Progress! IRA signed into law
Most comprehensive climate package in U.S. history affects EV policy
The Inflation Reduction Act (IRA) is a massive climate, health care, and tax bill with the overarching goal of slowing the rise in consumer prices that have been climbing at the fastest pace in approximately 40 years. The provisions included in the bill will fight inflation by lowering energy and health care costs for families, and by helping to reduce the deficit.
EV provisions
The legislation creates a new and used EV tax credit, extending the tax credit on some new EVs to 2032 while shifting tax incentives to more affordable models that are manufactured in North America. This will support millions more low- and middle-income families than the original credit.
Below, we break down the IRA’s EV related provisions and highlight how EVA chapters around the country are gearing up to make the most of this landmark package.
Clean Vehicle Credit: This $7,500 credit was renamed, reshaped, and split in two parts:
$3,750 if the vehicle’s battery is manufactured or assembled in North America. This is based on a percentage of the value of components that will increase over time starting with 50 percent in 2024.
$3,750 if the battery is constructed with critical minerals extracted in the U.S., or a country with which the U.S. has a free trade agreement, or with materials recycled in North America. This is based on a percentage of components that will increase over time starting with 40 percent in 2024.
Information on battery composition is generally unavailable, so it is therefore challenging to know incentive eligibility for a particular make and model. Industry experts predict that Korea, Japan, and the EU will challenge this component of the IRA in court for violation of World Trade Organization rules.
Additional changes include:
An MSRP cap of $80,000 for vans, SUVs, and pickup trucks and $55,000 for any other vehicle. The list of vehicles falling into each of these categories is still unknown.
Now through 2032, vehicles must have final assembly in North America. The excludes many Asian and European EVs.
Beginning in 2023, elimination of the cap on the number of vehicles that can be sold (previously 200,000 per automaker), meaning that Tesla, GM, and Toyota will all be eligible for the credit again, assuming their vehicles meet other IRA requirements.
Beginning in 2024, availability of the tax credit at the point of sale, meaning that buyers will not be forced to wait months to receive the federal tax credit. The credit can also be used toward a down payment.
An income cap of $150,000 for an individual, or up to $300,000 for a household, to receive the credit. It is unclear at this time how income caps will be determined at the dealership's point of sale.
Tax credit for Previously-Owned Clean Vehicles: A new tax credit of $4,000 or 30 percent of the vehicle sale price (whichever is lower) for used EVs, including hybrids with 7kwh or greater batteries. To qualify for the credit, the following criteria must be met:
A maximum buyer income of $75,000 for an individual. or $150,000 for individuals filing jointly, for the year of the purchase or prior year.
Used EV age of at least two years and weight of less than 14,000 lbs.
Used EV sale price less than $25,000.
Used EV purchased at registered auto dealerships.
And it's more than vehicle incentives. The IRA restores the 30% tax credit for an EVSE, and its cost of installation, to a maximum credit of $1000 (businesses may claim a larger amount). Originally, this credit ended last year, but has now been extended for installations through 2022 and is retroactive to the beginning of the year. It also continues through 2032, but adds the restriction that starting in 2023, the installation must be in a low-income community or rural census tract.
For all tax related items, consult with a tax advisor.
Greenhouse Gas Reduction Fund: Administered by the EPA, this funding supports all projects that reduce greenhouse gas emissions. supports any projects that reduce greenhouse gas emissions and includes $7 billion for zero emission technologies for low-income and disadvantaged communities and $8 billion for low income and disadvantaged communities.
United States Postal Service Clean Fleets: $3 billion is available for USPS to electrify fleets and provide charging equipment.
Environmental and Climate Justice Block Grants: Funding for investments in low- and zero-emission technologies and projects that reduce indoor air pollution and climate resiliency for disadvantaged communities as defined by the EPA.
Other exciting elements include billions for Clean Heavy-Duty Vehicles, as well as the Grants to Reduce Air Pollution at Ports, and a number of alternative fuel (hydrogen, biofuels etc.) programs.
Chapters get into gear
Across the country, EVA chapters are making plans to address the IRA. When we sent a query to chapter leaders, their focus was on informing chapter members as to the effect the legislation may have on them, and to be involved as much as possible in the distribution of the government funds in their area.
“Our EVA chapter is already listed as a stakeholder with the Kentucky Transportation Cabinet,” explained Mike Proctor, Publicity Chair of Kentucky chapter EVOLVE KY. “We’ll be particY
ipating in informational seminars on state plans for funds distribution.”
“We also plan to update the subscribers to our mailing list and Facebook page on the latest developments,” Proctor continued. “The legislation will be promoted at upcoming National Drive Electric Week (NDEW) ride/drive events and at our civic and education EV presentations.”
The New Jersey EVA is also educating membership in the form of a newsletter article, according to Stan Jaracz, chapter president.
“We’re seeking ways to receive a small piece of the pie so that we get paid for our outreach,” he continued about the federal monies, explaining that the chapter has been struggling to meet the demands of growing interest in EV displays and needs the help.
“Our state is very aggressive on electrification and the state agencies are laser focused on consistent and aggressive support of EV registrations via sales tax exemptions, rebates for EV purchase, and charging deployment and awareness,” Jaracz added. “We do whatever we can to support all of that.”