A study conducted by George Washington University discovered that individuals who purchase electric vehicles, particularly those with lower incomes, strongly favor a point-of-sale rebate over a tax credit. This rebate is valued at $1,450 more than the credit. According to the IRA, starting in January 2024, dealers will have the option to offer the credit as a rebate upon purchase.

The proposed rule for Friday outlines the procedure for dealers to offer the credit at the time of purchase. Dealers must register with the IRS and buyers must confirm they meet the income limit for the credit. This allows them to receive cash or apply the credit towards the car cost or down payment. If the buyer exceeds the income limit, they will need to repay the credit when they file their taxes.

The proposed rule states that the point-of-sale rebate will effectively make the EV tax credit refundable, allowing buyers to receive the rebate regardless of their tax liability.

The proposed rule was commended by Albert Gore, the executive director of the Zero Emission Transportation Association, in a statement made on Friday.

Gore stated that this guidance simplifies the process for individuals to claim the IRA’s tax credits for both new and used electric vehicles at the time of purchase. This streamlined approach will maximize the impact of these credits, benefiting not only drivers and their communities, but also the entire electric vehicle supply chain.

Dealer worries: Car dealers had expressed concerns that the point-of-sale EV rebate could force them to provide cash upfront with an uncertain timeline for repayment.

In 2009, there was a program called “Cash for Clunkers” where the government paid dealers to give cash rebates to drivers who traded in their old, less efficient vehicles. However, dealers were unhappy because they didn’t receive the rebates from the government on time.

The Treasury has announced that it will reimburse dealers within 72 hours of a sale with the implementation of the EV tax credit. Dealers will utilize a new website, Energy Credits Online, provided by the IRS to verify a vehicle’s eligibility for the credit and initiate the payment process by submitting a “time of sale” report.

In a statement, Mike Stanton, the president and CEO of the National Automobile Dealers Association, stated that the guidance is in line with dealers’ main objectives “to effectively implement the clean vehicle tax credit program in the showroom.”

Stanton stated that the details released by Treasury on Friday should ease the main worries of dealers regarding their involvement in providing advanced clean vehicle tax credits to consumers upon purchase, which is set to begin in January 2024.