The Inflation Reduction Act looks to accelerate the adoption of clean vehicles by reforming the related tax credits in a number of key ways.  Specifically, the bill does the following.

  1. Eliminates the 200,000 clean vehicles sold quota per manufacturer.
    • Previously, Tesla, GM, and Toyota were all over the 200,000 vehicle threshold and thus ineligible for the tax credit.
  2. Preserves the existing up to $7,500 tax credit for new qualified vehicles including electric, plug-in hybrids, and hydrogen fuel cell vehicles.
    • This credit is reduced or eliminated if a certain percent of the critical minerals used in the battery are not extracted or processed in a county with which the United States has a free trade agreement or recycled in North America. As of January 1, 2024, at least 40% of the critical minerals must meet the above definition with this percent climbing to 80% by 2026.
  3. Establishes an $80,000 price cap for vans, SUVs, and pickup trucks and a $55,000 price cap for all other consumer vehicles.
  4. Establishes an income eligibility cap of $150,000 or $300,000 for joint filers.
  5. Creates a tax credit for previously owned clean vehicles of the lesser of $4,000 or 30% of the sale price.
    • The sale price cannot exceed $25,000.
  6. Establishes an income eligibility cap for previously owned clean vehicles of $75,000 or $150,000 for joint filers.
  7. Creates a tax credit for commercial clean vehicles of up to $7,500 for vehicles weighing less than 14,000 pounds and $40,000 for vehicles greater than 14,000 pounds.
  8. Extends the alternative fuel refueling property credit 11 years to December 31, 2032.

The Biden Administration set a target of 50% of electric vehicle sale shares in the U.S. by 2030.  Currently, EV sales make up approximately 5% of new vehicles sales.  These changes will help drive the adoption of zero emission vehicles in the United States.  Will they be enough to push the U.S. the other 45% by 2030?  Stay tuned for Foley Hoag’s continuing zero emission vehicle series.

The post Inflation Reduction Act Aims to Propel EV and Clean Fuel Vehicle Adoption first appeared on Law and the Environment.