Treasury lays out rules for instant EV rebate

Treasury lays out rules for instant EV rebate scaled | ltc-a

The proposed rule is aimed at “expanding consumer choices and helping car dealers expand their businesses,” Laurel Blatchford, Treasury’s chief implementation officer for the Inflation Reduction Act, said in a statement.

“President Biden’s Investing in America agenda is focused on lowering transportation costs for consumers and giving American car companies the tools to lead the market,” Blatchford said.

Details: Under current rules, EV buyers must pay the full purchase price of the car, then wait until they next file taxes to receive the nonrefundable tax credit of up to $7,500 for new vehicles and $4,000 for used vehicles.

But a 2022 George Washington University study found that EV buyers — especially lower-income buyers — overwhelmingly preferred a point-of-sale rebate to a tax credit, valuing the rebate at $1,450 more than a credit. The IRA stipulates that beginning in January 2024, dealers can provide the credit as a rebate at the time of purchase.

Friday’s proposed rule explains how that process will work. Dealers must register with the IRS to be eligible to offer the credit at point of sale, and buyers must attest they will not exceed the tax credit’s income limit. They can then receive cash or apply the credit toward the cost of the car or a down payment. If the buyer ends up exceeding the income limit, they will have to pay back the credit to the IRS when they next file their taxes.

In effect, the point-of-sale rebate makes the EV tax credit refundable as buyers will be able to take the rebate regardless of their tax liability, according to the proposed rule.

Albert Gore, executive director of the Zero Emission Transportation Association, praised the proposed rule in a statement Friday.

“This guidance makes it easy for everyone to access the IRA’s new and used electric vehicle tax credits at the point of sale,” Gore said. “A simplified process will maximize the benefit of these credits, not just to drivers and their communities, but to the entire EV supply chain.”

Dealer worries: Car dealers had expressed concerns that the point-of-sale EV rebate could force them to provide cash upfront with an uncertain timeline for repayment.

They pointed to the “Cash for Clunkers” program, a 2009 initiative in which the government paid dealers to provide cash rebates for drivers trading in older, less efficient vehicles. Dealers complained at the time that they didn’t receive timely rebates from the government.

With the EV tax credit, Treasury said it expects to refund dealers within 72 hours of a sale. Dealers will use a new IRS website, called Energy Credits Online, to confirm a vehicle is eligible for credit and submit a “time of sale” report to begin the payment process.

Mike Stanton, president and CEO of the National Automobile Dealers Association, said in a statement the guidance is aligned with dealers’ priorities “for successful implementation of the clean vehicle tax credit program in the showroom.”

“The information Treasury released Friday should allay the biggest dealer concerns with their role in facilitating advanced clean vehicle tax credits to consumers at the point of sale starting in January 2024,” Stanton said.