- the u.s. treasury inspector general has issued a report saying "millions of dollars" have been claimed wrongly for plug-in electric-vehicle tax credits.
- the tax credit of up to $7500 went into effect for vehicles put into service after december 31, 2009, and is supposed to encourage americans to buy electric vehicles.
- the agency claims that out of $1.4 billion in credits issued between 2009 and 2017, up to $74 million are "potentially erroneous" because the vehicles claimed weren't eligible.
elizabeth warren and bernie sanders can give speeches all day about corporate greed, but there's another set of people who've just been caught expressing some greed of their own. congratulations, electric-car owners, you're now in the crosshairs of the irs.
a u.s. treasury inspector general report first brought to light by forbes found that 7 percent of taxpayers claiming credits for plug-in hybrids and battery-electric cars were in fact getting the tax break under false pretenses. that might not sound like a large number of the 239,422 claims that filers submitted between 2010 and 2017, but like anything else, the numbers add up. given the broad, sweeping social services that presidential candidates keep promising americans, at what point should $73.8 million in tax evasion look like small change? that's the amount that 16,510 people claimed on their taxes over that period of time who never had a right to do so, according to the ig report. and from the report, it appears automakers are as much to blame as their customers.
credit check
at issue is the qualified plug-in electric drive motor vehicle credit that taxpayers claim when they purchase a plug-in hybrid or battery-electric vehicle (hybrid, natural gas, and hydrogen fuel-cell vehicles are ineligible). president obama initiated the credit as part of the energy improvement and extension act of 2008, which allowed a reduction in federal tax liability of up to $7500 for any qualified vehicle entered into service starting in 2010. to recap, with some exceptions that have now expired for two- and three-wheelers, the vehicles must have weight ratings of under 14,000 pounds and have a battery of at least four kilowatt-hours.
the credit is $2500 plus $417 for a battery with at least 5.0 kwh and then $417 for each kilowatt-hour after that, up to the $7500 maximum. only the owner can claim the credit, but the term "owner" includes the automakers' banks that retain ownership during a lease. based on each manufacturer's cumulative sales of these qualified vehicles, the tax credit for specific cars reduces at at certain sales thresholds, with the credit phasing out entirely at 200,000 cars sold. bills are floating in congress that would raise this threshold to 400,000 cars, while president trump wants to end the credit program altogether. nothing so far has changed the law since it passed in 2008.
false claims
very few cars met the irs requirements in 2008, but more than a decade on, automakers have sold more than 1.2 million plug-ins eligible for the credit. whereas just 378 claims were filed before 2013, the irs received nearly 79,000 in 2017 alone. these claims aren't simply on individual tax returns. automakers claiming the credit on leased vehicles lump them together, so the 239,422 filings the ig report analyzed is the cumulative sum of practically every car sold during that time.
the issue is that the irs hasn't verified vins, and, in many cases, the automakers tally up the credits themselves without reporting individual vins. among tax returns filed by individuals, a total of 1509 people wrongly took $8 million from the federal government by double-claiming the credit, according to this report. that is, they claimed the credit as if they'd bought the car when in fact the lessor, the automaker that really owned the car, was the only one eligible under the law.
in other cases, ev owners have reported credit amounts above the specific threshold allowed for their vehicle at the specific tax filing date. someone who purchased a 2017 toyota prius prime, for example, could have gone scot free even if they claimed a credit amount higher than the car's $4502 allowable amount. in yet more cases, according to the treasury's report, it appears as though tesla and gm ev owners or lessees in particular have kept claiming irs credits—and the irs allowed them—after these automakers exceeded their sales thresholds that made their owners ineligible to receive the claimed amounts.
in total, it concludes that u.s. taxpayers have subsidized the production and ownership of plug-in cars by more than $1.4 billion. while the ig report doesn't say it—in the report, the inspector redacted information that could have shown how the irs processes these claims—a significant percentage of that amount has gone to wealthier individuals buying luxury evs.
but there's a silver lining ahead. the irs has agreed to the ig report's recommendations in audit procedures, and it will be sending notices to all 16,510 taxpayers who made ineligible claims to the irs by february 2021. if that's you, thank you for your prompt payment.