IRS Issues Statement on New Plug-In Electric Drive Vehicle Credit (IRC 30D)

[greenne]

Well, thinking about the point of sale rebate feature of the new law:

That point of sale rebate feature does not kick in until 2024, and so even under the new law during 2023 it will be a tax credit at filing.

I believe the only thing in the new law language specific to EVs (I will not be reading the entire 755pg bill), deals with this point-of-sale feature and how basically dealers will be able to get credit from the gov’ment for making purchase contract price reductions for the buyer.

Accordingly, perhaps somewhere this sales point rebate feature (not applicable until 2024) became characterized as a refundable credit to the buyer?

That, or it’s addressed in the other 700+ pages of the bill?

I don't see how you could have a POS rebate without the tax credit being refundable. In essence the dealer takes your refund from you and pays you(or gives you credit) in advance of your tax return.

Notice also that the law states this is an option(or right) but not mandatory. There's gotta be some way for you to file for credit come tax time if you choose not to get prepaid.

It could be handled similarly to the pandemic rebates where they asked you how much you recieved already. If you put full amount nothing else happened, if you put an amount less than allotted you received the pandemic $$ as a refund.

Every analysis I saw on this bill and all the bbb work said the EV credit was refundable.

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[cvalue13]

I don't see how you could have a POS rebate without the tax credit being refundable. In essence the dealer takes your refund from you and pays you(or gives you credit) in advance of your tax return.

Notice also that the law states this is an option(or right) but not mandatory. There's gotta be some way for you to file for credit come tax time if you choose not to get prepaid.

It could be handled similarly to the pandemic rebates where they asked you how much you recieved already. If you put full amount nothing else happened, if you put an amount less than allotted you received the pandemic $$ as a refund.

Every analysis I saw on this bill and all the bbb work said the EV credit was refundable.

I’m equally at a loss and not even agile in this particular matter at all. I was only attempting ham-fistedly to thread the oddity needle.

Namely, perhaps it’s “refundable” on the same time-line as the POS aspect, and/or only to the extent taken as a POS credit?

but, past such wild conjecture the best current answer I personally can muster seems its an area left silent in the bill, and intended for the IRS to hash out? But like you, if forced to say, I’d think it goes into effect no sooner than 1/1/23 given the Effective Date clause of the bill (together with the carve-ours to the effective date not touching on the point).

 

[Maquis]

Why worry about it? If you take delivery before Dec 31 2022 you fall under old tax credit rules..no $80k cap.

He’s complaining that his price went up by $100 and wants the dealer to take it off. He never mentioned the 80K limit relating to the credit.
Although the fact that he posted it in this thread would tend to indicate the cap was his beef.

 

[Rando]

I’m equally at a loss and not even agile in this particular matter at all. I was only attempting ham-fistedly to thread the oddity needle.

Namely, perhaps it’s “refundable” on the same time-line as the POS aspect, and/or only to the extent taken as a POS credit?

but, past such wild conjecture the best current answer I personally can muster seems its an area left silent in the bill, and intended for the IRS to hash out? But like you, if forced to say, I’d think it goes into effect no sooner than 1/1/23 given the Effective Date clause of the bill (together with the carve-ours to the effective date not touching on the point).

I sure hope it’s changed to a refundable credit at least for 2023. If not, that would be a pretty narrow income gap that’s eligible for the full credit, especially if you have kids.

Personally, if it’s not refundable, I’m not getting much, if any. As a self employed person, with children, who is only drawing enough money from the business to live off of and otherwise spending the rest in the business to grow it, I’m going to be incredibly tax poor next year.

 

[p52Ranch]

I literally got the call today my Lightning arrived and will be ready tomorrow for delivery. I went to the dealer and MSRP was $80,024 after Destination and Delivery went up $100. I kinda lost it on them and asked who can change that. Dealer said they can't, then I read someone here called Ford and was told Dealers can increase that. Obviously it was changed from the original $1695, so someone can unilaterally change it. But who? Dealer or Ford Corporate?

I just purchased mine on Monday when I inquired about running a "Smart Vincent" on the $100 price increase, my dealer said it didn't matter because they were honoring the original order price I signed back in February which had the $1695. The dealer will get the $100 credited back to them through Ford.

 

[greenne]

I sure hope it’s changed to a refundable credit at least for 2023. If not, that would be a pretty narrow income gap that’s eligible for the full credit, especially if you have kids.

Personally, if it’s not refundable, I’m not getting much, if any. As a self employed person, with children, who is only drawing enough money from the business to live off of and otherwise spending the rest in the business to grow it, I’m going to be incredibly tax poor next year.

If it were NOT refundable it would be a huge misstep. The biggest "issue" with the old credit(other than the 200k cap) was the fact well off folks got a huge benefit because they had tax liability to offset the $7500 credit. Moderate/Low income people could only use a small fraction of the $7500 credit so it didn't have as much impact.

If we truly want to make EVs mainstream, we have to get the average car buyer to choose one, not just the Tesla fans of the world. Example: A $25k Bolt or a $30-35k Equinox EV minus $7500 could do that.

 

[sotek2345]

If it were NOT refundable it would be a huge misstep. The biggest "issue" with the old credit(other than the 200k cap) was the fact well off folks got a huge benefit because they had tax liability to offset the $7500 credit. Moderate/Low income people could only use a small fraction of the $7500 credit so it didn't have as much impact.

If we truly want to make EVs mainstream, we have to get the average car buyer to choose one, not just the Tesla fans of the world. Example: A $25k Bolt or a $30-35k Equinox EV minus $7500 could do that.

My understanding (not a lawyer) is that is will be refundable, but I am not sure if that kicks in for 2023, or 2024 when it becomes a point of sale credit.

 

[Rando]

My understanding (not a lawyer) is that is will be refundable, but I am not sure if that kicks in for 2023, or 2024 when it becomes a point of sale credit.

That is indeed the $3750-$7500 question. I’ll keep digging.

 

[greenne]

My understanding (not a lawyer) is that is will be refundable, but I am not sure if that kicks in for 2023, or 2024 when it becomes a point of sale credit.

Pre Manchin bombshell surprise change of heart(not really) every analysis I saw had it as refundable. I don't see how you could do a point of sale any other way. However, at this point NOTHING surprises me with this very awkward law.

On a related topic, the bill extends the solar credit at 30% for 10yrs. Now may be the time to go solar for a lot of people...

 

[sotek2345]

Pre Manchin bombshell surprise change of heart(not really) every analysis I saw had it as refundable. I don't see how you could do a point of sale any other way. However, at this point NOTHING surprises me with this very awkward law.

On a related topic, the bill extends the solar credit at 30% for 10yrs. Now may be the time to go solar for a lot of people...

Hmmm...

I just took another pass through the legislative text and don't see anything saying it is made refundable. There is a section saying that if you take a POS rebate and end up not eligible for the full credit, you owe the difference in your annual taxes.

Again - very much not a lawyer and I easily could have missed a key word or tricky phrase.

 

[cvalue13]

I don't see how you could do a point of sale any other way.

I found that Dept. of Treasury also released a FAQ yesterday (posted in full below), which speaks to the issue of the credits and POS and makes no mention of rebate (underlined below).

I also note, it indirectly suggests some things on the separate topic of the Secretary releasing guidance RE batter minerals and components requirement, which could *theoretically* trigger implementation before 1/1/23 (see bold-italics below) Namely, the FAQ twice is explicit that nothing else becomes effective before 1/1/23, implying that either the Secretary won’t release guidance before the drop-dead date, there’s something we’re missing in the bill, or the FAQ isn’t addressing/anticipating this nuance.


Frequently Asked Questions on the Inflation Reduction Act’s Initial Changes to the Electric Vehicle Tax Credit

Q: How does the Inflation Reduction Act modify the existing tax credit for new electric vehicles?

The Inflation Reduction Act introduces a number of significant changes to the tax credit for new electric vehicles (section 30D). These changes will phase in over time. Effective immediately after enactment of the Inflation Reduction Act (after August 16, 2022), the tax credit is only available for qualifying electric vehicles for which final assembly occurred in North America. Further changes to the eligibility rules will begin in 2023.
Overall, the reforms in the Inflation Reduction Act mean that the tax credit for electric vehicles will evolve considerably over the coming months and years. However, the only change to the electric vehicle credit that takes effect immediately after the President signs the Inflation Reduction Act into law is the North America final assembly requirement.
Separately, starting in 2023, the Inflation Reduction Act also establishes tax credits for pre-owned clean vehicles (section 25E) and for commercial clean vehicles (section 45W). Treasury and the Internal Revenue Service will release more information on all the clean vehicle credits in the coming months.

Q: Now that the President has signed the Inflation Reduction Act into law, the North America final assembly requirement will enter into force after August 16, 2022. How do I know if an electric vehicle’s final assembly occurred in North America?

Dealers and consumers can follow a simple two-step process to check whether a vehicle’s final assembly occurred in North America.
First, the Department of Energy’s Alternative Fuels Data Center (AFDC) has developed a list of Model Year 2022 and 2023 electric vehicles that likely meet the North America final assembly requirement, available here: https://afdc.energy.gov/laws/inflation-reduction-act. Dealers and consumers can check this list to determine whether a make/model is potentially eligible for the credit in light of the final assembly requirement. Because some models are built in multiple locations, there may be vehicles on this list that do not meet the final assembly requirement in all circumstances.
Second, to identify whether a specific vehicle’s final assembly occurred in North America, dealers and consumers should enter the 17-character Vehicle Identification Number (VIN) into the National Highway Traffic Safety Administration’s VIN Decoder tool, available here: https://vpic.nhtsa.dot.gov/decoder/. Dealers and consumers can refer to the “Plant Information” field at the bottom of the page result, which expressly lists the build plant and country for the searched vehicle.

Q: How do I claim this credit?

Consumers that purchase a qualifying electric vehicle can continue to claim the electric vehicle tax credit on their annual tax filing. Starting in 2024, the Inflation Reduction Act establishes a mechanism that will allow car buyers to transfer the credit to dealers at the point of sale so that it can directly reduce the purchase price.
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Q: If I signed a contract to purchase an electric vehicle prior to enactment of the Inflation Reduction Act (before August 16, 2022) but have not yet taken possession of the vehicle, will the changes in the Inflation Reduction Act impact my tax credit?

No. If you entered into a written binding contract to purchase a qualifying electric vehicle before the date of enactment of the Inflation Reduction Act (August 16, 2022), the changes in the Inflation Reduction Act will not impact your tax credit. You may claim the credit based on the rules that were in effect before August 16, 2022. The Internal Revenue Service provides information on “written binding contract” here: https://www.irs.gov/businesses/plug-in-electric-vehicle-credit-irc-30-and-irc-30d.

Q: What if I purchase and take possession of a qualifying electric vehicle after August 16, 2022 but before the end of 2022?

The only change to the existing electric vehicle credit that takes effect after August 16, 2022 and before the end of 2022 is the introduction of the North America final assembly requirement. Otherwise, the rules in effect before enactment of the Inflation Reduction Act for the electric vehicle credit remain in effect, including the phase-out for manufacturers that have sold over 200,000 vehicles in the United States.

Q: Where can I find out more about the other changes taking effect starting next year?

The Internal Revenue Service and the Department of the Treasury will post information and request comments from the public on various existing and new tax credits in the coming weeks and months, including on further changes to eligibility rules for clean vehicle tax credits. Please look for updates on IRS.gov and other announcements from the Administration.”
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[greenne]

Hmmm...

I just took another pass through the legislative text and don't see anything saying it is made refundable. There is a section saying that if you take a POS rebate and end up not eligible for the full credit, you owe the difference in your annual taxes.

Again - very much not a lawyer and I easily could have missed a key word or tricky phrase.

To be fair, I didn't see that outlined in the previous(BBB era) bill drafts either. So I don't know, maybe its something else the IRS gets to decide...

 

[Maxx]

Looking at how the new law happen to be implemented exactly when Ford full $7,500 credit runs out makes me think R.J. must be kicking himself not to spend more money on lobbyists and less on manufacturing. I wonder what is the cost to the nation in termes of total time spent trying to understand and take advantage of this instead of doing something productive. I guess that is my que to get off line.

 

[Roy2001]

So delivery before 12/31 should be exempted from income limitation right?

 

[Aspesi4]

So delivery before 12/31 should be exempted from income limitation right?

That's my understanding. The Lightning which is assembled within the States, will be exempt from the income and 80k price through the end of the year. For all the MY22 orders, we're all good regardless of a binding contract or not.

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