IRS Auditing Improper EV Credit Claims

[Steven B]

I can attest that dealers whose EV brand sales have surpassed the 200k threshold may still be telling prospective buyers they could be eligible for up to $7500.

At our recent Drive Electric event, the salesman from the local Chevy dealer was handing out pricing info that had not been updated to reflect the reduced tax credit available on the Bolt.

https://www.caranddriver.com/news/amp29400725/ev-tax-break-cheaters/

A question: if GM resurrected Pontiac, could they rebadge a Bolt and restart the 200k sales counter on the credit? How 'separate' two brands be for the 200k number not to be cumulative? I suppose Toyota/Lexus, Nissan/Infinity, Honda/Acura are each cumulative. Nissan now owns a large chunk of Mitsubishi and what about Volvo/Polestar, MB/Smart, etc?

 

[interestedinEV]

Good article, and thanks for bringing it up.

First, there is a phase out period for the incentive, that could be used by unscrupulous dealers or accountants. The rules say that the full incentives ($7500) remain for one quarter after the 200,000 limit is reached, then $3750 for two more quarters and $1875 for final two quarters for the incentive. Tesla reached the limit in 3Q 2018, and hence had the full incentive till the end of 4Q 2018, half incentive till the end of 2Q 2019 and quarter incentive till the end of 4Q 2019. GM is one quarter behind, they reached the limit in 4 Q 2018, so the half incentive was available in 2Q and 3Q of 2019 and the quarter incentive is available to the end of 1Q 2020. It is not that confusing as it appears, but I can see people getting confused or people misusing it. For example, if you bought a Tesla on 1st of July 2019, you can claim only $1875. If you had bought it one day earlier, it would have been $3750. What if you claim that you bought in June 30th, even if the invoice says July 1st, 2019? Dealers may be misinformed or they just are not up to date or it could be deliberate.

As the date of the sale is crucial, IRS could have found some fraud or misreporting.

Second, the incentives are by automaker and not by brand. As shown below, IRS is one step ahead. If it was by brand, GM could resurrect the Geo brand they had used many years back and which was sold through Chevy dealers. If it were allowed, Tesla could have created a new brand called "Elon", made some cosmetic changes and started the incentive process from scratch. And when brand "Elon" reaches 200,000 cars, start a new brand "Elon II" and continue selling with the incentive. There would be no end to the incentives.

https://evadoption.com/ev-sales/federal-ev-tax-credit-phase-out-tracker-by-automaker/
If you see the footnote in the above article, BMW includes Mini, FCA includes Fiat and Chrysler brands, MB includes Smart. Mitsubishi is a separate company and Nissan does not own a controlling interest. So they will remain separate. Anything that comes from Infinity will be in the Nissan Brand. Nisaan at the current rate is still 5 years away from reaching 200,000, which is tragic. They chart below shows where each manufacturer is.

Notes: *As defined by IRS. BMW includes Mini, FCA includes Chrysler, Mercedes-Benz includes smart | **EV Sales beginning Jan 1, 2010 through June 201

 

[interestedinEV]

Also some of the claims are due to leasing cars. If you lease car, the lessor gets the credit, not lessee. This is one reason why leasing may not make sense unless the lessor factors the credit into their price when calculating lease terms. So if you have leased your car, you cannot claim credit, no matter what they dealer told you. What the IRS is waking up to is to check the VIN numbers. So if you have wrongly claimed credit, it is very easy for IRS to check it out. Wondering why it took them so long?

 

[Steven B]

Well, it doesn't seem to be just by Automaker. Kia gets their own 200k limit even though Kia and Hyundai are both wholly owned subsidiaries of Hyundai Motor Group. Genesis is also a brand under Hyundai Motor Group and I would assume would count toward Hyundai's total if they ever produced EVs.

Audi and Volkswagen get individual limits although I'd always viewed that relationship as premium / non-premium lines from the same automaker.

 

[interestedinEV]

Well, it doesn't seem to be just by Automaker. Kia gets their own 200k limit even though Kia and Hyundai are both wholly owned subsidiaries of Hyundai Motor Group. Genesis is also a brand under Hyundai Motor Group and I would assume would count toward Hyundai's total if they ever produced EVs.

It appears to be by automaker, but they do not appear to combine related companies where the shareholding is under some limits.

https://en.wikipedia.org/wiki/Hyundai_Motor_Company

As per wikipedia, Kia is now just 32.8% owned but there is so much cross-shareholding it could be effectively controlled by Hyundai. But for legal purposes, 32.8% seems to be a number to get under the 33% threshold, so that it can be claimed that they are independent companies. Genesis is an 100% subsidiary, so will need to be counted in Hyundai's total. Yes it is unfair, but at this rate it will be several years before it matters. It might make a difference if they get aggressive in the market and produce in volumes, but that does not seem to be the case.

There is a lot of cross-share holding in Japanese and Korean companies. They have groups of interlinked companies (the Ziabatsu and Chaebol) and is often difficult to find who owns what. But, in this case, it appears that Kia can claim independence from Hyundai, even if there is complete control exerted by Hyundai.


The Hyundai Motor Company, commonly known as Hyundai Motors (Korean: 현대자동차; Hanja: 現代自動車; RR: Hyeondae Jadongcha listen; Korean: 현대; Hanja: 現代; RR: Hyeondae, IPA: [hjə́ːndɛ],[3] modernity; KRX: 005380), is a South Korean multinational automotive manufacturer headquartered in Seoul. The company was founded in 1967 and, along with its 32.8% owned subsidiary, Kia Motors, and its 100% owned luxury subsidiary Genesis Motor,[4] altogether comprise the Hyundai Motor Group. It is the third largest vehicle manufacturer in the world.[5]