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HB 5738

AN ACT RELATING TO TAXATION -- PERSONAL INCOME TAX

2025 Regular Session Introduced by Karen Alzate and 9 co-sponsors

Rhode Island would provide a nonrefundable personal income tax credit worth 50% of conversion costs (up to $2,000/$3,000) for converting a vehicle to an approved alternative fuel.

05/21/2025 Committee recommended measure be held for further study
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WeVote Research Nonpartisan
Bill Summary · HB 5738

Summary of HB 5738 (Rhode Island)

Overview

HB 5738 would add a personal income tax credit for individual taxpayers who convert a Rhode Island motor vehicle from gasoline or diesel to operate on an alternative fuel. The credit is nonrefundable, limited by the taxpayer’s income tax liability, and would take effect for tax year 2026. The bill was introduced February 26, 2025, referred to the House Finance Committee, with the committee recommending the measure be held for further study on May 21, 2025.

Purpose and intent

  • Promote the use of alternative fuels and reduce reliance on traditional gasoline/diesel-powered vehicles.
  • Provide a financial incentive for individuals to convert existing vehicles to run on alternative fuels.

Key provisions

  • New tax credit: Added to Rhode Island’s personal income tax (Chapter 44-30) as Section 44-30-28.
  • Credit amount: 50% of eligible equipment and labor costs for converting a vehicle to alternative fuel.
  • Maximum per vehicle:
    • $2,000 for vehicles with gross weight ≤ 10,000 pounds.
    • $3,000 for vehicles with gross weight > 10,000 pounds.
  • Eligible fuels (alternative fuels):
    • Natural gas, liquified petroleum gas (LPG), liquified natural gas (LNG), hydrogen, cooking oil, electricity.
    • Any other fuel if at least 85% of the fuel is methanol, ethanol, or another alcohol/ether or a combination thereof.
  • Limitations:
    • The credit cannot exceed the taxpayer’s Rhode Island income tax liability for the year.
    • No carryback or carryforward; credit must be used in the year of conversion (per the taxpayer’s accounting method).
  • Seller restriction: A seller of an alternative fuel may not claim the credit for converting its own vehicles to the alternative fuel it sells.

Who is affected

  • Primary beneficiaries: Individual income taxpayers who convert their personal vehicles to operate on an approved alternative fuel.
  • Not affected: Sellers of alternative fuels cannot claim the credit for converting their own vehicles.
  • Vehicle owners must incur qualified equipment and labor costs to qualify.

Timing and procedural notes

  • Effective date: Tax year beginning January 1, 2026.
  • Legislative status: Introduced February 26, 2025; referred to House Finance; scheduled for hearing/consideration May 16, 2025; as of May 21, 2025, the committee recommended that the measure be held for further study.

Potential impact (high level)

  • Encourages conversions to alternative fuels among Rhode Island residents.
  • Provides a modest, nonrefundable tax incentive that is capped per vehicle and limited to the taxpayer’s liability.
  • Fiscal impact depends on uptake and the mix of eligible vehicle conversions; does not create a tax credit carryover, limiting long-term fiscal exposure.

Compiled from official sources — confirm details with the bill’s official record.

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