The new US federal EV tax credit draft bill contains some potential big developments to support the GREEN Act of 2019. The draft is being promoted by congressman Mike Thompson who is also a member of the powerful Ways & Means committee. It is the chief tax-writing committee in the US House of Representatives. As a result, this draft bill will be taken seriously. The bill is a potentially huge win for Tesla and General Motors, for whom the existing credit has almost fully extinguished.
The Current EV Tax Credit
Congress passed a tax credit for electric vehicle buyers back in 2010. It makes eligible EV buyers get back $7,500 at tax time after buying a new EV by assuming that at least they owed that much in federal income tax. However, the credit is structured so that once an automaker delivers 200,000 EVs in the US, the credit phases out over the subsequent four quarters.
Tesla becomes the first to hit that milestone in Q3 2018 followed by GM in Q4 2018. As a result, Tesla buyers will lose access to the credit after 31st December 2019 and GM buyers after 30th March 2020. This means the EV tax credit now primarily benefits automakers late to the EV game and penalizing those who put forward EVs earlier.
Revised Tax Credit for New Electric Vehicles
The current draft of the Green Act of 2019 would do the following to the current EV credit:
- Raise the threshold from 200,000 EVs to 600,000 EVs
- The EVs Tesla and GM sold in 2019 that only qualified for reduced partial credits wouldn’t count towards the new 600,000 threshold
- Reduce the credit from the current $7,500 to $7,000
New Taxation for Used EVs
For the first time, there would be a federal EV tax credit of up to $2,500 for used EVs. This used EVs tax credit has many limitations:
- The used EVs are sold for less than $25,000
- The model year of the used EV has to be at least two years earlier than the year you buy it
- It was previously used and registered in the USA by someone other than you
- The credit can’t exceed 30% of the sale price
- The credit is tied to your income. It gets reduced by $250 for each $1,000 by which your adjusted gross income exceeds $30,000
- You can only get the used EV credit once every three years
- And, the used EV credit expires December 31, 2024
New Tax Credit for Manufacturers of Heavy-EVs
The draft bill creates a manufacturer (not consumer) 10% investment tax credit for sales of zero-emission heavy-EVs. Zero-emission heavy EVs is defined as having a gross vehicle weight rating of at least 14,000 pounds. Not powered or charged by an internal combustion engine. And is propelled solely by an electric motor that draws electricity from a battery or fuel cell.
The proposed draft bill seems like a promising development. Though it will act like an atom-bomb explosion over the ICE landscape, it is a big relieve for new buyers.
However, this bill still has to make it out of Ways & Means and then survive the Republican-controlled Senate. The new bill has to make a jump on these hurdles first. So, consider us skeptical for now. Similarly, Connecticut recently plans for revising its EV.
What do you guys think about this new bill? Should it pass or dump in the dustbin? Share your thoughts in the comment section!