Am I reading Build Back Better correctly?

Section 136401. Refundable new qualified plug-in electric drive motor vehicle credit for individuals.

This provision provides for a refundable income tax credit for new qualified plug-in electric drive motor vehicles placed into service by the taxpayer during the taxable year. The credit is limited to one vehicle per-taxpayer per-taxable year.

The amount of credit allowed by this provision with respect to a qualified vehicle is equal to the base amount of $4,000 plus an additional $3,500 for vehicles placed into service before January 1, 2027 with battery capacity no less than 40 kilowatt hours and a gasoline tank capacity not greater than 2.5 gallons, and for vehicles with battery capacity of no less than 50 kilowatt hours thereafter.

The amount credit allowed for a qualified vehicle is increased by $4,500 if the final assembly of the vehicle is at a facility in the United States which operates under a union-negotiated collective bargaining agreement.

The amount of credit allowed for a qualified vehicle is increased by $500 if the vehicle model are powered by battery cells which are manufactured within the United States.

The amount of credit allowed for a qualified vehicle is limited to 50 percent of its purchase price.

Beginning in 2027, this credit shall only apply with respect to vehicles for which final assembly is within the United States.

- - -

Looks like a tiered approach....

Tier-1 = any plug-in hybrid, you get $4,000

Tier-2 = like BMW i3, large battery & small tank, you get an extra $3,500

 

The way I read it, John’s explanation is correct. Hmmm, I’m not really too enthused by them, but if these rules are adopted, that means it would be $12,000 off the price of the new electric mustang. Not overly fond of Fords, but for $12K, they may deserve a second look!

 

Mach-E is built in Mexico so it doesn't get the $4500 extra.

 

I’ve always viewed the gas tank limit as moronic

 

Quote from cnet.com:
Today, the only car that would qualify for anywhere near the full proposed credit is the Chevrolet Bolt EV and Bolt EUV. This provision would, notably, exclude Tesla and even the Ford Mustang Mach-E, since it's assembled in Mexico.

I'd buy a Bolt in a minute considering the msrp starts around $34,000 less $12,000 credit.

 

AS CURRENTLY WRITTEN
no changes for 2022 calendar year for PHEVs

Just a snip of relevant sections - feel free to look at the bill yourself to see how I figured this out. (which confirms a previous post on Prius Chat a few weeks ago - no changes were made since that post)

H.R.5376 - 117th Congress (2021-2022): Build Back Better Act | Congress.gov | Library of Congress

``SEC. 36C. NEW QUALIFIED PLUG-IN ELECTRIC DRIVE MOTOR VEHICLES.

``(a) Allowance of Credit.--In the case of an individual, there
shall be allowed as a credit against the tax imposed by this subtitle
for the taxable year an amount equal to the sum of the credit amounts
determined under subsection (b) with respect to each new qualified
plug-in electric drive motor vehicle placed in service by the taxpayer
during the taxable year.
``(b) Per Vehicle Dollar Limitation.--
``(1) In general.--The amount determined under this
subsection with respect to any new qualified plug-in electric
drive motor vehicle is the sum of the amounts determined under
paragraphs (2) through (5) with respect to such vehicle (not to
exceed 50 percent of the purchase price of such vehicle).
``(2) Base amount.--The amount determined under this
paragraph is $4,000.

...

``Sec. 36C. New qualified plug-in electric drive motor vehicles.''.
(e) Effective Dates.--
(1) The amendments made by subsections (a), (c), and (d) of
this section shall apply to vehicles acquired after December
31, 2021.
(2) The amendments made by subsection (b) shall apply to
vehicles purchased or leased after December 31, 2022.

 

Read (CTRL+F search) the linked bill that was passed by the House - it does not mention 2.5 gallon restrictions at all, from what I've searched.
That may have been modified from the pdf you linked, prior to passage.

 

Already bought PP this year. I will wait to read the final bill signed, then decide what to buy next year. Yeah. if Bolt is the only car that qualifies for the $12K, then that may be my first BEV. I was hoping the Mach-E will get that... but Oh well.

 

Yeah for now, but there is a possible work around:

"The amount credit allowed for a qualified vehicle is increased by $4,500 if the final assembly of
the vehicle is at a facility in the United States which operates under a union-negotiated collective
bargaining agreement."

Hmmm, how much constitutes final assembly? Could be anything from major components to???

Just as well they don't give the extra credit, lest I be tempted to buy another (shudder!) Ford. Been there, done that and hoped never again.

 

Unfortunately, I think the Prius Prime very well might lose the tax credit next year. Not because of the gas tank, but because of the battery. Qualifying plug ins for the credit have a minimum battery size 10kWh. It is a bit surprising as we are nearing the end of the year, and I would except allowing more time for a switch over from the current credit law.

Good news is this is just the House bill. The final law has to reconcile with Senate version.

The OP linked document is an easier reading summary of the current bill, because actual bill text is ugly. The bill you have linked here is from September 27, 2021. The summary is of the bill from November 3, 2021, which has the fuel tank limit. Here is a link to tat bill's text(car section starts p1480).
https://rules.house.gov/sites/democrats.rules.house.gov/files/BILLS-117HR5376RH-RCP117-18.pdf
Found it here.
H.R.5376–Build Back Better Act | House of Representatives Committee on Rules

A good example of the bill text being ugly. The use (lowercase letter) is confusing. If I have this right, subsections start with (lowercase letter), not "(lowercase letter).

Subsection (a) is the entire part 36C being added to the Internal Revenue Code. It goes from "(a) to "(l), which states the December 31, 2031 end date. It covers new plug in cars, motorcycles, and trikes. The 10kWh battery capacity limit is within the body.

Subsection (c) revokes the current tax credit from the IRC, and (d) puts in edits to the IRC to account from the old section being removed, and new one being put in.

Subsection (b) allows the plug in buyer to transfer their tax credit amount to the dealer for a down payment amount on the vehicle. making it a point of sale rebate in effect. It starting later is likely to allow time in setting up the system for doing so.

To avoid the chicken tax on the Transit Connect, Ford took the seats and windows of the vans off the ones arriving from Turkey, and installed new parts.

It is, but it is better than a tank limit with hobbling of car performance in hybrid mode.

Unfortunately, PHEVs can be used without ever plugging in. In Europe, the incentive structure was actually encouraging it with company cars. 2.5 gallons is a tank range around 100 to 150 miles. Most plug ins with that tanks size will have longer EV range. I would have gone with a larger tank limit; IIRC the Clarity PHEV's gas range is 270 miles. Something not so tedious for long trips, but the thinking is probably to get people supporting fast chargers on such trips.

 

When can you purchase a car and get the new tax credit?

 

Depends on what the law that finally passes says. Appears the House wants it to be next year.

 

I see it now - thanks for pointing out the subsection intricacies. So a Rav4 Prime can get $4,000 next year, Prius Prime $0 due to less than 10 kwh battery size.
A Ford Escape PHEV should get $4,000 + $4,500 and maybe $500 (battery cell source?), though? Interesting.

I'm glad that they are limiting it to 1 per taxpayer per year, also.

 

Why is that? If a family is required to make an unplanned purchase... accidents happen... why not look at that as an opportunity? Not having the opportunity to make that replacement a plug-in due to some arbitrary cutoff is a barrier to progress.

Think about the family itself. They would be quite excited about having already purchased a plug-in that year. Not being able to get another is quite counter-production. In fact, it is a rather large disenchantment event.

 

Because by limiting it to one per taxpayer per year, it prevents flippers. It is not one per household. As long as there is more than one taxpayer in a household, they can purchase a replacement vehicle and qualify for the credit if the original car is totaled or whatever. With the credit being refundable, wealthy families can purchase a vehicle for their child and they could now obtain the tax credit.
I also think the income cap is laughably high.

 

The retention requirement on other credits addressed exactly that. This bill could have included the same thing.

 

Would still be much simpler if it followed the Canadian model (immediate reduction of price at point of purchase—thus available to all regardless of tax situation, must have a base model available at 45,000 or fewer dollars—so taxpayers are not subsidizing the purchase of opulence, and the subsidy is 50% for PHEVs with smaller batteries—e. g. Prime).

The immediate rebate would be less regressive than an income tax credit, the price cap would skew production towards more affordable options, and the size of the incentive need not be as high per person as it would be a rebate everyone could apply immediately.

Obviously not how it will unfold in the US but proof of concept that such things can be done in a much, much less complicated fashion.