By on October 4, 2019

Image: GM

Tax credits are a great way to stimulate purchases or participation, and in the politician’s mind, they often take precedence over affordability measures that would benefit broader swathes of society. That being said, they’re here to say… unless you’re referring to the slowly vanishing federal EV tax credit.

Automakers like Tesla and General Motors are already watching their $7,500 credits halve, then halve again, after surpassing the 200,000-vehicle threshold that starts the countdown to a credit phase-out. Now, the Treasury Department is claiming some recipients of the eco stimulus shouldn’t have received it in the first place.

According to Bloomberg (via Automotive News), an audit of tax returns filed over a five year period ending in 2018 revealed thousands of suspect EV claims.

Of the $1.4 billion paid out to roughly 240,000 EV buyers during that period, the Treasury Inspector General for Tax Administration identified 16,510 returns worthy of further scrutiny. Money paid out to that cohort amounted to upwards of $70 million.

So, how exactly did these tax filers get their hands on the supposedly unearned credits? That’s a mystery for now — much of the audit’s juicy details were redacted. Depending on type of vehicle, where the automaker rests in its credit tally, and the vehicle’s battery capacity, recipients stand to gain between $2,500 and $7,500. Full-on EVs get the biggest bucks, but buyers of plug-in hybrids stand to gain a considerable incentive. The credit available to buyers of the Mitsubishi Outlander PHEV is $5,836. The now-departed Cadillac CT6 Plug-In, being of solid American stock, was eligible for the full $7,500, despite its 2.0-liter turbo.

While the wrongful credit payout remain shrouded behind black ink, the Internal Revenue Service claims it’s on the case, vowing to recoup the money. “Although the IRS has taken steps to address some of TIGTA’s previous recommendations to improve the identification and prevention of erroneous credit claims, many of the deficiencies previously identified still exist,” the audit stated.

[Image: General Motors]

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16 Comments on “Gaming the System? Treasury Department Complains of Unworthy EV Credit Recipients...”

  • avatar

    Not sure how you would scam this, but as they say…where there’s a will, there’s a way.

  • avatar

    I’m not surprised. If it can be used, it can be abused. It doesn’t matter what “It” is.

  • avatar
    SCE to AUX

    Since many EVs are leased, my guess is that the mfr took the subsidy at the point of sale, but the driver incorrectly claimed the discount on their taxes. This was likely a mistake – not malicious.

    In both of my EV leases, Nissan and Hyundai reduced the price of the vehicle by the $7500 subsidy amount, and we went from there. No income tax filing was required or permitted. The tax instructions clearly say – if you read them – that if the mfr takes the subsidy (as in a lease) – then the driver cannot.

    In both cases, my vehicles qualified for a smaller Pennsylvania EV rebate which was handled outside of the tax system.

    • 0 avatar

      Good point. Those people will be unhappy to get that letter.

    • 0 avatar
      Rick Astley

      As somebody who prepares north of 400 Form 1040’s personally and another hundred or so 1120 C/S, and in an office which prepares thousands of returns…. You could print the filing instructions for that lease in 100 point font in bold, clear typeface, and have the buyer sign it 5 times, plus a blood sample and finger print certifying that they CLEARLY understand the filing requirements placed upon them and their eligibility (or in this case, non-eligibility) to claim a tax credit and 9 times out of 10 they will claim the tax credit irrespective of eligibility.

      Willing to put down a large cash wager on that right now and go pull the returns which required communications with the client to explain this, apparently, more clearly than a clearly worded document….

  • avatar

    Watt? I’m shocked! Is this an old article or is it current? I would think people nowadays would show more resistance to doing things for gain. I also hate to believe that lying about buying an electric car might be a conduit to funding other illegal activities. That would be grounds for positive action on my part. My capacitance tolerating for such schemes is very low. If one is bias testing, getting overly charged up about stuff like this a fault of mine I suppose but I am really sensitive to things in the electrical field. I will probably get negative feedback for all the noise I am introducing to the system, but I must be a resistor until this is rectified.

    • 0 avatar

      I would love to flyback and provide a discrete response – it’s the way I’m wired. But I don’t want to come across as bipolar, and I certainly don’t want to have a breakdown. There are enough sources for that sort of thing without me being a drain – after all, no one really welcomes an avalanche, or even a crowbar. So at this junction I’ll clamp down and tunnel my way out.

    • 0 avatar

      Comment of the year!

      This ran the gamut, so much it hertz! In ample quantities! An entire arc of commentary!

      Go big or go ohm!

  • avatar

    This might be a silly question, but couldn’t “badge engineering” be used to make the most of the credits?

    Take some Teslas or Nissan Leafs (leaves?), throw some Dodge branding on them – BOOM – full tax credit.

    • 0 avatar

      It doesn’t work that way. The credit is based on the number of EVs/PHEVs sold by the manufacturer, regardless of the brand they are sold under. That’s why GM couldn’t get around the credit limit by rebranding the Chevy Bolt as a Buick.

  • avatar

    I might be mistaken, but a “credit” isn’t money being paid OUT to someone; it’s reducing the amount of taxes being paid TO the gov’t. Right?

    • 0 avatar
      SCE to AUX

      Partially correct, but only if you actually buy the vehicle.

      But per my post above, with my EV leases the mfrs simply deducted the Federal allowance from the vehicle price. This meant I could not report the EV purchase on my taxes, no matter how little or much I paid in taxes.

      In PA, they treat the EV acquisition as a rebate, so it actually is paid out. Again, no tax reporting is necessary.

  • avatar

    “The now-departed Cadillac CT6 Plug-In, being of solid American stock, was eligible for the full $7,500, despite its 2.0-liter turbo.”

    Was it not also wholly Chinese?

  • avatar

    I always find it pretty bogus when a Ford Fusion Energi PHEV has a prized dedicated charging station/parking spot in front of its house, or it’s parked at a public EV station. I don’t think PHEVs should ever have qualified for any of EV credits.

    • 0 avatar
      SCE to AUX

      They qualify because there are many times a PHEV car can run long distances on electric power alone, unlike a traditional hybrid. IIRC the PHEV credit is roughly 2/3 or 1/2 of the BEV credits.

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