A tax credit of up to $7,500 for electric vehicles survived in the final tax reform bill that was sent to President Donald Trump to sign, signaling a win for automakers.
The House of Representatives bill originally struck the Obama-era provision as of Dec. 31, but the Senate version of the bill was ultimately the one approved by Congress. Elimination of the credit would have cut off the discount for EV buyers, causing EVs to remain relatively high in price due to low gas prices that make combustion-engine cars a more popular option.
Tesla Inc., General Motors Co., and Nissan Motor Co. are the automakers closest to hitting the 200,000-unit level at which the $7,500 tax credit is phased out. Considering these automakers are the closest to the 200,000-unit level, it is questionable how much they stand to benefit from a continued tax credit individually, but for the industry overall it can be a useful tool for persuading buyers.
“We commend Congress for passing vitally important tax reform legislation,” General Motors said in a statement to Auto Finance News. “On the EV tax credit, we are pleased it was maintained, as it is an important customer benefit that can help accelerate the acceptance of electric vehicles.“ Nissan and Tesla did not respond to a request for comment.
Additionally, businesses that use “floorplan financing indebtedness” will be excluded from the tax reform provision that limits the deductibility of net business interest. This type of indebtedness is used to finance the acquisition of motor vehicles, which includes automobiles, trucks, recreational vehicles, motorcycles, boats, farm machinery or equipment, and construction machinery or equipment.
“Conversely, this provision also provides that any trade or business with floorplan financing that chooses to fully deduct the related interest wouldn’t be allowed the benefit of the new 100% bonus depreciation provision,” according to a published report, which refers to the House bill, but this provision was also included in the Senate version, which passed.
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