The narrow requirements for qualifying for the electric vehicle tax credits under the Inflation Reduction Act are causing some consternation in the auto industry, as they only seem to apply to a limited number of models, so accountants need to advise clients carefully about new vehicle purchases.
On April 18, the final eligibility requirements on sourcing of car battery components and critical minerals for the new $7,500 federal tax credit for buying a new electric vehicle took effect.
"That was a follow-up on some IRS regulatory guidance on the manufacturers that they issued back in March with this April 18 effective date," said Partner Bob Lickwar. "It's interesting that it should be on the date tax returns are due. But we feared that it might have an effect that certain cars would not be qualified, and I think the fears are realized."
He visited the U.S. Department of Energy's fueleconomy.gov site, which lists all of the qualifying vehicles, and the list was limited at best. "There's about 31 of them from eight or 10 manufacturers, including Cadillac, Chevrolet, Lincoln, Jeep, etc., and only about 21 of those qualify for the full $7,500 credit, and about 10 of them only qualify for a $3,750 credit," said Lickwar. "Certainly the minerals requirements, the critical materials requirement, is very important. Where are things coming from? If you looked at the regulations on the manufacturers, they have to basically follow the procurement chain from mining to recycling all the way to the bitter end."
On the other hand, consumers can feel some sense of relief that only the automakers have to get approval from the IRS, rather than the individual taxpayer. The website shows which vehicles qualified if they were placed in service before or after the April 18 date.
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