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The clean vehicle tax credit program, designed to promote electric vehicle sales, is causing headaches for many of the dealers who have decided to participate. Dealers are struggling to get reimbursed for the advanced payments of Section 25E and Section 30D tax credits, leading to potential financial losses in the hundreds of thousands of dollars.
Here’s what’s happening:
Dealers are facing several crippling challenges to obtaining reimbursement for the advanced payment of Section 25E and Section 30D clean vehicle tax credits.
Firstly, dealers are experiencing problems with the registration process for the advance payment program. Another significant issue is the tight window for submitting the correct Time of Sale reports.
Additionally, there is confusion and concern among dealers about data security and correct reporting procedures, which has raised concerns about the privacy and security of sensitive information.
This issue is significant because it impacts the financial stability of car dealerships across the country. Dealers have advanced these tax credits to consumers, but many have not been reimbursed, leading to potential losses in the hundreds of thousands of dollars. The problem could discourage dealer participation in the clean vehicle program, ultimately hindering efforts to promote EV sales and environmental sustainability.
On May 30, 2024, the National Automobile Dealers Association formally requested relief from the U.S. Department of the Treasury and the Internal Revenue Service for dealers who have not been reimbursed for the advanced payment of Section 25E and Section 30D clean vehicle tax credits. These credits, applied at the point-of-sale for 2024 clean vehicle sales, have been held up due to issues with the registration and reporting processes in the Energy Credits Online portal.
NADA’s letter, written by Senior Vice President of Regulatory Affairs Daniel E. Ingber, outlines a litany of difficulties dealers face in regards to verifying and obtaining these credits. Let’s break them down:
Ingber says: "Given the nascency of the advance payment program and the corresponding technical and administrative difficulties encountered during the portal’s implementation, dealers should not be forced to incur this loss merely because they issued the wrong type of Time of Sale report, missed an arbitrary report submission deadline, or because their advance payment registration remained pending due to technological issues or a processing backlog impacting their registration."
The IRS launched IRS Energy Credits Online (IRS ECO) in November 2023 as a registration portal designed to streamline the process for sellers of new and previously owned clean vehicles eligible for the federal tax credits. This tool was intended to simplify and expedite the reimbursement process, promising advance payments within 72 hours of an accepted Time of Sale report. Surprising no one, this government-run program didn’t run quite as smoothly as expected.
The Internal Revenue Service has highlighted several other caveats regarding the advance payments for clean vehicle tax credits. For example:
For vehicles placed in service in 2024 or later, dealers must submit all reports through IRS Energy Credits Online within 3 calendar days of the date of sale. They must also provide the buyer with a copy of the accepted seller report submitted to IRS Energy Credits Online within 3 calendar days of the date of submission. This reporting ensures that buyers receive the tax credits they are entitled to, but the process has proven cumbersome for many dealers.
The tight 3-day window for submitting the correct Time of Sale reports exacerbates dealer stress. Those who miss this deadline due to technical glitches or misunderstandings are unable to claim the reimbursement, despite having advanced the credits to consumers. Additionally, the IRS ECO system, though secure and accurate, has proven challenging for some dealers to navigate, especially when issues arise unexpectedly.
At the business level, dealers are experiencing financial strain and operational disruptions.
At the consumer level, 90% of qualifying electric-vehicle buyers opt for a new clean vehicle tax credit as upfront payment.
So from a broader perspective, these issues threaten the overall success of the clean vehicle tax credit program. If dealers pull out of the program, it will reduce consumer access and further slow the adoption of clean vehicles.
In addition, with all the complexities and difficulties, both buyers and sellers are rightfully worried that they’ll be SOL for the tax credit if something goes wrong, and everyone fears an audit that doesn’t go well. Ain’t nobody got time for that.
NADA has been in informal discussions with Treasury personnel, who have shown understanding but have yet to provide concrete solutions. While efforts are underway to enhance the portal's functionality, the timeline for these improvements is unclear. Dealers remain frustrated by the lack of real-time support and the inability to correct errors within the system promptly.
As Daniel E. Ingber said: “The significance of the problem cannot be overstated. Without imminent relief, dealers will incur significant financial losses and may cease participating in the program, which is detrimental to the overall goal of promoting clean vehicle sales.”
As for dealers, here a few recommendations from the WI Automobile & Truck Dealers Association to be proactive in this situation:
⭐️ Helpful links for even more information on Clean Vehicle Tax Credits: