Battle over EV tax credit pits automakers against oil interests

The possibility of an extension for the $7,500 federal EV tax credit has recently intensified lobbying efforts in Washington D.C.—and pitted the efforts of the auto industry soundly against those of the oil and gas industry.

So reports the Washington Post. According to its report this week, the powerful companies and interests opposing the EV tax credit have recently become more active in presenting numbers and talking points. American Fuel and Petrochemical Manufacturers is currently appealing to Congress that the proposal to extend the EV tax credit could cost $15.7 billion in 10 years. And the American Petroleum Institute argues that the credit only benefits those who can afford new vehicles—and typically more expensive ones at that.

Among the other talking points is a December study, commissioned by an oil-refining subsidiary of Koch Industries, that suggested that a lifted ceiling for the tax credit would cost $95 billion by 2035.

Meanwhile, earlier this year when the Trump Administration threatened to cut the credit completely, it was revealed to have deeper backing that went well beyond electric-vehicle interests and environmental associations. It has the support of the American Lung Association, the Edison Electric Institute (representing electric utilities), and the Alliance of Automobile Manufacturers.

2017 Chevrolet Bolt EV pre-production

The plan in question was introduced on April 10, by U.S. Senators Debbie Stabenow (D-MI), Lamar Alexander (R-TN), Gary Peters (D-MI), and Susan Collins (R-ME), with Congressman Dan Kildee (D-MI). Called the Driving America Forward Act, it would extend the phaseout of the federal EV tax credit by 400,000 vehicles per manufacturer, to a total of 600,000 vehicles each.

What’s proposed is just an extension of the ceiling. It wouldn’t include an income cap or vehicle price cap—qualifiers that would be difficult to write into the current rule but would quell complaints that it’s a tax break for the wealthy.

The tax credit was originally passed during the George W. Bush administration, as part of the Energy Improvement and Extension Act of 2008. Its ceiling is marked when any single automaker hits 200,000 cumulative deliveries of eligible plug-in vehicles (whether those vehicles are eligible for the $7,500 max or a reduced amount for plug-in hybrids with smaller batteries). That triggers a phaseout period; at the start of the second quarter after that. The credit and its phaseout are overseen by the IRS.

Proponents of the extension argue that letting the current rules phase out at the 200,000 ceiling effectively penalizes companies that were the most bullish about electric vehicles, putting them at a disadvantage as the economies of scale improve—essentially rewarding some companies that have resisted the trend.

Tesla Store Los Angeles [photo: Misha Bruk / MBH Architects]

GM and Tesla are only the two companies to have hit the phase-out ceiling so far, but Nissan is expected to hit it by early 2021, if not sooner. Tesla vehicles’ eligibility went down from $7,500 to $3,750 at the start of the year, and next month the amount will drop to $1,875. GM vehicles’ eligibility dropped to $3,750 on April 1 and will be at the $1,875 level starting in October.

The American Joint Committee on Taxation already anticipates that the federal government will spend $7.5 billion on the current tax credit from 2018 to 2022.