Public Comment is Open for Inflation Reduction Act

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promosinc

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If you have questions or comments for the IRS or Treasury Secretary about the Inflation Reduction Act as it applies to clean vehicles (EVs, PHEVs, fuel cell), please submit them to the IRS by 11.4.22. To access the PDF, go to https://www.irs.gov/inflation-reduction-act-of-2022 then click on <Notice 2022-46> and download the PDF (21 pages). At the very end of the document there are instructions for submitting your comments and identifying areas which need clarification. One thing that has been unclear from the beginning is whether the tax credit will be refundable or non-refundable. The old tax credit was non-refundable, meaning the amount was limited to the amount of the tax liability. So if the tax credit was $7500 but the taxpayer liability was only $2,000, the credit was only $2,000 - and the balance of the credit could not be carried forward to future tax returns. This needs clarification in the Inflation Reduction Act. The more people who submit this as a question, the more likely it will be addressed.

This is the time for public comment with your questions and requests for clarification for the Inflation Reduction Act and the soft deadline is 11.4.22.
 
One thing that has been unclear from the beginning is whether the tax credit will be refundable or non-refundable.
Is the question of refundability the only question for which our comments may have an effect?

What about the poor MINI buyers whow were planning to take the $7,500 federal EV tax credit, but the cars they ordered hadn't been delivered by August 16th? Is that question hidden in the 21-pages of legalese or is it a decided issue?
 
I don't think it's unclear at all. Nothing was changed to make the tax credit refundable or a carryover tax credit. Turbotax's blog and Nerd Wallet see it the way I do.

That's not what a refundable tax credit does. In a refundable tax credit, you get a refund for the excess over what you own in taxes in the same year. Hence the word refundable..

What you are describing is a tax credit that carries over, like the residential clean energy tax credit.

There are refundable tax credits, non-refundable tax credits and tax credits that carryover.
 
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Is the question of refundability the only question for which our comments may have an effect?No, but it's probably not worth your time since they really want input on how to calculate the material and manufacturing content.

What about the poor MINI buyers whow were planning to take the $7,500 federal EV tax credit, but the cars they ordered hadn't been delivered by August 16th? Is that question hidden in the 21-pages of legalese or is it a decided issue?

You need to have a binding contract for the transition rule to apply.

Transition Rule for Vehicles Purchased before August 16, 2022
If you entered into a written binding contract to purchase a new qualifying electric vehicle before August 16, 2022, but do not take possession of the vehicle until on or after August 16, 2022 (for example, because the vehicle has not been delivered), you may claim the EV credit based on the rules that were in effect before August 16, 2022. The final assembly requirement does not apply before August 16, 2022.


See https://www.irs.gov/businesses/plug-in-electric-vehicle-credit-irc-30-and-irc-30d
 
You need to have a binding contract for the transition rule to apply.

Transition Rule for Vehicles Purchased before August 16, 2022
If you entered into a written binding contract to purchase a new qualifying electric vehicle before August 16, 2022, but do not take possession of the vehicle until on or after August 16, 2022 (for example, because the vehicle has not been delivered), you may claim the EV credit based on the rules that were in effect before August 16, 2022. The final assembly requirement does not apply before August 16, 2022.


See https://www.irs.gov/businesses/plug-in-electric-vehicle-credit-irc-30-and-irc-30d
OK, there's no reason comment on this matter because the definition of binding contract is clear and set in stone.
 
OK, there's no reason comment on this matter because the definition of binding contract is clear and set in stone.

What Is a Written Binding Contract?
In general, a written contract is binding if it is enforceable under State law and does not limit damages to a specified amount (for example, by use of a liquidated damages provision or the forfeiture of a deposit). While the enforceability of a contract under State law is a facts-and-circumstances determination to be made under relevant State law, if a customer has made a significant non-refundable deposit or down payment, it is an indication of a binding contract. For tax purposes in general, a contract provision that limits damages to an amount equal to at least 5 percent of the total contract price is not treated as limiting damages to a specified amount. For example, if a customer has made a non-refundable deposit or down payment of 5 percent of the total contract price, it is an indication of a binding contract. A contract is binding even if subject to a condition, as long as the condition is not within the control of either party. A contract will continue to be binding if the parties make insubstantial changes in its terms and conditions.

Feel free to comment all you want, but if you put down a 5% non-refundable deposit, the IRS appears to believe the contract is binding.

Anyhow, I'm sure Rivian and others have lawyers working on this. If you think your comment will help, then go for it.
 
I don't think it's unclear at all. Nothing was changed to make the tax credit refundable or a carryover tax credit. Turbotax's blog and Nerd Wallet see it the way I do.

That's not what a refundable tax credit does. In a refundable tax credit, you get a refund for the excess over what you own in taxes in the same year. Hence the word refundable..

What you are describing is a tax credit that carries over, like the residential clean energy tax credit.

There are refundable tax credits, non-refundable tax credits and tax credits that carryover.

I still urge everyone to comment by 11.4.22 to the IRS via their portal as described in the PDF I mentioned above and voice any questions, concerns, need for clarification about the Inflation Reduction Act they may have. Whether the tax credit could be "refundable/non-refundable" in the tax year or a carry-over to future years - either way, it can mean a difference of thousands of dollars to many of us with low tax liabilities, like retirees, for example. To be expecting $7500 and only receive, say, $2,000, would be quite a shock. Personally, given the wording (or lack thereof) in the bill - and the fact that in 2024 and beyond it will be transferrable to the dealer, I think the full $7500 (or $3750, as the case may be) might be "rebatable" to the new car buyer. All the wording in the new IRA relates to upper limits on the price of the car and on the adjusted income of the taxpayer - nothing about tax liability. I don't see anything indicating the interpretation is linked to interpretation of the bill it replaces, so I think it's justifiable to ask for clarification from the IRS rather than rely on unofficial interpretations from a blog, even expert ones.
 
Feel free to comment all you want, but if you put down a 5% non-refundable deposit, the IRS appears to believe the contract is binding.
All I want is to provide one more comment, even though it doesn't apply to the final law: If only the binding contract clause had been clear long before August 16th, then people who submitted a refundable deposit before that date could have prevailed on their MINI dealer to take a 5% non-refundable deposit.

OK, I want to make a second last comment: Is there an internet equivalent of the instant make-me-clergy websites to make me a car dealer so I can sell my EV to someone who can then take the new $4,000 used EV tax credit?
 
OK, I want to make a second last comment: Is there an internet equivalent of the instant make-me-clergy websites to make me a car dealer so I can sell my EV to someone who can then take the new $4,000 used EV tax credit?
I would think dealerships require some type of business license. So your local and state government is where one would want to go to get setup as a dealer. Then I would think you would have to deal with IRS and their paper work, and find someone to trust you in doing so when buying the vehicle from you.

Frankly, I doubt it's worth the effort.
 
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