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| Treasury Department Unveils Guidelines for Immediate Electric Vehicle Rebates |
The Treasury Department has unveiled guidelines that aim to streamline the process for car dealers to offer immediate access to federal tax credits for electric vehicles (EVs). This move is part of the Biden administration's strategy to encourage more people to purchase battery-based cars.
The newly issued guidance outlines how dealers can effectively reduce the purchase price of an electric vehicle for consumers by up to $7,500 at the time of purchase, rather than requiring buyers to wait until they file their annual federal taxes to claim the credit.
The administration's objective is to facilitate instant refunds, thus stimulating greater sales of electric cars and helping President Joe Biden reach his target of achieving 50 percent of new car sales as electric vehicles by 2030. However, it was crucial for the Treasury Department to structure the program in a way that wouldn't overly burden car dealers with covering the cost of the incentive.
Laurel Blatchford, Treasury's chief implementation officer for the Inflation Reduction Act, emphasized that the proposed rule is designed to "expand consumer choices and help car dealers expand their businesses." She added, "President Biden's Investing in America agenda focuses on lowering transportation costs for consumers and empowering American car companies to lead the market."
Under the current rules, EV buyers must pay the full purchase price of the vehicle and then wait until they file their taxes to receive the nonrefundable tax credit, which can be as much as $7,500 for new vehicles and $4,000 for used vehicles.
However, a 2022 study by George Washington University found that EV buyers, particularly those with lower incomes, strongly preferred a point-of-sale rebate over a tax credit, valuing the rebate at $1,450 more than a credit. The Inflation Reduction Act stipulates that, starting in January 2024, dealers can provide the credit as a rebate at the time of purchase.
The proposed rule outlines how this process will function. Dealers must register with the IRS to be eligible to offer the credit at the point of sale, and buyers must confirm that they will not exceed the tax credit's income limit. Subsequently, they can either receive cash or apply the credit toward the cost of the vehicle or a down payment. If a buyer surpasses the income limit, they will need to repay the credit to the IRS when they file their taxes next.
In essence, the point-of-sale rebate makes the EV tax credit refundable, as buyers will be eligible for 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, stating that it simplifies access to the IRA's tax credits for new and used electric vehicles at the point of sale, benefiting not only drivers and their communities but the entire EV supply chain.
Concerns were raised by car dealers about the point-of-sale EV rebate, fearing that it might require them to provide cash upfront with an uncertain repayment timeline. They cited the "Cash for Clunkers" program from 2009, in which the government paid dealers to offer cash rebates to drivers trading in older, less efficient vehicles. Dealers at the time complained about not receiving timely rebates from the government.
However, with the EV tax credit, the Treasury Department expects to refund dealers within 72 hours of a sale. Dealers will utilize a new IRS website named Energy Credits Online to verify a vehicle's eligibility for the credit and submit a "time of sale" report to initiate the payment process.
Mike Stanton, president and CEO of the National Automobile Dealers Association, expressed that the guidance aligns with dealers' priorities for the successful implementation of the clean vehicle tax credit program in showrooms. He added that the information released by the Treasury on Friday should alleviate the major concerns dealers had regarding their role in facilitating advanced clean vehicle tax credits to consumers at the point of sale, which is set to commence in January 2024.
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