It’s no secret that many tree care businesses are adding electric or zero-emission vehicles to their fleets. Chipper and bucket trucks, vans, dump trucks – just about every commercial vehicle has an electric option.

Dan Mayer, owner of Mayer Tree Service, a 32-year TCIA member company based in Essex, Massachusetts, with his Rivian R1T all-electric pickup truck, left, and a customer’s Ford Lightning EV. “Mine is a Max Pack, which gives it a 400-mile range,” says Mayer

But whether transitioning to electric or zero-emission vehicles makes sense economically for a tree care business depends on a number of factors – especially funding.

On the government front, the Bipartisan Infrastructure Law (BIL) and the Inflation Reduction Act (IRA) provided funding for vehicle electrification, particularly for medium- and heavy-duty trucks and charging infrastructure. But it is the current tax breaks that provide most of the latest “going-green” funding.

Tax savings

Tree care professionals who purchase qualified, commercial clean vehicles can claim a clean-vehicle tax credit – a direct reduction of their tax bill rather than a deduction – thanks to the tax law’s 45W rules. The credit amount is the lesser of:

• 15% of the vehicle purchase price for plug-in hybrid electric vehicles (PHEV).
• 30% of the vehicle purchase price for electric vehicles (EVs) and fuel cell electric vehicles (FCEVs).

There is no limit to the number of credits a tree care business can claim, although the credits are nonrefundable, meaning they’re limited by the operation’s tax bill. For the amounts that can’t be claimed, the 45W credit can be carried over as a general business credit.
Partnerships and S corporations are required to file Form 8936, Clean Vehicle Credits, with all other businesses reporting the credit on Form 3800, General Business Credit.

Don’t forget that infrastructure

Whether for one vehicle or the more-than-five vehicles the IRS labels as a “fleet,” improvements are necessary to support those “green vehicles.” Fortunately, many of those necessary improvements also qualify for a tax credit.

A tree care business installing vehicle refueling and recharging property may be eligible for the Alternative Fuel Vehicle Refueling Property Tax Credit. The credit is based on the placed-in-service date for the qualifying refueling property.

The tax credit for alternative-fuel vehicle refueling property subject to depreciation equals 6%, with a maximum of $100,000 for each single item of property. To be eligible for a 30% tax credit with the same $100,000 limit, a tree care business must meet the prevailing wage and apprenticeship requirements. Generally, this means paying workers prevailing wage rate and employing apprentices from registered apprenticeship programs.

Partnerships and S corporations use Form 8911, Alternative Fuel Vehicle Refueling Property Credit, to claim the credit. All others can report this credit on Form 3800, General Business Credit.

Tax write-offs

While tax credits are the most direct and least competitive way for arborists and other tree care professionals to reduce the cost of trucks and charging equipment, the tax law’s potential cost reductions aren’t limited to tax credits.

Accelerated depreciation, such as Section 179 and bonus depreciation, allow a tree care business to deduct the cost of an asset early on rather than depreciating it over a longer period. The tax law’s Section 179 allows an immediate expense deduction for tree care operations purchasing depreciable equipment, rather than capitalizing and depreciating them over time.
Not only “green” vehicles qualify for the Section 179 write-off; heavy SUVs, pickups and vans used for business purposes and with a Gross Vehicle Weight Rating (GVWR) of more than 6,000 pounds and vehicles with no passenger seating, such as cargo vans and box trucks, qualify as well.

Bonus depreciation now allows tree care businesses to immediately save more of the cost of assets. Both Section 179 and the bonus depreciation (now down to 60% in 2024), which is usually taken after the Section 179 spending cap is reached, allow a business to deduct more of the cost of assets when first purchased, rather than depreciating them over a longer period.

We’ve got funding options

The upfront cost of transitioning to electric or zero emissions can be significant. While tax credits, first-year expensing and bonus depreciation write-offs can reduce the cost of transitioning, procuring the funding to purchase EV and zero-emission vehicles can be expensive. Fortunately, there are many ways to fund these expenses.

Getting a loan is a good option for any business seeking to acquire EVs. With one of the increasing numbers of electric-vehicle loans, a tree care business can buy and use a vehicle right away.

Although the interest paid on an EV loan is usually deductible and returns some of the amount paid for the vehicle or vehicles, it will still be worth less than the money put into it.

Enter EV leasing

EV leasing allows the tree care business to finance the vehicles needed with payment options such as a tax deduction for monthly payments. Leasing also facilitates getting newer equipment, usually under warranty.

On the downside, the operation doesn’t own the vehicle while payments are being made. Once the lease ends, there is, of course, usually an option to buy the EV or lease something newer and better. Leasing today is an increasingly preferable option, because it gives the tree care business access to new or almost-new vehicles for shorter periods. This helps reduce repair costs and keeps the EV in good shape.

The search for financing

The tree care professional’s first stop when searching for affordable funding should be its bank. Even without a personal relationship, the operation’s bank is familiar with the business, putting it one step ahead of other applicants.

And don’t forget that banks provide many services as well as guidance to other funding resources. Of course, if a bank won’t lend the tree care operation the funding necessary to electrify its vehicles, there are now numerous options. Government-backed loan guarantees, for instance, offer an option for fleet electrification. That’s when SBA loan guarantees come in.

The SBA does not have a dedicated commercial-vehicle loan, since most fall under the umbrella of equipment financing. The most commonly used SBA loan for equipment financing is their 7(a) loan program.
Although often difficult to qualify for and taking a long time to find, SBA financing options can provide up to $5 million to purchase one vehicle or a fleet of vehicles. Successful borrowers are rewarded with low interest rates and better terms.

Beyond the bank

There are hundreds of specialist small-business lenders that can help with fleet transition. While requirements, terms and interest rates will vary widely, these private lenders can absorb the high upfront costs of procuring electrified chipper and bucket trucks – and charging infrastructure – that allow a fleet to transition without tying up its capital.

Some companies offer EV financing or leasing that help a tree care business avoid the large capital outlays often required to transition a fleet. These costs also can be avoided by working with a fleet-management company, an
“Electrification-as-a-Service” provider that can provide procurement costs as well as ongoing vehicle maintenance – even charging infrastructure – for a single fee.

Don’t forget the tree care operation’s energy provider. While few provide funding for transitioning, most have programs for financing charging stations and other infrastructure improvements – as well as service upgrades and reduced electricity costs.

Going green via the internet

So-called funding “platforms” are an increasingly popular door to internet financing. With an online lender, bad credit is not always a barrier to getting the needed financing, although it often makes it expensive. And, while these lenders put up fewer barriers, other drawbacks can include a significantly higher risk and lower loan amounts.

An often-overlooked internet option is Peer-to-Peer business lenders. While often expensive, these lenders eliminate the middleman, such as banks, to connect borrowers with individuals and institutional investors.

Going beyond

Tax credits and deductions can reduce the cost of taking advantage of technology advances and complying with increasing regulations. However, financing the transition remains key.

Fortunately, when it comes to financing EVs or zero-emission vehicles (ZEVs), funding can take various forms, including:

• Loans with low or no interest offered by states.
• Loan guarantees from federal and state programs.
• Funding from public sources in the form of grants and credit vouchers. These can help offset the cost of electrification, both for vehicles and for the charging infrastructure.
• Private partners, such as those offering electric-truck leasing or financing. These partners can help in avoiding the large capital outlays required to convert to an EV fleet.
• Dealer financing. More and more dealers are entering the all-electric-vehicle market by offering electric chassis, which can then be customized to meet the unique needs of the tree care industry.

Conclusion

Transitioning to electrification or zero-emission vehicles and fleets can be costly. Fortunately, utilizing a mix of tax credits and deductions, traditional and non-traditional funding can help tree care professionals successfully reduce costs and economically finance the electrification of their operations.

Starting the transition now will provide not only operating efficiencies and customer and community goodwill, but also will allow the tree care operation to comply with current and proposed emission regulations. Of course, professional guidance can help on many fronts.

Mark E. Battersby is a freelance writer based in Ardmore, Pennsylvania. He has contributed tax and financial articles to TCI Magazine for more than 20 years.