EVs and the 2022 Inflation Reduction Act (IRA)
President Biden signed the $750 million Inflation Reduction Act of 2022 (IRA) into law August 16, 2022. The bill is a slimmed-down Democratic climate, prescription drug, and tax increase previously known as the Build Back Better (BBB) bill.
The law as passed does not include any of the major tax increases adverse to dealers that had been originally proposed in the BBB bill, and the IRA preserves state dealer franchise laws despite legislative threats from direct electric vehicle (EV) sellers.
As part of the agreement that led to the IRA, the existing Section 30D EV tax credit was substantially modified; specifically, The main purpose was to shift away from supply chains that rely on China and Russia. The new law states that starting January 1, 2023, consumers may be eligible for a tax credit for used cars, businesses may be eligible for a new commercial clean vehicle credit, and manufacturers will no longer face the current 200,000 electric vehicle cap for the consumer tax credit. GM, Toyota and Tesla had already exceeded the sales cap, and Ford was expected to reach the cap this year.
Under the enacted IRA, final assembly of the vehicle must occur in North America in order for EVs to qualify for the tax credit, which immediately ends credits for about 70 percent of the 72 models that were previously eligible, according to the Alliance for Automotive Innovation.
Links to helpful information regarding EVs and the IRA follow:
CLEAN VEHICLES TAX CREDIT SUMMARY
IRS QUALIFICATION GUIDANCE: CREDITS for NEW CLEAN VEHICLES PURCHASED in 2023 or AFTER
MANUFACTURERS and MODELS for NEW QUALIFIED CLEAN VEHICLES PURCHASED in 2023 or AFTER
IRS FAQs ABOUT NEW EV ELIGIBILITY FOR TAX CREDIT
NADA REGULATORY UPDATES ON 2023 EV TAX CREDITS
NADA sample report form dealers must provide to Taxpayer-Purchasers for every sale potentially eligible for a Section 30D Clean Vehicle tax credit:
2023 IRC SECTION 30D CLEAN VEHICLE TAX CREDIT SAMPLE SELLER REPORT FORM
NADA sample report form dealers must provide to Taxpayer-Purchasers for every sale potentially eligible for a Section 25E Previously Owned Clean Vehicle Tax Credit:
2023 IRC SECTION 25E PPREVIOUSLY-OWNED CLEAN VEHICLE TAX CREDIT SELLER REPORT FORM
IRS USED CLEAN VEHICLE CREDIT WEBPAGE
Dealers may direct questions about the IRA or its applicability to vehicle inventory to the NADA Legislative Affairs office: (202) 547-5500 | email@example.com.
Guides and Resources
IRS: Updated frequently asked questions related to new, previously owned and qualified commercial clean vehicle credits
ComplyNet: Top EV safety tips
NADA: Incentives for clean vehicles and refueling infrastructure
KPA Software: EV Safety – How to assess the risk of battery fire inside a vehicle
Reuters: Scratched EV battery? Your insurer may have junk whole car
Wall Street Journal: Confusion over EV tax credits stymies buyers and sellers
The White House: Biden-Harris Administration announces new standards and major progress for a made-in-America national network of EV chargers
Wall Street Journal: The EV question for auto executives: How fast to make the shift?
Cincinnati Business Courier: Cincinnati luxury dealers are embracing EVs; here’s how it feels behind the wheel
Fortune: EV adoption is soaring across the world—Wyoming wants to put an end to that
MSN Business Insider: Electric cars are killing the car dealership
The Drive: This is the list of vehicles that qualify for the Clean Vehicle Tax
AutoBlog: EVs more issue-prone than gasoline and hybrid cars
Wall Street Journal: With new EVs arriving, brand loyalty goes out the window
Bluefield (W.Va.) Daily Telegraph: Is now really the best time to buy an electric vehicle?
Route Fifty: How California’s initiative to fund electric vehicles went terribly wrong
Bloomberg: The wrong Americans are buying electric cars
New York Times: Electric vehicles start to enter the car-buying mainstream
SlashGear: Why not all electric cars are the same