Yeah there are numerous issue with the binding contract... some states don't allow it for vehicles, some states don't allow direct sales so any agreement with Nissan is moot as your agreement and contract for sale has to be between you and the dealership, IRS guidelines has push for a large deposit or significant nonrefundable deposit with unbounded penalties for breaking the contract. The only binding agreement that I've seen that I think will hold up with the IRS is Fisker. $5000 non-refundable deposit and Fisker can charge you $2000+ for shipping if you decline it - so you are out $7000 for rejected the car.
Federal Tax Credits Seem To Be A Go For Now
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If the Ariya is not delivered this calendar year and if the binding agreement is valid. Can we still $7,500 in next year's tax return? Or the binding agreement lapses this year ?
My understanding is that the delivery date is irrelevant. The only issue is whether a "written binding contract" was signed before Biden signed the IRA on August 16, 2022.
Here is the language posted on the IRA wb site:
Transition Rule for Vehicles Purchased before August 16, 2022
If you entered into a written binding contract to purchase a new qualifying electric vehicle before August 16, 2022, but do not take possession of the vehicle until on or after August 16, 2022 (for example, because the vehicle has not been delivered), you may claim the EV credit based on the rules that were in effect before August 16, 2022. The final assembly requirement does not apply before August 16, 2022.
Here is the language posted on the IRA wb site:
Transition Rule for Vehicles Purchased before August 16, 2022
If you entered into a written binding contract to purchase a new qualifying electric vehicle before August 16, 2022, but do not take possession of the vehicle until on or after August 16, 2022 (for example, because the vehicle has not been delivered), you may claim the EV credit based on the rules that were in effect before August 16, 2022. The final assembly requirement does not apply before August 16, 2022.
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Thank you very much for the information
Therefore, the only issue would be the definition of the "written binding contract," which is not at all clear. Again, here is the wording posted by the IRS:
What Is a Written Binding Contract?
In general, a written contract is binding if it is enforceable under State law and does not limit damages to a specified amount (for example, by use of a liquidated damages provision or the forfeiture of a deposit). While the enforceability of a contract under State law is a facts-and-circumstances determination to be made under relevant State law, if a customer has made a significant non-refundable deposit or down payment, it is an indication of a binding contract. For tax purposes in general, a contract provision that limits damages to an amount equal to at least 5 percent of the total contract price is not treated as limiting damages to a specified amount. For example, if a customer has made a non-refundable deposit or down payment of 5 percent of the total contract price, it is an indication of a binding contract. A contract is binding even if subject to a condition, as long as the condition is not within the control of either party. A contract will continue to be binding if the parties make insubstantial changes in its terms and conditions.
What Is a Written Binding Contract?
In general, a written contract is binding if it is enforceable under State law and does not limit damages to a specified amount (for example, by use of a liquidated damages provision or the forfeiture of a deposit). While the enforceability of a contract under State law is a facts-and-circumstances determination to be made under relevant State law, if a customer has made a significant non-refundable deposit or down payment, it is an indication of a binding contract. For tax purposes in general, a contract provision that limits damages to an amount equal to at least 5 percent of the total contract price is not treated as limiting damages to a specified amount. For example, if a customer has made a non-refundable deposit or down payment of 5 percent of the total contract price, it is an indication of a binding contract. A contract is binding even if subject to a condition, as long as the condition is not within the control of either party. A contract will continue to be binding if the parties make insubstantial changes in its terms and conditions.
This guidance would seem to invalidate Nissan's contract with reservationists. However, there is plenty of wiggle room. For example, it depends on your State's definition of a binding contract. Also, the IRS typically presents the strictest interpretation possible (the one that maximizes its collections), and there are many examples of initial guidance being overruled in the favor of the individual. For the EV credit, there have been many, many opinions submitted to the government (I think the opinion period has closed) pointing out that this very strict interpretation is in direct opposition to the overall policy of the Biden administration to promote the adoption of EVs in the U.S. Unfortunately, we really won't know until a final decision is made by the IRS on the 2022 tax returns. Even then, if the IRS disallows the tax credit, there will likely be lawsuits appealing the ruling.
Even Biden indicated today after meeting with Macron that the guidance from feds needs to be looked at not to inconvenience customers and partners. There is no way IRS or any one will go after those with any kind of signed agreement before 8/16 in my opinion. With republicans taking over congress and promising to cut funds, does anyone thinks IRS wants to go after those EV customers. Watch the guidance change to be very loose. If I get the car, I plan to take the tax credit and not sweat about the nuances.
Your comment is contradictory. If government wants to cut funds then they should get rid of the EV tax credit - not allow more folks to claim it. The easiest is just to pass a law nuking the EV tax credit which I expect the next government to do.
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The House will try nuke it, but if they succeed it won't make it past the Senate.
My comment was that GOP might cut funds to IRS as they promised in mid terms and IRS going after middle class EV owners when there is some kind of written agreement, will give an easy talking point to portray IRS as overreaching And thereby cut funds for IRS enforcement.
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Agreed. Seems we’re in a status quo holding pattern for some time.
Copied from another forum. The IRS has updated form 8936 and a draft instructions to mention the transition rule:
2023 Form 8936
Draft 2022 Instructions
In the draft, the transition rule is now mentioned!
"Line 3
Enter 08/15/2022 if you qualify and elect to apply the transition rule discussed below.
Transition rule. If you purchased, or entered into a written binding contract to purchase, a qualified plug-in electric drive motor vehicle after 2021 and before August 16, 2022, you may elect to treat such vehicle as having been placed in service on August 15, 2022, the day before the enactment date of the Inflation Reduction Act of 2022. Any additional election guidance that is issued will be added to these instructions at a later date."
2023 Form 8936
Draft 2022 Instructions
In the draft, the transition rule is now mentioned!
"Line 3
Enter 08/15/2022 if you qualify and elect to apply the transition rule discussed below.
Transition rule. If you purchased, or entered into a written binding contract to purchase, a qualified plug-in electric drive motor vehicle after 2021 and before August 16, 2022, you may elect to treat such vehicle as having been placed in service on August 15, 2022, the day before the enactment date of the Inflation Reduction Act of 2022. Any additional election guidance that is issued will be added to these instructions at a later date."
This is awesome. Expected this all along as the congressional bill is clear. Even the first draft when I saw it had the same language.
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This draft certainly aligns with the intent of the IRA transition rule. This news should put any Ariya reservation holders mind at ease that their purchase will still be tax credit eligible when taking delivery in 2023. I wonder how many Ariya reservation holders who cancelled and purchased a M Y in order to qualify for the tax credit will have remorse?
Manchin is trying to enforce the IRA rules for all 2023 tax year to avoid loopholes. That should still keep grandfathered buyers with the 2022 pre IRA rules.
The IRS just has to finalize the instructions, which don't concern when the vehicle is physically delivered.
The IRS just has to finalize the instructions, which don't concern when the vehicle is physically delivered.
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The draft form has had line 3 since at least September. This has been available for some time now. The problem is that when reading the instructions there is no further guidance on line 3. Meanwhile the IRS website continues to state that the written binding agreement is in effect until the end of 2022. This does not clarify anything further than we already had.
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no remorse until it's been confirmed that they received this tax credit after filing taxes for 2022 or 2023!
then I might have a little remorse.
If vehicle arrived Jan 30,2023 are we able to claim on 2022 taxes since we are saying In Service 8/15/2022 ??
Do you have link or copy of any draft form instructions before the this latest (Rev. January 2023)?
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