federal transportation act and tax incentive

It was the Energy Act of 2005 that passed Congress on Friday that contains the hybrid vehicle tax credit language, not the transportation act.

It appears clear that it qualifies the Toyota Prius for a $2,000 tax credit.

It remains unclear to me exactly when the credit goes into effect (retro for purchases to beginning of this tax year, upon signing (enactment) of the bill or January 1, 2006).

It also remains unclear to me just how quickly the phase out would occur. Each manufacturer trips a phase out trigger when it delivers 80,000 US units under the credit. The credit then remains fully in effect for purchases in the balance of that calendar quarter and one subsequent calendar quarter. The credit would then be cut in half for the purchases in the next two calendar quarters and would be gone after that. (Talk about major concessions to the Detroit manufacturer lobbyists for being so far behind the curve on hybrid deployments.)

 

The energy bill puts a cap on the # of vehicles eligible for tax
credits by manufacturer. The first manufacturers (Toyota, Honda)
will be hurt as the number reaches the cap. Newer hybrid makers
(Ford, DaimlerChrysler) will benefit.

 

The credit is only effective for vehicles purchased on or after Jan 1, 2006 :cussing: :cussing: :cussing: :guns:

So all of us who purchased this year effectively got screwed out of over $1000 depending on your tax bracket. (we just lost $1700 bucks...)

The credit will drop to 50% for the 2 quarters after the manufacturer sells 60K units, then 25% 1 or 2 quarters after that. Then, it's over. This will enourage people to buy the FEH and any other new hybrids coming out, and I bet the credit for the Prius will end sometime next summer. I also think the Honda hybrids will lose out on the full credit by the end of the year. Does anyone think this will cause lower sales between now and Jan 1? I think Toyota may see those numbers drop as people wait for the new credit to take effect.

I think the least they could do is grandfather us recent purchasers in... heck, we've only had ours 4 months...

Makes me sick. We were really hoping to get some money back at the end of the year. Between the fluctuations in both our incomes and my payroll department being completely incapable of implementing a new W4 requesting a higher withholding within 4 months... we are going to have a rough tax season. ukeright: That credit would have been a great help.

 

I understand that, and clearly from reading the legislation, the trigger number is 80,000 units for each manufacturer.

Exactly when each manufacturer will hit that trigger remains to be seen. It would first depend on when exactly the legislation is actually effective. If it's the current tax year, that would mean that Toyota has already hit that 80,000 phase out trigger level.

If the effective date is actually January 2006, I've read that Toyota intends to increase total Prius production to 500,000 units for model year 2006 and most of them would be delivered to the US, so Toyota would likely hit the trigger in the first calendar quarter.

Subtitle D-Alternative Motor Vehicles and Fuels Incentive, Section 1531 has only one mention of "effective date" in the entire section being the last clause of the section saying "shall apply to property placed in service after the enactment of this Act, in taxable years ending after such date. My interpretation of this is that this section takes effect for purchases in all of the current tax year. The current tax year has not ended and the President's signature is anticipated this week.

 

I agree that's what the media is reporting, but that's not exactly what the legislation says.

This version of the legislation is dated July 28 as it came out of the House: http://energy.senate.gov/public/_files/H6_EAS.pdf

The entire Subtitle D section 1531 starts on page 1091 and ends on page 1113. The only mention of effective date for the entire section is found as the last clause on page 1113.

 

David, thanks for the link. I must have seen a draft of it or something, because I note a few changes.

Well, I'm keeping my fingers crossed about the credit applying to us. I'm not good at this legal talk, so a lot of it's Greek to me.

[crossing fingers tightly...]

 

I believe part of the problem here is the enrolled bill is not yet available for viewing. Here's a brief explanation:

The enrolling clerk of the House, with respect to bills originating in the House, receives the original engrossed bill, the engrossed Senate amendments, the signed conference report, the several messages from the Senate, and a notation of the final action by the House, for the purpose of preparing the enrolled copy. From these documents, the enrolling clerk must meticulously prepare for presentation to the President the final form of the bill as it was agreed to by both Houses.

 

The New York Times had this online yesterday:

"The energy bill sets up a complex formula that begins restricting eligibility for the tax credit once an automaker sells 60,000 gas-electric hybrids or cleaner burning diesels, known as advanced lean-burn vehicles.

Once an auto company hits the 60,000 mark, it has the remainder of that fiscal quarter plus one additional quarter in which buyers of its vehicles can receive the full credit. The credit ranges from $250 to $3,400 depending on the fuel efficiency of the vehicle.

During the two quarters immediately after the cars and trucks of the automakers become ineligible for the full credit, buyers would receive 50 percent of the credit. The next two quarters after that, the credit is 25 percent. The credit is phased out entirely at the end of the fifth full quarter after the automaker sells 60,000 hybrids or advanced diesels."

Sounds like they have an extra quarter after they hit the 60,000 limit to still offer the full credit. They also list the Jan. 1, 2006 start date but when I read the bill it sure looked to me like it should go into effect this year. I hope so because I would rather get my 2006 Prius in November as an early Christmas present!

 

:cussing: :cussing: :cussing: :cussing: :cussing: :cussing:

I'm going to be really, really unhappy if it doesn't apply to 2k5's. I bought an '05 instead of waiting for the '06 just to get the tax break.

B*****ds.

Of course, I suspect the point is to stimulate sales for the sinking ships in detroit, and has little if anything to do with hybrids, fuel economy, or the environment. So I doubt they care to much about Pri drivers getting a tax break.

dave.

 

Eric and AnOldHouse: Thanks for the pointers to the NYTimes articles, and the clarification of what the energy bill means to people buying Prii in 2006. (And I agree with Thomas Friedman and others who say: what a pile of pork-barrel offal.)

A question, though: if you purchase a Prius in 2005, is the $2000 tax deduction (not credit) still in effect? In other words, does the new energy bill override the previous tax bill for 2005?

Thanks in advance!

 

YES. The $2,000 (effectively) tax deduction is still in effect for tax year 2005. (And I still may be taking advantage of that myself rather than waiting for 2006...just got called today, there's a Tideland #6 allocated with my name on it...could have it by end of month).

By the way, I saw nowhere in the new legislation that actually repeals the $500 tax deduction for 2006. Minor technicality, I'm sure it will get repealed one way or the other when Congress reconvenes.

 

Thanks David!