Tax Credit Implications Pre March 2022 Preorder Holders

[ryanb]

Hello All,

Please forgive me if this has been covered elsewhere.

Excluding considerations for income and battery component thresholds, are early reservation holders subject to the new 80k MSRP threshold for tax credit qualifications, or does the 70-72k purchase base price for R1T/S allow us to avoid the 80k limit and still (potentially) qualify?

Thanks

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[Lsthrz]

My understanding is that the key milestone for all the new regulations is when you actually purchase the car, so at that point the vehicle cost, parts and income restrictions are in play. This is why some EV companies are trying to get full purchase commitments immediately.
Of course, this is a political bill, always complicated and unclear

 

[jakef801]

Throw everything you know out the window. Any and all EVs currently for sale in the USA will not be available for any tax credit. This is due to the fact that the new bill requires that 40%+ of the materials used in lithium ion batteries be sourced from countries that are not on the USA's list of "foreign entities of concern". China is on that list and they currently have a 76% "lock" on the worldwide battery market. Source: https://www.theverge.com/2022/8/8/23296678/ev-tax-credit-qualify-battery-supply-chain-china

 

[frostbit3]

Throw everything you know out the window. Any and all EVs currently for sale in the USA will not be available for any tax credit. This is due to the fact that the new bill requires that 40%+ of the materials used in lithium ion batteries be sourced from countries that are not on the USA's list of "foreign entities of concern". China is on that list and they currently have a 76% "lock" on the worldwide battery market. Source: https://www.theverge.com/2022/8/8/23296678/ev-tax-credit-qualify-battery-supply-chain-china

That's not in effect yet is it? From the wording (emphasis mine):

40 percent of materials sourced from North America or a US trading partner by 2024 in order to be eligible for a $7,500 tax break​

I don't see how they'd be able to enforce that for buyers of a vehicle in 2023.

 

[jakef801]

That's not in effect yet is it? From the wording (emphasis mine):

40 percent of materials sourced from North America or a US trading partner by 2024 in order to be eligible for a $7,500 tax break​

I don't see how they'd be able to enforce that for buyers of a vehicle in 2023.

A valid argument. I have to read deeper into it as the brand new bill is dissected (and, no, it hasn't passed, but with Dem control of House as well, it's highly likely it could pass by this Sunday -- Biden has stated that he'll sign immediately afterward).

 

[Autolycus]

That's not in effect yet is it? From the wording (emphasis mine):

40 percent of materials sourced from North America or a US trading partner by 2024 in order to be eligible for a $7,500 tax break​

I don't see how they'd be able to enforce that for buyers of a vehicle in 2023.

OK, round and round we all go again...

The materials requirement goes into effect as soon as the Secretary of Treasury issues their implementing guidance. The IRA requires that the guidance be issued no later than 12/31/2022. That guidance will almost certainly first appear in the form an Interim Final Regulation and then later be confirmed in the form of subsequent Proposed Regulation and Final Regulation.

The percentage requirement increases gradually. For the critical minerals requirement it's 40% for vehicles placed in service from the date of issuance of guidance through 1/1/24, 50% for vehicles placed in service in 2024, 60% in 2025, 70% in 2026, and 80% after 12/31/2026. For the battery components requirement it's 50% through 1/1/24, 60% in 2024-2025, 70% in 2026, 80% in 2027, 90% in 2028, and 100% in 2029 and after.

 

[COdogman]

It’s also possible (but not guaranteed) the Treasury Dept could issue waivers on the sourcing requirements like they do for other industries if the industry as a whole needs more time to meet the goals. They do this with steel and a few other things.

 

[Dave711]

I too am curious about the specific use of the MSRP language and how that affects the Pre-March 2022 order holders. As I have my R1S spec'ed out, it will be below the $80k threshold under the old pricing. But if they are using MSRP, the MSRP of my spec at the time that my sale goes through (late next year likely) will be AT LEAST $88k or so, assuming no additional price hikes in the interim. Do I get to use my sale price/MSRP that will be on sale contract or do they force you to use the advertised MSRP as of the sale date?

The significant price difference might be unique to Rivian, but I haven't seen it come up on other threads yet. Can somebody point me that way if it has?

 

[Jac]

Geez. I'm on board with the intent here, but the aggressively short timelines and near-immediate effect leave so little room for planning. Six months is NOTHING in terms of planning for sourcing, design, etc. for large scale manufacturing. Seems like this will essentially take away qualification from most vehicles and force automakers to make these big changes before they can requalify, with the cost on consumer having to pay full price if they buy a non-qualifying vehicle that USED to qualify. Seems like orders from some companies are going to stall until the products get back into compliance.

Seems like intent has stomped all over feasibility and implementation considerations.

Hard to believe Autolycus has had to correct misinformation and restate the facts about the battery content-related requirement‘s implementation schedule in, I think, three separate forum threads today.

 

[Sgt Beavis]

I’m at $80125. If I have to, I’ll remove the all weather floormats and be under $80K. Fortunately I’m just under the joint filing AGI limit.

I’m also crossing my fingers that the feeds will waive the battery content requirement for a few years.

 

[Zoidz]

Throw everything you know out the window. Any and all EVs currently for sale in the USA will not be available for any tax credit. This is due to the fact that the new bill requires that 40%+ of the materials used in lithium ion batteries be sourced from countries that are not on the USA's list of "foreign entities of concern". China is on that list and they currently have a 76% "lock" on the worldwide battery market. Source: https://www.theverge.com/2022/8/8/23296678/ev-tax-credit-qualify-battery-supply-chain-china

Don't throw everything out the window. All EVs for sale today are and will be eligible for the existing tax credit, which has no battery sourcing clause, if there is a binding sales agreement in effect before the president signes the bill. Rivian is reportedly doing the same thing as Fisker, below:

"However, the bill also contains a “Transition Rule” for the tax credit, which allows a taxpayer who—after 31 December 2021, and before the date of enactment of the bill—purchased, or entered into a written binding contract to purchase, a new qualified plug-in electric drive motor vehicle (as defined in the IRS code as in effect before the enactment of the bill), to treat the vehicle as having been placed in service on the day before the date of enactment.

The bill, as currently written, would make the Fisker Ocean electric SUV, which will be built in Austria starting in November, ineligible. However, Fisker believes customers may be able to retain eligibility for the full $7,500 credit for the 2022 tax year by converting their existing reservations into a binding sales contract for the purchase of the Fisker Ocean, per the Transition Rule."

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