Cash for Clunkers
This program, formally called the Car Allowance Rebate System, or CARS, was introduced in 2009. It was touted as an economic stimulus package during the Great Recession, with a secondary motive to reduce carbon emissions. The start of the Green New Deal?
When a consumer traded in a qualifying older, less fuel-efficient vehicle to purchase a newer, more fuel-efficient vehicle, the consumer was eligible for a $3,500 to $4,500 instant rebate per trade-in. The dealers had to file a 26-page claim for each vehicle, and reimbursement was noticeably slow.
Irony No. 1, the last paragraph on the claim form stated that the 26-page form complied with the Federal Paperwork Reduction Act.
Irony No. 2, even though the Federales had bailed out GM and Chrysler during this time, they decided to create a 26-page form in lieu of asking the Incentive Gurus at GM or Chrysler how to run an efficient rebate program.
EV Tax Credits
The Federales were technically a manufacturer, given their position with GM and Chrysler in 2009, so I can see how the CARS rebate could be considered a manufacturer rebate. Of course, GM and Chrysler reclaimed their boardrooms, and the Federales are no longer owners.
Last year, the Federales introduced EV tax Credits as part of the Inflation Reduction Act to help stimulate the sale of electric vehicles. It was a true tax credit. A dealer would give the consumer a form verifying the purchase of a qualifying vehicle. The consumer could then claim the tax credit on a tax return.
Enter 2024 with an updated EV tax credit program. Now the consumer who purchases a qualifying vehicle and whose income falls within program guidelines has the option to receive an instant credit to reduce the total amount paid. It sounds like a rebate, looks like a rebate, but it continues to be called a tax credit. But I don’t recall seeing a “Federales” nameplate on any vehicle.
Thankfully, the dealer does not need to complete a 26-page claim form. Instead, the dealer claims the reimbursement on a website the Federales created. Because of website glitches during the initial filing period of Jan. 1 through Jan. 16, 2024, the Federales extended the first filing period to Jan. 19. Kinda sounds like the Federales launch of the Affordable Care Act.
Program Details
New and Used Vehicles
This article addresses the new-vehicle portion of the EV tax credit program. Some used vehicles are eligible for instant rebates with different pricing and income caps.
Instant Rebate
The instant rebate ranges from $3,750 to $7,500 depending on the vehicle that is purchased.
Eligible Vehicles
There appears to be a short list of vehicles that are currently eligible for the rebate, and the amounts of the rebates vary.
Vehicles must be assembled in North America to be eligible for the rebate. The current list is likely to change on a periodic basis, so you should stay informed of updates to the program.
The vehicle must also be for personal use. Commercial vehicles do not qualify.
Vehicle Price and Income Cap
There are a couple of maximum dollar amounts. The maximum price for cars is $55,000, while SUVs and trucks can have a retail price of $80,000 or less.
The consumer’s maximum income is based on tax filing status. Married couples filing jointly have an Adjusted Gross Income (AGI) cap of $300,000. Heads of household are limited to $225,000 AGI, and other filers are capped at $150,000 (AGI).
Reimbursement
Dealers are to file for reimbursement within three days of the sale. The dealer can expect reimbursement within 15 days of accepted filing.
It is not likely that the dealer will have access to the consumer’s tax return, but this program is managed by the Internal Revenue Service, and we know the IRS has access to the consumer’s tax returns.
The good news is that once the IRS accepts and pays the claim, the dealer will not be hit with a chargeback. The consumer will have to deal with the IRS if the income was misstated. I can see a scenario, though, that an IRS agent will come knocking on the dealer’s door if several misstated income claims are filed by the dealership.
Auditing
The tax credit must be approved at point of sale through the program’s website. The dealer must provide the consumer with the submitted report and confirmation that the claim was accepted by the IRS. Copies of these two forms should be in the deal file. I am modifying the gvo3 checklist template to audit for the forms.
Good Luck, Good Health, and Good Selling!
Gil Van Over is executive director of Automotive Compliance Education (ACE), Founder and president of gvo3 & Associates, and author of “Automotive Compliance in a Digital World.”
