$5,000 electric vehicle tax credit hike clears Senate panel

The Biden Administration has made no secret of its support for electric vehicles. President Joe Biden emphasized that commitment, as well as his general love of motoring, when he took the wheel of Ford’s new electric pickup truck at the Michigan plant on May 18.

Now Congress is following up on the White House electric auto initiative.

$5,000 EV credit hike: Part of the Clean Energy for America bill would boost the current maximum electric vehicle (EV) tax credit from $7,500 to a potential $12,500. It cleared the Senate Finance Committee on May 26.

The added $5,000 in tax credits would come from $2,500 for autos built by union members and $2,500 for vehicles assembled in the United States.

In addition, S. 1298 would remove the credit’s cap of 200,000 electric car deliveries. The current EV credits are phased out once a manufacture meets the 200,000 sales mark. So far, only Tesla and GM have seen the credit for their EVs ended.

Instead, the EV tax credit would phase out after EVs account for half of an automaker’s total annual sales. At that point, the credit would phase out over three years.

While the sales limit would help Tesla, Elon Musk’s company would not be eligible for the added union credit since its EVs are not assembled by United Auto Workers (UAW) members. Volkswagen’s Tennessee plant that’s expected to start making EVs next year also would be affected, as it also is not a union shop.

The bill also takes a vehicle’s price into account in determinizing eligibility for the tax break. Currently, there is no price limit on credit-qualifying EVs. The new bill would limit credit availability to EVs whose sticker price does not exceed $80,000.

Expected partisan divide: The bill cleared the Senate Finance Committee on a partisan 14-14 vote. It advances because Democrats technically control the evenly divided Senate thanks to Vice President Kamala Harris’ deciding vote. It’s awaiting a full Senate hearing.

President Joe Biden and climate change activists obviously support the bill. U.S. automakers apparently do, too.

That the American car industry has shifted its focus from strictly fossil fueled autos is evidenced by the fact that Michigan’s senior U.S. Sen. Debbie Stabenow, a Democrat who hails from car-centric Lansing, is one of the lead sponsors of the measure.

Republican lawmakers are less thrilled.

GOP Senators on the tax-writing panel argued that the tax breaks are too costly. They also criticized the tax credit increase, saying it’s coming at a time when electric autos are gaining in popularity.

“Why are we paying them a bonus to buy what they are already going to buy?” asked Oklahoma Republican Sen. James Lankford.

Those arguments (and more) no doubt will be revisited when the energy measure finally gets a full Senate debate.

More luxury EVs credit eligible: If you’re already committed to an electric auto, a few more vehicles have been added to the list eligible for the existing $7,500 tax credit. And some of them are from luxury carmakers.

The Internal Revenue Service has added another BMW and a Bentley to the list of vehicles eligible for the plug-in electric drive motor vehicle credit.

The 2022 BMW 745e xDrive has an available maximum credit of $5,836. Bentley’s 2021 Bentayga Hybrid SUV, shown below, can net buyers the full $7,500 credit.

You can check out the full range of qualifying vehicles and their potential EV credit amounts at the IRS’ special Qualified Plug-In Electric Drive Motor Vehicle Credit web page.

You also might find these items of interest:

• Electric vehicle tax credits favor the wealthy
• IRS let up to $83 million in improper EV tax credits slip through, says watchdog report
• BMW, Honda, Jaguar, Mini, Range Rover & Subaru electric vehicles added to IRS tax credit list

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