Cut Inflation Act Aims to Boost Adoption of Electric and Clean-Fuel Vehicles | Foley Hoag LLP – Environmental Law

The Inflation Reduction Act aims to accelerate the adoption of clean vehicles by reforming the corresponding tax credits in several ways. Specifically, the bill does the following.

  1. Eliminates the quota of 200,000 clean vehicles sold per manufacturer.
    • Previously, Tesla, GM and Toyota all exceeded the 200,000 vehicle threshold and therefore were not eligible for the tax credit.
  2. Preserves existing tax credit of up to $7,500 for qualifying new vehicles, including electric vehicles, plug-in hybrids and hydrogen fuel cell vehicles.
    • This credit is reduced or eliminated if a certain percentage of the critical minerals used in the battery are not mined or processed in a country with which the United States has a free trade agreement or recycled in North America. By January 1, 2024, at least 40% of critical minerals must meet the above definition, with this percentage rising to 80% by 2026.
  3. Establishes a price cap of $80,000 for vans, SUVs and pickup trucks and a price cap of $55,000 for all other consumer vehicles.
  4. Establishes an income eligibility limit of $150,000 or $300,000 for joint filers.
  5. Creates a tax credit for clean used vehicles under $4,000 or 30% of the sale price.
    • The sale price cannot exceed $25,000.
  6. Sets an income eligibility cap for previously owned clean vehicles at $75,000 or $150,000 for co-filers.
  7. Creates a clean commercial vehicle tax credit of up to $7,500 for vehicles weighing less than 14,000 pounds and $40,000 for vehicles over 14,000 pounds.
  8. Extends the real estate credit for alternative fueling by 11 years until December 31, 2032.

The Biden administration has set a goal of 50% EV sales share in the United States by 2030. Currently, EV sales are about 5% of new vehicle sales. These changes will help drive the adoption of zero-emission vehicles in the United States. Will they be enough to push the United States towards the remaining 45% by 2030? Stay tuned for Foley Hoag’s continuing series of zero-emission vehicles.