reference Tennessee Code 55-7-203)

Laws and Regulations

Plug-In Electric Vehicle (PEV) Fee

In addition to standard registration fees, PEV owners must pay an annual fee of $100. Low-speed and medium-speed vehicles are exempt from the fee. (Reference House Bill 534, 2017)

Alternative Fuel Tax

Compressed natural gas (CNG) and liquefied gas used for operating motor vehicles on public highways is subject to excise tax imposed on a per gallon basis as follows:

Until June 30, 2017July 1, 2017-June 30, 2018July 1, 2018-June 30, 2019July 1, 2019 & Beyond
CNG$0.13$0.17$0.19$0.22
Liquefied Gas$0.14$0.17$0.19$0.22

For the purposes of this tax, the Tennessee Department of Revenue (Department) uses a CNG gallon equivalent factor of 5.66 pounds (lbs.) and a liquefied gas gallon equivalent factor of 6.06 lbs. Liquefied gas is all combustible gas that exists in the gaseous state at 60 degrees Fahrenheit and at a pressure of 14.7 lbs. per square inch, but does not include gasoline, diesel fuel, or CNG. Government agencies are exempt from this tax. (Reference House Bill 534, 2017, and Tennessee Code 67-3-1101 to 67-3-1103 and 67-3-1113)

Natural Gas Measurement

Compressed natural gas (CNG) and liquefied natural gas (LNG) used for transportation must be sold in gasoline gallon equivalents (GGE) or diesel gallon equivalents (DGE) prescribed by the state, unless equivalent measures are established by the National Conference on Weights and Measures. According to current state law, one GGE is equal to 5.66 pounds (lbs.) of CNG. One DGE is equal to 6.38 lbs. of CNG or 6.06 lbs. of LNG. (Reference Tennessee Code 47-26-914)

Utility District Natural Gas Fueling Station Regulation

Utility districts may own and operate natural gas fueling stations provided that the operation of the station is not franchised to another entity. This regulation does not prohibit private companies from owning or operating natural gas fueling stations within a utility district service area. (Reference Tennessee Code 7-82-302)

Biofuel Blending Contract Regulation

Any provision in a contract between a fuel wholesaler and a refiner or supplier that limits or restricts the wholesaler's ability to blend petroleum products with ethanol or biodiesel is null and void. This regulation applies to contracts executed or renewed on or after January 1, 2010. (Reference Tennessee Code 47-25-2004)

Supply of Petroleum Products for Blending with Biofuels

Petroleum product refiners and suppliers must make all grades of gasoline and diesel fuel available to any wholesaler in a condition that allows for the fuel to be blended with ethanol or other bio-based products and sold in Tennessee. In addition, gasoline products must be available with detergent additives in sufficient concentrations such that after the addition of ethanol, the final product meets or exceeds the lowest additive concentrations that the U.S. Environmental Protection Agency requires. (Reference Tennessee Code 47-25-2003)

Biodiesel and Ethanol Definitions and Retail Requirements

Biodiesel blend stock must be at least 99% biodiesel (no more than 1% diesel fuel) and meet ASTM specification D6751. Biodiesel blends must meet ASTM specification D975. Biodiesel blends made available for public use at retail locations may not exceed 20% biodiesel (B20), and biodiesel blends containing more than 5% biodiesel (B5) must be labeled as a biodiesel blend at the pump.

Ethanol is defined as nominally anhydrous ethyl alcohol meeting ASTM specification D4806. Ethanol blends made available for public use at a retail location must be labeled accordingly (e.g., E85).

(Reference Rules of the Tennessee Department of Agriculture 0080-5-12-.01, 0080-5-12-.02, and 0080-5-12-.03)

Alternative Fuel and Fuel-Efficient Vehicle Acquisition and Use Requirements

The Tennessee Department of General Services must ensure that at least 25% of newly purchased passenger motor vehicles procured for use in areas designated as ozone nonattainment areas are all-electric vehicles (EVs), hybrid electric vehicles (HEVs), natural gas vehicles (NGVs), or propane powered vehicles, provided that such vehicles are available at the time of procurement. If these vehicles are not available, conventional gasoline vehicles achieving an average fuel economy of at least 25 miles per gallon (mpg) may satisfy the requirement. In areas not designated as ozone nonattainment areas, at least 25% of newly purchased passenger motor vehicles must be EVs, HEVs, NGVs, propane powered vehicles, or conventional gasoline vehicles achieving an average fuel economy of at least 25 mpg.

State fleets must make every effort to ensure that 100% of newly purchased motor vehicles are energy-efficient vehicles. Energy-efficient vehicles are defined as passenger vehicles that are alternative fuel vehicles using alternative fuels, as defined by the Energy Policy Act of 1992; HEVs; conventional gasoline vehicles achieving an average fuel economy of at least 25 mpg; or vehicles powered by ultra-low sulfur diesel achieving an average fuel economy of at least 30 mpg. Additionally, state agencies should strive to use ethanol and biodiesel in appropriate state-owned vehicles whenever possible and should support the development of biofuels fueling infrastructure.

The Tennessee Department of General Services must inventory the state's passenger vehicle fleet and prepare annual progress reports that outline cost savings, pollution avoidance, and petroleum displacement of the fleet.

(Reference Tennessee Code 4-3-1109, and Executive Order 33, 2006)

Biofuels Quality Specifications

The Tennessee Department of Agriculture may inspect and test biofuels under the Kerosene and Motor Fuels Quality Inspection Act of 1989. (Reference Tennessee Code 47-18-1306 and 54-1-136)

Liquefied Petroleum Gas (Propane) and Natural Gas Liability Immunity

An individual or entity that supplies, handles, transports, or sells propane or natural gas at a retail station is immune from civil liability if incorrect use of the fueling equipment causes injury or damage. In order to be immune, the fuel provider must have exercised reasonable care of the equipment and taken reasonable steps to warn the customer of the hazards associated with misuse of the equipment. (Reference Tennessee Code 29-34-202 and 29-34-207)

Compressed Natural Gas (CNG) Permit

CNG dealers must apply for and obtain a permit from the Tennessee Department of Revenue (Department). The permit authorizes the dealer to collect and remit taxes on CNG delivered to motor vehicles by means of a dispenser with meter capability. This permit will remain valid as long as the dealer provides timely reports and remits taxes when due, or until surrendered or cancelled. All CNG meters and dispensers are subject to inspection and verification by the Tennessee Department of Agriculture's Weights and Measures enforcement provisions.

A CNG vehicle user must apply for and obtain a CNG user's permit from the Department unless the user purchases CNG from a dealer through a metered dispenser.

For more information, see the Department of Revenue Compressed Natural Gas Tax Return for Dealers fact sheet. (Reference Tennessee Code 67-3-1119 and 67-3-1120)

Low- and Medium-Speed Vehicle Access to Roadways

A low-speed vehicle is any four-wheeled electric vehicle, excluding golf carts, that achieves speeds of at least 20 miles per hour (mph) but not more than 25 mph. Low-speed vehicles may access roadways with speed limits of up to 35 mph. A medium-speed vehicle is any four-wheeled electric or gasoline vehicle that has a maximum speed of at least 30 mph. Medium-speed vehicles may not operate on interstate highways. Low- and medium-speed vehicles must comply with the safety standards in Title 49 of the Code of Federal Regulations, section 571.500. (Reference Tennessee Code 55-1-125, 55-8-101, and 55-8-191)