On August 7, 2022, the U.S. Senate passed the “Inflation Reduction Act” which includes new rules for EV and PHEV tax credits. The House passed the bill yesterday and it now heads to President Biden for his signature next week.
The new bill includes a requirement mandating that to qualify for a federal EV and/or PHEV tax credit, the “final assembly” of the vehicle must occur “within North America,” (i.e., the U.S., Mexico, or Canada). This provision will be effective immediately upon final passage and signature of the President.
This could affect many dealers of EV and PHEV that were not assembled in North America as they will no longer qualify for the federal tax credit as soon as the bill is signed. To soften this provision, the bill provides that if a customer has already “entered into a written binding contract to purchase” an EV / PHEV that was assembled outside of North America (or signs such a contract before the President signs the bill), the customer will still qualify for the current credit even if the vehicle is not delivered until after the legislation is signed (as long as the vehicle is delivered before 1/1/2023).
NJ CAR is recommending that in anticipation of the enactment of the bill, all Dealers that could be affected by the change in the law take the following actions:
- Reach out to your OEM to confirm which EV models will be affected by the bill.
- Reach out to any EV/PHEV pre-sold or wait-list customers.
- Enter written binding contract (dated/with a deposit) with your customer to purchase an incoming EV/PHEV.
- Continue to promote any State or local incentives that are applicable.
- Notify customers that if vehicle is not delivered by 1/1/2023, the tax credit will not apply and have them sign a document indicating their understanding.
- Advise customers who order or purchase an EV after the bill is enacted, that they do not qualify for the tax credit and have them sign something to that effect.
The bill also provides that vehicles must have an MSRP of under $55,000 for cars and $80,000 for SUVs, trucks and vans and also provides that buyers can only take advantage of the credit if they make under $150,000 a year ($300,000 if filing jointly). Additionally, used EVs, will now qualify for the tax credit of up to $4,000 on cars priced $25,000 or less, and subject to a number of other requirements, including a lower income cap of $75,000 a year ($150,000 if filing jointly).
A comprehensive summary of the new federal EV tax credit program, including new provisions that expand the credit to allow other clean vehicles to qualify, eliminates the manufacturer cap, and allows consumers to transfer the credit to the dealer at the point of sale in 2024 will be forthcoming after the President signs this legislation into law.
NJ CAR reminds dealers that the Charge Up New Jersey incentive program is still applicable and FY23 of the program started on 7/25/2022. The program provides a point-of-sale incentive for applicable electric vehicles that are leased or purchased and includes electric vehicles that are ordered. The program provides up to $4000 for an EV under $45,000 and up to $2000 for an EV between $45,000 and $55,000.
If dealers have questions about this topic or any other questions, they can contact Greyson P. Hannigan, NJ CAR’s Director of Legal & Regulatory Affairs at (609) 883-5056 – ext. 340 or via email at [email protected].