Congress Fails To Renew Important Electric Vehicle Tax Credits
Further proof that we have a do-nothing Congress came at the end of 2013, when our legislators failed to renew three important electric vehicle tax credits. Basically, they just didn’t get around to it before the New Year’s break. A total of 55 tax breaks went unaddressed.
- The first credit, up to $1,000, was for homeowner alternative vehicle refueling, including the purchase of a 240-volt Level 2 EV charging station.
- The second, for up to $2,500, could be used to offset up to 10 percent of the purchase price of an electric motorcycle (or three-wheeled EV).
- The third, for businesses, allowed them a credit for up to 30 percent of an EV charger purchase, up to $30,000.
According to Brian Wynne, president of the Washington-based Electric Drive Transportation Association (EDTA), “We think these credits are valuable and are working to renew them. The charging credit is alternative-fuel neutral, so it goes beyond electric cars.”
Wynne said that credit renewal was stalled in part by some discussion of tax reform, led by Senator Max Baucus (D-MT), who is retiring. “They had a run on that, and it delayed looking at the extenders,” Wynne said. “I don’t think there was intent to let the incentives expire—that wasn’t the focus.”
A Bad Pattern
Intent or not, Congress has set a pattern of renewing credits like this for only a year, then leaving a lot of confusion in the market as it drags out the renewal process. The classic case is the wind production tax credit, which is worth 2.3 cents for every kilowatt-hour of electricity generated. That was one of the 55 credits that expired, and according to the Washington Post, “The fact that the credit constantly expires has also created a fair amount of uncertainty for the industry.”
Both of the EV credits that expired had been the victim of the one-year renewal process. That makes it difficult for companies that make charging stations or electric motorcycles to plan on what kind of sales year they'll have. "Why is it that EV, solar and wind credits are the ones that have these sunset dates?" asked Tom Saxton, chief science officer at Plug In America.
Jay Friedland, Plug In America's senior policy adviser, said his group worked to renew the credits that expired at the end of 2011, and although they were absent for much of 2012, they later became retroactive. That process will now have to start all over again. "Congress is ridiculous," Friedland said.
If there's any silver lining in this, it's that Baucus is likely to be replaced on the Senate Finance Committee by Senator Ron Wyden (D-OR), a big EV proponent who will probably push for early renewal of the tax credits.
Also dead for the time being are incentives that encourage people to take buses and trains, buy energy-efficient appliances and install renewable energy. Breaks few people will miss help NASCAR to build racetracks, subsidize the write-off of race horses, and save on expenses for motion picture producers.
The Big Credit Still Safe
In case you were wondering about the really big incentive—up to $7,500 for consumers who buy battery vehicles, based on pack size—that one’s safe for now. It doesn’t just expire, like these other credits, and only goes away after a manufacturer has sold 200,000 battery cars. If Nissan can meet its goal of selling 30,000 or more electric cars per year for the next several years, it would reach the sunset limit for the tax break in 2018 or 2019. The incentives are not entirely cut off at that point; instead, the incentive is phased out over the following year.
Buyers of conventional gas-electric hybrid cars enjoyed a smaller tax credit from 2006 until hybrid sellers reached a phase-out period after selling 60,000 vehicles. The Toyota Prius, the most popular hybrid, benefited from the tax break from early 2006 until the perk was completely phased out in late 2007. Sales of the Prius were mostly unaffected by the loss of the relatively smaller tax credit, which at its full amount was $3,400 compared to the EV credit of $7,500.
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