Electric vehicle incentives – federal | Eversheds Sutherland (US) LLP

With interest and investment in electric vehicle (EV) technology increasing steadily, it is important for original equipment manufacturers, suppliers, dealers, and consumers to be aware of federal and state incentives available in the United States that may subsidize their particular EV decisions. These are some of the more important federal incentives to consider.

Qualified Plug-In Electric Vehicle (PEV) Tax Credit
A tax credit is available for the purchase of new qualified PEVs that are propelled by a battery with at least four kilowatt-hours (kWh) of capacity, use an external source of energy to recharge the battery, have a gross vehicle weight rating at or below 14,000 pounds, and meet specified emission standards. The vehicles must be acquired for use or lease and not for resale and must be predominately used in the US. The minimum credit amount is $2,500 but may go up to $7,500, depending on battery capacity and other details. The credit phases out for the EVs of each particular manufacturer in the second quarter following their sale of 200,000 qualified PEVs in the United States. (References: IRS Plug-In Electric Drive Vehicle Credit (IRC 30D) website; IRS Form 8936 and Instructions for Form 8936; 26 U.S.C.A. § 30D.)

Qualified Electric Motorcycle Tax Credit
A tax credit is available for the purchase of new qualified two-wheeled PEVs that are propelled by a battery with at least 2.5 kWh of capacity, use an external source of energy to recharge the battery, are manufactured primarily for use on public roadways, and can travel at least 45 miles per hour. The credit is the lesser of $2,500 or 10% of the cost of the vehicle. Qualifying two-wheeled vehicles must be purchased prior to January 1, 2022. (References: IRS Form 8936 and Instructions for Form 8936; 26 U.S.C.A. § 30D(g).)

Airport Zero-Emissions Vehicle (ZEV) and Infrastructure Pilot Program
The FAA’s ZEV pilot program provides funding to eligible public-use airports to acquire ZEVs and to install or modify infrastructure required to support those vehicles. Qualifying vehicles are all-electric or hydrogen-powered, with those used for passenger and employee transport being the most commonly funded type. Relevant infrastructure includes refueling stations, rechargers, on-site fuel storage tanks, and other equipment needed for station operation. Priority is given to applications that will achieve the greatest air quality benefits measured by cost per ton of emissions reduced. In addition to standard grant assurances and Buy American requirements, ZEV-funded equipment must remain at the airport, the airport sponsor must track and maintain records of ZEV-funded equipment use, and ZEV equipment must remain in use during the equipment’s useful life. (References: Airport ZEV and Infrastructure Pilot Program website; program brochure; 49 U.S.C.A. § 47136.)

Alternative Fuel Infrastructure Tax Credit
Qualified refueling equipment for EVs and other alternative fuel vehicles installed before the end of 2021 is eligible for a federal tax credit. For business/investment refueling equipment subject to an allowance for depreciation, the credit for all property placed in service at each location is generally the smaller of 30% of the property’s cost or $30,000. For personal use refueling equipment not subject to a depreciation allowance and placed in service at the taxpayer’s main home, the credit is generally the smaller of 30% of the property’s cost or $1,000. Permitting and inspection fees are not included in covered expenses. Unused business tax credits may be carried backward one year and carried forward 20 years. (References: IRS Form 8911 and Instructions for Form 8911; 26 U.S.C.A. § 30C.)

Advanced Technology Vehicles (ATV) Manufacturing Loan Program
Manufacturers of eligible ATVs and related components and infrastructure may be eligible for direct loans at US Treasury rates for up to 30% of the cost of reequipping, expanding, or establishing manufacturing facilities, including associated hardware and software, used to produce such products. Qualified ATVs are light-duty or ultra-efficient vehicles that meet specified federal emission standards and fuel economy requirements, generally a 25% improvement in fuel efficiency compared with 2005 baselines or a 75-miles-per-gallon equivalent using alternative fuels (including electricity). The project must be located in the US, with foreign ownership or sponsorship permissible, and must provide for a reasonable prospect of repayment. Other conditions apply, including Department of Energy (DOE) Loan Programs Office (LPO) review and approval of any application. (References: ATV Manufacturing Loan Program website; ATV Loan Program Fact Sheet; 42 U.S.C.A. § 17013.)1

Improved Energy Technology Loans
The DOE also provides Title XVII loan guarantees to eligible innovative energy projects that avoid, reduce, or sequester air pollutants and greenhouse gases by using advanced technologies not yet widely deployed in the US. The DOE may issue loan guarantees for up to 100% of the amount of the loan for an eligible project. Deployment of EV-related infrastructure, including associated hardware and software, may be eligible. The project must be located in the US, with foreign ownership or sponsorship permissible, and must provide for a reasonable prospect of repayment. Other conditions apply. (References: LPO website; LPO Eligibility Fact Sheet; 42 U.S.C.A. § 16513.)

Advanced Energy Research Project Grants
The Advanced Research Projects Agency-Energy (ARPA-E) was established within the DOE to advance high-potential, high-impact energy technologies that are too early for private-sector investment but have the potential to radically improve US economic prosperity, national security, and environmental well-being. The ARPA-E focuses on various concepts in multiple program areas, including but not limited to vehicle technologies, biomass energy, and energy storage, and it looks for projects that can be meaningfully advanced with a small amount of funding over a defined period of time. (References: ARPA-E website; ARPA-E FAQs.)

Low- and Zero-Emission Public Transportation Funding
Financial assistance is available to government entities, public transportation providers, private and nonprofit organizations, and higher education institutions for research, demonstration, and deployment projects involving low- or zero-emission public transportation vehicles. Vehicles must be designated for public transportation and significantly reduce energy consumption or harmful emissions compared with a comparable standard vehicle. Funding was available through fiscal year 2020 but is subject to Congressional appropriations thereafter. (References: Public Transportation Innovation Program website; Low or No Emission Vehicle Program website; 49 U.S.C.A. § 5312; 49 U.S.C.A. § 5339(c).)

PEV Weight Exemption
PEVs and natural gas vehicles may exceed the federal interstate maximum gross vehicle weight limit for comparable conventional-fuel vehicles by up to 2,000 pounds (lbs.). The PEV must not exceed a maximum gross vehicle weight of 82,000 lbs. (Reference: 23 U.S.C.A. § 127(s).)

Biden Executive Order to Convert Federal Fleet
Although not formally an incentive, the recent Biden executive order directing, among other things, the conversion of the entire federal vehicle fleet to EVs will influence the market and pricing for EVs. To the extent there are roughly 645,000 vehicles in the federal fleet, including passenger vehicles, heavy trucks, vans, and others, and only about 4,500 of those are presently EVs, according to the General Services Administration, this directive alone could increase the total number of EVs on US roads by more than 50%, depending on when and how it is finally implemented. Having such a large guaranteed public buyer enter the market is a significant de facto incentive for EV makers and suppliers. (Reference: Executive Order on Tackling the Climate Crisis at Home and Abroad § 205(b)(ii).)2

For more information on federal and state EV incentives, programs, and rules, see our recent summary of Georgia credits and discounts and visit the DOE’s Alternative Fuels Data Center.

1 42 U.S.C.A. § 17013(c) suggests that the relevant facilities or equipment had to be placed into service and/or the relevant integration costs incurred before December 30, 2020, but the LPO is still promoting the program without obvious reference to any such cutoff.
2 See also Kaplan, “Biden wants an all-electric federal fleet. The question is: How will he achieve it?The Washington Post (Jan. 28, 2021).

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