Senate moves forward with EV tax credit reform, Tesla (TSLA) to be included back and more

The US Senate is going to move forward with a sweeping new bill after Senator Joe Manchin finally accepted to include investments to curb climate change. The new bill is going to include the long-awaited electric vehicle tax credit reform that is going to give back access to the tax credit to Tesla GM vehicles, along with other changes.

Last year, the US House of Representatives passed the $1.9 trillion “Build Back Better” legislation, but it has been stuck in the divided Senate ever since.

The bill is interesting to the EV community because it includes a long-needed reform to the federal tax credit for electric vehicles.

Even though it is technically a small part of the overall bill, it is a point of contention.

The main goal of the reform, and the one most people agree on, is the need to eliminate the tax credit cap after automakers hit 200,000 EVs sold, since it is putting automakers that were early in pushing electric vehicles at a disadvantage. It also happens that those automakers are American automakers, like Tesla and GM, while many foreign automakers still have access to the credit.

Joe Manchin, a Democrat and senior United States senator from West Virginia, has been holding his vote, which is the deciding vote since the democrat needs every single one of their votes in the Senate to pass anything.

The senator, who comes from a very conservative state, has proven to be difficult to deal when it comes to initiatives that deal with climate change, but in a reversal today, he announced that he accepted a new version of the bill, now called ‘Inflation Reduction Act of 2022’.

We pulled the information from the bill and confirmed all the changes to the EV federal tax credit in the new version:

• Federal tax credit for EVs maintained at $7,500
  • Eliminates tax credit cap after automakers hit 200,000 EVs sold, making GM and Tesla once again eligible
  • The language in the bill indicates that the tax credit would be implemented at the point of sale instead of on taxes.
  • In order to get the full credit, the electric vehicle needs to be assembled in North America, the majority of battery components need to come from North America, and contain a certain percentage of minerals from countries with free trade agreements with the US.
• A new federal tax credit of $4,000 for used EVs
• Zero-emission vans, SUVs, and trucks with MSRPs up to $80,000 qualify
• Electric sedans priced up to $55,000 MSRP qualify
• The full EV tax credit will be available to individuals reporting adjusted gross incomes of $150,000 or less, $300,000 for joint filers

This would enable Tesla and GM to get access back to the credit – though in Tesla’s case, it would only apply to some versions of the Model 3 due to the new $55,000 price limit.

The new limit on gross income has also been greatly reduced.

However, the bill is not law yet, but with Manchin now being on board, it should be able to move through the legislative process after over a year of negotiation.

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