Latest Possible Build Date for 2022 Tax Credits?

[cvalue13]

I'm biting my tongue as hard as I can, I learned long ago during my active duty career not to express opinions until policy & counsel have reviewed and issued guidance.

fair enough!

I’m a bit more foolhardy, and in any event attempt (but surely fail) to inject to cast doubt or caution over those confused or asserting certainty.

To wit, your point about awaiting guidance from the IRS brings up an important nuance folks interested in this topic should bare in mind:

Technically speaking, the rules around the MSRP and income caps go into effect when the IRS issues it’s guidance which in theory could be before 12/31/22; that said, indications are that few expect the IRS to issue such guidance before the 12/31/22 deadline, but still it should be held in mind that while it’s possible that the relevant date for the MSRP cap is 12/31/22 it is not certain it couldn’t happen earlier.


Secondly, as for the trigger of “placed in service” - for what little it’s worth to others, a quick glance around at the “placed-in-service” approaches taken by the IRS suggest it definitely “depends,” and somewhere out there there will be specific guidelines around a personal use vehicle eligible for individual tax credits (which specific guidelines I’m unfamiliar with), but that it would appear folks should not assume that completion of purchase is the relevant trigger. In fact, seems doubtful, to my untrained eye.

to reemphasize and clarify that last point, while the “transition rule” placed a lot of emphasis on the date of having a binding sales contract (which is probably leading folks to a present confusion), folks should not assume (and in fact it seems doubtful) that such a purchase date trigger is relevant to when their vehicles will be viewed as “placed in service” by the IRS.

you *might* even need keys in hand?

That said, while the story isn’t over until the fat lady sings (ie the IRS issues it’s specific new guidance on these specific new laws), if you have a tax professional they may be familiar with what the IRS has historically said about the “placed in service” trigger for personal vehicles eligible for personal tax credits.

Until a tax professional says otherwise, and in particular until the IRS says otherwise in guidance not yet released, I personally would presently assume that to feel remotely comfortable I could avoid the MSRP cap (with minimal audit risk):

(1) I could pull the vehicle in my driveway (after completing purchase)

(2) on a calendar date prior to the calendar date the IRS issues its guidance on the new law (which I’d hope is 12/31/22 but can’t bank on)

But to repeat, I’m here only expressing my personal view of how to estimate the relevant facts from a non-tax professional’s view, until learning otherwise from a tax professional. References above to possibly needing registration/titling are an example of unknowns I’d seem a tax professional to weigh in on.

Notably, I’m pointing out my above personal ‘estimate’ because it’s meanwhile rather unhelpful to state the technical present conclusion: you won’t know for sure what ‘placed in service’ means until the IRS issues it’s guidance, but the vehicle will need to be ‘placed in service’ before the IRS issues it’s guidance

Sponsored

 

[greenne]

fair enough!

I’m a bit more foolhardy, and in any event attempt (but surely fail) to inject to cast doubt or caution over those confused or asserting certainty.

To wit, your point about awaiting guidance from the IRS brings up an important nuance folks interested in this topic should bare in mind:

Technically speaking, the rules around the MSRP and income caps go into effect when the IRS issues it’s guidance which in theory could be before 12/31/22; that said, indications are that few expect the IRS to issue such guidance before the 12/31/22 deadline, but still it should be held in mind that while it’s possible that the relevant date for the MSRP cap is 12/31/22 it is not certain it couldn’t happen earlier.


Secondly, as for the trigger of “placed in service” - for what little it’s worth to others, a quick glance around at the “placed-in-service” approaches taken by the IRS suggest it definitely “depends,” and somewhere out there there will be specific guidelines around a personal use vehicle eligible for individual tax credits (which specific guidelines I’m unfamiliar with), but that it would appear folks should not assume that completion of purchase is the relevant trigger. In fact, seems doubtful, to my untrained eye.

to reemphasize and clarify that last point, while the “transition rule” placed a lot of emphasis on the date of having a binding sales contract (which is probably leading folks to a present confusion), folks should not assume (and in fact it seems doubtful) that such a purchase date trigger is relevant to when their vehicles will be viewed as “placed in service” by the IRS.

you *might* even need keys in hand?

That said, while the story isn’t over until the fat lady sings (ie the IRS issues it’s specific new guidance on these specific new laws), if you have a tax professional they may be familiar with what the IRS has historically said about the “placed in service” trigger for personal vehicles eligible for personal tax credits.

Until a tax professional says otherwise, and in particular until the IRS says otherwise in guidance not yet released, I personally would presently assume that to feel remotely comfortable I could avoid the MSRP cap (with minimal audit risk):

(1) I could pull the vehicle in my driveway (after completing purchase)

(2) on a calendar date prior to the calendar date the IRS issues its guidance on the new law (which I’d hope is 12/31/22 but can’t bank on)

But to repeat, I’m here only expressing my personal view of how to estimate the relevant facts from a non-tax professional’s view, until learning otherwise from a tax professional. References above to possibly needing registration/titling are an example of unknowns I’d seem a tax professional to weigh in on.

Notably, I’m pointing out my above personal ‘estimate’ because it’s meanwhile rather unhelpful to state the technical present conclusion: you won’t know for sure what ‘placed in service’ means until the IRS issues it’s guidance, but the vehicle will need to be ‘placed in service’ before the IRS issues it’s guidance

As if this were not enough to consider..

For those of us close to the msrp cap I'm waiting for the IRS to define "MSRP. Are they really going to tell someone who ordered say an all terrain tire that pushes him just over $80k he/she Can't have the tax credit vs someone who didn't have that option? How could that ever possibly be enforced unless they inspected each VIN and looked at the widow sticker?

For example, NYS uses base MSRP(no options) as the factor rather than total MSRP so that it covers a huge batch of trucks vs thousands of individual transactions.

Also..does MSRP include destination/delivery? Some say yes, some say NO. (I am aware Ford has total MSRP on the sticker but other manufacturers do not)

IRS could also decide to waive or delay the requirement.

Still lots of unknowns here...

 

[cvalue13]

As if this were not enough to consider..

For those of us close to the msrp cap I'm waiting for the IRS to define "MSRP. Are they really going to tell someone who ordered say an all terrain tire that pushes him just over $80k he/she Can't have the tax credit vs someone who didn't have that option? How could that ever possibly be enforced unless they inspected each VIN and looked at the widow sticker?

For example, NYS uses base MSRP(no options) as the factor rather than total MSRP so that it covers a huge batch of trucks vs thousands of individual transactions.

Also..does MSRP include destination/delivery? Some say yes, some say NO. (I am aware Ford has total MSRP on the sticker but other manufacturers do not)

IRS could also decide to waive or delay the requirement.

Still lots of unknowns here...

yeah, as you know, I went down the MSRP definition rabbit hole in a different post and came to the conclusion that it’s at least possible (based on language of the bill and some historical precedent) that the IRS will look only to base MSRP

that it’s possible obviously not meaning it’s certain, but instead only finding optimism in having not arrived at he opposite conclusion

 

[greenne]

yeah, as you know, I went down the MSRP definition rabbit hole in a different post and came to the conclusion that it’s at least possible (based on language of the bill and some historical precedent) that the IRS will look only to base MSRP

that it’s possible obviously not meaning it’s certain, but instead only finding optimism in having not arrived at he opposite conclusion

From an admin point of view that makes it much easier to manage. That means looking at batches of almost an entire model year truck at once VS looking at tens of thousand of individual truck. If they plan to try to enforce that (even if thru random audit) its gonna require many, many man hours of research. A quick VIN check would confirm model year(trim) which is easy to confirm base MSRP. To find optioned MSRP you would have to then take an MSRP and look at sales documents for specific MSRP.

 

[cvalue13]

From an admin point of view that makes it much easier to manage. That means looking at batches of almost an entire model year truck at once VS looking at tens of thousand of individual truck. If they plan to try to enforce that (even if thru random audit) its gonna require many, many man hours of research. A quick VIN check would confirm model year(trim) which is easy to confirm base MSRP. To find optioned MSRP you would have to then take an MSRP and look at sales documents for specific MSRP.

It will be months before the IRS issues guidance and interpretation on the IRA, including the much-discussed MSRP caps. Until then, nobody (least of all me) knows exactly how the IRS will define these MSRP caps.

Still, I’ve been curious to better anticipate how these MSRP caps may be interpreted, and through some digging have collected a couple of interesting tidbits, which at the end I apply to Ford’s MY2023 MSRP details.

….

But the web to get there takes a sleepless night of dreaming up the IRS guidance to come, as follows:

(1) Prior IRS guidance on “MSRP” points to the laws behind the “Monroney Sticker” requirements

One prior IRS vehicle tax-credit precedent guidance I found concerned the long-ago expired (2010) “qualified alternative fuel motor vehicle” (QAFMV) credit. For the QAFMV, the law based the credit on an MSRP calculation, and so the IRS issued guidance that amongst other things defined/clarified the relevant sense of MSRP (my emphasis in underline, quoted only in relevant part):

“.03 Manufacturer’s Suggested Retail Price. If the manufacturer of a QAFMV or a mixed-fuel vehicle is required under 15 U.S.C. § 1232 to provide a manufacturer’s suggested retail price for the vehicle, then the manufacturer’s suggested retail price for the vehicle is the price provided in accordance with 15 U.S.C. § 1232 for that vehicle….”

The code section referenced above, 15 U.S.C. § 1232, is the underlying substance of the Monroney Sticker.

(2) Unhelpfully, 15 U.S.C. § 1232 does not itself make reference to “manufacturer’s suggested retail price”

Below I post the relevant portions of the code, my emphasis again underlined:

“Every manufacturer of new automobiles distributed in commerce shall, prior to the delivery of any new automobile to any dealer, or at or prior to the introduction date of new models delivered to a dealer prior to such introduction date, securely affix to the windshield, or side window of such automobile a label on which such manufactures shall endorse clearly, distinctly and legibly true and correct entries disclosing the following information concerning such automobile —

(a) the make, model, and serial or identification number or numbers;

(b) the final assembly plant;

(c) the name, and the location of the place of business, of the dealer to whom it is to be delivered;

(d) the name of the city or town at which it is to be delivered to such dealer;

(e) the method of transportation used in making delivery of such auromobile, if driven or towed from final assembly point to place of delivery;

(f) the following information:

(1) the retail price of such automobile suggested by the manufacturer;

(2) the retail delivered price suggested by the manufacturer for each accessory or item of optional equipment, physically attached to such automobile at the time of its delivery to such dealer, which is not included within the price of such automobile as stated pursuant to paragraph (1);

(3) the amount charged, if any, to such dealer for the transportation of such auromobile to the location at which it is delivered to such dealer; and

(4) the total of the amounts specified pursuant to paragraphs (1), (2), and (3);

(g) if one or more safety ratings for such auromobile …. [omitting remainder]…”

Unhelpfully, nowhere does the statute itself reference the exact term “manufacture’s suggested retail price.” The IRS guidance instead says “the manufacturer’s suggested retail price for the vehicle is the price provided in accordance with 15 U.S.C. § 1232 for that vehicle.” For this language, statute item Item (1) appears to be the nearest match, then, as “retail price of such automobile suggested by the manufacturer.”

Noting that item (2) is a requirement to list not the “retail price” of the automobile, but instead the retail “delivered” price, “for each accessory or item of optional equipment, physically attached to such automobile,” I deduce (from my armchair) that item (2) is not included within the IRS’s notion of “manufacturer’s suggested retail price for the vehicle” but instead the “MSRP” for the optional equipment. (And more certainly it’s not the case that item (3), delivery charges, are a “retail price” at all, much less inherent to the price of the vehicle.)

Instead (from my armchair), the IRS’s notion of “MSRP” for the vehicle I take to relate only to item (1) in the statute. (If anyone has on-point rulings from the IRS relarinf to the QAFMV credit definition of MSRP, that might settle it!)

On this view,” “MSRP” appears to mean the price of the base trim level before options or delivery.

(3) The view that “MSRP” mean the price of the base trim level before options and delivery is probably supported by examples of Monroney Stickers

Taking this view of “MSRP,” it has the benefit of seeming to square with the Monroney Sticker themselves:

Note that there is listed an “MSRP” for the vehicle, separately from the “MSRP” for the options, and together - along with D&D - described as “total” MSRP.

Looking at the sticker alone, one might worry if the new EV law’s reference to “MSRP” could be to the “total” number on the sticker; but looking first to the IRS’s prior guidance and the operative code language regarding the MSRP for “the vehicle,” as distinct from MSRP for options/D&D, the sticker instead seems to support the read that the IRS is looking to - in effect - the base trim level MSRP, before options.

….

Of course, awaiting the IRA guidance from the IRS should prove out whether the above-described MSRP calculation is correct. And, anyone over the income cap is busted, anyway. Not to mention separately still needing a final understanding of the battery minerals and assembly requirements and where Ford comes out there….

 

[ExCivilian]

From an admin point of view that makes it much easier to manage. That means looking at batches of almost an entire model year truck at once VS looking at tens of thousand of individual truck. If they plan to try to enforce that (even if thru random audit) its gonna require many, many man hours of research. A quick VIN check would confirm model year(trim) which is easy to confirm base MSRP. To find optioned MSRP you would have to then take an MSRP and look at sales documents for specific MSRP.

I think you're overstating the difficulty of this process. No one needs to "look" at anything to conduct these reviews. All of these reviews can be accomplished via computerized data analyses--it's entirely possible the IRS is using AI at this point but even if they weren't this would be possible with something as basic as Excel.

Regardless, the numbers aren't that vast. There are, I believe, less than a handful of VINs eligible for the tax credit (in regards to the MSRP, at least) if the IRS does not use base MSRP. If they do use base MSRP then it's only one--the platinum trim.

Numerous states have already had MSRP caps in place for their state-level rebates so it's not an unmanageable workload.

 

[cvalue13]

less than a handful of VINs eligible for the tax credit (in regards to the MSRP, at least) if the IRS does not use base MSRP.

out of genuine confusion/lack of familiarity, are you suggesting the vehicle-specific VIN contains all optioned expenses including not just tire selections, but also D&D charges, factory or dealer add-ons (such as spray in liner, tool boxes, low-jack), etc.?

I don’t think that’s your suggestion, but it was, I think, the type of most expansive “MSRP” case @greenne was referencing as being theoretically possible but seemingly unwieldy to police?

Put differently, if the IRS uses base MSRP no doubt Ford can submit and “qualify” a handful of mail uplifting VIN categories.

But instead if the IRS were to use all-in purchase price before TTL, would it not get into individual taxpayers needing to submit (or have ready to submit) both their window stickers and final purchase docs?

 

[VTbuckeye]

With cliff like cutoffs (not phased out above a number) things get interesting. That premium color, or spray in bed liner, or floor mats... could turn into a 7500+ dollar option. It gets really interesting when you can purchase the same thing from your dealer's parts department and have it stay off the sticker. We purchased an EV last year that was just above the MSRP limit for a credit from our electric company. 1500 credit and our price was a few hundred over the limit. It would be nice if they gave you the difference, but that is not how it works. Let's hope the guidance arrives on 12/31/22 and that they use the base MSRP for the model, not with options.

 

[TaxmanHog]

But instead if the IRS were to use all-in purchase price before TTL, would it not get into individual taxpayers needing to submit (or have ready to submit) both their window stickers and final purchase docs?

The IRS could buy state sales tax databases where it is available, state EV rebate/credit databases and so on, then query that information with the VIN's reported by folks claiming the federal credit and determine the gross value and evaluate which are disqualified, this process would take 1-2 years, certainly they would be done with the examination prior to the 3 years statute of limitations expiring.

 

[cvalue13]

this process would take 1-2 years, certainly they would be done with the examination prior to the 3 years statute of limitations expiring.

youre right that we shouldn’t over-value the degree to which the IRS might prioritize efficiency and expedience

Sponsored