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:
Dealers are able to enter a Vehicle Identification Number (VIN) into a Dept. of Transportation website to determine tax credit eligibility.
The Dept. of Energy has created a list of vehicles that will likely qualify for tax credits.
If a customer “entered into a written binding contract to purchase” an EV that is assembled outside of North America before the IRA was signed, the customer will still qualify for the old credit even if the vehicle is/was not delivered until after the legislation was signed.
- Review their EV inventory to determine the impact the change in law has had on the vehicles on their lots.
- Contact their OEM(s) to confirm which EVs are no longer eligible for the credit.
- Be mindful of the potential applicability of the FTC’s “Mail, Internet, or Telephone Order Merchandise Rule” in the event that they entered into contracts to sell vehicles that were not in their current inventory.
Helpful links follow:
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.
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