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

[DBC]

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.

Well the rule in Darusmont is the rule I laid out. Per the Court: As respects income tax statutes, it long has been the practice of Congress to make them retroactive for relatively short periods so as to include profits from transactions consummated while the statute was in process of enactment.

On the other hand, it is likewise clear that it would violate the Due Process Clause if Congress enacted a tax provision to encourage a behavior and then changed it after the taxpayer had engaged in the behavior being encouraged. See United States v. Carlton. This prohibition would exactly fit the case of the EV tax credit.

In any event it's not happening so neither you nor anyone else needs lose sleep over it.

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[DBC]

Think she had any particular vehicle in mind? ? She might be more open to the idea when she figures out that her position would simply encourage the creation of more non-Union jobs in Tennessee or Texas.

My guess is she already knows that but just couldn't resist the opportunity to make a good soundbite. That said, the "Made in America" requirement does reflect Biden's thinking. Probably some compromise would work.

 

[Malfy34]

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.​

​

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.​

​

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.​

​

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.

Also for those potentially waiting for the 2022 credit… if your income is over 500k and married you will no longer get the $7500 tax credit in 2022 based on the current bill passed in the house.

 

[kennethjk]

Also for those potentially waiting for the 2022 credit… if your income is over 500k and married you will no longer get the $7500 tax credit in 2022 based on the current bill passed in the house.

The recent senate changes mirrors what the house has produced.

not a good omen as MME is classified as a small station wagon

its also not a sedan so maybe there is an out and that will be helpful

 

[Malfy34]

The recent senate changes mirrors what the house has produced.

not a good omen as MME is classified as a small station wagon

its also not a sedan so maybe there is an out and that will be helpful

One of the salesman told me to wait until next year bc I would get $12,500 not knowing about the income or the possibility that these likely won’t qualify for the additional 5k bc not made in USA by USA unions. I’ve seen some debate in here that they might consider the definition of made in America to extend to NAFTA but I think it’s unlikely.

 

[generaltso]

One of the salesman told me to wait until next year bc I would get $12,500

Sales people say a lot of things.

 

[KevinS]

"I'm not an accountant, but I play one at the dealership."

No shame in either field, but I wouldn't buy a new car from my accountant. If I had an accountant.

 

[Bigfeets]

Tell me if any of this is mistaken (as of late Dec 2021): Congress did not pass the BBB bill that would change the Federal tax credit rules discussed in this thread. It is unclear if the BBB bill will be considered any further in 2022, in whole or in pieces.
Today, the existing law regarding the Federal tax credit remains applicable. The MME currently qualifies for the $7,500 tax credit. However, due to Ford's total production of qualifying EV units (estimated at about 150,000 vehicles sold in US as of Sept 2021), the 200,000 unit cap will likely be exceeded in 2022. The tax credit would phase out, cut by half in the quarter following the quarter when the cap was reached. The second quarter after that, no Federal tax credit.
So, it appears possible that someone ordering a 2022 MME in late 2021, who must wait 28 weeks, or longer, for delivery/purchase of the EV, could encounter the tax credit phase out. An MME order made 6 months from now seems likely to encounter no Federal tax credit. (Even if Ford accelerates the production of MME units and shortens the delivery time, the cap will still likely be exceeded in 2022 assuming production of its other EV units continues as before.)
Also, orders for MME may decline as Ford reaches the cap and their EVs are no longer qualified for the Federal tax credit (joining Tesla and Chevy and perhaps Toyota, too). Other manufacturers (such as VW and Hyundai, KIA, and newcomers) may still have the "advantage" of qualifying for the Federal tax credit on their EVs sold in the US. Or course, some States have applicable legislation that will continue to encourage electric vehicle use there. There are currently 11 States with ZEV, Zero Emissions Vehicle, programs/incentives and others considering it.

 

[krafty81]

I would envision that most new rebate/incentive programs will be tied to car purchase price and/or your personal income level. They will aim it at lower income and cheaper cars.

 

[generaltso]

Tell me if any of this is mistaken

I answered this in the other thread where you posted the same thing, but I’ll do so here as well. In a nutshell, yes you are mistaken.

That‘s not how the phase-out works. When a manufacturer reaches 200k plugin vehicles sold, they keep the full tax credit for the remainder of that quarter AND the following quarter. Then they get two full quarters at 50%. ($3750). Then they get two more quarters at 25% ($1875).

 

[Jack]

Bigfeets, how did you come up with Ford building 150000 electric vehicles(Els) ?

 

[RickMachE]

https://www.macheforum.com/site/threads/fords-tax-credit-availability.1851/

 

[Bigfeets]

Bigfeets, how did you come up with Ford building 150000 electric vehicles(Els) ?

from another forum commenter:
IRC 30D – Plug-In Electric Drive Motor Vehicle Credit Quarterly Sales | Internal Revenue Service (irs.gov)
The thesis of some other commenters seems to be that Ford might hit the 200,000 cap in 1Q 2022 and start 13-month phaseout which would end tax credit entirely for all Ford EV and PHEV by 1 Julyr 2023.
"IF 1st quarter of 2022, Ford hits the 200,000 (vehicles sold in the US) limit, then this would be the schedule:
$7500 credit now thru 6/30/2022
$3750 credit 7/1/2022 thru 12/31/2022
$1875 credit 1/1/2023 thru 6/30/2023

Could still be one quarter later than that though."
Take a look at other threads regarding the tax credit.

 

[yngwenli]

If Ford was smart, they would do what Tesla did and possibly schedule builds in Canada/EU just below 200k, then once they past a calendar quarter (like Oct 1st or Jan 1st), then open the flood gates to USA orders and production after that point; make US cars vs. EU/Canada cars as much/as fast as possible.

This would allow more people to take advantage of the full credit during that quarter hitting 200k and the full 2nd quarter afterwards.

All this will be moot IF (and a big IF) the BBB passes. The BBB will probably be changed and we have no idea what will be cut to satisfy Manchin.

 

[ChasingCoral]

One of the salesman told me to wait until next year bc I would get $12,500 not knowing about the income or the possibility that these likely won’t qualify for the additional 5k bc not made in USA by USA unions. I’ve seen some debate in here that they might consider the definition of made in America to extend to NAFTA but I think it’s unlikely.

The salesman doesn't know if a version of the bill will pass in the Senate. However, it certainly didn't happen in 2021.

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