Iowa DOT Issues Report on Electric Vehicles

On December 31, 2018, the Iowa DOT released a report analyzing the potential effect of electric vehicles on the Road Use Tax Fund in Iowa.  Because these vehicles use no gasoline, they do not pay the state fuel tax.  The number of electric vehicles is relatively small at this time, so the impact on the Road Use Tax Fund is not immediately significant, but it is projected to be over $40 million per year by 2040.  In order to mitigate that impact, the Iowa DOT makes a three-part recommendation to increase fees and charges for electric vehicles:

1.  A 2.6 cent-per-kWh charge for nonresidential charging locations (intended to capture out-of-state and commercial vehicles).
2. A supplemental registration fee for electric cars and related vehicles ($130 per year for plug-ins, $65 for hybrids, and $7 for motorcycles).
3. A hydrogen fuel excise tax (65 cents per 2.49 pounds of hydrogen) for fuel cell vehicles.

The fees are calculated to approximate the amount of tax levied upon motor fuels.  The DOT indicates that in the long term, a mileage-based user fee is the preferred option, but concerns about privacy and accuracy make this a future option.

BrownWinick expects that legislation will be introduced in the 2019 session to implement the DOT recommendations.