From The Car Connection:

SUV Tax Credit Survives Senate

Republican leaders on Monday quashed a Senate plan to eliminate a tax loophole allowing small-business owners to deduct up to $100,000 from their income for buying the largest sport-utility vehicles on the market. At the same time, though, lawmakers endorsed $2 billion in tax incentives over five years for consumers to buy hybrid and clean diesel vehicles.

The Senate had added language to the Energy bill eliminating a much-criticized tax dodge allowing small business owners and independent contractors to deduct the cost of a vehicle so long as it weighs over 6000 pounds. But party leaders upheld the loophole under pressure from small-business and auto industry lobbyists. SUV and trucks with the worst gas mileage also provide automakers with the highest per-unit profit. The tax provision was originally written to help farmers and contractors buy pickup trucks and other heavy vehicles. But with the growth in large personal-use SUVs like the Hummer H2, Lincoln Navigator, and Chevy Tahoe, the code has had the effect of incentivizing realtors, accountants and other independent business owners to buy gas-guzzling SUVs instead of more fuel-efficient passenger cars or even smaller SUVs.

The energy bill, which could make it to President Bush's desk to sign this week also would make buyers of cars and light-duty trucks with either hybrid or modern diesels eligible for tax credits of up to $3400 per vehicle, provided they meet certain performance and fuel-saving criteria. Bigger incentives would be available for fuel cell vehicles and larger trucks. The provision could help drive sales of 500,000 alternative-fuel vehicles over the next five years, and incentivize automakers to bring more clean diesel vehicles to market.-Jim Burt