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New IRS guidelines - Plug-In Electric Drive Vehicle Credit (IRC 30D)

12K views 119 replies 24 participants last post by  CTValleySubaruGuy 
#1 ·
IRS has updated their guidelines after the IRA signing:


Interesting bit about binding contracts.

Transition Rule for Vehicles Purchased before August 16, 2022
If you entered into a written binding contract to purchase a new qualifying electric vehicle before August 16, 2022, but do not take possession of the vehicle until on or after August 16, 2022 (for example, because the vehicle has not been delivered), you may claim the EV credit based on the rules that were in effect before August 16, 2022. The final assembly requirement does not apply before August 16, 2022.

What Is a Written Binding Contract?
In general, a written contract is binding if it is enforceable under State law and does not limit damages to a specified amount (for example, by use of a liquidated damages provision or the forfeiture of a deposit). While the enforceability of a contract under State law is a facts-and-circumstances determination to be made under relevant State law, if a customer has made a significant non-refundable deposit or down payment, it is an indication of a binding contract. For tax purposes in general, a contract provision that limits damages to an amount equal to at least 5 percent of the total contract price is not treated as limiting damages to a specified amount. For example, if a customer has made a non-refundable deposit or down payment of 5 percent of the total contract price, it is an indication of a binding contract. A contract is binding even if subject to a condition, as long as the condition is not within the control of either party. A contract will continue to be binding if the parties make insubstantial changes in its terms and conditions.

--------------------

Some of us (me) have put $2K+ deposits to the the dealer as that was required to submit the factory order that listed the trim and OTD price (using local tax rates + fees). That probably is close to a binding contract as anything.
 
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#3 ·
It will be interesting to watch what comes from this part of that guidance


Future Guidance

To reduce carbon emissions and invest in the energy security of the United States, the Inflation Reduction Act of 2022 significantly changes the eligibility rules for tax credits available for clean vehicles beginning in 2023. The Internal Revenue Service and the Department of the Treasury will post information and request comments from the public on various existing and new tax credit incentives in the coming weeks and months. Please look for updates on IRS.gov and other announcements from the Administration
 
#4 · (Edited)
So just to be 100% clear, unless you’ve already signed a contract with the dealer, all Solterras will be ineligible even if it gets delivered before Jan 1, 2023?

I’m assuming most of you didn’t have your dealer draft a contract up since most of you don’t have a confirmed VIN yet.

EDIT:
Just saw this from the IRS website. Basically you just want a binding contract with the dealership before 12/31/2022 or take possession of the vehicle before that date.

Vehicles Purchased and Delivered between August 16, 2022 and December 31, 2022
If you purchase and take possession of a qualifying electric vehicle after August 16, 2022 and before January 1, 2023, aside from the final assembly requirement, the rules in effect before the enactment of the Inflation Reduction Act for the EV credit apply (including those involving the manufacturing caps on vehicles sold). If you entered into a written binding contract to purchase a new qualifying vehicle before August 16, 2022, see the rule above.
 
#5 ·
So just to be 100% clear, unless you’ve already signed a contract with the dealer, all Solterras will be ineligible even if it gets delivered before Jan 1, 2023?
This is correct. Your edit is not correct, because the Solterra isn't assembled in North America, and the binding contract needed to be in place before August 16.
 
#7 ·
So just to be 100% clear, unless you’ve already signed a contract with the dealer, all Solterras will be ineligible even if it gets delivered before Jan 1, 2023?

I’m assuming most of you didn’t have your dealer draft a contract up since most of you don’t have a confirmed VIN yet.

EDIT:
Just saw this from the IRS website. Basically you just want a binding contract with the dealership before 12/31/2022 or take possession of the vehicle before that date.

Vehicles Purchased and Delivered between August 16, 2022 and December 31, 2022
If you purchase and take possession of a qualifying electric vehicle after August 16, 2022 and before January 1, 2023, aside from the final assembly requirement, the rules in effect before the enactment of the Inflation Reduction Act for the EV credit apply (including those involving the manufacturing caps on vehicles sold). If you entered into a written binding contract to purchase a new qualifying vehicle before August 16, 2022, see the rule above.
Having a contract signed after 8/15/2022 is of no value for tax credit purposes - for the Solterra - because of this wording: "aside from the final assembly requirement"
 
#11 ·
Nope... without the prior written binding contract and (possible) 5% non-refundable deposit.

Maybe this will put the brakes on Hyundai and Kia dealerships tacking $5,000 onto the asking price for Ioniq 5 and EV6???? Or maybe there will still be enough uniformed people to keep paying ADM?
I guess I don't see why the IRS created this transition period clarification. If North American assembled manufacturing was a requirement, why don't they just say this bill goes into affect August 16, 2022. There's no need for a "transition period". The new incentive can be claimed starting August 16, 2022 per the first paragraph. The point of transition period is to provide some flexibility to the consumer.
 
#15 ·
[
I guess I don't see why the IRS created this transition period clarification. If North American assembled manufacturing was a requirement, why don't they just say this bill goes into affect August 16, 2022.
Because only the Final Assembly provision goes into effect on August 16. The other (battery components/minerals) requirements don't kick in until January 1. Until then, other than the NA assembly requirement, the rest of the old legislation governs.

[
There's no need for a "transition period". The new incentive can be claimed starting August 16, 2022 per the first paragraph. The point of transition period is to provide some flexibility to the consumer.
Even if the car is assembled outside of North America, the consumer still has the option of choosing the old legislation for purposes of the tax credit if they have a binding contract to purchase in place prior to August 16.
 
#10 ·
I suspect the changes caused by the legislation won’t immediately be reflected in the EV market, but will take some time to filter down into it.

The folks that are all excited about getting an EV may decide to go ahead without the credit, but my thought is that we will see a dip in sales at some point down the road until more vehicles meet the new requirements (made in NA, materials sourced in NA, etc.).

At some point, it’s bound to have an impact.
 
#20 ·
I still wonder if the slightest possibility exists that Subaru could have bought the cars they wanted to have the credit. Much like how they offered the $7500 straight off the lease. That would have been Subaru monetizing the credit....

THE OLD INFO - If you’re leasing a new EV, the tax credit will go to the manufacturer offering you the lease. They may choose to apply that credit to help lower your monthly payments. But they aren’t required to do so. It’s a point you can bring up in negotiations.

Thats the last tiny thing I'm waiting to see. I ALSO May be a dumbass. So take it easy :)
 
#21 ·
US Inflation Reduction Act (EV Tax Credit) Megathread [PART 2] : electricvehicles (reddit.com)

What is a written binding contract?
Check the IRS definition here — in summary, it implies any contract enforceable within your state, and nonrefundable deposit of no less than 5% of the total contract value to be in place. Refundable deposits don't count. There's a grey area for 'significant' deposits of less than <5%, but they might represent a risk in an audit situation.

Doesn't look like the onlie reservation would count. Too grey.
 
#33 ·
Doesn't look like the onlie reservation would count. Too grey.
There would need to be some sort of agreement directly between the 2 parties involved in the final transaction to have even a chance of it being considered "binding" such finalized order with down payment.

Still all speculation until the rules are finalized, which could take months and stretch into filing season
 
#37 ·
I have a question. What about in the case that you signed a Written Binding Contract at say for example noon on August 16, 2022. The IRA was signed into law around 2:05pm Eastern Time on August 16, 2022.

The text of the IRA says "date of enactment" when its talking about the transition rule. Is "date of enactment" defined as August 16, and not August 16 at 2:05pm Eastern?

The IRS guidance issued so far also mentions "Before August 16th" and "on or after August 16th" but there is some lack of clarity or ambiguity.

Any thoughts?
 
#42 ·
Foreign made battery components and minerals rules don't take affect until after the date the Treasury Secretary issues guidance on the bill. The date of issuance will be no later than December 31, 2022. Meanwhile, the old rules are in effect, except the final assembly has to be in North America.
 
#43 ·
My request to SOA... Since you have not delivered any of the actual customer Solterra's to the dealers, why don't you deliver them to the Subaru plant in Indiana, given the low amount of them you are making, and install what is legally enough to classify as final assembly in North America. That way all of us on this Forum will not have to wrack our brains about trying to understand the finer points of legislative language. My hope is that our customer cars was not fully assembled, so that Toyota can put on a new lug tire configuration that will not break.
 
#44 ·
that's a lot of logistical things to get right. you're better off asking them to give a 7500 cash discount for the buyer, which i dont think will happen either, given how conservative subaru is.

since we're still months away from solterra delivery, i think the safest option is to hold your reservation and hope that subaru compensates the buyer with something. i'm sure SOA is getting a lot of cancellations already, and they're considering that into their decision making process.
 
#52 ·
"If you are interested in claiming the tax credit available under section 30D (EV credit) for purchasing a new electric vehicle after August 16, 2022(which is the date that the Inflation Reduction Act of 2022 was enacted), a tax credit is generally available only for qualifying electric vehicles for which final assembly occurred in North America(final assembly requirement.)"

"If you purchase and take possession of a qualifying electric vehicle after August 16, 2022 and before January 1, 2023, aside from the final assembly requirement, the rules in effect before the enactment of the Inflation Reduction Act for the EV credit apply (including those involving the manufacturing cars on vehicles sold). If you entered into a written binding contract to purchase a new qualifying vehicle before August 16, 2022, see the rule above."[referring to Transition Rule for Vehicles Purchased Before August 16, 2022 here:]

"If you entered into a written binding contract to purchase a new qualifying electric vehicle before August 16, 2022 but do not take possession of the vehicle until on or after August 16, 2022 (for example, because the vehicle has not been delivered), you may claim the EV credit based on the rules that were in effect before August 16, 2022. The final assembly requirement does not apply before August 16, 2022."

Notice that first quotation says AFTER August 16 a tax credit is generally available only for vehicles meeting the Final Assembly Requirement. I take that to mean it starts August 17.

It seems to me like binding written contracts dated August 16 might qualify for the full tax credit..... we'll see.
 
#57 ·
(2) Final assembly.--The amendments made by subsection (b)
shall apply to vehicles sold after the date of enactment of this
Act.
The Transition Rule says: "in the case of a taxpayer that after December 31, 2021, and before the date of enactment of this Act, purchased, or entered into a written binding contract to purchase"

So, as your snippet says, the Final Assembly clause applies to the vehicles sold after the date, but the contract had to be entered into before the date of enactment. At least that's what the bill said before it was voted on by the Senate.
 
#59 ·
To my interpretation, the date of enactment is August 16 so therefore the snippet, from the text of the IRA, means the Final Assembly Rule takes effect the day after August 16th.
It may be a moot point for everyone who didn’t get a signed binding contract on the 16th, but that day appears to fall outside the Final Assembly rule applicability. It also falls outside of “purchasing before the day of enactment of the Inflation Reduction Act.” I believe it will require further clarification and guidance.
 
#60 ·
Looks very clear to me. If you purchased a vehicle on the 16th, you're fine. If you purchased after the 16th, you would have had to have a binding agreement in place before the 15th. Those are two separate ideas with different dates.

Of course, the IRS changed "treat such vehicle as having been placed in service on the day before the date of enactment" to "the rules in effect before the enactment of the Inflation Reduction Act for the EV credit apply", which is very different.
 
#66 ·
The thing is, the written binding contract by definition makes the date of purchase be the date of the written binding contract. Date of delivery is different than date of purchase.

date and time of written binding contract =
Date and time of purchase

date car is handed over from dealer to buyer =
Date of delivery
 
#68 ·
auguest 16th purchase or binding contract would be subject to all old provisions, AND not subject to final assembly provision. So on what basis do you say they would be SOL?

it says right there if you are correct that they meant “on or after” august 16th that purchases between Aug 16 - dec 31 are subject to all the rules with the addition of the new final assembly provision.

it also says the new final assembly provision doesn’t kick in until August 17th.

so again, on what basis would a buyer who signs binding contract on August 16th and takes delivery by New Year’s Eve be SOL?
 
#70 · (Edited)
The language in the bill is clear that if you place the vehicle into service on or after the date of enactment, the transition rule only applies if you purchased or have a binding contract to purchase before the date of enactment. Verbatim:

(l) TRANSITION RULE.—Solely for purposes of the application of section 30D of the Internal Revenue Code of 1986, in the case of a taxpayer that—

(1) after December 31, 2021, and before the date of enactment of this Act, purchased, or entered into a written binding contract to purchase, a new qualified plug-in electric drive motor vehicle (as defined in section 30D(d)(1) of the Internal Revenue
Code of 1986, as in effect on the day before the date
of enactment of this Act), and

(2) placed such vehicle in service on or after the
date of enactment of this Act,
such taxpayer may elect (at such time, and in such form
and manner, as the Secretary of the Treasury, or the Secretary’s delegate, may prescribe) to treat such vehicle as
having been placed in service on the day before the date
of enactment of this Act.
 
#71 ·
Will you agree the final assembly rule takes effect August 17th?

will you agree that the preliminary guidance says vehicles purchased and delivered within the window of time from august 16- dec 31 are subject to the previous rules?

Additionally to the old rules, the only new rule that kicks in before January 1, 2023 is the Final Assembly Rule which kicks in on August 17th.

I’m pretty sure that’s correct in spite of what other folks are saying. So yes, reader, do your own homework.
 
#73 ·
You’re confusing the written binding contract with an actual sale/date of purchase. They aren’t the same thing. The written binding contract is a part of the transition rules and required the day before enactment or earlier. The final assembly rule takes effect after the date of enactment and is tied to the date of sale/delivery and not to the date of the written binding contract.
 
#72 ·
In the end, the rules will be what the Treasury Department/IRS finalizes and publishes, and that’s going to be a while coming. Everyone is entitled to their own opinion and interpretation of the law, but in the end, we all know which opinion will win out… the IRS version…

My opinion… One would have to be an idiot to rely upon tax filing advice from an Internet car forum…I can only imagine “I got my tax filing information from reading a car forum” being used at an audit!
 
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