Proposed Senate legislation

Discussion in 'Clarity' started by jenesuispasbavard, Jul 29, 2022.

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  1. jenesuispasbavard

    jenesuispasbavard New Member

    Hi fellow Clarity fans, I've been on the lookout for a used Clarity Touring for the last month (prices are still out of control so I haven't found one yet).

    But after this week's news, I'm wondering whether to hold off:

    For the $4000 used EV tax credit, there's the modified adjusted gross income limit of $150,000 for couples which we qualify for (thanks retirement contributions!). And there's an upper limit of $25000 on the cost of the used car, which I want to stay under for a Clarity Touring anyway.

    But I'm not sure whether the clause that applies to the $7500 new EV tax credit - specifying that a portion of battery chemicals sourcing and battery production / assembly must happen in free trade countries (doesn't include Japan) - applies to the $4000 used EV tax credit as well.

    Judging by the text of the proposed bill: on pages 370-373, Section 30D(e) that used to impose the 200,000 limit on number of cars from a manufacturer, is now replaced by 30D(e) which specifies "critical mineral and battery component requirements".

    And 30D(e)(1)(A) and 30D(e)(2)(A) apply to new EV purchases (you get $3750 if battery minerals are sourced from free trade countries, and another $3750 if battery components are assembled/produced in North America, page 366).

    BUT, the requirements applicable to used car purchases (section 25E(c-g), pages 387-392) seem to require that it's two or more years old, and otherwise only the current regulations - weight < 14,000 lbs, battery > 4 kWh or fuel cell. In the used EVs section, I can't find any reference to the battery minerals and component assembly requirements that apply to new EVs.

    Basically, I'm wondering whether a used Clarity (manufactured in Japan) will qualify for the $4000 used EV credit if I can buy it for a sale price of under $25000 after January 1, 2023.

    Anyone read any articles corroborating this?
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  3. I can't see the used provisions surviving. There's, IIRC, no limit on how many times the car will be resold and the $4,000 will be recovered. A single car might potentially cost the government 10s of $1,000.

    I also don't see the purpose--the $7,500 puts a new hybrid/electric car out into the market. The $4,000 does nothing except incent people to buy the hybrid/electric instead of another car, but both cars remain on the roads.
  4. jenesuispasbavard

    jenesuispasbavard New Member

    There is a limit - the $4000 credit can only be used on a specific used car once (presumably tracked by VIN). See 25E(c)(2)(C) on page 390.

    Yes, that's the point...

    I don't want to enter a debate here on whether the credits are a good or bad idea; just wanted to confirm whether a used Clarity under $25,000 would qualify for the $4000 credit after January 1, 2023. If so, I'll wait until then to buy one; otherwise buy one sooner.
    Last edited: Jul 29, 2022
    DaleL likes this.
  5. insightman

    insightman Well-Known Member Subscriber

    $25K Claritys will quickly become very scarce if that $4K credit works. I expect high-mileage $20K Clarities will instantly become $25K Claritys.
  6. If it's passed into law unchanged, it seems it might (I have no patience to follow the links to various sections to see whether the US made qualifications are included or not in it's current form, but it seems you're right from a quick reading). What will be in case in Jan 1 wrt conference committee (and whether that will result in a market price adjustment) is anyone's guess
    jenesuispasbavard likes this.
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  8. Johnhaydev

    Johnhaydev Active Member

    jenesuispasbavard likes this.
  9. Seems pretty straightforward. Once the proposed legislation passes, as written or modified, it’s just a matter of determining how Treasury and the IRS will interpret and enforce those regulations. What could be easier?

    Will any of that have an impact on a vehicle made prior to 2024?
    jenesuispasbavard likes this.
  10. jenesuispasbavard

    jenesuispasbavard New Member

    Woohoo, passed the Senate; bill going to the House on Friday. Now who knows how long Clarity Touring <60k-mile prices will take to drop below $25,000; and how long dealers will take to implement the point-of-sale $4000 credit for their used EV/PHEVs? ¯\_(ツ)_/¯
  11. teslarati97

    teslarati97 Well-Known Member

    For the transition year it will depend on the battery as the credit is based on the battery components ($3,750) and critical minerals ($3,750). If a vehicle is delivered in 2023, then it has to be 50%+ North America battery components/assembly and 40%+ critical minerals in USA or country with a free trade agreement. Likely the critical minerals will be met so there's still the $3,750 (maybe?). Battery components/assembly will be much more difficult.

    For 2024+ the vehicle must be assembled in North America and the percentages are roughly +10% each year for North America requirements until it gets to 80% critical minerals and 100% made in North America batteries.

    The loophole is if an organization was able to recycle "renewable energy storage" batteries that were identical to automotive grade batteries in North America, it would also count as 100% North American assembly (but still subject to critical minerals percentage). Opening a battery storage unit, removing the modules, and then placing them into an electric vehicle is technically recycling!
    Last edited: Aug 7, 2022
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  13. Just read this in a Washington Post article. It reads as though the current tax credits will be terminated upon signing of the new legislation, possibly this week or next (August 2022), and the new credits will begin on Jan 1, 2023. Who would buy an otherwise eligible vehicle during that 4 1/2 month period where it appears there will be no credit available? 63B43B7E-1D15-4FAC-8AF1-9323362B99FB.jpeg 66CB7F21-47BA-499A-AA5C-9D2457FE1F89.jpeg 66CB7F21-47BA-499A-AA5C-9D2457FE1F89.jpeg
  14. This is an important question, not clearly detailed in the legislation.

    I would anticipate rules clarification from Treasury secretary before implementation. Were I a betting man, I would wager that the same "Made in North America with battery materials from free trade partners" provision will apply to used EVs and PHEVs.

    I anticipate deep discounts from manufacturers on existing stock that is unsold after the bill is signed.
    jenesuispasbavard likes this.
  15. Steven B

    Steven B Active Member

    Since no mfr currently meets the M-i-A requirements, the speculation is that Treasury will delay enforcement of that for a year or more while the mfrs continue to onshore their supply chains.
  16. Steven B

    Steven B Active Member

    With regard to Rivian's statement of binding contract signature date, that's never been an option. The Treasury policy has always been date on which the buyer took possession of the vehicle.
  17. jenesuispasbavard

    jenesuispasbavard New Member

    Consumer Reports' article from a few days ago suggests that used EVs are not subject to the battery component and material sourcing requirements: (8th paragraph).

    (And used EVs include the Honda Clarity because its battery is bigger than 7kWh - see page 368 sec 13401 (c)(1)(B)(iii)(I) which replaces the current 30D(d)(1)(F) specifying 4kWh.)

    Good news for used Clarity's, but like insightman said this will probably just raise the prices of higher-mileage ones up closer to $25,000 than bringing the price of lower-mileage ones below $25k ;_;
  18. As it turns out, beginning today, 8/16/22, vehicles assembled outside of North America are no longer eligible for the “old” credit.

    A “transition rule” was included in the legislation which allowed for a binding contract to be written prior to the legislation being signed. That contract would allow a vehicle that would otherwise be ineligible for the “old” credit to remain eligible even though the vehicle will be placed in service after the “old” credit for that vehicle had been terminated.

    There probably aren’t many new EV’s available for sale that were assembled outside of North America. Those that are still on dealer lots will likely need to be discounted.
    Jim Matthews likes this.
  19. insightman

    insightman Well-Known Member Subscriber

    Due to supply-chain problems, there are quite a few (more than 20 for some individual dealers) undelivered electric MINI Cooper SEs that were ordered with a deposit many months ago. Some of those cars are wandering the oceans on RORO carrier ships, others are languishing at the dock in Southampton, UK, and the rest have yet to be built. The prospective owners of those cars are praying the Treasury Secretary decides their deposits (in most cases, regrettably refundable) count as binding orders.
  20. teslarati97

    teslarati97 Well-Known Member

    Well the non-refundable deposit or down payment has to be +5% of the total contract price as of Aug 16, 2022 guidance.
  21. insightman

    insightman Well-Known Member Subscriber

    Here is that guidance.

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