New IRA Provision To Increase Access To Clean Vehicle Credits In US

Brooklyn-Based Renewables.org Partners Tech Firm Dyme For Clean Energy In India

The US Treasury Department and the Internal Revenue Service (IRS) released guidance that will lower costs for consumers and help car dealers grow their businesses. They will do so by increased access to Inflation Reduction Act (IRA) credits at the point of sales for new and previously owned clean vehicles, a report says. 

The IRA offers an investment option in the renewable energy niche and also gives provisioning tax credits for wind and solar energy projects and electric vehicles. It mandates taxing the largest and most profitable companies enabling them to for pay their fair shares. On the other hand, it prohibits taxes for households with income less than $40,000 per annum.

Clean Vehicle Credit System:  

Cheaper Than Imports? US Counts On Inflation Reduction Act To Galvanise RE Manufacturing

Also Read

Researchers have found that consumers overwhelmingly prefer an immediate rebate at the point of sale. The IRA will allow consumers to choose to transfer their new clean vehicle credit of up to $7,500 and their previously owned clean vehicle credit of up to $4,000 to a car dealer starting January 1, 2024. 

This will effectively lower the vehicle’s purchase price by providing consumers with an upfront down payment on their clean vehicles at the point of sale. This is opposed to the practice of having to wait to claim their credit on their tax return the next year. Under the IRA provision, only vehicles purchased under the consumer clean vehicle credits are eligible for this benefit.  

The guidance also would include important safeguards to help prevent fraud or abuse. These measures would help ensure only verified, tax-compliant dealers will get the benefit of advance payments from the IRS and only eligible vehicles will get the benefit of the credit. 

Inflation Reduction Act (IRA) 2022: A Bill To Make US ‘The Clean Energy Leader’

Also Read

IRS Guidelines: 

Today’s guidance on the IRA would also provide clarity regarding the federal income tax treatment of the transferred credit and advance payment for the buyer and the dealer. Under the proposed rules, credit transfers and advance payments would generally not affect dealers’ tax liability.

The payment made by the dealer to the consumer (in the form of a cash payment, down payment, or partial down payment) would not be includible in the gross income of the consumer. The Treasury and the IRS will carefully consider public comments and feedback before issuing final rules.

“President Biden’s Investing in America agenda is focused on lowering transportation costs for consumers and giving American car companies the tools to lead the market,” said Chief Implementation Officer for the Inflation Reduction Act Laurel Blatchford. “For the first time, the Inflation Reduction Act (IRA) allows consumers to reduce the up-front cost of a clean vehicle, expanding consumer choices and helping car dealers expand their businesses. The IRS has focused on streamlining this process for car dealers as part of its commitment to improving service and helping taxpayers claim the credits, they are eligible for.” 

Eligibility Criterion: 

Later this month, dealers will be able to register via IRS Energy Credits Online, on a new website. This registration is a prerequisite for dealers so that it can offer consumers clean energy tax credits to qualified electric products. 

The guidelines set for the eligible buyers to claim or transfer a credit starting January 1, 2024, involves dealer registration with Energy Credits Online. When a buyer chooses to transfer the credit, registered dealers will reduce the purchase price of the vehicle or provide cash to the buyer.