The Inflation Reduction Act (IRA) signed into law by President Biden in August 2022 fundamentally changed the structure of the federal tax credit for electric vehicles (EVs). Now, we’ve learned that the U.S. Treasury is delaying implementation of one key piece of the IRA, which means more vehicle models than expected may be eligible for incentives for a short time at the beginning of 2023. 

First: Catch Up on the IRA 

If you are not yet familiar with all of the changes to the federal tax credit implemented by the IRA, we have a couple of resources for you to review. There’s this blog we published in August 2022 that outlines the details of the new clean vehicle credit and this page on our Drive Green website that explains both the federal and state-level incentives for EVs. If you prefer a video, here’s a clip from one of our webinars on the IRA that focuses just on the transportation aspects. 

Recent Updates 

On December 19, the U.S. Treasury Department announced that is delaying until March the release of the guidance automakers need in order to prove their compliance with the battery requirements of the IRA.  

As a refresher, per the IRA, the Clean Vehicle Credit amount any particular vehicle model qualifies for depends on whether the manufacturer meets strict battery requirements: 

• $3,750 if a specific (and increasing!) percentage of critical minerals are mined or processed in North America or a country with a free trade agreement with the US, 
• $3,750 if a specific (and increasing!) percentage of the value of the battery’s components is manufactured or assembled in North America (that's a mouthful and we don't fully get it yet either),  
• $7,500 if both requirements are met. 

Though the IRA is clear on the percentage requirements for minerals and battery value, it is NOT clear on how a manufacturer will verify to the federal government whether they meet those requirements. What paperwork do they need to submit? How are the values calculated? All of that will be outlined in the guidance from the Treasury, which now won’t come out until the spring. 

Why the delay? Simply put, the Treasury needs more time to translate complicated requirements into detailed instructions. 

What Does This Mean For Consumers? 

Effectively, this means that vehicles that might not meet the battery requirements in the IRA will be eligible for the Clean Vehicle Credit for a short time in 2023 – between January 1 and whenever the Treasury finalizes the guidance. (The other provisions in the IRA, like the income cap and price cap, will still take effect on January 1.) 

For example, the well-loved Chevrolet Bolt will be even more affordable starting January 1. Previously, General Motors had signaled that they believe the Bolt would qualify for half the federal tax credit, at $3,750. But starting January 1 and until the battery requirements kick in, the Bolt should qualify for the full $7,500. The Bolt’s starting MSRP of $25,600 is lower than most EVs – and most new vehicles, period!  

The well-loved Chevrolet Bolt at this year's August Moon Festival in Quincy

As always, we want to help you make the switch from your gas-powered car to an EV. We will update our Drive Green shopping tool with the new Clean Vehicle Credit information on January 1, so you can compare different car models and find the right one for you. Have questions? Email us at drivegreen@greenenergyconsumers.org. We’re here to help!