New federal tax credit rules for EVs
Under the IRA, these production limits are gone. Starting January 1, 2023, the new federal tax credit for electric vehicles will be available to all manufacturers through 2032. However, there are some limitations. First, all qualifying cars must be finally assembled in the US (or Canada, or Mexico – it’s complicated). Second, the materials used to make batteries must meet certain domestic production targets (percentages will increase over time).
Third, the components used to manufacture these batteries must also meet certain domestic production targets (again, this percentage will increase over time). Fourth, cars and other SUVs and light trucks have maximum selling prices. Fifth, there are income limits that apply to the purchaser. Congress can make bills, but it is up to the executive branch to make the rules that carry out the intent of new laws. The requirements for battery materials and battery components are very complex. This is mainly because, until now, it has not been necessary to verify the entire transistor supply chain for every molecule of material and every battery component. There is now
The task of creating the rules fell to the Treasury Department, which was overwhelmed and flagged it as unable to complete the rules for materials and components on time. He said it would be in March at the earliest.
Rulemaking is not for weaklings
If you think rule-making for all these things is easy, forget about it. The Ministry of Finance said:
By the end of the year, the Treasury Department will release information on the expected direction of critical mineral and battery component requirements that vehicles must meet to qualify for the Inflation Reduction Act tax benefits. This information will help manufacturers prepare to identify vehicles eligible for the tax credit when the new requirements take effect.
The Treasury will issue a notice of proposed rulemaking in March with draft guidance on critical minerals and battery component requirements. By law, the requirement for critical minerals and battery components will only take effect after the Treasury Department issue that proposed the rule. Additional guidance on clean vehicles for consumers and manufacturers will be released soon.
Since the Control Inflation Act was signed into law in August, the Treasury Department has worked swiftly to produce regulations that deliver on the promises of the law. Within days of the law being enacted, the Treasury Department issued guidance on electric vehicle tax credits and is working closely with the DOT and DOE to make it easier for consumers to find a list of eligible vehicles online. I made it
In the fall, the Treasury Department will hold a series of stakeholder meetings with Secretary Yellen and Deputy Secretary Adiemo to discuss key groups representing millions of workers, thousands of businesses and trillions of dollars of invested assets. and advocates for climate and environmental justice. Community-based organizations and other key stakeholders critical to the success of the Inflation Reduction Act. The Treasury Department also hosted three formal consultations with tribal governments and Alaska Native businesses to hear directly from tribal leaders about the provisions of the law that directly affect tribal nations.
In addition, the Treasury sought and considered thousands of public comments from industry groups, automakers, labor groups, state and local leaders, consumers, foreign governments, utility companies, climate advocacy groups, think tanks, and others. I’m here.
What does that mean?
As a result of all this disclaimer, after January 1, 2023, electric vehicles manufactured by Tesla, General Motors, and Toyota will again be eligible for the federal tax credit. If final assembly is done in the USAHowever, the buyer’s selling price limits and income limits apply. For those who forgot what these limits are, here’s a summary.
Sales prices cannot exceed $55,000 for sedans and wagons and $80,000 for SUVs and light trucks. An SUV is what the EPA says it is. For example, the Honda HR-V is classified as a wagon and the Subaru Outback as his SUV. The decisive factor seems to be the vehicle height. Expect manufacturers to quietly raise the ride height of some vehicles and move them into the SUV category. The law also limits the new tax credit to individuals whose income is below her $150,000. $300,000 or less for taxpayers who are married and file joint tax returns.
It will be difficult to meet the new federal tax credit rules
General Motors CEO Mary Barra recently said that once these battery materials and component rules go into effect (which could be as early as March 2023), GM’s production, including the Volt and Equinox EV He said that only electric vehicles that do the same would be covered. half credit. GM seems to impose his 40% requirement on covered materials, but not on components. She says it will take her two to three years before all of The General’s electric vehicles qualify for his $7,500 tax credit. There is good reason to believe that all other U.S. automakers face similar challenges when it comes to meeting the regulations the Treasury Department is currently busy writing.
Ultimately, the idea of a battery passport proposed by the Global Battery Alliance would ensure batteries comply with all the limits required by US and EU regulators in order to qualify for government incentives. It may become accepted as a method.
More changes planned for 2024
In 2024, the federal tax credit rules will change again. After January 1, 2024, if the vehicle was purchased from a dealer, the credit can be applied directly at the point of sale. Dealers receive consumer tax credit advances from the federal government. as a result, CNBC Consumers say they are likely to receive full tax credits from car dealerships at the point of sale, either as discounts on sticker prices or as a reduction in the vehicle’s down payment, even if they are not tax obliged.
Joe Levine, Executive Director of Plug In America, said: CNBC.
That’s when the whole American electric car game changes. There are still sales price limits, personal income limits, battery material and component limits, and final assembly point limits, but for qualifying vehicles, the EV incentives are all practical, not taxable. The purpose is converted to a point of sale rebate. credit. So for some, he might as well wait until 2024 to buy an electric car.
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