Gaming the System? Treasury Department Complains of Unworthy EV Credit Recipients

the truth about cars ^ | October 4, 2019 | Steph Willems

[Subcutaneous Fishstick Blues]

Tax credits are a great way to stimulate purchases or participation, and in the politician’s mind, they often take precedence over affordability measures that would benefit broader swathes of society. That being said, they’re here to say… unless you’re referring to the slowly vanishing federal EV tax credit.

Automakers like Tesla and General Motors are already watching their $7,500 credits halve, then halve again, after surpassing the 200,000-vehicle threshold that starts the countdown to a credit phase-out. Now, the Treasury Department is claiming some recipients of the eco stimulus shouldn’t have received it in the first place.

According to Bloomberg (via Automotive News), an audit of tax returns filed over a five year period ending in 2018 revealed thousands of suspect EV claims.

Of the $1.4 billion paid out to roughly 240,000 EV buyers during that period, the Treasury Inspector General for Tax Administration identified 16,510 returns worthy of further scrutiny. Money paid out to that cohort amounted to upwards of $70 million.

So, how exactly did these tax filers get their hands on the supposedly unearned credits? That’s a mystery for now — much of the audit’s juicy details were redacted. Depending on type of vehicle, where the automaker rests in its credit tally, and the vehicle’s battery capacity, recipients stand to gain between $2,500 and $7,500. Full-on EVs get the biggest bucks, but buyers of plug-in hybrids stand to gain a considerable incentive. The credit available to buyers of the Mitsubishi Outlander PHEV is $5,836. The now-departed Cadillac CT6 Plug-In, being of solid American stock, was eligible for the full $7,500, despite its 2.0-liter turbo.

While the wrongful credit payout remain shrouded behind black ink, the Internal Revenue Service claims it’s on the case, vowing to recoup the money. “Although the IRS has taken steps to address some of TIGTA’s previous recommendations to improve the identification and prevention of erroneous credit claims, many of the deficiencies previously identified still exist,” the audit stated.

[roadcat]

IRS makes it out to be a cash gift. But it’s a credit that reduces the tax bite. People have to pay out taxes before getting a reduction on their taxes. In other words, the rebate is a reduction of taxes; if you owe $2000 that’s all you get reduced, not the $7500. But it’s not a gift!