Search Federal and State Laws and Incentives

Vehicles, vehicle power sources, or parts used for converting a vehicle power source to reduce emissions are exempt from state sales and use tax. Exempt vehicles include vehicles certified to federal LEV standards that have a gross vehicle weight rating (GVWR) of over 26,000 pounds. The exemption also applies if the GVWR is greater than 10,000 pounds and if the vehicle, power source, or parts used for converting the power source meet the definition of a category 4, 4A, 4B, 4C, 7, or 7A truck, as defined in Colorado Revised Statutes 39-22-516.8. The vehicle power source includes the engine or motor and associated wiring, fuel lines, engine coolant system, fuel storage containers, and other components. (Reference Colorado Revised Statutes 39-26-719)

Gross vehicle weight rating limits for AFVs are 2,000 pounds greater than those for comparable conventional vehicles, as long as the AFVs operate using an alternative fuel or both alternative and conventional fuel, when operating on a highway that is not part of the interstate system. For the purpose of this exemption, alternative fuel is defined as compressed natural gas, propane, ethanol, or any mixture containing 85% or more ethanol (E85) with gasoline or other fuels, electricity, or any other fuels, which may include clean diesel and reformulated gasoline, so long as the Colorado Air Quality Control Commission determines that these other fuels result in comparable reductions in carbon monoxide emissions and brown cloud pollutants. (Reference Colorado Revised Statutes 42-4-508 and 25-7-106.8)

Motor fuels, including alternative fuels, may be sold by gasoline gallon equivalent (GGE) or diesel gallon equivalent (DGE) as long as the dispenser used for the sale of motor fuel in GGEs or DGEs clearly displays the applicable conversion factor and other required information. (Reference Colorado Revised Statutes 8-20-232.5)

The Colorado Department of Personnel and Administration (DPA) requires all state-owned diesel vehicles and equipment to be fueled with a fuel blend of 20% biodiesel (B20), subject to the availability of the fuel and so long as the price differential is not greater than $0.10 more per gallon as compared to conventional diesel. Biodiesel is defined as fuel composed of mono-alkyl esters of long chain fatty acids derived from plant or animal matter that meets ASTM specifications and is produced in Colorado.

Additionally, DPA has adopted a policy to increase the use of alternative fuels and establish objectives to increase its use for each succeeding year. DPA must purchase motor vehicles that operate on compressed natural gas (CNG), plug-in hybrid electric vehicles, or vehicles that operate on other alternative fuels, subject to the availability of vehicles and adequate fueling infrastructure and assuming the incremental base or life cycle cost of the vehicle is not more than 10% over the cost of a comparable dedicated conventional vehicle. DPA has adopted a policy to allow some vehicles to be exempt from this requirement if available alternative fuel vehicles (AFVs) do not meet application requirements.

On or before November 1 of each year, DPA must submit a report to the general assembly outlining vehicle purchases, including alternative fuel and conventional vehicles; alternative fueling infrastructure availability in the state; AFV purchase exemptions; administrative policies in place to facilitate the purchase of AFVs; suggested changes to facilitate the gradual conversion of the motor vehicle fleet to AFVs; and a plan for the necessary infrastructure development.

(Reference Executive Order D 2015-013, 2015, and Colorado Revised Statutes 24-30-1104)

Upon registering a motor vehicle with the Colorado Department of Revenue Division of Motor Vehicles, the vehicle owner must report the type of alternative fuel used to operate the vehicle and whether the vehicle is dedicated to one alternative fuel or uses more than one fuel. The Department of Revenue provides forms for the purpose of registering motor vehicles and must include space for the following fuel types: gasoline, diesel, propane, electricity, natural gas, methanol/M85, ethanol/E85, biodiesel, and other. For more information, see the Colorado Department of Revenue Division of Motor Vehicles page. (Reference Colorado Revised Statutes 42-3-113)

Alternative fuel is defined as compressed natural gas, propane, ethanol, or any mixture containing 85% or more ethanol (E85) with gasoline or other fuels, electricity, or any other fuels, which may include clean diesel and reformulated gasoline, so long as the Colorado Air Quality Control Commission determines that these other fuels result in comparable reductions in carbon monoxide emissions and brown cloud pollutants. Alternative fuel does not include any fuel product that contains or is treated with methyl tertiary butyl ether (MTBE). (Reference Colorado Revised Statutes 25-7-106.8)

A corporation or individual that resells alternative fuel supplied by a public utility for use in an alternative fuel vehicle (AFV) is not subject to regulation as a public utility. Additionally, a corporation or individual that owns, controls, operates, or manages a facility that generates electricity exclusively for use in AFV charging or fueling facilities is not subject to regulation as a public utility provided that the electricity is generated on the property where the charging or fueling facilities are located and the electricity is generated from a renewable resource. For the purposes of this definition, alternative fuel is defined as propane, liquefied natural gas, compressed natural gas, or electricity. (Reference Colorado Revised Statutes 40-1-103.3)

Natural gas fueling stations are exempt from the requirement to file Air Pollutant Emission Notices, as they have a negligible impact on air quality. (Reference Colorado Air Quality Control Commission Regulations Number 3, Part A, Section II.D.1.hhh)

Compressed natural gas (CNG), liquefied natural gas (LNG), and liquefied petroleum gas (LPG) are subject to excise tax imposed on a per gallon basis as follows:

(Reference Colorado Revised Statutes 39-27-102)

The Colorado Energy Office (CEO), the Regional Air Quality Council (RAQC), and the Colorado Department of Transportation (CDOT), have partnered to provide grants through the ALT Fuels Colorado program for new, publicly accessible compressed natural gas (CNG) fueling equipment; co-located electric vehicle charging and propane station equipment at funded CNG stations; and CNG, propane, and electric vehicles. CEO will administer the station grants to advance infrastructure development along major state-wide transportation corridors. RAQC will administer the vehicle grants for fleets operating within counties with air quality nonattainment and maintenance areas. For more information, including application deadlines and annual award amounts, see the Refuel Colorado and Clean Air Fleets websites.

Biogas production systems, including sales and storage systems, that create a transportation fuel or renewable natural gas, are exempt from state sales and use tax. Towns, cities, and/or counties that currently have production sales or use taxes may choose to individually enforce or exempt producers from their local taxes. (Reference Colorado Revised Statutes 39-26-724)

Government fleets may finance the lease or purchase cost of alternative fuel vehicles and alternative fueling infrastructure through energy performance contracts where vehicle operational and fuel cost savings pay for the capital investment. Energy performance contracts must show that the annual cost savings associated with the fueling and maintenance of vehicles with higher efficiency ratings or alternative fueling methods is equal to or higher than the annual contract payments. (Reference Colorado Revised Statutes 24-30-2001 through 24-30-2003 and 29-12.5-101 through 29-12.5-104)

The Colorado Department of Labor and Employment, Division of Oil and Public Safety, enforces regulations concerning the design, construction, siting, installation, and operation of retail natural gas fueling stations, including mobile fueling vehicles and equipment. (Reference 7 Code of Colorado Regulations 1101-16 and Colorado Revised Statutes 8-20-102)

The Colorado Energy Office administers Refuel Colorado Fleets, a free energy coaching program for fleet managers and communities. The program helps fleet managers identify AFV options and develop a business case. Energy coaches guide fleet managers through the acquisition process by providing technical expertise on issues such as fueling, incentives, maintenance, and safety. Energy coaches also work with local leaders, fuel providers, and dealerships to encourage AFV development in each community. For more information, including a list of regional contacts, see the Refuel Colorado Fleets website.

Noble Energy is partnering with the Regional Air Quality Council (RAQC) to match grants to qualified Colorado school districts to fund CNG school bus purchases. School districts must apply to RAQC for an ALT Fuels Colorado program grant. Noble Energy will provide additional funds directly to the school district once RAQC approves the grant award. For more information, including additional requirements, see the Noble Energy Grant Program information and the ALT Fuels Colorado website.

The Colorado Energy Office, Department of Transportation (CDOT), Department of Public Health and Environment, and Department of Personnel and Administration (DPA) will establish a State Fleet Sub-Council (Sub-Council) to help develop, implement, and improve programs, plans, and policies that save money, reduce emissions, promote domestic fuel use, and conserve natural resources. The Sub-Council will:

• Develop standard procedures and formulas for modeling and monitoring potential alternative fuel vehicles (AFVs) and fuel reduction efforts that link acquisition and operations budgets;
• Create an idle reduction policy for state agencies;
• Create a process that allows fleet coordinators to replace vehicles with AFVs before standard retirement age if the replacement is cost-effective;
• Identify and evaluate other fuel-saving practices and develop procedures for their implementation; and
• Evaluate alternative financing options for state fleet vehicles including leasing, energy performance contracting, and other options that may reduce costs.

In addition, DPA and CDOT will establish policies and procedures to promote the cost-effective use of non-petroleum fuel vehicles and other fleet efficiency improvements. The policies must strive for the use of non-petroleum based fuels at least 90% of the time when cost-effective.

(Reference Executive Order D 2015-013, 2015)

The Colorado state fleet and the Colorado Department of Transportation (CDOT) must purchase natural gas vehicles (NGVs) where natural gas fueling is available or planned, whenever possible. Where NGVs are not viable options, other alternative fuel vehicles (AFVs) such as plug-in electric, hybrid electric, and propane vehicles, must be considered. All new vehicles purchased must be either alternatively fueled or exceed federal Corporate Average Fuel Economy standards.

In addition, CDOT and the Colorado Department of Personnel and Administration (DPA) must include AFVs in state pricing agreements; AFVs include compressed natural gas, hybrid electric, plug-in electric, and propane vehicles. CDOT and DPA must also determine opportunities to expand state pricing into alternative fuel and fuel-efficient heavy-duty equipment, as well as into idle reduction technologies and telematics.

(Reference Executive Order D 2015-013, 2015)

AFVs titled and registered in Colorado are eligible for a tax credit. For the purpose of the credit, AFVs include dedicated or bi-fuel natural gas, propane, and hydrogen vehicles. The tax credit is equal to the amounts listed below:

Eligible purchased vehicles must be new, and eligible leased vehicles must have a lease with a term of not less than two years. A purchaser may assign the tax credit generated through the purchase, lease, or conversion to any of the above categories of vehicle to the financing entity, allowing the purchaser to realize the value of the tax credit at the time of purchase, lease, or conversion. The financing entity may collect an administrative fee of no more than $150.

For more information, see the Colorado Department of Revenue's Income 69 FYI publication.

(Reference Colorado Revised Statutes 39-22-516.7 and 39-22-516.8)