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EV Tax Credit Guidance

On December 29, 2022, the Treasury Department and the IRS released new guidance regarding the EV tax credit that was modified by the Inflation Reduction Act. The guidance issued includes the following documents:

• FAQs for consumers on the clean vehicle tax credits that will help them better understand how to access the various tax incentives for the purchase of new and used electric vehicles available beginning January 1.  These FAQs include a link containing a list of clean vehicles that manufacturers have indicated to the IRS meet the requirements to claim the new clean vehicle tax credit beginning January 1, 2023. This list will be updated over the coming days and weeks so consumers looking to purchase a new clean vehicle in the new year should be sure to check it regularly.  
• A notice on the “incremental cost” of vehicles eligible for the commercial clean vehicle tax credit. For vehicles under 14,000 pounds, this tax credit is the lesser of $7,500, 15% of a qualifying vehicle’s cost (30% if the vehicle is not gas- or diesel-powered), or the “incremental cost” of the vehicle relative to a solely gas- or diesel-powered vehicle of comparable size and use. Today’s notice clarifies the incremental cost in 2023 for commercial clean vehicles. 
• A notice of intent to propose regulations on the tax credit for new clean vehicles. This includes definitions that will provide clarity to manufacturers and buyers around the changes that take effect automatically on January 1, such as Manufacturer’s Suggested Retail Price limits. Importantly, the notice specifies that a vehicle is considered to be “placed in service” for the purposes of the tax credit on the date the taxpayer takes possession of the vehicle, which may or may not be the same date as the purchase date. 

In addition to the above pieces of guidance, which taxpayers may rely on beginning January 1, Treasury also released a white paper on the anticipated direction of Treasury and the IRS’s upcoming proposed guidance on the critical minerals and battery components requirements and the process for determining whether vehicles qualify under these requirements. While this preliminary information is not proposed guidance, it will help manufacturers prepare to be able to identify vehicles eligible for the tax credit when the new requirements go into effect after Treasury and the IRS issue a Notice of Proposed Rulemaking in March.

For a copy of the press release, click here.

Clean Vehicle Tax Credit Guidance

Clean Vehicle Tax Credit Guidance (IR-2022-218) – On December 12, 2022, the Treasury Department and Internal Revenue Service issued a Revenue Procedure setting out key processes for manufacturers and sellers of clean vehicles.  Specifically, the guidance applies to manufacturers of vehicles eligible for the clean vehicle credit under § 30D of the Code (§ 30D credit), vehicles eligible for the credit for qualified commercial clean vehicles under § 45W of the Code (§ 45W credit), and vehicles eligible for the credit for previously-owned clean vehicles under § 25E of the Code (§ 25E credit). The processes discussed in the guidance are required for vehicles to be eligible for one or more clean vehicle tax incentives, including tax credits for new and previously owned clean vehicles, as well as for commercial clean vehicles.

For vehicle manufacturers, Revenue Procedure 2022-42 provides guidance on new rules in the tax law added by the Inflation Reduction Act on how to enter into a written agreement with the IRS and how to provide periodic written reports containing specified information related to each clean vehicle manufactured. Per the guidance, qualified manufacturers must file reports with the IRS on a monthly basis, by the fifteenth of the month. Qualified manufacturers must send an email  to [email protected] indicating their intent to submit monthly reports and the IRS will respond with instructions on how to submit their reporting information.

This revenue procedure also provides the procedures for persons selling vehicles to report specified information to the IRS for a vehicle to be eligible for the credit for new or previously owned clean vehicles.  For vehicle sales occurring in calendar year 2023 and later, Sellers must file reports with the IRS within fifteen days after the end of the calendar year (i.e., the first report will be due Jan. 15, 2024).

NOTE: This revenue procedure is not the issuance of proposed guidance with respect to the critical minerals and battery components requirements under § 30D(e). The Treasury Department and the IRS will explicitly identify when they are issuing proposed guidance with respect to the critical minerals and battery components requirements under § 30D(e).

The Securing America’s Clean Fuels Infrastructure Act

On March 25, 2021, Senator Tom Carper (D-Del.), Chairman of the Environment and Public Works Committee (EPW), Debbie Stabenow (D-Mich.) and others introduced legislation (S.975) to promote investments in clean vehicle infrastructure, such as electric vehicle charging stations and hydrogen refueling stations for fuel cell vehicles.

The Securing America’s Clean Fuels Infrastructure Act would improve and expand the Alternative Fuel Vehicle Refueling Property Investment Tax Credit (ITC), commonly referred to as “30C,” lowering costs for clean vehicle infrastructure deployment. Providing incentives to build the needed infrastructure to support clean vehicles, the legislation will support American consumers as they move towards more electric and clean energy vehicles.

According to the Sen. Carper, the current 30C ITC structure isn’t adequate for encouraging greater private investments in clean vehicle refueling infrastructure like electric charging stations and hydrogen refueling stations. If implemented, Securing America’s Clean Fuels Infrastructure Act would do three things:

1. Clearly state that the 30C ITC can be applied to each item of refueling property (i.e., each charger) rather than per location.

2. Increase the 30C ITC cap for business investments from $30,000 to $200,000 for each item of refueling property.

3. Extend the 30C ITC tax credit for eight more years from the December 31, 2021 expiration date, which means the 30C ITC would apply to refueling property that is placed in service by December 31, 2029.

The full text of the bill can be found here.

This legislation has broad support from the auto companies, environmental community, and industry stakeholders, including Ford, Honda, General Motors, Volkswagen, Alliance for Automotive Innovation, Electric Drive Transportation Association, the Fuel Cell and Hydrogen Energy Association, Zero Emission Transportation Association, Electrify America, EVGO, Environmental Defense Fund, National Wildlife Federation, Natural Resources Defense Council, Sierra Club, American Lung Association, Clean Air Task Force, Union of Concerned Scientists, Stellantis, Duke Energy, Volta Charging, ChargePoint, EV Box Group, and ABB.

GREEN Act of 2021

On Feb. 4, 2021, Rep. Mike Thompson (D-CA) introduced the GREEN Act of 2021 (H.R. 848).  Main features of the legislation are as follows:

• Builds on current successful tax incentives that promote the deployment of green energy technologies, while providing new incentives for activities that reduce greenhouse gas emissions,
• Encourages residential investments in green energy and energy efficiency,
• Expands incentives for energy efficiency and conservation in homes and buildings, with updated standards,
• Supports widespread adoption of zero-emission cars, vans, and buses through tax credits for purchasing vehicles, and supporting deployment of publicly accessible electric vehicle charging infrastructure,
• Invests in the green workforce by providing tax credits for advanced manufacturing facilities and mechanical insulation installations,
• Advances environmental justice using tax credits for research and other academic programs, and
• Prices greenhouse gas emissions.

Specifically with regard to EVs, the bill would expand the qualified plug-in electric drive motor vehicle credit under Section 30D to apply a new transition period for vehicle sales of a manufacturer between 200,000 and 600,000 electric vehicles (EVs), under which the credit is reduced by $500. The provision replaces the current phaseout period (which begins at 200,000 vehicles) with a phaseout period that instead begins during the second calendar quarter after the 600,000-vehicle threshold is reached. At the start of the new phaseout period, the credit is reduced by 50% for one quarter and terminates thereafter. For manufacturers that pass the 200,000-vehicle threshold before the enactment of this bill, the number of vehicles sold in between 200,000 and those sold on the date of enactment are excluded to determine when the 600,000-vehicle threshold is reached. The provision extends the 2-wheeled plug-in electric vehicle credit through 2026. It also extends the 3-wheeled plug-in electric vehicle credit through 2026.

For used EVs, the bill creates a new refundable credit for buyers of used plug-in electric cars from date of enactment through 2026. Buyers would be able to claim a base credit of $1,250 for the purchase of qualifying used EVs, with additional incentives for battery capacity. The credit is capped at the lesser of $2,500 credit or 30% of the sale price. To qualify for this credit, used EVs must generally meet the eligibility requirements in the existing Section 30D credit for new EVs, not exceed a sale price of $25,000, and be a model year that is at least two years earlier than the date of sale. Buyers with up to $30,000 ($60,000 for married couples filing jointly) in adjusted gross income can claim the full amount of the credit. The credit phases out so that buyers with below $40,000 ($70,000 for married couples filing a joint return) in AGI may be eligible for a reduced credit. Buyers must purchase the vehicle from a dealership for personal use and cannot claim the credit more than once every three years. The credit only applies to the first resale of a used EV and includes restrictions on sales between related parties.

With regard to heavy vehicles, the bill includes a manufacturer credit for the sale of zero-emission heavy vehicles starting after the date of enactment through the end of 2026. Eligible manufacturers may claim a credit of 10% of the sale price of an eligible vehicle, capped at a credit of $100,000 per sale. To be eligible, vehicles must be for domestic use, must weigh no less than 14,000 pounds, must not include an internal combustion engine, and must be propelled solely by an electric motor which draws electricity from a battery or fuel cell.

Regarding fuel cell vehicles, the bill would extend the credit for the purchase of a qualified fuel cell motor vehicle through 2026.

Regarding refueling infrastructure, the bill calls for extending the alternative fuel vehicle refueling property credit through 2026.  Beginning in 2022, the provision expands the credit for zero-emissions charging infrastructure by allowing a 20% credit for expenses in excess of $100,000 (i.e., it allows a credit for expenses beyond the current limit if certain requirements are met). To qualify for this uncapped credit, the property must: 1) be intended for general public use and either accept credit cards as a form of payment or not charge a fee, or 2) be intended for exclusive use by government or commercial vehicle fleets.

The bill has been referred to the House Committee on Ways and Means.

Full text of the bill is available here and a section-by-section summary is available here.

Regulatory and Legislative Tracking Reports for Vehicle Manufacturers and Suppliers

Since 1999, Kardos & Associates LLC has supplied the auto industry with the most comprehensive regulatory and legislative tracking reports available. We currently offer clients the following:

Motor Vehicle Safety & Emissions Regulatory Update (the REG UPDATE)

The REG UPDATE has been tracking US and Canadian regulatory activity impacting the auto industry for over twenty years. Regulations developed by the NHTSA, FMCSA, EPA, FCC, CARB, Transport Canada, and Environment Canada are the focus. For each rulemaking, the Reg Update provides a description of the rulemaking, comment deadlines, effective dates, a docket reference, and links to documents available online. Deadlines and critical path items are color-coded so that you can quickly identify what’s new and important. In addition to being an excellent tool for tracking regulatory activity, the Reg Update is a great archive of past actions. The report contains information on virtually every rulemaking affecting automakers from the past two decades. Approximately 400 pages in length.

U.S. Safety & Fuel Economy Regulatory & Legislative Update
The U.S. Safety & Fuel Economy Regulatory & Legislative Update provides a snapshot of the past month’s legislative and regulatory activities relating to safety, emissions and fuel economy. The report provides brief summaries of notices issued by DOT, EPA, CARB and others. With regard to federal legislation, the report covers newly introduced bills, information on committee hearings, etc. Activities at the state level pertaining to emerging technologies (e.g., automated vehicles, advance driver assistance systems, EVs and EV infrastructure, etc.) are also covered.

Federal Legislation Tracking Report
Our legislative tracking report focuses on matters relating to environment and energy, safety and fuel economy/climate change. The report covers two years-worth of bills (the length of each Congressional session) and includes summaries and status updates for each tracked bill. Links to bill text and related information are provided.

All of our reports are distributed monthly via email as a PDF. Subscribers also get access to an online archive of past reports.

For pricing, contact Dale Kardos at (202) 3064997 or [email protected]. For more information about Kardos & Associates LLC, see www.kardosllc.com.

For a PDF of this information, click here.

EV Incentives

Kardos & Associates LLC has released the Spring 2020 edition of its long-running EV incentives report.  Organized by state, the report covers the following types of incentives:

- vehicle rebates and tax credits

- charger rebates

- special electricity rates for EV owners

- HOV lane exemptions

- emissions inspection exemptions

- EV parking

The report contains information for approximately 250 programs ranging across 44 states.  Links to each program’s website where more information can be obtained are provided.

To inquire about purchasing the report, email Dale Kardos at [email protected].

 

 

Clean Cars for America

On Oct. 27, 2019, Sen. Schumer (D-NY) announced a plan to promote electric and hydrogen fuel cell vehicles.  The plan is comprised of the following three components:

1. Cash vouchers for trading-in gas-powered cars and buying a plug-in electric, plug-in hybrid, or hydrogen fuel cell car.  Consumers wishing to trade in a gas vehicle for a new vehicle could receive a point of sale rebate starting at $3000, and ramping up based on the zero-emission range of the vehicle. Consumers with household incomes less than or equal to 200 percent of the federal poverty would receive an additional $2000 rebate for new vehicles, or a 20% rebate to purchase used vehicles built prior to the program taking effect.  An additional incentive worth an additional 50% of the base incentive would also be available for vehicles made in America with strong labor standards, as well as $500 for vehicles with 50% domestic content and a US manufactured battery.  The program would receive $392 billion in funding and replace approximately 25% of the US gas-vehicle fleet with clean vehicles after 10 years.
2. Making charging infrastructure accessible through a new grant program to states and localities to ensure all Americans have access to charging infrastructure.  The proposal includes $45 billion in funding to states, cities, and municipalities for making charging infrastructure accessible to everyone.
3. Incentives for manufacturers to build new factories or re-tool existing factories in the United States to assemble zero-emission vehicles or manufacture charging equipment.  The plan would create two new grant programs that would stimulate the regional economy, and improve the global competitive position of the United States in the electric vehicle industry by creating a robust domestic supply chain, and require that workers both building and working in the new factories make good-wages and have strong labor standards. One program would provide cash grants to manufacturers to build new factories for assembling electric vehicles, manufacturing charging equipment, or manufacturing or recycling critical component parts of electric vehicles like batteries. A second program would help reduce permanent plant closures in the U.S. by providing an additional cash grant for manufacturers that re-tool existing U.S. factories that make internal combustion engine vehicles or component parts. These programs would receive $17 billion, which is enough money to ensure that all new clean vehicles sold (including their batteries) through Clean Cars for America are manufactured in the U.S.

For additional details, click here.  

EV Drive Coalition

On Nov. 13, 2018, the EV Drive Coalition, a broad coalition with a focused goal to reform the federal electric vehicle (EV) tax credit, announced its official launch as Congress convenes for its lame duck session.  The EV Drive Coalition is comprised of a diverse group of members, including automobile manufacturers and consumer and environmental groups. Launched in 2018, the coalition was founded with the singular purpose of reforming the electric vehicle tax credit. For more information about the EV Drive coalition, visit the coalition web site at www.evdrivecoalition.com/home

Overcoming Barriers to Deployment of Plug-in Electric Vehicles

On April 22, 2015, the National Academy of Sciences (NAS) released its report, "Overcoming Barriers to Deployment of Plug-in Electric Vehicles (2015).” 

Conducted at the request of Congress, the report recommends the following:

• Reinstate tax and other incentives for electric vehicles (EVs) and other low-emitting sources,
• Continue efforts to cut GHG emissions from the power sector,
• Continue to fund battery research aimed at improving batteries and lowering battery costs.

 Other recommendations in the report include:

• The federal government and states should use their incentives and regulatory powers to (1) eliminate the proliferation of plugs and communication protocols for direct current fast chargers and (2) ensure that all PEV drivers can charge their vehicles and pay at all public charging stations using a universally accepted payment method just as any ICE vehicle can be fueled at any gasoline station.

• To increase consumer information and awareness, the federal government should make use of its Ad Council program, particularly in key geographic markets, to provide accurate information about federal tax credits and other incentives, the value proposition of PEV ownership, and who could usefully own a PEV.

• Federal and state governments should adopt a PEV innovation policy where PEVs remain free from special roadway or registration surcharges for a limited time to encourage their adoption.

• Local governments should streamline permitting and adopt building codes that require new construction to be capable of supporting future charging installations.

• To ensure that adopters of PEVs have incentives to charge vehicles at times when the cost of supplying energy is low, the federal government should propose that state regulatory commissions offer PEV owners the option of purchasing electricity under time-of-use or real-time pricing.

• Federal financial incentives to purchase PEVs should continue to be provided beyond the current production volume limit as manufacturers and consumers experiment with and learn about the new technology. The federal government should re-evaluate the case for incentives after a suitable period, such as five years. Its re-evaluation should consider advancements in vehicle technology and progress in reducing production costs, total costs of ownership, and emissions of PEVs, HEVs, and ICE vehicles.

• The federal government should consider converting the tax credit to a point-of-sale rebate based on information about the effectiveness of incentives.

The report notes that the Committee is not recommending additional direct federal investment in the installation of public charging infrastructure.  Instead, they recommend research on the relationship between charging infrastructure availability and PEV adoption and use.

 

Elimination of Tax Credits for Alternative Fuel Vehicles

On May 1, 2014, Sen. Lee (R-UT) introduced the Energy Freedom and Economic Prosperity Act of 2014 (S.2279) to terminate certain energy tax subsidies and lower the corporate income tax rate. Vehicles impacted by the legislation would include those that run on alcohol fuels, biodiesel, various alternative fuel mixtures, hydrogen, fuel cells, electricity, and others.  The bill was referred to the Committee on Finance.