24 Responses to All things Chevy Volt, including the new House tax credit for plug ins
GM has rolled out its upcoming plug-in hybrid electric vehicle, the Chevy Volt. Calcars has posted a bunch of articles from GM and the press on “why GM changed the design.” Personally, I can’t really imagine that many people will choose to buy — or not buy — this particular vehicle on the basis of its looks.
The new Volt design is about the same size as the Prius, but with much less cargo space because of the batteries:
Imagine how much you’ll save when the price of gasoline is double that (see “Must read CIBC report: $7 gas by 2010“).
In theory the new House energy bill would provide a $5,000 tax credit (see below), but many people might not be able to get that because of our delightful tax code. In particular, the Alternative Minimum Tax may negate some or all of the credit, as it does with the current hybrid vehicle tax credit, as the IRS explains:
The Credit and the Alternative Minimum Tax
Also the Alternative Motor Vehicle Credit cannot be used to offset the Alternative Minimum Tax (AMT). A taxpayer cannot claim the credit unless the taxpayer’s regular tax liability exceeds the taxpayer’s AMT liability.
Even if a person is not subject to the AMT, he may not be able to claim the maximum allowable credit, or any credit, for the qualified vehicle that is purchased. The amount of the credit that one can claim depends on the particular facts and circumstances.
For example, A, B and C each purchase the same make, model, and model year of qualified hybrid motor vehicle to use as their personal vehicles. At the time that A, B and C purchase their vehicles, the maximum allowable credit for the vehicle is $3,150. A, B and C each have regular tax of $12,000 for the taxable year in which they purchase their vehicles. A’s tentative minimum tax is $8,000, B’s tentative minimum tax is $11,000, and C’s tentative minimum tax is $12,000. Because A’s regular tax ($12,000) exceeds A’s tentative minimum tax ($8,000) by $4,000, A can claim the maximum credit allowable for the qualified hybrid vehicle that A purchases. Because B’s regular tax ($12,000) exceeds B’s tentative minimum tax ($11,000) by only $1,000, B can claim a credit of only $1,000 for the qualified hybrid vehicle that B purchases. Because C’s regular tax ($12,000) does not exceed C’s tentative minimum tax ($12,000), C cannot claim any credit for the qualified hybrid vehicle that C purchases.
Also, if you claim the credit as a personal credit, the tax code limits the amount of the credit that you may claim to the amount of your regular tax liability. Therefore, if your regular tax liability is zero, the amount of the credit for which you are eligible will be zero. The credit cannot be used to reduce your regular tax liability below zero, and cannot be carried forward or back to another taxable year.
If the vehicle that you purchase is subject to the allowance for depreciation, then the credit is part of the general business credit and the rules applicable to the general business credit apply.
Get all that? Gotta love the IRS.
Anyway, here is an explanation of the plug-in tax credit in the House bill:
Buried in the bill that’s popularly dubbed the Off-Shore Drilling Bill, or H.R. 6899, is a section that details a tax credit for “New Qualified Plug-In Electric Drive Motor Vehicles.”
The credit kicks off at $3,000, and for every kilowatt hour of the battery over 5 kwh, it goes up $200, to a maximum of $5,000. That means the Chevy Volt — at 16 kwh — would get a total tax credit of $5,000. No other automaker has officially announced a plug-in electric vehicle for sale in the U.S.
This new credit will have an identical lifespan — 60,000 vehicles per company — as the original tax incentives for non-plug-in hybrids, with a similar reduction plan that reduces the credit by 50% and 25%, then down to nothing. The credit would go into effect after Dec. 31, 2008.
There are a number of restrictions we list below that are pretty cut and dried — very dry.
(d) New Qualified Plug-In Electric Drive Motor Vehicle, For purposes of this section
(1) IN GENERAL — The term “new qualified plug-in electric drive motor vehicle” means a motor vehicle —
(A) the original use of which commences with the taxpayer,
(B) which is acquired for use or lease by the taxpayer and not for resale,
(C) which is made by a manufacturer,
(D) which has a gross vehicle weight rating of less than 14,000 pounds,
(E) which has received a certificate of conformity under the Clean Air Act and meets or exceeds the Bin 5 Tier II emission standard established in regulations prescribed by the Administrator of the Environmental Protection Agency under section 202(i) of the Clean Air Act for that make and model year vehicle, and
(F) which is propelled to a significant extent by an electric motor which draws electricity from a battery which —
(i) has a capacity of not less than 4 kilowatt hours, and
(ii) is capable of being recharged from an external source of electricity.
(2) EXCEPTION – The term “new qualified plug-in electric drive motor vehicle” shall not include any vehicle which is not a passenger automobile or light truck if such vehicle has a gross vehicle weight rating of less than 8,500 pounds.
(3) MOTOR VEHICLE – The term “motor vehicle” means any vehicle which is manufactured primarily for use on public streets, roads, and highways (not including a vehicle operated exclusively on a rail or rails) and which has at least 4 wheels.
(4) OTHER TERMS – The terms “passenger automobile,” “light truck,” and “manufacturer” have the meanings given such terms in regulations prescribed by the Administrator of the Environmental Protection Agency for purposes of the administration of title II of the Clean Air Act (42 U.S.C. 7521 et seq.).
(5) BATTERY CAPACITY – The term “capacity” means, with respect to any battery, the quantity of electricity which the battery is capable of storing, expressed in kilowatt hours, as measured from a 100 percent state of charge to a 0 percent state of charge.
I must say that “60,000 vehicles per company” is way too lame. That will have to be dealt with by the next President and Congress.