The new federal EV tax credit rules issued by the US Department of the Treasury on April 7, 2023, take effect this week on April 18th. These dates are important. Since April 7th, Treasury put the EV world on notice that battery compliance will influence the amount of a federal EV tax credit. Trying to get ahead of the April 18th effective date, OEMs are now revealing battery details that previously were not critical to prior years’ sales.
Significantly, under these rules, battery data may cause an EV’s federal tax credit to be lower if the EV is sold on or after April 18th, than if it had been sold before April 18th.
Importantly, these rules do not relate to a consumer’s ongoing tax credit eligibility which continues to be income based; they relate only to the amount of the tax credit. As of April 18th, the federal tax credit can be either for the full $7,500, a partial tax credit of $3,500, or zero. The variance depends on the OEM’s answers to the rule’s newly established two-pronged criteria:
- How much of the battery components are made in North American? and
- How much of the battery’s critical minerals are sourced in the US or certain acceptable countries?
Automakers now are rushing to collect this data for immediate dissemination to assist dealers and consumers understanding of the federal EV tax credits starting on April 18th. New car and truck dealers are going to need to stay on top of this new and developing OEM data about tax credit eligibility. Here are the key takeaways about the new federal EV tax credits:
- It is possible that last year’s EVs for which the full $7,500 tax credit was available, may be eligible for a lesser amount as of April 18th.
- The previous EV tax credit cap that had previously eliminated some OEM’s EVs (GM, Tesla, Toyota) from the tax credit program has been lifted so those OEMs are back in the program effective April 18th (subject to the same two-pronged battery criteria).
- Because the federal EV tax credit amount is based on new criteria for EV batteries, OEMs will continually report to the federal government their EVs’ batteries’ components and sourcing data.
To take the guess work out of which EVs are eligible for inclusion in the federal program and at what level, the Department of Energy’s Alternative Fuels Data Center (AFDC) created a VIN Decoder and Verification webpage in the Fall of 2022, to which the OEM will feed their data. The IRS also has a website to help address some EV tax credit questions that may come up in the showroom.
Below are websites for the three important federal resources that every New Jersey dealer should bookmark for their EV sales team:
- AFDC VIN Decoder and Verification:
- IRS’ determination of qualified OEMs under the retroactive guidelines:
- IRS FAQs: