Jan 6 - Knight Ridder/Tribune Business News - Tom Incantalupo Newsday, Melville, N.Y.

Buyers of Toyota's Prius, the bestselling hybrid vehicle in the United States, have tended to be relatively affluent, with median family incomes of almost $90,000 a year -- high for a midsize family car.

But, apparently unintentionally on the federal government's part, the new tax credits that took effect this year to encourage the sale of fuel-saving hybrids won't be available to many affluent families if they are among the growing numbers subject to the alternative minimum tax, accountants say.

The IRS hasn't yet specified the credit amounts or other details but the credits are expected to range from $250 to about $3,000, depending upon the specific vehicle's fuel economy and other factors.

Toyota hasn't complained about potential hybrid customers getting caught by the alternative minimum tax, but General Motors' spokesman Chris Preuss in Washington says the Detroit carmaker isn't happy about that at all. "A tax credit that can't be used is really not a tax credit, so that needs to be looked at," he said.

GM probably stands to benefit more than Toyota from the hybrid car credits because they begin phasing out when manufacturers have sold 60,000 hybrids. Toyota sold about 108,000 Priuses last year and has predicted that credits for the Prius could run out as early as June.

GM offers just two hybrid models now -- variants of its full-sized Chevrolet Silverado and GMC Sierra pickup trucks that are produced in low volume and aimed primarily at commercial users.

But this summer, the first of a series of hybrids aimed at the average consumer -- a variant of the Saturn Vue sport utility vehicle called the Green Line -- is scheduled to go on sale, followed by a hybrid version of the Chevrolet Malibu, a midsize sedan. Hybrid versions of the automaker's full-size SUVs are scheduled to go on sale next year as 2008 models. The Green Line is expected to cost $1,100 to $1,500 more than a conventionally powered Vue.

At $21,725 to start, the Prius costs about $1,350 more than a comparably equipped four-cylinder Camry, although Toyota estimates that Prius buyers are paying a premium of more than $2,000 for the hybrid powertrain.

The U.S. Environmental Protection Agency estimates the Prius fuel economy at 60 miles per gallon in city driving, when the vehicle sometimes is propelled only by its electric motor, and 51 mpg on the highway when the gasoline engine is needed. Consumer Reports said, however that it got 44 mpg overall in its tests. The Camry is rated at 24 mpg city and 34 highway with a four-cylinder engine.

Toyota says the $89,900 median income for Prius buyers compares to about $64,000 a year for Camry buyers and about $58,500 for buyers of all midsize sedans.

Preuss says widely available incentives are important in helping persuade buyers to spend extra money for hybrids -- in the case of the Vue, probably $1,100 to $1,500 more than a conventionally powered Vue. "Obviously, incentives would sweeten the deal and that's something we've sort of factored into the business planning for these vehicles."

Honda and Ford Motor Co. also offer hybrids to U.S. buyers.

Honda says its Accord Hybrid buyers have a $105,000 a year median household income, compared with $95,800 for buyers of the conventional Accord V-6.

The alternative minimum tax, enacted in 1969 to ensure that the rich paid their fair share of federal income taxes, has to be paid if it is higher than a tax calculated the conventional way with itemized deductions. It is now catching more middle class people because it is not indexed for inflation. In 2003 2.4 million households paid the AMT, up from only 414,000 in 1995. Temporary relief enacted by congress in 2001 expired at the end of last year.

Asked for a comment on the unavailability to those consumers of the hybrid tax credit, Democratic Sen. Hillary Rodham Clinton's office sent the following: "The fact that the AMT could wipe out the tax credits for hybrids is another in the long list of reasons that we need AMT reform. More than 90 percent of Americans want cleaner, higher mileage cars to drive -- and they want the government to help make that happen."

Citing the potential political fallout if millions more families become subject to the AMT this year, many tax experts believe Congress will reinstate that temporary relief.

Not everyone agrees, though, that sales of hybrids will be hurt much even if that doesn't happen. Prius owner Ralph Barris of Bellmore, for example, says he'd have bought it to "use less gasoline and help the environment" even if no credits were available. The 67-year-old retired school teacher took delivery of his car earlier this week at Atlantic Toyota in Amityville. "I was aware of it," he said of the credit, "but I have no idea what it is."

The credit for the Prius is expected to be about $3,000.

Dan Becker, who heads the Sierra Club's Global Warming Program, says he doesn't think the AMT will deter affluent consumers and that the credits could help pull in a new group of buyers who have hesitated to consider hybrids because of their relatively high purchase prices.

"There are more people wanting hybrids than there are hybrids being made," Becker said. "Although some people might buy them with the expectation of a tax credit, the majority of people who are buying hybrids will buy it anyway."