New Federal Tax Credit Appears to Only be Valid for Vehicles Made in America

[salt]

I'm interested to hear your take on this.

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Point-of-sale rebates would, frankly, be a huge deal. Effectively, the US government would allocate funds for car buyers purchasing a new EV. Today, buyers can take advantage of a $7,500 federal tax credit for qualifying electric cars and plug-in hybrid vehicles. But they don't see the reimbursement until they file taxes the following year -- and only if they paid more tax than the credit. Direct rebates would make EVs cheaper for all buyers right as they sign on the dotted line. The White House fact sheet didn't specify how much it targets for each rebate, or if we'll see a sliding scale like the child tax credit system. It's also not clear if the rebates would coexist with the $7,500 tax credit, or if this plan would replace the current system.​

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There is one big catch, however. The program would only apply to American-made EVs. If, say, an automaker builds an EV in Europe and sells it at a US dealership, it's a no go. So far, it appears a foreign automaker building an EV in the US would still qualify and this wouldn't be an exclusive benefit to US automakers.​

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Source: https://www.cnet.com/roadshow/news/biden-infrastructure-plan-ev-rebates-charging-stations/

and here:

5. It includes incentives for Americans to buy EVs: The plan says it will give EV buyers "point of sale" rebates and tax incentives to buy American-made EVs. Despite the dropping costs of batteries and EVs, consumers still need incentives to buy more expensive electric cars. Biden reportedly plans to extend the current $7,500 federal tax credit, an amount that diminishes for vehicles built by automakers including Tesla and General Motors that already have sold over 200,000 electric vehicles. Biden could drop that 200,000 ceiling as well as enhance incentives for EV buyers in disadvantaged communities.​

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source: https://www.greenbiz.com/article/key-things-know-about-bidens-ev-infrastructure-plan

I've been pretty frustrated with this whole process. I don't want to go through a dealer. Especially the dealer we only chose because it was the first one in the drop down. They've been WORTHLESS. Now if we don't qualify for the tax credit because it got replaced and the vehicle didn't qualify because it was built in Mexico. I'm going to be very upset.

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[artifact]

IMO a PoS rebate is far superior to a tax credit since it applies to everyone no matter what their employment/tax situation is. COVID, seasonal worker, downsized, retiree, living on savings or investments -- all the same.

One thing you didn't mention is that the current tax credit can't carryover. If it did those that don't make the $7500 cap could still benefit from the full amount. This is especially relevant with so many people having cut hours due to COVID.

The 'American made' still remains a question. An earlier poster pointed out Mexico/Canada/USA trade agreement might work in our favor. How many EVs qualify for 100% USA made?

 

[Larry]

IMO a PoS rebate is far superior to a tax credit since it applies to everyone no matter what their employment/tax situation is. COVID, seasonal worker, downsized, retiree, living on savings or investments -- all the same.

One thing you didn't mention is that the current tax credit can't carryover. If it did those that don't make the $7500 cap could still benefit from the full amount. This is especially relevant with so many people having cut hours due to COVID.

The 'American made' still remains a question. An earlier poster pointed out Mexico/Canada/USA trade agreement might work in our favor. How many EVs qualify for 100% USA made?

I realize I’m teetering on the edge of politics here so please don’t fall over the edge….

Considering all the talk about globalism by this administration, I really can’t see an “American made” limitation happening. My guess is that it is just a talking point that will fall by the wayside as details are fleshed out.

That’s kind of the way these things work regardless of administration.

 

[UW2]

I realize I’m teetering on the edge of politics here so please don’t fall over the edge….

Considering all the talk about globalism by this administration, I really can’t see an “American made” limitation happening. My guess is that it is just a talking point that will fall by the wayside as details are fleshed out.

That’s kind of the way these things work regardless of administration.

"American" probably refers to NAFTA-made, not just the US

 

[Mirak]

I realize I’m teetering on the edge of politics here so please don’t fall over the edge….

Considering all the talk about globalism by this administration, I really can’t see an “American made” limitation happening. My guess is that it is just a talking point that will fall by the wayside as details are fleshed out.

That’s kind of the way these things work regardless of administration.

Waiting to make a purchase based on the possibility of an expanded tax credit is folly. With every Republican opposed (and to be clear, I’m not casting aspersions) it’s going to take a lot of grease to ram this “infrastructure” bill through, even with the Senate reconciliation rules.

My only concern is IF the bill passes, will it retroactively eliminate the $7,500 tax credit for 2021? I’d ordinarily scoff at such a notion, but I don’t think we can rule anything out in these times. It seems politicians will never stop trying to outdo each other when it comes to fiscal irresponsibility.

 

[Larry]

Waiting to make a purchase based on the possibility of an expanded tax credit is folly. With every Republican opposed (and to be clear, I’m not casting aspersions) it’s going to take a lot of grease to ram this “infrastructure” bill through, even with the Senate reconciliation rules.

My only concern is IF the bill passes, will it retroactively eliminate the $7,500 tax credit for 2021? I’d ordinarily scoff at such a notion, but I don’t think we can rule anything out in these times. It seems politicians will never stop trying to outdo each other when it comes to fiscal irresponsibility.

Retroactive increase I could definitely see. In fact I’d expect it. Retroactive decrease? That would be a political disaster. IMHO, not a chance.

 

[Larry]

"American" probably refers to NAFTA-made, not just the US

That seems likely.

 

[Mirak]

Retroactive increase I could definitely see. In fact I’d expect it. Retroactive decrease? That would be a political disaster. IMHO, not a chance.

Ordinarily I would agree. But I’m worried nonetheless. We’re looking down the barrel of hundreds of billions of dollars in tax increases - to fund just a relatively small portion this current agenda. I don’t think concepts like “unfairness” of retroactively eliminating a tax credit are really in play anymore.

 

[DBC]

Retroactive increase I could definitely see. In fact I’d expect it. Retroactive decrease? That would be a political disaster. IMHO, not a chance.

Ordinarily I would agree. But I’m worried nonetheless. We’re looking down the barrel of hundreds of billions of dollars in tax increases - to fund just a relatively small portion this current agenda. I don’t think concepts like “unfairness” of retroactively eliminating a tax credit are really in play anymore.

Actual "retroactive" decreases are unconstitutional. But it's a term of art. The rule is that if when legislation is submitted that serves as notice, so decreases (or increases) after that date are not "retroactive". So purchases before legislation is introduced would not be effected.

That said, I can't see any decreases, or increases for that matter, in 2021. Changes would most likely take effect at the end of the calendar year, which for most individual filers is also the end of the tax year. Even 2022 would be soon.

I think uncoupling the credits or allowing them to be carried forward is likely simply as a matter of fairness. Otherwise the credits are just for wealthier people.

 

[Mirak]

Actual "retroactive" decreases are unconstitutional. But it's a term of art. The rule is that if when legislation is submitted that serves as notice, so decreases (or increases) after that date are not "retroactive". So purchases before legislation is introduced would not be effected.

That said, I can't see any decreases, or increases for that matter, in 2021. Changes would most likely take effect at the end of the calendar year, which for most individual filers is also the end of the tax year. Even 2022 would be soon.

I think uncoupling the credits or allowing them to be carried forward is likely simply as a matter of fairness. Otherwise the credits are just for wealthier people.

I don’t think that’s at all clear from the Constitution or case law. And U.S. v Darusmont held that it is not unconstitutional to make a tax change retroactive to the beginning of the year in which a law was enacted. If Congress decides they want my $7,500, they can probably take it, regardless of whether that would be grossly unfair. And this Congress wants to extract a lot more money from the American economy. I’m not saying it’s going to happen. I’m saying it could happen, and I’m a little concerned. January 2022 can’t get here soon enough.

 

[hybrid2bev]

"American" probably refers to NAFTA-made, not just the US

I hope so. too

If it's not inclusive of NAFTA and only applies vehicles where final assembly is in the USA it's bad for the Mach-E but still good for Ford and the electric F-150!

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