US Treasury says consumer leases may qualify for electric vehicle tax credits

Dec 29 (Reuters) – The U.S. Treasury Department said on Thursday that electric vehicles leased by consumers from Jan. 1 are eligible for a clean commercial vehicle tax credit of up to $7,500, a decision that makes eligible those assembled outside of North America.

The announcement is a victory for South Korea and some automakers who earlier this month sought permission to use the commercial electric vehicle tax credit to boost consumer access to vehicles. electrical. Automakers said the credit could be used to reduce rental prices.

The $430 billion US Inflation Reduction Act (IRA) passed in August ended $7,500 consumption tax credits for purchases of electric vehicles assembled outside of North America. North, angering South Korea, the European Union, Japan and others. The new Treasury guidelines do not change the definition of what constitutes North American assembly to make more vehicles eligible for EV purchases.

The Treasury said it used “longstanding tax principles” to determine whether consumer leasing could qualify for the electric vehicle tax credit.

The IRA also imposes significant supply restrictions on battery minerals and components, sets revenue and price caps on eligible vehicles, and seeks to phase out Chinese battery minerals or components. Trade credit, however, does not have the supply restrictions of consumer credit.

Sen. Joe Manchin, a Democrat who chairs the House Energy Panel, has urged the Treasury to suspend implementation of business and new consumer tax credits for electric vehicles and said they will s were bent “to the wishes of companies looking for loopholes” and would seek new legislation that “prevents this dangerous interpretation of the Treasury from going forward.”

Toyota Motor (7203.T) said earlier that “the lack of criteria to qualify (for trade credits) could undermine the IRA’s goals of increasing domestic production of batteries for electric vehicles and maintaining the America’s Energy Independence”.

The law lifts the cap of 200,000 vehicles per manufacturer that had made Tesla (TSLA.O) and General Motors (GM.N) ineligible for electric vehicle tax credits from January 1. The Internal Revenue Service released an initial list of eligible 2023 electric vehicles on Thursday. which includes Ford Motor (FN), Rivian (RIVN.O), Chrysler-parent Stellantis (STLA.MI) and Nissan (7201.T) electric vehicles for the consumption tax credit and plans to release a list more complete by Saturday.

On December 19, the Treasury announced that it would delay the publication of proposed guidance on the required supply of batteries for electric vehicles until March. This means that some electric vehicles that do not meet the new requirements may have a brief eligibility window in 2023 before the battery rules come into effect.

Half of the credit is contingent on at least 40% of the battery’s critical mineral value being mined or processed in the United States or a country with a free trade agreement with the United States, or recycled in North America, a percentage requirement that increases every year.

The Treasury said Thursday that its definition of a free trade agreement will at least include existing comprehensive trade agreements with Australia, Bahrain, Canada, Chile, Colombia, Costa Rica, Dominican Republic, El Salvador , Guatemala, Honduras, Israel, Jordan, South Korea and Mexico. , Morocco, Nicaragua, Oman, Panama, Peru and Singapore.

The United States could negotiate other qualifying free trade agreements with allies in the coming months. The Treasury said it “will assess all newly negotiated agreements for proposed inclusion” when finalizing the EV rules.

Reporting by David Shepardson in Grand Rapids, Michigan; Editing by Chizu Nomiyama

Our standards: The Thomson Reuters Trust Principles.

Author: niso

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