The Biden administration issued guidance Thursday explaining which electric vehicles (EVs) qualify for the tax credits, adding a workaround that would allow a wider range of vehicles to qualify.
Under the Inflation Reduction Act (IRA), which President Biden signed into law in August, regular consumer electric vehicles would qualify for a $7,500 commercial clean vehicle credit if they were leased instead of purchased, the Treasury Department said in a statement. The solution allows car rental dealers or businesses to collect credit on leased EVs that, if purchased, would not qualify for tax relief.
“In issuing today’s guidance, the Treasury is simply following the tax laws and the IRA,” a Treasury Department spokesperson told FOX Business Thursday evening. “What are the tax laws and legitimate business use governing ownership in a lease situation — and therefore what would qualify for the 45W credit for commercial vehicles purchased for use or lease — is long-standing, settled, and clear.”
According to the Treasury Department, a “qualified commercial clean vehicle” is a vehicle owned or leased by a taxpayer, manufactured by a qualified manufacturer, and “substantially propelled” by a battery-powered electric motor. Any rented EV that falls within the wide range of requirements and is worth less than £14,000 will be eligible for a $7,500 loan.
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The interpretation of the definition of commercial vehicles allows consumers to circumvent the more stringent requirements that must be met by the IRA in order to be eligible for the credit if EVs are purchased. To comply with the new law, electric vehicles purchased must undergo final assembly in North America; under $55,000 or $80,000 for vans, sport utility vehicles (SUVs), and pickup trucks; and must be purchased by an individual with an annual income of less than $150,000 or a family with an annual income of $300,000.
In addition, the Biden administration said it would begin implementing a fourth qualification for EVs purchased in March. The qualification states that at least 40% of the critical minerals in the battery of purchased electric vehicles must be mined or processed in the United States or a country that has a free trade agreement with the United States.
Sen. Joe Manchin, DW.Va., who was instrumental in crafting the IRA EV tax credit claims and pushing the bill, blasted the Treasury Department’s announcement Thursday, saying it would allow companies to exploit loopholes. He added that he will draft new legislation during the upcoming Congress to clarify the purpose of the law.
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“The information released today from the Treasury Department outlining how to apply the commercial and consumer EV tax credits bends to the wishes of companies seeking loopholes and is clearly at odds with the intent of the law,” Manchin said. The instruction was issued on Thursday. “It only serves to weaken our ability to be a more energy secure country.”
Manchin also criticized the administration for delaying implementation of the critical mineral provision until March, saying he “can’t understand why the Biden Administration has issued guidance to ensure we continue on this path,” and said the IRA should have the rule in place by January. 1, 2023. Hostile nations such as China and Russia dominate global critical mineral supply chains vital to EV production.
Although eligibility for many EVs purchased under the IRA will expire in 2023, Thursday’s guidance means the tax credits will eventually accrue on expensive sports cars when they are leased. The federal government previously published a long-term list of electric vehicles that include cars made by high-end brands such as Bentley, Ferrari, McLaren, Mercedes-Benz and Porsche that are eligible for the credit if purchased in 2022 or earlier.
For example, the Bentley Bentayga Hybrid SUV — with a starting price of about $167,000, according to Car and Driver — qualifies for a $7,500 clean car loan if leased under the guidance of the Treasury Department.
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Additionally, the Ferrari 296 GTB priced at around $323,000, the McLaren Artura at around $237,000, the Mercedes-Benz at $105,000 and the Porsche Taycan at $84,000 will also be eligible for the loan.
“These are lawn ornaments for most people. It’s to show that you’re a good person because you have an electric Mercedes,” Dan Kish, senior fellow at the Energy Research Institute’s free-market think tank, told FOX Business. “That kind of virtue signaling — when people are just struggling to get by — is the kind of elitist mentality that permeates so much of the whole green agenda.”
“Even if you put boundaries around it, as we’ve been told, it turns out the Treasury Department is just writing its own rules,” he said.