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Business Tax

IRS announces phase-out of credit for GM plug-in electric drive motor vehicles

Thomson Reuters Tax & Accounting  

Thomson Reuters Tax & Accounting  

IR 2019-57, 3/26/2019; Notice 2019-22, 2019-15 IRB

In an Information Release and Notice, IRS has announced that General Motors (GM) has reached a total of more than 200,000 sales of vehicles eligible for the plug-in electric drive motor vehicle credit under Code Sec. 30D(a) during the fourth quarter of 2018. Thus, a phase out of the tax credit available for purchasers of new GM plug-in electric vehicles is triggered beginning Apr. 1, 2019.

Background. Code Sec. 30D(a) provides for a credit for certain new qualified plug-in electric drive motor vehicles. The new qualified plug-in electric drive motor vehicle credit begins to phase out for a manufacturer’s vehicles in the second calendar quarter after the calendar quarter in which at least 200,000 of the manufacturer’s vehicles that qualify for the credit have been sold for use or lease in the U.S. (determined on a cumulative basis for sales after Dec. 31, 2009). Taxpayers purchasing the manufacturer’s vehicles during the first two calendar quarters of the phase-out period may claim 50% of the otherwise allowable credit. Taxpayers purchasing the manufacturer’s vehicles during the third and fourth calendar quarters of the phase-out period may claim 25% of the otherwise allowable credit. No credit is available for vehicles purchased after the last day of the fourth calendar quarter of the phase-out period.

In accordance with Notice 2009-89, 2009-48 IRB 714, GM has submitted reports that indicate that its cumulative sales of qualified vehicles reached the 200,000-vehicle limit during the calendar quarter ending Dec. 31, 2018. Accordingly, the credit for all new qualified plug-in electric drive motor vehicles sold by GM will begin to phase out Apr. 1, 2019.

New guidance. Notice 2019-22 provides that qualifying vehicles from GM purchased for use or lease are eligible for a $7,500 credit if acquired before Apr. 1, 2019. Beginning Apr. 1, 2019, the credit will be $3,750 for GM’s eligible vehicles. Beginning Oct. 1, 2019, the credit will be reduced to $1,875. After Mar. 31, 2019, no credit will be available.

References: For the new qualified plug-in electric drive motor vehicle credit, see FTC 2d/FIN ¶L-18031United States Tax Reporter ¶30D4.

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