INFLATION REDUCTION ACT LIKELY IMPACTS AVAILABILITY OF EV TAX CREDITS

By: Andrew G. Thomas and Richard N. Sox

As you may or may not know, the Inflation Reduction Act was signed into law by the President on August 16, 2022. This Act is largely targeted at promoting green technology, and includes a number of ambitious measures which impact a variety of industries. Of particular importance to motor vehicle dealers is the Act’s impact on electric vehicle (“EV”) tax credits. This newly passed law has revamped the old EV tax credit, and the many changes have a substantial impact on which consumers and which vehicle models qualify.

Why does this matter to motor vehicle dealers? Because the new law likely applies to consumers who have already ordered an EV, but have not yet received it (although customers who actually had a binding contract for their pre-ordered EV prior to the Act being signed into law may have a chance at qualifying under the pre-existing tax credit instead). This is problematic if your dealership made representations to consumers regarding the availability of EV tax credit at the time of ordering. However, even if no representations were made, consumers may likely be upset to find out that they do not qualify for the tax credit until after their vehicle has been delivered.

For these reasons, it would be prudent for dealers to get ahead of this issue by sending a simple communication to consumers who have pre-ordered an EV which explains: (i) that the Inflation Reduction Act altered the eligibility rules for the EV tax credit; and (ii) that the consumer may not qualify for the EV tax credit even if they previously believed they did.

Dealers should contact their motor vehicle franchise counsel to ensure they are protected.