Webinar | Up to Speed

How dealerships can maximize Inflation Reduction Act credits webinar

Feb 15, 2023·Authored by A. Michael Mader, Chad Resner, Bob Hofacker

Learn from Baker Tilly dealership specialists in this recorded webinar how the Inflation Reduction Act (IRA) is impacting auto dealerships and how you can take advantage of various tax credits.

The IRA has created game changing opportunities for dealerships through $270 billion in energy incentives. Dealerships can receive benefits from these energy incentives as they provide a direct offset to federal tax liability in the form of tax credits. This webinar dives into the four main provisions in the IRA that impact dealerships the most, including:

Vehicle tax credits
Section 30C: Electric charging stations
Section 48: Investment tax credit for energy property

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FAQs from live webinar

For the 2024 purchased credits, do we know if the dealership will need to evaluate the buyer’s eligibility regarding taxable income limits? Will the dealership claim this on their returns or separate filing?

The dealership should notify the buyer of the modified, adjusted gross income limits, but will not need to verify this. If the buyer fails to qualify because of the modified, adjusted gross income limits when they file their tax return, an additional tax will be assessed on the buyer.
The secretary will set up a program to allow payments in advance to the dealership. The exact details of the program and any filing requirements have not been released yet. Later in 2023, there will be additional guidance released regarding the program allowing credit transfer to the dealership.

Do you have more info on vehicles sold to tax-exempt, government units? These sales are fleets to a state or city. Given unsure if the government has a mechanism to claim, can the dealer still take the general business credit?

The qualified commercial vehicle credit is eligible for elective payment by an eligible entity. Such entities include any state or political subdivision thereof. The elective payment allows the eligible entity to file a tax return and claim a refund in the amount of the eligible credits. The exact procedures for filing tax returns have not been released yet.

Please clarify…Dealers will or will not receive any form of credit for these programs because the credits are only applicable to the buyer on their personal or business tax returns (Y/N). Thanks!

The new, clean vehicle credit, used vehicle credit and the qualified commercial clean vehicle credit are allowed to the taxpayer that places the vehicle in service. Vehicles that are held by the dealer as inventory will not qualify for any of these credits.
If the dealer acquires a vehicle, leases it to a lessee or places the vehicle in service as a loaner vehicle, then the dealer may be eligible for the qualified commercial clean vehicle credit. We believe that if you place an EV vehicle into loaner service, the vehicle must be placed into your fixed assets and depreciated versus keeping it in inventory to be eligible for the credit.

Should the dealer title the loaner EV in its name to be safe?

If the dealer intends to place the vehicle in service as a loaner vehicle, then yes, titling the vehicle in the dealer’s name would be advisable.

Facts: Dealer holds a loaner vehicle in its inventory under a leasing permit with the associated state and the loaner is sold as a new vehicle: Does the customer only qualify for used vehicle credit (Y/N)? Should the dealer claim the new credit when the vehicle is placed in loaner (Y/N)?

If the vehicle is considered inventory, then it won’t be considered placed-in-service. This means that the dealer will not be able to claim a credit. If the dealer removed the vehicle from inventory and places the vehicle in service, the dealer may be eligible for the qualified commercial clean vehicle credit.
If the vehicle is placed in service by the dealer, a future sale of the vehicle may allow the buyer to claim the used vehicle credit. Among other requirements, the vehicle model year must be at least two years earlier than the calendar year in which the vehicle is sold.