Strategists have touted the Inflation Reduction Act as a boon for the electric vehicle industry thanks to a series of tax credits, but accountants and others warn that the benefits are complex. that could reduce the expected gain for manufacturers. The bill, signed into law by President Joe Biden on August 16, includes a 15% corporate minimum tax aimed at companies earning more than $1 billion a year, and provision for a 1% tax on acquisitions. share. One of the measures that caught Wall Street’s attention was extending a $7,500 tax credit toward the purchase of a qualifying new electric or plug-in hybrid vehicle, as long as they’re put into service by the date. January 1, 2033. Furthermore, used car buyers may also qualify for a tax credit of up to $4,000. “In theory, we have a lot of energy credits that would make industries more attractive – in theory,” said Ed Zollars, certified public accountant and partner at Thomas, Zollars & Lynch said. “People will find a way to ask for it.” New Levels of Complexity Prior to an IRA, a $7,500 credit is subject to a sales limit that will apply when a producer sells 200,000 qualifying units. The new law will remove that limit, but it does put limits on who can claim credit based on their income. Single miners with a modified adjusted gross income in excess of $150,000 will not be able to claim the credit ($300,000 for joint miners and $225,000 for head of household). Income limits also apply to people claiming credit for used electric vehicles – and they’re even lower. Single miners who have revised adjusted gross income of $75,000 can claim the credit ($150,000 for joint filers and $112,500 for head of household). New cars that qualify for the tax are also subject to a price cap: Sedans will need to be under $55,000, while the limit is $80,000 for vans, SUVs, and pickups. Used cars will be subject to a cap of $25,000. The IRA also added new manufacturing and sourcing requirements: New electric vehicles purchased after August 16 must be last assembled in North America. The Department of Energy has a list of EVs in 2022 and early 2023 that could meet the requirement. You will need the vehicle’s identification number to know where it was made. The law also sets forth sourcing requirements for battery components in these electric vehicles, so that people can claim the full $7,500 value of the credit. The complexity of credits, along with income limits, can ultimately lead to fewer people claiming benefits. “You’re missing out on people with the money to do this work,” said Dan Herron, CPA and founder of Elemental Wealth Advisors. “I would imagine the manufacturers are pumping in it, but I don’t see it moving the needle.” Indeed, Fitch Ratings has poured cold water on the industry’s gains from EV credit measures. “Electric vehicle (EV) tax credits under the Inflation Reduction Act (IRA) that limit the number of qualified auto and buyer buyers could also boost EV sales growth and improve improve margins for domestic automakers,” the company said on August 29. Longer and broader games Instead of just betting directly on the manufacturers themselves, Wall Street pointed out longer-term benefits for companies in the green energy supply chain. Michael Arone, chief investment officer, said: “I think the key takeaway from the Inflation Reduction Act is climate change policy and the transition from a fossil fuel-based economy to energy. clean or alternative energy economy is a long-term opportunity for investors. US SPDR business strategist at State Street Global Advisors. Citi’s Andrew Kaplowitz highlighted names that could benefit from EV adoption and focus on domestic manufacturing, including AECOM, Quantum Services, Rockwell Automation and Emerson Electric. “We think the broader goals of increasing energy security, decarbonizing the economy, reducing energy costs and boosting domestic production provide long-term growth opportunities,” he said. term for our companies”. – Michael Bloom of CNBC contributed to this report.
