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All things Chevy Volt, including the new House tax credit for plug ins

By Joe Romm  

"All things Chevy Volt, including the new House tax credit for plug ins"

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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:

GM says it will cost 2 cents per mile to drive the Volt less than 40 miles per day versus 12 cents per mile for gasoline at a price of $3.60.

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.

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24 Responses to All things Chevy Volt, including the new House tax credit for plug ins

  1. albert says:

    My big worries are that they won’t make enough of them, gas prices will already have gone up, and there will be long waiting lists to get one, or that it won’t live up to the promises.

  2. A Siegel says:

    Not going to talk about how Lutz remains a Putz when it comes to Global Warming in his ‘promotion’ of the Volt? The Colbert Show was impressive (disappointing) to watch. See: http://getenergysmartnow.com/2008/09/17/lutz-remains-a-putz-on-global-warming-denial/

  3. Paul K says:

    Since automakers can’t keep up with the demand for hybrids – they sell out as soon as they hit the showroom floor – it is arguable whether tax incentives for plug-ins are necessary or even wise. Subsidies could hinder market and economy of scale cost reductions.

    On the AMT front, it was reported yesterday that a bipartisan agreement in the Senate will remove 20 million taxpayers from its clutches and provide $17 billion in incentives for alternative energy!

  4. Lamont says:

    $0.12 per mile is for a 30mpg car.

    taking a 10mpg SUV and the 15,000 average vehicle miles per year for the light truck category that is $0.36 per mile and $5400 per year (at the quoted $3.60/gal price). the volt would be $300/yr for 15,000 miles.

    unfortunately, i drive a 30mpg car about 8,000 miles a year, so only spend about $960/yr on gas, for a savings of only $800/yr.

    it also probably still makes more GHG sense to drive my current car to death rather than have GM produce another car for me.

  5. hapa says:

    still gonna be over $30K after tax credit. chevy spokesperson said so last week.

  6. Rick C says:

    Well, I’m on the list at 5082, ableit an unofficial list, but a list nontheless. I’m am bullish about this vehicle now that it has been unveiled and look forward to pruchasing it two years hence.

    I’m moving away from fossil fuels and I’m watching the cost of photovoltaic panels.

  7. Paul K says:

    Lamont,
    If you are driving only 8,000 miles per year, it is likely you wouldn’t use any gasoline in a Volt. Or maybe you only use your car when you have to go more than 40 miles.

  8. rpauli says:

    I recall recent govt studies putting the typical ownership cost per mile up around 65 cents per mile. I will look for the source.

  9. Brewster says:

    “The new Volt design is about the same size as the Prius, but with much less cargo space because of the batteries”

    Where did that come from? The Volt batteries are a “T” shape located between the front seats and under the back ones… Unused space in most vehicles.

    I’m not sure if there’s less cargo space or not, I haven’t seen any figures, but if there is, it’s not because of the batteries.

  10. Brewster says:

    I guess I should add:

    There WILL be some loss of space – there’ll be no legroom for a centre passenger in the back seat – the car will be limited to 4 passengers.

    Since almost no-one ever uses that position anyway, it’s a pretty small loss…

  11. Bob Wallace says:

    That $0.65 figure includes depreciation, insurance, tire replacement. The sort of things that will be roughly the same for both PHEVs and ICEs.

    Fuel/electricity is the big difference. Tuneups and lots of routine maintenance will be less for PHEVs.

    For those of us who have surplus electricity from our solar in the summer the cost difference will be even greater. ;o)

  12. Sasparilla says:

    It’s going to be an impressive car, but its still going to be around $30k per vehicle after whatever rebates it gets, so most folks won’t be able to afford this first version. GM is looking to knock down prices substantially in follow on versions.

    This higher price is probably good as 60,000 – 100,000 yr production volume wouldn’t come close to satisfying demand if it was down in the $25k or lower price range.

    I’m on the unofficial waiting list and saving dollars….

  13. charlie says:

    “Tuneups and lots of routine maintenance will be less for PHEVs.”

    What support do you have for that statement. In a new car, you don’t have tuneups — although at some point you need to replace spark plugs, filters, and oil. You are still going to do so with a PHEV, although it is unclear to what degree.

    I have tremendous worried about long term reliability of hybrids and PHEV. Turning the engine on and off like that can’t be good. You can easily sludge out an engine that way. Also, I have no idea what to do with engine oil.

  14. Bob Wallace says:

    Let’s start with the fact that the ICE in a hybrid is smaller and will accumulate many fewer miles than a non-hybrid. It will also be optimized to run at one particular speed and not undergo the stress of frequent changes in RPM and load.

    If 80% of American daily driving is less than 40 miles we might guess that the ICE is only going to be run 20% of the time. That would be about 2,400 miles per year for the ‘average’ driver.

    Few oil changes. One every three years or so. (And used oil is a very recyclable substance.)

    Fewer worn out parts over the years. Given a 2,400 mile use per year and engines that are expected to last at least 100,000 miles without problems (that’s what my engines have given me) we’re looking at over 40 years of trouble free driving.

    The engines are unlikely to be turning on and off a lot. For many people the engine will only come on during their infrequent long trips. And will run at a stable speed for the remainder of the trip. Not the sort of on/off/on/off that happens in engines that shut themselves off at each stop.

    (The car’s computer might have to be programmed to run the engine, remind the owner to run the engine, periodically if needed just to ‘freshen things up’. Not clear. I’ve got a 20 year old lawn mower that gets run 2-3 times a year and hasn’t seemed to suffer.)

    Long term reliability. Essentially no battery failures on Toyota hybrids that have run more than 200,000 miles. Some Prius taxis are up around 300,000. Electric motors are long-lived beasts. Car bodies are likely to wear out sooner than the batteries, electric motors, and seldom used ICEs.

  15. rpauli says:

    here it is: Average Cost of Owning an Automobile

    http://www.bts.gov/publications/national_transportation_statistics/html/table_03_14.html

    If you want to swim in data, try:
    ns/national_transportation_statistics/html/table_03_14.html

  16. Bob Wallace says:

    Googled sludge a bit. Here’s a well-written statement that sums up what other sites said….

    “Sludge in gasoline engines is usually black emulsion of water and other combustion by-products, and oil formed primarily during low-temperature engine operation. Sludge is typically soft, but can polymerize to very hard substance. It plugs oil lines and screens, and accelerates wear of engine parts. Sludge deposits can be controlled with a dispersant additive that keeps the sludge constituents finely suspended in the oil.”

    People who use their cars mostly for short hops during which the engine doesn’t reach full operating heat can cause a build up of water in the oil. They need to change their oil more often (or use a dispersal additive).

    Hybrid ICEs are likely to turn on infrequently but run for extended times when they do switch on. Easy enough to monitor “minutes at temp” and signal the driver to use the ICE from time to time if needed.

    Also the “combustion byproducts” that help to create sludge are more common in well-worn engines with leaky rings and head gaskets. Should be many years before the typical hybrid ICE is well worn.

  17. Earl Killian says:

    Team Fate at U.C. Davis regularly took ICEs and converted them to PHEVs and they lost nothing in interior space. The volume occupied from EV components came from volume freed up from using smaller ICE components (e.g. smaller engines).

    The maintenance records for some Prius Taxis are online. One can also find reports such as this one, from people who pay attention to maintenance costs:

    http://www.autospies.com/news/Toyota-Prius-Taxi-Cracks-550000-km-32731/

    Toyota Prius Taxi Cracks 550000 km

    A Cairns-based Toyota Prius taxi has clocked up approximately 550,000 kilometers while costing just half the fuel and maintenance outlay compared to other conventionally-powered cars in the fleet.

    Thirty-two Prius taxis operate in Cairns, each clocking up around 200,000km per annum. Local Toyota dealer Pacific Toyota says it has eight more on order for local cab companies.

    Taxi operator Graham Boundy, who owns Black and White Taxis in Cairns, received the company’s first Prius in September 2005.

    “We’ve have had almost three years great service from it,” he said.

    “We obviously track our costs very closely and our reports show the Prius consumes half the petrol of other vehicles in our fleet and also half the service costs – it is quite amazing.

  18. nataraj says:

    I’ve always wondered – who comes up with the elaborate language of the bills. I doubt it can be done by our busy representatives – do lobbyists write all the stuff and pass it on ?

    GM has volt for one purpose now – to get billions of $ in cheap credit from uncle sam. They will price it high – very high – since they know the car will get some tax credit – and they will produce a small number of them. So they don’t have to work hard to sell them all.

    I hope Mitsu MiEV comes to our rescue – or may be the Chinese BYD.

  19. Cyril R. says:

    A clever plugin hybrid design would use the waste heat of the electric motor and energy storage unit to warm up the ICE. That way, it is always warm when it starts. Increases reliability (no cold ICE start) and reduces pollution.

  20. msn nickleri says:

    A clever plugin hybrid design would use the waste heat of the electric motor and energy storage unit to warm up the ICE. That way, it is always warm when it starts. Increases reliability (no cold ICE start) and reduces pollution.

  21. g-money says:

    how are these hybrids heated and cooled for a comfortable ride during hot or cold temperatures?

  22. shop says:

    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.

  23. büyütücü says:

    “Drill, baby, drill” is no solution to our energy problems, not by a long shot. Help us stand up to Big Oil today.