7500 EV tax credit update with new bill

[Money_Mani]

The first link I posted says: “Individuals who 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), can claim the EV credit based on the rules that were in effect before the Inflation Reduction Act’s enactment.”

There’s a link in that page to here: https://www.irs.gov/credits-deductions/individuals/plug-in-electric-drive-vehicle-credit-section-30d

The proof is there (copied below). The contract with Lucid is virtually non-existent. At the time we entered into the agreement, the only thing that was clear is that we clearly agreed to “forfeiture of a deposit.” It reads like the prime example of an unenforceable contract according to the IRS, and therefore not sufficient under the transition rules to qualify for a rebate.

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).

When I finalized my design, the webpage has a link to "view order". It says order agreement with date of execution as 8/11/22. Does that not qwualify as writtent/ binding contract?

 

[gunick06]

When I finalized my design, the webpage has a link to "view order". It says order agreement with date of execution as 8/11/22. Does that not qwualify as writtent/ binding contract?

That’s the big debate in this thread. It appears the general consensus is that what Lucid did does not qualify as a “binding contract” in the eyes of the IRS. Accordingly, the only “safe” way to get the federal $7500 credit at this time appears to be accepting delivery of a car before the end of the year.

However, the IRS just recently requested public comment on these rules (among a host of other rules), so this could theoretically change.

Here’s the source:
https://www.irs.gov/businesses/plug...ext=If you purchase,Written Binding Contract?

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.

Vehicles Purchased and Delivered between August 16, 2022 and December 31, 2022​

If you purchase and take possession of a qualifying electric vehicle after August 16, 2022 and before January 1, 2023, aside from the final assembly requirement, the rules in effect before the enactment of the Inflation Reduction Act for the EV credit apply (including those involving the manufacturing caps on vehicles sold). If you entered into a written binding contract to purchase a new qualifying vehicle before August 16, 2022, see the rule above.

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.

 

[maazymaaz]

could what a "written contract be binding" vary per state?

 

[Tim-in-CA]

Honestly all this speculation is moot as the IRS will make the final determination!!! I'm hopeful to get my Touring before 12-31 to guarantee the $7500, but will also accept a decision by April 15th filing deadline. Initial pre-order Tourings should be delivered by then!!

 

[gunick06]

Honestly all this speculation is moot as the IRS will make the final determination!!! I'm hopeful to get my Touring before 12-31 to guarantee the $7500, but will also accept a decision by April 15th filing deadline. Initial pre-order Tourings should be delivered by then!!

Yes, absolutely. If you have already confirmed your Touring order with all of the preferred features (basically fully loaded except for Stealth and one of the less-popular interiors), my sales advisor told me today that you will get your car by the end of the year. Hope she is right.

 

[gunick06]

could what a "written contract be binding" vary per state?

Yes, that is technically the requirement and every state has their own laws. For that reason, you should consult with a tax advisor because there are risks involved with being wrong. It would have been nice if Lucid had the foresight to offer people placing 5% down.

 

[joec]

Yes, absolutely. If you have already confirmed your Touring order with all of the preferred features (basically fully loaded except for Stealth and one of the less-popular interiors), my sales advisor told me today that you will get your car by the end of the year. Hope she is right.

My DA went out of his way not to promise end of the year, but then said he’d much rather under promise and over deliver. So maybe he’s just talking from experience and knows things could still go wrong. Given how many Lucid employees are now saying end of the year for all Tourings that have the “right” specs, I’m starting to believe that is the plan, at least.

 

[gunick06]

My DA went out of his way not to promise end of the year, but then said he’d much rather under promise and over deliver. So maybe he’s just talking from experience and knows things could still go wrong. Given how many Lucid employees are now saying end of the year for all Tourings that have the “right” specs, I’m starting to believe that is the plan, at least.

I think that’s a accurate assessment of the situation. It does seem like they have improved manufacturing significantly over the last few months, and it would make sense if there was a manageable number of customers who have checked all of the appropriate boxes.

My SA has basically promised me nothing all year long until today, which was a drastic change in tone. Fingers crossed.

 

[wklglider]

Lucid even mentioned "binding order" in their order agreement. Does that mean it's enforceable? For my understanding, a contract with 5% down payment is a binding contract but a binding contract doesn't necessarily have to have a 5% down as long as it's enforceable under State law and does not limit damages to a specified amount. I think we need a lawyer instead of a CPA to interpret the order agreement.

 

[gunick06]

Lucid even mentioned "binding order" in their order agreement. Does that mean it's enforceable? For my understanding, a contract with 5% down payment is a binding contract but a binding contract doesn't necessarily have to have a 5% down as long as it's enforceable under State law and does not limit damages to a specified amount. I think we need a lawyer instead of a CPA to interpret the order agreement.

You may need an attorney and a CPA if you intend to rely on this rule.

 

[Codyroo]

You may need an attorney and a CPA if you intend to rely on this rule.

And this is the crux of the debate - we don't have anyone here who is an expert in one or both fields. So the verbiage is poorly written (or at least not clarified by an example) that it's meaning is nebulous. The verbiage uses a 5% deposit as an example of a requirement to make it a binding contract, but it doesn't specifically state that it has to be 5% (just that it can't limit damages).

I can see validity in both sides of the argument, thus I've given up until people more knowledgable than myself rule on it.......otherwise it is just "Argy Bargy" as the Aussies say.

 

[Tim-in-CA]

And this is the crux of the debate - we don't have anyone here who is an expert in one or both fields. So the verbiage is poorly written (or at least not clarified by an example) that it's meaning is nebulous. The verbiage uses a 5% deposit as an example of a requirement to make it a binding contract, but it doesn't specifically state that it has to be 5% (just that it can't limit damages).

I can see validity in both sides of the argument, thus I've given up until people more knowledgable than myself rule on it.......otherwise it is just "Argy Bargy" as the Aussies say.

The IRS will be the final decider no mater what any CPA or Lawyer says.

 

[Bobby]

Yes, that is technically the requirement and every state has their own laws. For that reason, you should consult with a tax advisor because there are risks involved with being wrong. It would have been nice if Lucid had the foresight to offer people placing 5% down.

The rebate is federal, not state. States may offer additional rebates.

 

[gunick06]

The rebate is federal, not state. States may offer additional rebates.

This is not something I made up, it’s what the IRS says.

 

[wklglider]

The IRS will be the final decider no mater what any CPA or Lawyer says.

I also think the IRS is unlikely to fine us if we do file our tax credits given the number of consumers and manufacturers impacted. They might get themselves into lawsuits if they insist to do so.

 

[invalidname]

The rebate is federal, not state. States may offer additional rebates.

@gunick06 was referring to IRS's answer regarding the new federal ev tax incentive to "what is a written binding contract?" which states that a "written contract is binding if it is enforceable under State law [...]" And technically, a $300 or $1000 deposit converted to a non-refundable contract is technically considered significant enough to be a binding contract under CA state laws.

 

[noobzilla]

I'm assuming we can't pay additional 5% now for the contract we signed with Lucid?
I wonder, if they do accept downpayment now, if they could still reflect the date as pre- new EV bill?

 

[digiboxer]

Lucid even mentioned "binding order" in their order agreement. Does that mean it's enforceable? For my understanding, a contract with 5% down payment is a binding contract but a binding contract doesn't necessarily have to have a 5% down as long as it's enforceable under State law and does not limit damages to a specified amount. I think we need a lawyer instead of a CPA to interpret the order agreement.

The Lucid agreement itself says if the buyer defaults L's sole remedy is forfeiture of the depot.

The point here is prior IRS regs that say if a contract doesn't provide for specific performance, it can still be considered "binding' for tax purposes IF the buyer has deposited non-refundable cash of at least 5% of the purchase price

 

[digiboxer]

The rebate is federal, not state. States may offer additional rebates.

There is no "rebate". The $7500 is a credit against your federal tax liability. If you owe no Fed taxes you get no benefit.

 

[digiboxer]

I'm assuming we can't pay additional 5% now for the contract we signed with Lucid?
I wonder, if they do accept downpayment now, if they could still reflect the date as pre- new EV bill?

I think the might have worked before the passage of the new bill (16 Aug '22?)--doubt it works now.