Anyone Else Place Last-Minute EV Orders to Lock In $7,500 Tax Credit?

[ridgebackpilot]

Do you have an authoritative source for this? Everything I've read, along with the guidance from my dealer's attorney and the California New Car Dealer's Association says that effective today, the tax credit no longer applies without a binding purchase agreement (which Ford does not have).

I hope you're right, but I need proof.

Complex statutes like the IRA are difficult to interpret, even for some lawyers. But there are many authoritative sources of information on this new law, beginning with the text of the legislation itself.

For those not accustomed to reading statutory language, here are a couple of articles that explain the EV provisions of the new law pretty well and point out most of them go into effect at the beginning of 2023.

https://www.forbes.com/wheels/news/new-clean-vehicles-tax-credit-evs-qualify/

https://electrek.co/2022/08/15/bide...-reduction-act-tomorrow-affecting-ev-credits/

https://electrek.co/2022/08/13/if-you-want-an-ev-buy-this-week-rivian-fisker-ev-tax-credits/

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[kennethjk]

Do you have an authoritative source for this? Everything I've read, along with the guidance from my dealer's attorney and the California New Car Dealer's Association says that effective today, the tax credit no longer applies for the remainder of 2022 without a binding purchase agreement (which Ford does not have). Beginning January 1, 2023 the new program will be available.

I hope you're right, but I need proof.

I posted this before from KPMG analysis of the senate bill, please read it

The Senate bill would bifurcate the $7,500 credit into two components:
• $3,750 if critical minerals requirements are satisfied; plus
• $3,750 if battery component requirements are satisfied.

The critical minerals requirements provide that the applicable critical minerals in a battery must be (1) extracted in the United States or a country with which the United States has a free trade agreement in effect, or (2) recycled in North America. The value of “good” minerals must be equal or greater to an applicable percentage. The applicable percentages for the critical minerals requirement are as follows:
• 2023—40%
• 2024—50%
• 2025—60%
• 2026—70%
• 2027 and later—80%
This provision would go into effect as soon as the IRS issues guidance on the requirement which the statute states is to be no later than December 31, 2022.

The battery component requirements provide that the percentage of the value of the components contained in such battery that were manufactured or assembled in North America must be equal to or greater than the applicable percentage. The applicable percentages for the battery component requirement are as follows:
• 2023—50%
• 2024-2025—60%
• 2026—70%
• 2027—80%
• 2028—90%
• 2029 and later—100%
This provision would also go into effect as soon as the IRS issues guidance on the requirement which the statute states is to be no later than December 31, 2022.

 

[dmastro]

Complex statutes like the IRA are difficult to interpret, even for some lawyers. But there are many authoritative sources of information on this new law, beginning with the text of the legislation itself.

For those not accustomed to reading statutory language, here are a couple of articles that explain the EV provisions of the new law pretty well and point out most of them go into effect at the beginning of 2023.

https://www.forbes.com/wheels/news/new-clean-vehicles-tax-credit-evs-qualify/

https://electrek.co/2022/08/15/bide...-reduction-act-tomorrow-affecting-ev-credits/

https://electrek.co/2022/08/13/if-you-want-an-ev-buy-this-week-rivian-fisker-ev-tax-credits/

Your examples say exactly what I've been saying.

Electrek Quote 1
"The various provisions of the bill have different phase-in times, but currently, the most important is the final assembly provision, which will take effect tomorrow. *Other “old” provisions can be claimed by having a binding purchase agreement signed before the bill is signed.* Once the bill is signed, any EV order or delivery will be affected by the phase-in times of other provisions of the “new” credit."

Elektrek Quote 2
"But the law includes a “transition rule” which states *any EV with a “written binding contract to purchase” signed before the date of the law’s enactment will be able to take the old credit if the buyer so chooses, even if the car is delivered after the bill is signed.* This is covered on page 393-394 of the bill. We don’t know when the bill will be signed, but it could happen within days.'"

Applicable Bill Language
"(l) TRANSITION RULE.—Solely for purposes of the application of section 30D of the Internal Revenue Code of 25 1986, in the case of a taxpayer that—

(1) after December 31, 2021, and before the date of enactment of this Act, purchased, or entered into a written binding contract to purchase, a new qualified plug-in electric drive motor vehicle (as defined in section 30D(d)(1) of the Internal Revenue Code of 1986, as in effect on the day before the date of enactment of this Act), and

(2) placed such vehicle in service on or after the date of enactment of this Act,

such taxpayer may elect (at such time, and in such form and manner, as the Secretary of the Treasury, or the Secretary’s delegate, may prescribe) to treat such vehicle as having been placed in service on the day before the date of enactment of this Act."

I'm no CPA, but reading through the bill indicates to me that short of a binding contract to purchase, cars sold between today and the end of the year will not qualify

 

[dmastro]

I posted this before from KPMG analysis of the senate bill, please read it

The Senate bill would bifurcate the $7,500 credit into two components:
• $3,750 if critical minerals requirements are satisfied; plus
• $3,750 if battery component requirements are satisfied.

The critical minerals requirements provide that the applicable critical minerals in a battery must be (1) extracted in the United States or a country with which the United States has a free trade agreement in effect, or (2) recycled in North America. The value of “good” minerals must be equal or greater to an applicable percentage. The applicable percentages for the critical minerals requirement are as follows:
• 2023—40%
• 2024—50%
• 2025—60%
• 2026—70%
• 2027 and later—80%
This provision would go into effect as soon as the IRS issues guidance on the requirement which the statute states is to be no later than December 31, 2022.

The battery component requirements provide that the percentage of the value of the components contained in such battery that were manufactured or assembled in North America must be equal to or greater than the applicable percentage. The applicable percentages for the battery component requirement are as follows:
• 2023—50%
• 2024-2025—60%
• 2026—70%
• 2027—80%
• 2028—90%
• 2029 and later—100%
This provision would also go into effect as soon as the IRS issues guidance on the requirement which the statute states is to be no later than December 31, 2022.

Yes, but this is for the new incentive program effective 1/1/23.

 

[jason330i]

https://www.irs.gov/businesses/plug-in-electric-vehicle-credit-irc-30-and-irc-30d

binding contract might require 5% of total cost?

 

[dmastro]

Well, IRS guidance is out, and maybe there is hope...

Transition Rule for Vehicles Purchased before August 16, 2022
If you entered into a written binding contract to purchase a new qualifying electric vehicle before August 16, 2022, but do not take possession of the vehicle until on or after August 16, 2022 (for example, because the vehicle has not been delivered), you may claim the EV credit based on the rules that were in effect before August 16, 2022. The final assembly requirement does not apply before August 16, 2022.

Vehicles Purchased and Delivered between August 16, 2022 and December 31, 2022
*If you purchase and take possession of a qualifying electric vehicle after August 16, 2022 and before January 1, 2023, aside from the final assembly requirement, the rules in effect before the enactment of the Inflation Reduction Act for the EV credit apply (including those involving the manufacturing caps on vehicles sold).* If you entered into a written binding contract to purchase a new qualifying vehicle before August 16, 2022, see the rule above.

What Is a Written Binding Contract?
In general, a written contract is binding if it is enforceable under State law and does not limit damages to a specified amount (for example, by use of a liquidated damages provision or the forfeiture of a deposit). While the enforceability of a contract under State law is a facts-and-circumstances determination to be made under relevant State law, if a customer has made a significant non-refundable deposit or down payment, it is an indication of a binding contract. For tax purposes in general, a contract provision that limits damages to an amount equal to at least 5 percent of the total contract price is not treated as limiting damages to a specified amount. For example, if a customer has made a non-refundable deposit or down payment of 5 percent of the total contract price, it is an indication of a binding contract. A contract is binding even if subject to a condition, as long as the condition is not within the control of either party. A contract will continue to be binding if the parties make insubstantial changes in its terms and conditions.


I'm not sure how to interpret the second paragraph... eligible under the "old" incentive or not?

 

[daemonic3]

It looks like there is good clarification on the sourcing parts of the rebate and when they take affect, but I'll need to look further on when the income cap gets enforced. Adjusting W4 or taking capital gains with the idea of owing tax above $7500 is not a small thing to "oopsie!" on or get yanked out from under us.

 

[kennethjk]

Yes, but this is for the new incentive program effective 1/1/23.

What exactly is your concern regarding the new bill and it’s effective date? Please explain

 

[dmastro]

What exactly is your concern regarding the new bill and it’s effective date? Please explain

My concern (which appears to be unfounded after reading the IRS guidance published this afternoon) was that the "old" program would not apply to cars sold between today and 12/31, leaving me without a tax credit when my car arrives next month (hopefully). Further, I won't qualify for the "new" program in 2023 when the income cap becomes effective (in which case I would have canceled my MME order and purchased something next year) - so I was worried I didn't have any path to a tax credit

 

[kennethjk]

My concern (which appears to be unfounded after reading the IRS guidance published this afternoon) was that the "old" program would not apply to cars sold between today and 12/31, leaving me without a tax credit when my car arrives next month (hopefully). Further, I won't qualify for the "new" program in 2023 when the income cap becomes effective (in which case I would have canceled my MME order and purchased something next year) - so I was worried I didn't have any path to a tax credit

And which parts of the new act are you concerned about At least before what you read. There are different effective dates throughout the bill. Income? MSRP of the car? Where it is made, Etc.

 

[dmastro]

And which parts of the new act are you concerned about At least before what you read. There are different effective dates throughout the bill. Income? MSRP of the car? Where it is made, Etc.

My concern with the new bill is income. I won't qualify under the new limit, at least without some creative accounting. (to be clear, this would be for a 2023 purchase)

Specific to the MME, all indications are that it will qualify under the other criteria at least for next year.

 

[phil]

I was curious so I googled it and US income disparity is always greater than anyone realizes. $150k isn't even top 10%. Though I agree that MME buyers probably have more disposable income than most... At least I would hope so for someone buying a 50k car...

https://www.investopedia.com/personal-finance/how-much-income-puts-you-top-1-5-10/

Nemy - this didn't sound right to me, so I looked at your link, and the underlying data from Economic Policy Institute and the Social Security Administration.

Good news! Properly interpreted, the data show income disparity is less than you thought. In fact, $150k is enough to put you in the top 4% of earners, as of 2020. The confusion results from the difference between averages and percentiles. The average earnings of the top 10% are indeed greater than $150k - about $173k, according to EPI. But the earnings of the worker at the 90th percentile is just about $100k.

Not your fault, by the way. The author of the Investopedia article you linked reported the data incorrectly. Amusingly, Investopedia lists both a reviewer and a fact-checker, who also don't understand math!

 

[ridgebackpilot]

My concern with the new bill is income. I won't qualify under the new limit, at least without some creative accounting. (to be clear, this would be for a 2023 purchase)

Specific to the MME, all indications are that it will qualify under the other criteria at least for next year.

Come 2023, my income will prevent me from qualifying for the tax credit, too. But if I had an MME pending delivery later this year, I wouldn't worry. It's pretty clear you'll be able to claim the credit as before.

The IRS guidance illustrates why I secured "written binding contracts to purchase" both a Fisker Ocean and Rivian R1T last week, anticipating the President would sign the bill today. With any luck, those contracts (which make part or all of my deposits non-refundable) will allow me to claim the $7,500 tax credit whenever those vehicles are actually built and delivered.

 

[phil]

The IRS guidance illustrates why I secured "written binding contracts to purchase" both a Fisker Ocean and Rivian R1T last week...

Pilot, have you read the guidance quoted above? It indicates that you have a binding contract if you "made a non-refundable deposit or down payment of 5 percent of the total contract price".

I'm afraid your $1,000 deposit, of which only $100 is non-refundable, will not qualify.

It would have been nice to know this earlier, of course. Do you think you still have a shot with your contracts?

 

[ridgebackpilot]

Pilot, have you read the guidance quoted above? It indicates that you have a binding contract if you "made a non-refundable deposit or down payment of 5 percent of the total contract price".

I'm afraid your $1,000 deposit, of which only $100 is non-refundable, will not qualify.

It would have been nice to know this earlier, of course. Do you think you still have a shot with your contracts?

Difficult to say at this early stage. I assume what was released today is just preliminary guidance. We’ll have to wait and see what happens when they publish the actual implementing regulations, which of course will be subject to public comment before they’re finalized.

100 percent of my Fisker deposit was made non-refundable when they converted it to a “binding contract”. But in neither case are the deposits anywhere near 5 percent of the total vehicle price. So it’s fingers crossed at this stage!

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