Post by Barry Kresch

Tax Credit for Purchase and Installation of an EV Charger

The recently passed Inflation Reduction Act has amended US Code 26, Section 30C to reinstate a tax credit for the purchase and installation of an EV charger.

This credit had been in the tax code a while. Every year it expired and every year it got extended for one year, sometimes, as is the case now, after the fact. It had expired on December 31, 2021. It is now folded into the 10-year time horizon of the IRA. Here are the key things to know:

• The credit is for 30% of the combined cost of the hardware and installation, capped at $1000. This is the same as what it used to be.
• This has nothing to do with the utility incentives. Any charger qualifies.
• It is retroactive to January 1, 2022. If you bought a unit earlier this year, include it in your tax return.
• This incentive becomes more restrictive beginning in 2023, going through 2032. It then applies only to low income communities and rural census tracts.
• Use IRS form 8911 to claim the credit.

There is a commercial version of this with higher amounts.

Standard caveat: Always check with your CPA.

Photo: Hyundai Ioniq 5 is an example of a vehicle that immediately loses eligibility due to its not being manufactured in North America

Post by Barry Kresch

Which EVs Are Eligible for the Federal Tax Credit for the Remainder of 2022

The Inflation Reduction Act, for the most part, goes into effect in January 2023. That leaves this interregnum from August 16th through the end of this year, when the existing program stays in place except for the fact that as of the moment the ink dries, EVs not assembled in North America lose eligibility. According to EVAdoption, only 21 models qualify for the remainder of this year:

All of these are manufactured in either the United States, Canada, or Mexico.

The manufacturer cap remains in place until the end of the year, which eliminates Tesla and General Motors. All of the above manufacturers have not phased out. Toyota reportedly exceeded the 200,000 unit cap during the second quarter. That would translate to the tax credit being halved in Q4. After that, they wouldn’t have to worry about it. For any company that exceeds the cap in the third (or fourth) quarter, Ford being the most likely example, it becomes a non-issue as the cap would be gone before they phase out.

The Volkswagen ID.4 has been imported from Germany, but the company will soon manufacture them in its Tennessee plant. Be sure and check.

Customers of Rivian and Lucid, new manufacturers of high-end EVs, will be able to utilize the credit until the end of the year. As of next year, these cars, except for lesser equipped versions of the R1T and R1S, will exceed the new price thresholds. The Karma and the Mercedes also exceed the new price thresholds.

What if You Bought a Car Earlier This Year That Is No Longer Eligible

If you bought a car earlier this year that was eligible when you bought it but has lost eligibility either as of August 16th or will lose eligibility as of next year, you can still take the tax credit when you file your 2022 taxes.

If you have a binding contract from before August 16th on a vehicle such as the above-noted Ioniq 5 that has lost eligibility, but you have not taken delivery, you should still get the credit based on the federal language. Usually, it means a binding contract that neither party can change, a non-refundable deposit, and a VIN.

“Binding” is the key word. This is the IRS language:

“If you entered into a written binding contract to purchase a new qualifying electric vehicle before August 16, 2022, but do not take possession of the vehicle until on or after August 16, 2022 (for example, because the vehicle has not been delivered), you may claim the EV credit based on the rules that were in effect before August 16, 2022. The final assembly requirement does not apply before August 16, 2022.”

A binding contract is generally interpreted as enforceable under state law, including a non-refundable deposit of at least 5% of the total value. This is an excerpt of the language on the IRS website (which is federal):

“For example, if a customer has made a non-refundable deposit or down payment of 5 percent of the total contract price, it is an indication of a binding contract. A contract is binding even if subject to a condition, as long as the condition is not within the control of either party. A contract will continue to be binding if the parties make insubstantial changes in its terms and conditions.”

As we are always careful to say, we try to provide accurate information, but with respect to tax credit eligibility, please check with a CPA.

Although I applaud the goals of the IRA, I think this abrupt loss of eligibility is confusing for consumers and not helpful in general.

We do not yet know which models will meet the minerals sourcing and battery manufacturing requirements that take effect next year. I expect to see reports in the EV press as models become declared eligible.

Post by Barry Kresch

EV Transferable Tax Credit Included in Inflation Reduction Act (IRA)

President Biden signed the Inflation Reduction Act into law on August 16th. With it comes a new EV purchase incentive.

It was past time to revise the existing federal EV incentive. The IRA brings with it some improvements, along with more complexity and some uncertainty. I have read a lot of the reporting around this legislation and find much of it not completely clear and sometimes inconsistent. There is also still additional rule-making that has to happen. This is what it looks like to me with the caveat that your mileage may vary and the content may be updated based on new information.

Summary of the new incentive:

• Tax credit of up to $7500 for new EVs.
• Option to take the credit as a normal tax credit or assign it to the dealer to receive it as an immediate rebate (not to mention utilize it if you do not have enough tax liability). Begins 2024.
• Although the bill has a lot of language about dealers, Tesla and other direct sellers are eligible to the extent their vehicles meet the other requirements.
• Used EV incentive of up to the lesser of $4000 or 30% of the vehicle cost.
• In order to receive the used EV incentive, the vehicle must be purchased from a dealer. Used-car only dealers qualify. Private sales do not.
• Means testing (income limits for recipients of new and used incentives).
• Price cap for new and used EVs.
• 10-year time horizon – Incentives in place through 2032.
• Minimum battery pack size requirement of 7 kWh (increased from the current 5 kWh, but still really small).
• New incentives are effective as of 2023.
• Requirements for minerals sourcing and battery manufacturing phase in beginning in 2023.
• Final assembly takes place in North America.

Limitations of the Current Incentive

The existing federal EV tax credit was limited from the beginning and has become increasingly less useful as time goes on. Perhaps because EVs were relatively exotic when it first began, each manufacturer was allotted a quota of 200,000 unit sales before they would begin to phase out of the incentive. It never made a lot of sense. Not only did it end up penalizing those companies that were first out of the gate, the number is puny considering the country has a light-duty fleet of approximately 200 million vehicles (Bureau of Transportation Statistics).

When a manufacturer crosses the 200,000 unit threshold, a phase-out period begins that lasts 15-18 months, depending on the timing of when they crossed. Tesla and General Motors exceeded the threshold in 2018. Tesla was fully phased out by the end of 2019 and GM followed in March, 2020. Toyota, Ford, Nissan, and Hyundai have either just recently hit that mark or are close.

The second limitation to the current program is inherent in its structure as a tax credit. You have to wait until you file your taxes to get it and it only helps if you have enough tax liability to offset. There is no carry-forward provision. All that said, it does have the virtue of relative simplicity. The only rule is that the size of the credit is based on the size of the battery pack. All BEVs and the longer-range PHEVs qualify for the full credit, which begins at 18 kWh.

The New IRA Upends Much of This Thinking

The new program makes a good start by removing the 200,000 cap. In its place are new rules intended to introduce progressivity, and new requirements to jump-start a domestic supply chain and spur domestic manufacturing. The result is a much more complex program and a risk that the materials and manufacturing requirements may be so aggressive as to cause EVs to lose partial or complete eligibility, at least for a period of time.

The IRA is a big deal with a lot of parts that are out of scope of this EV-focused post. Nonetheless, what is arguably the most controversial aspect of the EV proposal goes to what is at the core of the bill as a whole. That is its big bet on industrial policy to revive domestic industry with an eye towards not only emissions reduction, but jobs and national security – a combination of tax incentives; direct pay; and support for research, materials sourcing, and manufacturing, coupled with consumer incentives, not only for EVs, but for solar, storage, and heat pumps. In my view, the design is a good one that will lead to private investment, job creation, leadership in industries of the future, and a lower risk profile. You don’t need a long memory to recall the serious shortage of PPE early in the pandemic or the continuing shortage of microchips.

Automobile manufacturers are objecting to how aggressively the materials and manufacturing requirements are put in place and how quickly they escalate. We will see where this lands. I don’t take what the manufacturers say at face value. Many of these companies are the same ones that fought airbags and lobbied (with some degree of success) to loosen CAFE standards.

The other controversial part of the IRA is its provision to tie granting of oil and gas leases to renewable energy development. I  don’t see the point in tying the development of fossil-fuel assets to renewables. However, in the scheme of things, I think there will be a fossil-fuel long-tail no matter what we do, and there is enough here to generate a robust adoption of cleaner technology that will create a positive feedback loop and erode fossil-fuel demand. The simple fact is that as renewables scale and become cheaper, fossil fuels become less cost competitive.

The fact that the IRA has a 10-year lifespan is a great thing. Our government has never had a consistent energy policy to speak of. This makes for much greater certainty in the investment environment.

EV Material and Assembly Requirements

• Upon enactment (August 16th), the current incentive remains in place for the balance of 2022, but the domestic final assembly (of the vehicle, not the battery) provision will apply immediately. I’m not sure why they felt they had to lower the boom so quickly. Any EV that is imported will no longer be eligible and there are some major ones. Hyundai, Kia, Polestar, and Toyota are some of the manufacturers importing EVs to this country.
• The new tax credit is split into 2 parts: sourcing of critical minerals and assembly of batteries, each valued at $3750.
  • These begin in 2023.
  • 40% of critical minerals must be sourced from a country with which the USA has a free-trade agreement. This escalates each year until it reaches 80% in 2027, where it stays through the duration of the bill.
  • 50% of battery components must be manufactured and assembled in North America. This escalates until it reaches 100% in 2029.
  • It is possible that many EV manufacturers will not meet one or both of these requirements because they have to reorganize their supply chains and augment domestic manufacturing.
  • Beginning in 2025, none of the critical minerals can be extracted or processed from a foreign entity of concern. This is obviously aimed at China, but it affects other countries as well.
  • Beginning in 2024, none of the battery manufacturing can occur in a foreign entity of concern.
  • Recycling of retired batteries that occurs in North America can be counted toward the required percentages.
  • As noted above, final vehicle assembly must be in North America as of 8/16 (unless a binding contract had been signed and the customer is awaiting delivery). That is table stakes.
  • The final assembly and sourcing provisions do not apply to used EVs.

There have been reports of intense lobbying happening around these requirements. We’ll see if there is a grant of a waiver. There is also some rule-making to be done. For example, the NY Times wondered if a Chinese battery company like CATL were to build a facility here, whether that would escape the “entities of concern” provision.

This is a list of currently eligible vehicles on the Department of Energy website: https://afdc.energy.gov/laws/inflation-reduction-act. The list applies to 2022. 2023 is TBD.

Price Caps and Means Testing

• There is a price cap for new vehicles of $55,000 for a sedan and $80,000 for an SUV, van, or pickup. For prospective Tesla buyers, it means the Model Y gets more support than the 3. These definitions are drawn from the EPA classifications.
• Used EVs have a price cap of $25,000.
• A used EV has to be at least 2 years older than its model year.
• A used vehicle is eligible if it is the first transfer of a vehicle subsequent to the enactment of the legislation. It is intended to prevent multiple incentives per vehicle. Further, the transfer has to be to a different person (i.e. a person cannot get the incentive for buying a vehicle off-lease).
• The used incentive cannot be utilized by a person more frequently than once every 3 years.
• Eligible new car buyers are limited to a max adjusted gross income of $300,000 for joint filers, $225,000 for a head of household filer, and $150,000 for a single filer.
• Used EVs are income limited to $150,000 for joint filers, $112,500 for head of household filer, and $75,000 for a single filer.
• Neither the income limits nor MSRP cap are indexed for inflation over the 10-year course of the bill.

The federal MSRP cap seems to work differently than it does for the state incentive. Based on reporting in the NY Times that said, “Rivian’s electric pickups start at $72,500 but can easily top $80,000 with options,” I am assuming that means the federal definition is inclusive of options. This differs from what the state uses, which is the base MSRP of the trim level (i.e. excluding options). This will make it more difficult to have a chart of available vehicles such as there is with the CHEAPR website. The Department of Energy’s Alternative Fuels Data Center will likely publish such a list, but it will have to be hedged as “may” be eligible. You can always use a VIN decoder, which will tell you the particulars of a vehicle such that you can determine if it is eligible. The downside of that approach is that it is not usable unless you are far enough into the purchase process to have a VIN. Anyway, here it is on the NHTSA website: https://www.nhtsa.gov/vin-decoder

It will be interesting to see if as we, hopefully, emerge from the supply chain mess, manufacturers will make an effort to get their vehicles under the price caps. Of late, it has been going in the other direction.

Keep in mind that the income caps are binary. If you are within the cap, you get the full credit. If not, you get nothing.

It strikes me that having both an MSRP cap and means-testing is overkill. Until the income-limited incentives were introduced in 2021 for CHEAPR, the program used the MSRP cap as an indirect form of means qualification. It would probably get you to a similar place and be less intrusive.

In general, the more rules, the more difficult it is for the consumer, resulting in lower utilization than otherwise might have occurred. There are a bunch of rules here.

Tax Credit and Transference

• The new tax credit allows the purchaser to take the tax credit as is done now at filing time with the flexibility to use either the current or prior tax year to determine income eligibility.
• Alternatively, the purchaser can assign the credit to the dealer and receive the funds as a rebate at the time of purchase. This also solves the problem of someone who doesn’t have enough tax liability to use a standard tax credit.
• Transferring of the credit to a dealer goes into effect in 2024.
• When the credit is transferred, it is up to the dealer to verify eligibility. Only the prior tax year can be used in this instance and hopefully, there are adequate privacy protections in place.
• In order for a dealer to accept the transfer, they have to be registered with the Secretary of the Treasury. There appear to be some considerable burdens placed on dealers to comply with the program.

E-bikes and auto cycles

• Sorry, nothing here. An e-bike incentive was included in Build Back Better, but did not make it to the IRA.
• Auto cycles, such as the 3-wheeled Aptera vehicle do not qualify, nor do electric motorcycles.

Those individuals who had a binding contract, but had not taken delivery, of a vehicle that lost eligibility on August 16th  or will lose eligibility next year, will still receive the tax credit. To be clear, the contract had to be in effect before August 16th, 2022.

Photo by David Dreyfuss/Post by Barry Kresch

Update:

These chargers have been ordered removed. The site has been approved for chargers but not the signage.

How Did That Happen?

Volta is a company that installs charging stations at their own expense at highly trafficked locations which are free to users. These chargers are at the site of the former Barnes and Noble on Post Road East in Westport, now being renovated as an Amazon supermarket due to open later this year.

Volta chargers have large screens that display digital advertising. Its business model is that the advertising covers the cost of installation and power, plus earns a profit. The business benefits from having this amenity (and Amazon has made sustainability a corporate focus). Volta chargers typically have J1772 connectors.

While we always welcome EV charging stations, the odd thing about this is that a proposed Volta installation just down the road at Stop and Shop was nixed by Westport Planning and Zoning, the reason being that the video display was non-conforming signage. Do they think these will remain invisible?

Volta chargers can be found at the new upscale mall, The Sono Collection, in Norwalk. Malls and supermarkets are ideal locations from Volta’s perspective with people constantly coming and going, the better to bulk up the number of advertising exposures. The chargers are placed in a prominent location, not ancillary parking. Volta has a master agreement with Stop and Shop to install chargers at a number of their locations, including 2 locations in Norwalk.

Just don’t try and sneak in for a charge after hours. They typically turn off the units when the business is not open. Operating hours can generally be found on the PlugShare app. These chargers are not yet listed because they are not yet live.

“Old CHEAPR” Quietly Ends – How Fast Will The New Program Ramp?

June was a slow rebate month by any measure with just 57 rebates, of which 41 were PHEV. These numbers continue recent trends of a low-volume PHEV-heavy program. The Toyota RAV4 Prime, the popular PHEV SUV, continues to dominate the rebates. There were no income-limited rebates.

Looking at the trend in the chart in the featured image, one can see the rebate trend increase as more EVs came on the market with the big spike being due to the Tesla Model 3. Then there is a big drop in Q4 of 2019 when the MSRP cap was reduced. There was another trough during the pandemic, followed by a spike due to pent up demand, which has now leveled off at an anemic rate this year. We look forward to seeing more incentives used beginning with July.

Higher MSRP Cap Now in Effect

The components of the new program as legislated in Public Act 22-25 (previously referred to as SB-4 when it was wending its way through the legislature) are being implemented as they are operationally ready. The simplest change was the increase in the MSRP cap to $50,000. That went into effect July 1. There will be over 10 new vehicles that now become eligible, including some important BEVs such as the Hyundai Ioniq 5 and its sibling Kia EV6, Polestar 2, the Mustang Mach-E, and the Tesla Model 3 Standard Range Rear Wheel Drive. Most of the EVs on the market come in multiple trim levels. The base price of the trim level determines a vehicle’s eligibility.

Coming Enhancements

Looser eligibility requirements for the income-limited incentives. The requirement is now an income level that is a maximum of three times the poverty level. These incentives come in the form of an additional incentive for a new EV or an incentive for a used EVs. Used EVs have to be purchased through a dealership (either a new or used dealership, including virtual, i.e. not private sales) to be eligible. DEEP may revise the size of these incentives. We’ll update when we are closer to implementation, which will most likely be near the end of the year.

CHEAPR since 2019 has been residential only, but now it is extended to business, non-profits, municipal, fleets, and tribal entities. This is expected to be implemented as of the fall. After the next board meeting in September, we should have a firmer idea.

$500 rebate for eligible e-bikes (income limited). ETA unknown, but probably around the end of the year.

All licensed drivers are entitled to use the rebate twice (beginning as of June 2021). The newly eligible categories, such as businesses or municipalities get up to 10 rebates per year with a total cap of 20.

Budget Blues?

Most, if not all, state rebate programs have to steward the budget carefully. If the funds are expended before the next replenishment, the program either has to be suspended or the rebate can be granted and paid after the fact. Neither is an appealing scenario. NJ is a case of the former, where the state burns through the money and rebates become unavailable for a period of time.

CHEAPR has had 3 different funding mechanisms at different points since its inception in 2015. Prior to this new relaunch, the legislature had funded the program at $3 million annually since 2019. It isn’t a robust amount and DEEP has been concerned, based on modeling from its consultant, about program over-spending. However, DEEP made cuts to both the size of the incentive and the MSRP cap, which caused the program to be vastly under-spent. The unpredictable variable has been utilization rate. A persistently lower number of eligible purchasers have availed themselves of the rebate than projected.

The higher MSRP cap and the new enhancements will increase the spend substantially. The consultant again modeled that if the utilization rate ticks up, the program could run too hot. Should we be concerned about budget?

I don’t think we have much to worry about in the short term, at least until 2024 and probably later than that. The unspent funds get rolled over and the program has a reserve of over $5MM. The budget for the new program increases from $3MM to roughly $8MM by virtue of the entirety of the clean air fees collected going to support the program. With registration moving from biennial to triennial, there could conceivably be some front-loaded revenue. Many of the new enhancements won’t be ready until late in the year. Only $566,750 in consumer rebates were awarded in the first half of 2022 (plus expenditures for admin and dealer incentives) so the reserve will quite possibly increase. Finally, there will be additional funding coming in from the Regional Greenhouse Gases Initiative (RGGI) auction proceeds. It doesn’t kick in right away and I have not heard a specific number, but a ballpark guess is $2-3MM.

Bottom line – we don’t have to be overly concerned and there will be plenty of time to gather data to forecast and make adjustments if necessary.

Volunteers Needed For Sierra Club Rev Up EV Shopper Study, Round 3

The Sierra Club is fielding a third round of its Rev Up EV Shopper Study and is asking for help from the EV Club. Help is defined as visiting dealerships with a set of questions to ask and items to observe to assess if a dealership is making a serious effort to sell electric vehicles. The last study, like the new one, was national, and was done in 2019. At that point, there were serious deficiencies with respect to dealership commitment to EV sales. The prior study can be found here. These were some of the key findings:

A lot has changed in the macro EV environment since 2019 and we look forward to seeing the new findings. As we did last time, we will ask the Sierra Club to join us at a meeting to discuss the study results.

This link will take you to the Sierra Club page about the study. If you volunteer, they will follow up with you directly. Feel free to let the club know about your experience with the survey. We got some interesting additional texture last time from participating members – more like a focus group to complement the quantitative survey results.

It is not necessary to be a member of the Sierra Club or EV Club to participate. There are questions about the Tesla shopping experience in the study which serve as a useful point of comparison. We appreciate the participation of Tesla owners as well.

One final note. This club supports changing the franchise laws to allow direct sales by EV-exclusive manufacturers. Even though we and other like-minded individuals and organizations have not yet carried the day, these studies, and findings like that pictured above, have been an important data point in our arguments that excluding these companies from doing business in CT serves to slow EV adoption.

Net-Zero Hotel Marcel Gets Electric Shuttle Bus

Ensconced under the solar canopy in the photo, in front of level 2 J-1772 chargers, is an electric shuttle van from Maxwell. The shuttle seats 14, including the driver. This is a battery electric van, i.e. 100% electric. Maxwell has been manufacturing these at its Southern California facility since 2019. It sports a 74 kWh battery, a range of 150 miles, and can take a DC fast charge using a CCS connector.

It is owned by the recently opened net-zero Hotel Marcel, and is ready to provide guests with an emission-free and quiet ride to downtown New Haven, the Yale campus, Tweed Airport, or the nearby Amtrak station. The hotel can use it to transport wedding parties, and it has the range to reach Westchester and Bradley Airports.

Electric vans are projected to be a high-growth segment. Amazon has ordered 100,000 delivery vans from Rivian. FedEx is testing 150 electric delivery vans in Los Angeles, purchased from BrightDrop (General Motors.) There are reportedly around a half-million of this category of passenger van, now ripe for moving to electric.

The existing, quaint rules need updating. As part of the registration process, the vehicle had to pass an emissions test.

We are not aware of any other electric shuttle vans in the state. If you know of any, please tell us in the comments.

25,444 Registered EVs

The new number is the result of 5,441 EVs added to the rolls from January through June (and turnover of 1,379 EVs). This represents virtually the same pace relative to the 5,407 registered in the second half of 2021 and an improvement over the 4,335 year over year comparison.

Registrations are up 19% for the first half of this year and 48% from one year ago.

These numbers come from the DMV website which publishes top line data. The breakdown of battery electric vehicles, plug-in hybrids, make, model, and municipality are not yet available to us. We have a Freedom of Information Act Request on file and expect to receive the information before the end of the month.

This number puts us at 6.06 registered EVs per 1000 residents. As a point of comparison, Maryland just announced that they passed the 50,000 mark, which puts them at 8.13 per 1000 residents.

For our purposes, the definition of EV includes battery electric vehicles, plug-in hybrids, fuel cell vehicles, and battery electric motorcycles. This is what the state tracks. We’ll have the breakdown when we receive the new files.

The state has set goals for itself via the Multi-State Zero Emission Action Plan of 150,000 by 2025 and 500,000 by 2030. A 48% increase in a year isn’t bad, but that percentage pace will at minimum need to sustain itself off of an increasing base, meaning the absolute number increase will have to grow substantially.

Observant EV Owners Noticed Frequent Pings

Several people posting on Facebook and writing to the EV Club who have registered for the charging incentives via telematics noticed that their vehicles were being status-checked every 30 minutes. That is excessive from both a power consumption (it uses a modicum of power or battery drain) and data privacy perspective. And it had been doing this 24/7 since the program started. This only applies to Eversource customers as UI uses a different external vendor.

Eversource advised the EV Club that they are diminishing the frequency to once per hour, which still sounds like a lot, but is an improvement, and after the demand/response period ends after September, they will stop it altogether. They are testing alternatives and will roll out a new solution for 2023. There will also be a new managed charging program, likely with a two-tier option for enrollment. We will update those details as we get closer to the new year.

Thank you to those who called this out and supplied data.

The photo above is the solar canopy in the parking lot of the net zero Hotel Marcel in the Long Wharf area of New Haven. The newly opened hotel, powered by solar panels on the canopies and the roof of the building, is soon to be home to one of the newest clusters of EV chargers in the state.

There are 12 Tesla Superchargers, along with EVConnect level-2 chargers with J1772 connectors. The initial level-2 installation will be 10 level-2 ports (5 dual port units), eventually growing to 30 ports. The infrastructure for the expansion is already in place.

The level 2 chargers are under the canopy. The Superchargers are close to the canopy. Basically, whomever plugs in will have a sheltered walk to the front door of the hotel. The chargers are located at the far end of the lot to discourage ICEing.

The units are not live as of this writing. There is a “splice box” that has yet to arrive for the transformer. It is hoped that the units will be online by mid-August but we’ll publish updates as more information becomes available. We are waiting for the chargers to come online to schedule a planned EV Club meeting at this facility.

There are also 2 level-2 ChargePoint chargers just a few feet away near the entrance to Ikea. These are in operation.