2022 vs 2023 Tax credit…Again

[Gavinmcc]

Thanks!

Though I guess I still have one last question.

I have the binding agreement. I will likely be taking delivery in January (slight chance of Dec in which case all this is moot…but also a chance I’m bumped into Feb).

So if I take delivery in Jan, or even Feb, but file my taxes in March…do I claim the car on my 2022 taxes that I file in March 2023, or do I claim it on my 2023 taxes that I file in 2024, but with the 2022 rules?

Yay, now my brain hurts

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[electruck]

my concern is around the IRS interpretation of "does not limit damages to a specified amount" given that the agreement with Rivian limits damages to $100 which may not be a substantial enough dollar amount (eg 5%) to avoid being treated as a limited amount.

 

[tomis916]

I'm a CPA (how good of a CPA is debatable), but the idea that signing a BPA and taking delivery of the vehicle in a later tax year allows me to amend my 2022 to claim the credit in 2022 does not sound correct - notwithstanding the fact that the bill was written this way.

I believe the BPA will suffice to a support claiming a credit, but the question in my mind, is what tax year? The basic premise of IRC 30D is that the taxpayer can claim the credit in the year the vehicle is placed in service. Which would be the year you take delivery. Assuming you took delivery in 2023 or 2024, you would claim the credit as under the pre-2023 rules. But, on your 2023 or 2024 tax return.

The updated IRC 30D omits the wording in the bill about timing and simply says:

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 opening to IRC 30D still reads:

(a)Allowance of credit
There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of the credit amounts determined under subsection (b) with respect to each new clean vehicle placed in service by the taxpayer during the taxable year.

So, I believe you take the credit in the tax year the vehicle is placed in service and, if you signed a BPA, you apply the pre-2023 credit rules.

 

[Yodi]

Thanks!

Though I guess I still have one last question.

I have the binding agreement. I will likely be taking delivery in January (slight chance of Dec in which case all this is moot…but also a chance I’m bumped into Feb).

So if I take delivery in Jan, or even Feb, but file my taxes in March…do I claim the car on my 2022 taxes that I file in March 2023, or do I claim it on my 2023 taxes that I file in 2024, but with the 2022 rules?

Yay, now my brain hurts

My interpretation of the 'Transition Rule': where it says 'taxpayer may elect to treat such vehicle as having been placed in service on the day before the date of enactment of this Act' would suggest that you are basically backdating as though it was delivered in 2022, so you would file your 2022 tax return by April 18, 2023.

This maybe a big stretch, but I think it may also imply that if you do not treat vehicle as having been placed in service before Aug 16, 2022, you also forego the Transition Rule exemptions and are now subject to the present-day Inflation Act requirements.

Just my interpretation, but I'd love to hear other justifications.

Thx for starting the discussions @Gavinmcc ... I'm rooting for your Dec delivery either way, since few have earned that spot more justly than you have.

 

[CyberKentuckian]

I am not sure the purchase agreement will work. But maybe?

If not:

1. Vehicle must be assembled in North America to qualify for new credit. (Page 366, line 15)
   
   
2. $3,750 of the new credit is based upon the vehicle having at least 40% of its battery critical minerals from the United States or countries with a free trade agreement with the United States. This is a list of countries with free trade agreements with the US. (Page 371)
3. The other $3,750 of the new credit is based on at least 50% of the battery components of the vehicle coming from the United States or countries with a free trade agreement with the US. (Page 372, line 13)

So one is fine, but I don't think Rivian matches either of 2 or3

https://electrek.co/2022/11/16/which-electric-vehicles-still-qualify-for-us-federal-tax-credit/

They think these will work in 2023 for some reason?

RIVIAN
EDV 700 (2022)	$7,500
R1T (2022) (Dual Motor Adventure only)	$7,500
R1S (2022) (Dual Motor Adventure only)	$7,500

This may have been answered elsewhere in this thread, but I would assume those of us with pre-March '22 preorders and keeping our config under 80k would still qualify? Or at least that's my hope with a Apr-Jun delivery estimate and a $76k price tag on my configuration.

 

[VSG]

'...taxpayer may elect ... to treat such vehicle as having been placed in service on the day before the date of enactment of this Act.'

• This sounds like pre-08/16/22 contract holders who take delivery in 2023 will need to amend 2022 tax returns (if filed by that point). Might be worth delaying completion of your return as long as you can, if your delivery is close.

You left out a very important part of that quote when you added the ellipses. It reads:
"... taxpayer may elect (at such time, and in such form and manner, as the Secretary of the Treasury, or the Secretary's delegate, may prescribe) to treat such vehicle as having been placed in service on the day before the date of enactment of this Act." where the emphasis has been added by me to highlight the missing phrase.

What that means is that the mechanics of the implementation is left up to the regulators, and is not specified in the legislation. The IRS has yet to codify rules on how taxpayers can claim this credit. While it's possible that they might require you to file an amended 2022 return, it's also possible (and IMO more likely) that they will let you take the "old" credit for the tax year in which you actually accept delivery. For example, if you finally get your Max Pack R1T in 2024, then the IRS might let you take the full $7500 "old" deduction on your 2024 return provided you signed that "binding contract" before 16 Aug. I think requiring an amended return is less likely, partially because no-one wants to have to go back and deal with all those returns that are already closed and finished, and partially because "pretending" that the car was actually purchased in 2022 even if delivered two years later adds all sorts of other complications - would you also treat it as purchased in 2022 for the purpose of depreciation, etc.? To me it's much easier to deal with it as a credit for the year of delivery.

Regardless, this is a detail that the regulators will have to work out, and we're not likely to know the answer for a few more months yet at the earliest. There are clearly things in the works where the regulators are trying to soften the blow of the sudden change by dragging out the implementation as long as possible while staying within the letter of the law. For example, the regulators could interpret "binding contract" in a way that recognizes what Rivian did as a binding contract, or they can say no, it's not a contract. There's tremendous latitude in interpretation that occurs when the IRS writes the detailed regulations which spell out the details that are (deliberately) not included in the legislation.

 

[VSG]

This may have been answered elsewhere in this thread, but I would assume those of us with pre-March '22 preorders and keeping our config under 80k would still qualify? Or at least that's my hope with a Apr-Jun delivery estimate and a $76k price tag on my configuration.

Well, depends. Under the "old" rules, there is no MSRP limit. But to qualify under the "old" rules you would have had to sign that binding agreement with Rivian before 16 Aug. If you accept delivery in 2023 and you didn't sign that agreement, then you will certainly fall under the new rules.

Under the new rules, there IS a limit on the MSRP. But buying a configuration that is less than $80k is not sufficient - you must also qualify under the assembled in the US rule, the battery mineral sourcing rule, and the battery component sourcing rule. Rivian is assembled in the US so meets that first requirement. The other two are unknown, and very dependent upon how the IRS writes the regulation. (How do you count 50% of the battery components? By number? By weight? By cost? Is one cell one component, or is one component equal to one battery module which consists of a thousand+ cells? These are questions that the regulations have to address.)

 

[sac602]

The new rules also have an income cap ( Single tax filers are eligible if their income is below $150,000. For heads of households, that income cap rises to $225,000. Joint filers are eligible for the EV tax credit if their income is below $300,000 ); and as I had posted previously, there is conflicting info on what is included in the MSRP (include the $1500 destination charge or not). This is important as the pre March-price increase with any options will put you in the $78,500 zone.

 

[CyberKentuckian]

Well, depends. Under the "old" rules, there is no MSRP limit. But to qualify under the "old" rules you would have had to sign that binding agreement with Rivian before 16 Aug. If you accept delivery in 2023 and you didn't sign that agreement, then you will certainly fall under the new rules.

Under the new rules, there IS a limit on the MSRP. But buying a configuration that is less than $80k is not sufficient - you must also qualify under the assembled in the US rule, the battery mineral sourcing rule, and the battery component sourcing rule. Rivian is assembled in the US so meets that first requirement. The other two are unknown, and very dependent upon how the IRS writes the regulation. (How do you count 50% of the battery components? By number? By weight? By cost? Is one cell one component, or is one component equal to one battery module which consists of a thousand+ cells? These are questions that the regulations have to address.)

Agreed. Perhaps my post came across as an unintentional over-simplification. Appreciate the thoughtful response!

 

[VSG]

The new rules also have an income cap

Yes.

there is conflicting info on what is included in the MSRP

I think MSRP is well-defined at this point, and it is not being redefined by the new IRA law. Rule of thumb, if it's installed by the manufacturer, it's included in the MSRP. For example, wheel options (incl. spare tire), paint options, tonneau cover, underbody shield, etc. are all part of MSRP. But all-weather foor mats, cargo bars, recovery kit, etc. are not part of MSRP. Destination charge is not something that is normally considered part of MSRP.

 

[CWARD]

I haven't seen anyone talk about this scenario.

I took delivery of my R1T in October, but I did not sign the binding contract. Do I still qualify for the old tax credit, or do I need to deal with the new one?

 

[electruck]

I haven't seen anyone talk about this scenario.

I took delivery of my R1T in October, but I did not sign the binding contract. Do I still qualify for the old tax credit, or do I need to deal with the new one?

You still qualify for the credit and should claim it when filing your taxes in the spring. The only new rule in effect before 1/1/23 is regarding location of assembly which Rivian meets.

 

[Petey88]

So say you go through all the steps and fill out all papers and waiting for delivery. So paperwork done except for signing the delivery drivers sheet. Can you file 2022 without the physical vehicle? Or do you have to have both paperwork and delivery of the vehicle to file 2022 without an amendment? Assuming we can claim the 7500 with an amendment.

 

[Autolycus]

So say you go through all the steps and fill out all papers and waiting for delivery. So paperwork done except for signing the delivery drivers sheet. Can you file 2022 without the physical vehicle? Or do you have to have both paperwork and delivery of the vehicle to file 2022 without an amendment? Assuming we can claim the 7500 with an amendment.

• If you purchased a qualifying electric vehicle on or before August 16, 2022, and placed it in service before January 1, 2023, you may claim the EV credit based on the rules that were in effect before August 16, 2022.

I think there would initially be a question as to whether completed paperwork is actually "purchased" in the first place, but either way, you won't have placed it into service in 2022 if you don't have possession of it.

Otherwise, if you're hoping to use the 2022 rules, you'll have to fit into this:

• 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.

 

[Petey88]

I think there would initially be a question as to whether completed paperwork is actually "purchased" in the first place, but either way, you won't have placed it into service in 2022 if you don't have possession of it.

Otherwise, if you're hoping to use the 2022 rules, you'll have to fit into this:

So it would come down to me signing Rivian's agreement back in August? If I'm understanding that clearly?

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