IRS Issues Statement on New Plug-In Electric Drive Vehicle Credit (IRC 30D)

*Hat tip* to @Lucky EV for raising it on another thread; seemed worth a stand-alone post

https://www.irs.gov/businesses/plug-in-electric-vehicle-credit-irc-30-and-irc-30d

Reposted in full below (as website contents like these may change over time):

“Updated information for consumers as of August 16, 2022

New Final Assembly Requirement
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).

The Department of Energy has provided a list of Model Year 2022 and early Model Year 2023 electric vehicles [NOTEOSTIthat may meet the final assembly requirement. Because some models are built in multiple locations, there may be vehicles on the Department of Energy list that do not meet the final assembly requirement in all circumstances.

To identify the manufacture location for a specific vehicle, please search the vehicle identification number (VIN) of the vehicle on the VIN Decoder website for the National Highway Traffic Safety Administration (NHTSA). The website, including instructions, can be found at VIN Decoder.

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.

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.

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.

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

Pre-Inflation Reduction Act of 2022 Information
The information below pre-dates the enactment of the Inflation Reduction Act of 2022 but, subject to the final assembly rule described above, remains relevant for qualifying vehicles purchased and delivered prior to January 1, 2023.

Internal Revenue Code Section 30D provides a credit for Qualified Plug-in Electric Drive Motor Vehicles including passenger vehicles and light trucks.

For vehicles acquired after December 31, 2009, the credit is equal to $2,500 plus, for a vehicle which draws propulsion energy from a battery with at least 5 kilowatt hours of capacity, $417, plus an additional $417 for each kilowatt hour of battery capacity in excess of 5 kilowatt hours. The total amount of the credit allowed for a vehicle is limited to $7,500.

The credit begins to phase out for a manufacturer’s vehicles when at least 200,000 qualifying vehicles have been sold for use in the United States (determined on a cumulative basis for sales after December 31, 2009). For additional information see Notice 2009-89.

Section 30D originally was enacted in the Energy Improvement and Extension Act of 2008. The American Recovery and Reinvestment Act of 2009 amended section 30D effective for vehicles acquired after December 31, 2009. Section 30D was also modified by the American Taxpayer Relief Act (ATRA) 2013 for certain 2 or 3 wheeled vehicles acquired after December 31, 2011 and before January 1, 2014.

The vehicles must be acquired for use or lease and not for resale. Additionally, the original use of the vehicle must commence with the taxpayer and the vehicle must be used predominantly in the United States. For purposes of the 30D credit, a vehicle is not considered acquired prior to the time when title to the vehicle passes to the taxpayer under state law.

Notice 2009-89 applies to vehicles acquired subsequent to December 31, 2009 and provides procedures that a vehicle manufacturer may use if it chooses to certify that a vehicle meets certain requirements that must be satisfied to claim the Qualified Plug-in Electric Drive Motor Vehicle Credit and the amount of the credit allowable with respect to that vehicle

Credit Amounts for Qualified Vehicles Acquired After December 31, 2009

Qualified Plug-In Electric Drive Motor Vehicle Credit (IRC 30D) Phase Out
The qualified plug-in electric drive motor vehicle credit phases out for a manufacturer’s vehicles over the one-year period beginning with the second calendar quarter after the calendar quarter in which at least 200,000 qualifying vehicles manufactured by that manufacturer have been sold for use in the United States (determined on a cumulative basis for sales after December 31, 2009) (“phase-out period”). Qualifying vehicles manufactured by that manufacturer are eligible for 50 percent of the credit if acquired in the first two quarters of the phase-out period and 25 percent of the credit if acquired in the third or fourth quarter of the phase-out period. Vehicles manufactured by that manufacturer are not eligible for a credit if acquired after the phase-out period.

Quarterly Sales by Manufacturer”

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The DOE announcement referenced above posted in full below as well

https://afdc.energy.gov/laws/inflation-reduction-act


Inflation Reduction Act of 2022
Enacted August 16, 2022
The Inflation Reduction Act of 2022 (Public Law) amends the Qualified Plug-in Electric Drive Motor Vehicle Credit (IRC 30D), now known as the Clean Vehicle Credit, and adds a new requirement for final assembly in North America that takes effect on August 16, 2022. Additional provisions will go into effect on January 1, 2023. Further guidance on these provisions is forthcoming. Find more information about the creditfrom the Internal Revenue Service.

List of Vehicles with Final Assembly in North America
The following table provides a list of Model Year 2022 and early Model Year 2023 vehicles with final assembly in North America based on data submitted to the National Highway Traffic Safety Administration (NHTSA) and FuelEconomy.gov as of August 1, 2022. Note that for some manufacturers, the build location may vary based on the specific vehicle, trim, or the date in the Model Year when it was produced because some models are produced in multiple locations. The build location of a particular vehicle should be confirmed by referring to its Vehicle Identification Number (VIN) using the VIN decoder described below or an information label affixed to the vehicle.

As vehicle manufacturers continue to submit the applicable vehicle identification information to the relevant government agencies, this list will be updated as more information becomes available.

NOTE: Some manufacturers that have vehicles assembled in North America have reached a cap of 200,000 EV credits used and are therefore not currently eligible for the Clean Vehicle Credit.

Electric Vehicles Assembled in North America
Specific Assembly Location Based on VIN
In addition to the list of vehicles with final assembly in North America listed above, the build location of a particular vehicle should be confirmed by the VIN or an information label affixed to the vehicle. The U.S. Department of Transportation's NHTSA provides a VIN decoder that can be used to look up the vehicle's assembly location using these steps:

1. Enter the Vehicle Identification Number in the VIN decoder.
2. Click the "Decode VIN" button.
3. Look for the country name in the "Plant Information" field at the bottom of the page.

Find additional directions for using the VIN decoder to identify a vehicle's build plant and country of manufacture.

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MODERATOR

These links will reflect changed documents by the end of the year, maybe sooner.
https://www.irs.gov/pub/irs-dft/i8936--dft.pdf
https://www.irs.gov/pub/irs-dft/f8936--dft.pdf

Please keep discussion civil & respectful!
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TLDR; Lightning owner before 12/31/2022 can get the $7,500 credit.

All the other inflation "reduction" (lol) act rules (income limits, $80k MSRP....) apply 1/1/2023

I’m glad I’m not getting screwed out of the credit by not having purchased prior to today.

broncoaz said:

I’m glad I’m not getting screwed out of the credit by not having purchased prior to today.

Click to expand...

How are you not getting the credit? North America rules is the only rule in effect

luebri said:

TLDR; Lightning owner before 12/31/2022 can get the $7,500 credit.

All the other inflation "reduction" (lol) act rules (income limits, $80k MSRP....) apply 1/1/2023

Click to expand...

I’d add, in to:dr style: for the few folks that may have benefitted from a “binding” contract (eg people taking delivery in 2022 of non-NA assembled EV, or taking 2023 delivery of any EV over the MSRP/income/battery req’s), the various “form” agreements circulating on the web (with $100-$500 deposits and probably contingencies in the control If the parties) will maybe to have a steep hill to climb to qualify as “binding”

Just the tl version:

Many (most?) people who were taking delivery in 2023 and so scrambled for a “binding” contract under the “Transition Rule,” may have a steep hill to climb based on the discussions and forms that I saw circulated

“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.”


It’s important to first point out (in brief, and over-simplifying), that the ultimate “test” of whether a contract is binding will among other things be like a weighing test, where perhaps certain characteristics suggest it’s binding, perhaps others suggest it is non-binding, and in the end a judgment will be made regarding the resulting balance.

That being said, take for example the Rivian contract it offered to potential purchasers.

First, Rivian’s $100.00 “non-refundable” deposit (underlined in red below) is well below the 5% of contract price threshold mentioned in the guidance. This goes in the weighing bucket labeled “reasons it may not be binding (in the eyes of the IRS).”

Second, there are a few places in the contract that are potentially interpreted as (to put it in the IRS’s language) as being contingent on a condition that is within the control of a party, namely Rivian (underlined in blue below). These conditions may also go in the. I let labeled “reasons it may not be binding (in the eyes of the IRS).”




There will also be a bucket labeled “reasons it may still be binding,” and for both buckets state laws will come into play, all before being … let’s call it … weighed against one-another.

Fisker’s contract (which I can no longer find online), I remember to suffer the same issues (a $250 non-refundable deposit, wiggle-out conditions for the manufacturer - especially this manufacturer).

The Nissan Ariya contract floating around was even worse (it didn’t even pretend to include an agreement on the vehicle price, and other seeming material conditions to the document).

In all, these issues and how the IRS will come to judge the “binding” nature of the
Are relevant only to vehicles to which the “binding agreement” might have applied, which broadly speaking include two buckets:

(1) any EV taking delivery after yesterday but before1/1/23 that is not assembled in North America (which does it include the F150L)

(2) (less clear but still theoretically in play) any EV taking delivery after 1/1/23 that busts any of the other new bill caps/req’s (eg MSRP cap, income cap, battery minerals req, battery complimentary req, etc. - which may include the F150L, depending on the facts)

for folks in the two postures above, whether or not they succeeded in achieving a “binding” agreement in the eyes of the IRS will be the $7,500 question, and todays guidance by the IRS leans toward suggesting the Rivian/Fisker/Nissan “form” approaches could be … challenging (depending perhaps on state laws).

Not incidentally, this might be exactly why the IRS’s guidance today decided to highlight this facet (though apparently this >%5 deposit the IRS uses/has used in other similar contexts, so it is not as though they are coming up with this threshold regarding merely the EV tax credit)

Scenerio. If i purchased my Pro yesterday, i would get a non-refundable tax credit of $7,500. If my Pro shows up and i buy it tomorrow, i get a fully refundable tax credit of $7,500. Correct?
(Lets omit the whole "buyers order" binding contract matter for this discussion)

luebri said:

TLDR; Lightning owner before 12/31/2022 can get the $7,500 credit.

All the other inflation "reduction" (lol) act rules (income limits, $80k MSRP....) apply 1/1/2023

Click to expand...

Thank God, I am breathing a huge sigh of relief because I was worried the $80k MSRP limit was going to go into immediate effect, and I did not yet have a binding written contract. Mine should be delivered within the next month but definitely before 12/31!

jazzmanmonty said:

Scenerio. If i purchased my Pro yesterday, i would get a non-refundable tax credit of $7,500. If my Pro shows up and i buy it tomorrow, i get a fully refundable tax credit of $7,500. Correct?
(Lets omit the whole "buyers order" binding contract matter for this discussion)

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Interesting question. I *think* it remains like the old credit(non refundable) thru Dec 31, 2022.

However the IRS would have to rule on this, I'm so confused about where it even states the credit is non refundable vs refundable in the law(other than the Point of sale discussion)

I literally got the call today my Lightning arrived and will be ready tomorrow for delivery. I went to the dealer and MSRP was $80,024 after Destination and Delivery went up $100. I kinda lost it on them and asked who can change that. Dealer said they can't, then I read someone here called Ford and was told Dealers can increase that. Obviously it was changed from the original $1695, so someone can unilaterally change it. But who? Dealer or Ford Corporate?

Riviot said:

I literally got the call today my Lightning arrived and will be ready tomorrow for delivery. I went to the dealer and MSRP was $80,024 after Destination and Delivery went up $100. I kinda lost it on them and asked who can change that. Dealer said they can't, then I read someone here called Ford and was told Dealers can increase that. Obviously it was changed from the original $1695, so someone can unilaterally change it. But who? Dealer or Ford Corporate?

Click to expand...

I picked mine up on 7/23….I pointed out the $100 increase in shipping and provided a copy of my online order price details. My dealer pointed out to me that I was price-protected per Ford policy and they credited me that $100.

I would force the issue!

jazzmanmonty said:

Scenerio. If i purchased my Pro yesterday, i would get a non-refundable tax credit of $7,500. If my Pro shows up and i buy it tomorrow, i get a fully refundable tax credit of $7,500. Correct?
(Lets omit the whole "buyers order" binding contract matter for this discussion)

Click to expand...

Well, thinking about the point of sale rebate feature of the new law:

That point of sale rebate feature does not kick in until 2024, and so even under the new law during 2023 it will be a tax credit at filing.

I believe the only thing in the new law language specific to EVs (I will not be reading the entire 755pg bill), deals with this point-of-sale feature and how basically dealers will be able to get credit from the gov’ment for making purchase contract price reductions for the buyer.

Accordingly, perhaps somewhere this sales point rebate feature (not applicable until 2024) became characterized as a refundable credit to the buyer?

That, or it’s addressed in the other 700+ pages of the bill?

So looks like my Lariat ER that will be delivered any day/week/month now is safe. My MME ordered in January is not, even though I did sign a contract way back when with a forfeitable $1,000 deposit, because of this 5% rule. Going to have to think about whether to do the MME or not… probably not.

Sam James said:

My MME ordered in January is not, even though I did sign a contract way back when with a forfeitable $1,000 deposit, because of this 5% rule.

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maybe, maybe not: can’t emphasize enough that this deposit business will turn on details of your state law, the exact contents of the contract at issue, and - ultimately - guidance or rules the IRS sets out to address these topics.

above, I only meant to flag that the IRS seems to be signaling that simply calling the contract “binding” and having some non-refundable deposit won’t, on its own, make the determination any easier or provide any broad-stroke guidance to all.

given that Fisker went around making public announcements (boasting?) that it sold out of the Oceans based on these deposits, I suspect the IRS is going to have its hands full?

cvalue13 said:

maybe, maybe not: can’t emphasize enough that this deposit business will turn on details of your state law, the exact contents of the contract at issue, and - ultimately - guidance or rules the IRS sets out to address these topics.

above, I only meant to flag that the IRS seems to be signaling that simply calling the contract “binding” and having some non-refundable deposit won’t, on its own, make the determination any easier or provide any broad-stroke guidance to all.

given that Fisker went around making public announcements (boasting?) that it sold out of the Oceans based on these deposits, I suspect the IRS is going to have its hands full?

Click to expand...

MME not even scheduled for production yet, so I have some time to mull it over. Thank God I don’t need to urgently dig into Missouri’s statutes for the Lightning. For now I’m just making the assumption that misery’s particulars won’t be in my favor

Thank you for providing the information above and your thoughts!

Riviot said:

I literally got the call today my Lightning arrived and will be ready tomorrow for delivery. I went to the dealer and MSRP was $80,024 after Destination and Delivery went up $100. I kinda lost it on them and asked who can change that. Dealer said they can't, then I read someone here called Ford and was told Dealers can increase that. Obviously it was changed from the original $1695, so someone can unilaterally change it. But who? Dealer or Ford Corporate?

Click to expand...

Why worry about it? If you take delivery before Dec 31 2022 you fall under old tax credit rules..no $80k cap.