On August 16, President Biden signed the Inflation Reduction Act (IRA) of 2022 into law. The law will, among many things, allocate nearly $370 billion to climate and energy-focused investments and incentives. The IRA resulted from a hard-fought effort that created a complex regulation. One of the many things the IRA does is amends the existing Qualified Plug-in Electric Drive Motor Vehicle Credit program by creating the Clean Vehicle Credit provision, a key element of the IRA and one that is likely to have a significant impact on the clean vehicle market. The CVC maintains the $7,500 tax credit for consumers who purchase a new clean vehicle, i.e., battery electric vehicles (BEV), plug-in electric vehicles (PHEV), and fuel cell electric vehicles (FCEV) while eliminating the current 200,000 vehicle cap per automaker.
It also allows consumers to receive a $4,000 tax credit for purchasing a used clean vehicle. Although the IRA extends the $7,500 tax credit for consumers, which is now available at the point of sale, it also adds critical qualifications and restrictions, including strict eligibility requirements for vehicle assembly and critical mineral and battery sourcing for manufacturers. The new law also imposes vehicle manufacturer's suggested retail price (MSRP) limits and personal income caps for consumers purchasing clean vehicles.
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