No tax credit for customers with binding contracts.

[VHRivian]

This is not (entirely) correct. That’s one part they mention. The other is that it NOT limit damages. A $100 penalty on a $75-90k contract amount seems doubtful to meet that standard.

I would love a contract attorney to weigh in pro-bono on this because it makes a big difference to me (and many others) financially.

I think people are getting hung up on the $100. Although we did make $100 of the deposit automatically not refundable, I don’t think we limited financial damages. Theoretically Rivian could sue us and force us to buy the vehicle and, by contract, we would lose that lawsuit and be forced to buy (unless our state contract law doesn’t allow that contract to be enforced). Maybe wishful thinking but that’s how I read it.

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[racekarl]

I would love a contract attorney to weigh in pro-bono on this because it makes a big difference to me (and many others) financially.

I think people are getting hung up on the $100. Although we did make $100 of the deposit automatically not refundable, I don’t think we limited financial damages. Theoretically Rivian could sue us and force us to buy the vehicle and, by contract, we would lose that lawsuit and be forced to buy (unless our state contract law doesn’t allow that contract to be enforced). Maybe wishful thinking but that’s how I read it.

Believe me, I would like this all to be true too. I am just having a hard time getting myself there. Been on the receiving end of a mistaken IRS giant ass bill and audit, I don’t relish the idea of fighting them about this.

 

[JerseyGreens]

Speaking as a CPA (for many years), I can tell you that many of you will be sorely disappointed by your "home grown" interpretation of what constitutes a "binding contract".

Consult your personal tax adviser before making any decisions based on what you "think" or what you read online.

The people who can afford a high end EV have been well and truly screwed by the latest revisions to the tax credits. I am neither seeking nor accepting new clients, and my only advice is "call your tax guy".

Ok...so you didn't say home grown theory but stated home grown interpretation...

Come on...

 

[McMoo]

I edited the post. Meant for customers with binding contracts.

Look at this way....the IRS can deny the rebate for many other reasons but if they want to based on the BPA not meeting the definition of a Contract...then they must look at State Law...

This is half true. Having a contact under state law is only one element that must be met. There is historical precedent with what is considered a binding written contract. Yes, I am a CPA, and no I’m not giving anyone advice on what to do. I don’t think this is a settled issue yet.

https://www.irs.gov/pub/irs-drop/n-13-29.pdf


1) Binding written contract. A contract is binding only if it is enforceable under local law against the taxpayer or a predecessor and does not limit damages to a specified amount (for example, by use of a liquidated damages provision). For this purpose, a contractual provision that limits damages to an amount equal to at least five percent of the total contract price will not be treated as limiting damages to a specified amount. For additional guidance regarding the definition of a binding contract, see
§ 1.168(k)-1(b)(4)(ii)(A)-(D).

 

[JohnB R1T]

Ok...so you didn't say home grown theory but stated home grown interpretation...

NOW you're beginning to understand...

How can you construe that my statement regarding "your home grown interpretation" relates to the Rivian BPA (presumably crafted by legal professionals) as being a "theory"?
Pro tip: It doesn't, because my comment was totally unrelated to the Rivian BPA (as I expressed before your initial statement that what I said was "uneducated crap")

You don't have to read very far into THIS thread to see that much of the "interpretation" was nothing more than "uneducated crap". A lot of the rest of it is what's known as "confirmation bias" (look that up if you don't know what it means).

I've seen people postulate (back to Day 1 of the revisions to the credits) that their $1,000 deposit was "at risk" (in the event of Rivian's bankruptcy) and that they had no intention of cancelling, therefore they had a "binding contract"...or nonsense to that effect. These are the types of "home grown interpretations" to which I referred (along with much of what has been posted in this thread).

 

[JerseyGreens]

Are the CPAs chiming into this thread going to eat crow when folks get their rebates s00n? Or will they continue to throw shade...

Honestly I'd LOVE for some Attorneys to chime in because they actually study LAW.

 

[CO-rayman]

Are the CPAs chiming into this thread going to eat crow when folks get their rebates s00n? Or will they continue to throw shade...

Honestly I'd LOVE for some Attorneys to chime in because they actually study LAW.

I know, why are all these alleged CPAs practicing law (mind you in all 50 states) without a license?

 

[JerseyGreens]

I know, why are all these alleged CPAs practicing law (mind you in all 50 states) without a license?

Seriously!

The messages they are leaving herein aren't going to age very well...

 

[Jac]

Are the CPAs chiming into this thread going to eat crow when folks get their rebates s00n? Or will they continue to throw shade...

Honestly I'd LOVE for some Attorneys to chime in because they actually study LAW.

These are tax credits, not rebates. EV tax credits Rivian buyers are receiving for the 2022 tax year have nothing to do with BPAs. Even under the new EV tax credit, Rivian buyers who took delivery in 2022 were eligible for $7500 tax credits without any signed binding purchase agreement.

 

[JerseyGreens]

These are tax credits, not rebates. EV tax credits Rivian buyers are receiving for the 2022 tax year have nothing to do with BPAs. Even under the new EV tax credit, Rivian buyers who took delivery in 2022 were eligible for $7500 tax credits without any signed binding purchase agreement.

Fair enough. Good point. The BPAs aren't going be tested for those that took delivery in 2022. It's the group of us taking delivery in 2023 that will be the true test...absent the IRS enacting future guidance which completely shuts this door...

 

[the long way downunder]

https://www.irs.gov/credits-deductions/credits-for-new-electric-vehicles-purchased-in-2022-or-before

Purchase date vs. delivery date

If you entered a written binding contract to buy a vehicle before August 16, 2022, but took possession on or after August 16, 2022, and before January 1, 2023, you may claim the credit based on the prior rules and disregard the assembly requirement.

If you purchased a vehicle between August 16, 2022 and December 31, 2022 but don't take delivery of the vehicle until 2023, see Credit for New Clean Vehicles Purchased in 2023 and After.

They pulled the rug out from under us.

of course

 

[the long way downunder]

If you entered a written binding contract to buy a vehicle before August 16, 2022, but took possession on or after August 16, 2022, and before January 1, 2023, you may claim the credit based on the prior rules and disregard the assembly requirement.
If you purchased a vehicle between August 16, 2022 and December 31, 2022 but don't take delivery of the vehicle until 2023, see Credit for New Clean Vehicles Purchased in 2023 and After.

 

[BendR1S]

So, in my case, I am going to apply for this refund on my 2023 taxes that is unless the IRS renegs on their guidance.

Did you mean on your 2022 return? I'm in a very similar situation (and LA Silver!) and that's what I'm planning to do.

 

[Dark-Fx]

This is half true. Having a contact under state law is only one element that must be met. There is historical precedent with what is considered a binding written contract. Yes, I am a CPA, and no I’m not giving anyone advice on what to do. I don’t think this is a settled issue yet.

https://www.irs.gov/pub/irs-drop/n-13-29.pdf


1) Binding written contract. A contract is binding only if it is enforceable under local law against the taxpayer or a predecessor and does not limit damages to a specified amount (for example, by use of a liquidated damages provision). For this purpose, a contractual provision that limits damages to an amount equal to at least five percent of the total contract price will not be treated as limiting damages to a specified amount. For additional guidance regarding the definition of a binding contract, see
§ 1.168(k)-1(b)(4)(ii)(A)-(D).

The thing is, the Rivian binding contract doesn't actually limit damages against the taxpayer. By signing it, $100 becomes non-refundable but it doesn't actually say anything being able to break the contract and only be out that $100. Rivian could bring every single person who signed this and refuses to purchase the vehicle into arbitration over it.

1. Agreement to Purchase & Deposit. As of the date of this Agreement (“Order Date”), you agree that you shall purchase the Vehicle from Rivian, LLC, or its affiliate (“we,” “us” or “our”), pursuant to the terms and conditions of this Agreement. You hereby create a binding contract with Rivian obligating you to purchase the Vehicle. Immediately prior to taking delivery of the Vehicle you will be required to sign a dealership-specific Rivian Motor Vehicle Purchase Agreement that contains further terms and conditions. As part of the consideration you provided to Rivian for this Order, one hundred dollars of the deposit amount you submitted with your preorder/reservation becomes non-refundable.

 

[BullWink181]

Hi all. Lawyer weighing in here. All the typical caveats apply that this post does not not create an attorney-client relationship, this is not legal advice, and the fact that I am only licensed in North Carolina, so I can only speak to NC law and federal law. THIS IS NOT LEGAL ADVICE. Just an quick overview/analysis from someone who spends all day scrutinizing contract language. (Insurance contract for me, but the basic principles apply across practice areas.)

IF I had a client dealing with this I would probably focus on the fed. statutory language deferring to enforceability under state law and on distinguishing the non-refundable $100 in the BPA from a liquidated damages clause.

Creation of a binding contract in NC generally requires a meeting of the minds (agreement between the parties) re: the material (core/essential) terms and some consideration for the agreement. Consideration basically means some bargained for exchange of something of value. The easiest type to identify is money but it can come in all forms like promises to do something or waiving a right. Just needs to be something of value. And, most broadly, it generally doesn't necessarily need an objective value. Just something that is valuable to the contract parties. (If you own a home, look at the deed for your house. it might say that the property transfer is being made for the sum of $10.00 plus other valuable consideration. That's what this means.)

BPA appears to set out most of the essential terms of the contract. The absence of pricing COULD be an issue. However, I believe the contract gives Rivian the right to set the applicable prices. This might be enough. While an agreement to agree on a price later is not valid in NC, an agreement that one party will set the price is typically valid.

The liquidated damages issue definitely needs to be addressed. IF I was trying to argue for the BPA's enforceability, I would probably argue that the $100 amount becoming non-refundable is not a liquidated damages clause but RATHER is additional consideration for elevating the contract from a mere pre-order reservation to a contract that is binding on the purchaser. One could argue that for the initial pre-order, the refundable $1000 was the consideration from the purchaser. But, by making the contract binding, the purchaser would have to give something else as consideration for changing the terms of the pre-order agreement. The promise to buy on its own COULD be the consideration. But, an exchange of money just adds to the enforceability of the contract. This kind of situation is called an accord and satisfaction. It occurs where the terms of an existing contract are changed (the accord) and additional consideration (satisfaction) is offered to keep the contract valid. So, making that $100 non-refundable might be valid as additional consideration. It is clearly identified as such in the contract. Just not sure whether a court would agree that it is sufficient.

This argument is undermined by the remaining $900 still being refundable. I'm not sure how I would address that.

None of this is surefire and I'm positive there are additional sections of the tax code that may influence and affect this analysis. Just hoping that this gives some folks some additional context for what the lawyers at the IRS and the tax attorneys are probably thinking. There may also be issues with differing state law, the uniform commercial code (Statute of Frauds), and requirements that the consideration be objectively reasonable. So, you'll need to consult your local attorney who knows the applicable state law.

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