It used to be that the nation’s largest climate impacts came from coal-fired power plants. But now that many of these plants have either closed, are announcing closure or are being converted, the transportation sector has now taken the lead when it comes to climate impact. Transportation now accounts for 27% of greenhouse gas emissions in the U.S. by end-use sector. And within that sector, 43% of those emissions come from passenger cars. So the importance of increasing the efficiency of passenger cars, and converting the market from gasoline to electric for passenger vehicles, is increasing in importance.

Legislative Issues Affecting Kentucky: Electric and Hybrid Vehicle User Fees, alternatives and resources 

KCC supports appropriately funded road development and maintenance. However KCC feels that laws proposed so far do not yet address electric motor vehicles equitably with equivalent gas cars, particularly considering Kentucky is behind neighboring states on EV adoption.

2022 Legislative Session:

House Bill 8: (Petrie) the comprehensive Revenue Bill, included an “ownership fee” of $120 for electric vehicles and $60 for Hybrid cars and electric motorcycles. This fee in the final legislation was slightly less than the original bill, due to the work of Kentucky Conservation Committee, the Evolve Electric Vehicle Group, and our constituents. The bill also included an additional excise tax on electric vehicle charging stations, exempting chargers installed before July 1, 2022. Due to language in a "cleanup" bill HB659, the dates for implementation of charger fees is now extended to January 1, 2024, which we hope will provide more time to make further adjustments in the charging program.

2021 Session Proposals: HB508 (DuPlessis) and HB561 (Santoro) Neither passed nor were heard during the 2020 session.

• HB508 Summary: Sets an initial base rate fuel tax at 24.6 cents per gallon, subject tax to annual adjustments. Allow those adjustments to increase the tax no more than ten percent or decrease no more than two percent each year and that are based on the National Highway Construction Cost Index 2.0 values. Also establishes base highway user fees for non-hybrid electric motor vehicles and plug-in electric hybrid motor vehicles and requires the collection of the fees at the time of registration and renewal. The EV and hybrid fees will be adjusted in the same manner as for motor fuel excise taxes. The proposed fees are: non-hybrid electric vehicles of 10,000 lbs. or less, $150; non-hybrid electric motor vehicles of greater than 10,000 lbs, $300; hybrid vehicles of 10,000 lbs. or less, $75; hybrid vehicles of greater than 10,000 lbs, $150.

• HB561 Summary: Sets an initial base rate fuel tax at 34.6 cents per gallon, subject tax to annual adjustments. Allow those adjustments to increase the tax no more than ten percent or decrease no more than two percent each year and that are based on the National Highway Construction Cost Index 2.0 values. Also establishes base highway user fees for non-hybrid electric motor vehicles of $150 and requires the collection of the fees at the time of registration and renewal. The EV fees will be adjusted similar to motor fuel excise taxes. Also charges a fee for vehicles with gas mileage greater than 30 mpg ranging from $35-$40. Increases registration fees, renewal fees, and special license plate fees including nature plates.

2020 Session Proposals: HB580 (did not pass).

• HB580 Summary: Proposing substantial changes to fees for Electric vehicles plus establishes fees for vehicles based on EPA mileage on a sliding scale, unfortunately sliding higher for more efficient cars. Establishes an electric vehicle highway user fee collected by county clerks upon registration and renewal. The base fee is $200. For each two tenths of one cent change in motor fuel vehicle tax, the electric vehicle highway user fee will correspondingly change by $1 dollar (up or down, but not to go below the base fee). In addition, establishes a highway preservation fee that will be collected from owners of all noncommercial motor vehicles annually, based on the combined city/highway fuel efficiency rating. 0–19 Miles Per Gallon, $5; 20–29 Miles Per Gallon, $15; 30–39 Miles Per Gallon, $25; 40 Miles Per Gallon or more, $40. All of these funds collected by the clerk will be sent to the road fund.

Background: For several sessions now, legislators in Kentucky have introduced bills that address alternative tax revenue targeting electric vehicles, since they would not be subject to a gas tax. (See HCR27 and HB317 from the 2017 session). And during the 2019 Interim Legislative Session, a special committee was formed to look at the question of “mileage-based transportation fee” models.

The 2019 Interim Special Committee (“Mileage-Based Transportation Funding Task Force“) looked at several models being piloted in other states, and researched funding issues relating to electric and hybrid vehicles.

John Snyder, Transportation, Committee Staff Administrator, Legislative Research Commission, 1n 2020, summarized a memorandum from the LRC Economist’s Office in response to questions from a Task Force member regarding the extent inflation has affected transportation funding, and the impact of fuel efficiency on taxable gallons sold and fuel tax receipts.

The memo stated that while the National Highway Cost Construction Index increased 94.7% from 2003 to 2019, Kentucky’s Road Fund receipts increased by only 39.4%. In order for the 2019 Road Fund to have the same purchasing power as in 2003, it would need to have an additional $620 million. As for the effect of fuel efficiency, if the fuel efficiency of all motor vehicles was the same in 2019 as in 1996, Kentucky fuel tax receipts would be $54.9 million higher (7.1%), based on the current 24.6 CPG rate.

The Chairman of the Special Committee, Senator Higdon, reported that “As evident in Oregon and Utah, a mileage based system requires a third party administrator...with expenses over 40% of revenue in other states, the third party administrator seems to be benefiting the most from the mileage based system, therefore the findings suggest a mileage based system would not be beneficial to Kentucky…” Chairman Higdon also added the use of GPS tracking to enable this system to work is not looked upon favorably.

Conclusion of the 2019 Special Committee: It is not the Task Force’s recommendation that Kentucky follow a mileage based transportation funding system currently. Chairman Higdon identified the one recommendation, that the General Assembly explore an electric vehicle fee at the time of registration, and upon annual renewal to ensure that operators of these vehicles pay for use of roadways.

More info:

• Consumer Reports: Rising Trend on Punitive Fees on EVs

• Mileage-Based User Fee Alliance

• Article: Switching from a Gas Tax to a Mileage-Based User Fee

• Rand Report: Mileage-Based User Fees for Transportation Funding

• University of California Study: Assessing Alternatives to California’s Electric Vehicle Registration Fees (2018)

• 17 States Now Charge Fees for Electric Vehicles

States across the U.S. have been introducing legislation that would punish people for switching to electric vehicles. Georgia, formerly the state with the second most EV sales, used to offer a tax credit of up to $5,000, but replaced the program with a $200 yearly fee that led to an 80 percent drop in EV sales. However, A recent study commissioned by the Southern Alliance for Clean Energy determined that Georgia would benefit from reintroducing a tax credit and lowering the user fee. Approving a new $2,500 tax credit, combined with a $100 user fee, would produce nearly 1,000 full-time jobs, $100 million in gains to the state’s GDP and $54 million in increased income, the study concluded.

What are states considering in a mileage-based fee process?

Washington State is currently running a pilot program, looking at 4 primary options for tracking mileage, (details here) such as:

• A Mileage Permit concept, where you purchase a pre-selected block of miles

• Quarterly Odometer Reporting to your Department of Licensing

• Automated Mileage Meter, installed in your car to track miles driven

• Smartphone app to track miles driven, verified with odometer photo

Other alternatives: States have looked at other alternatives to flat fees and mileage-based fees such as fees on tires, fees based on vehicle weight, or a combination.

See NCSL policy paper on EV fees.