US Capitol

The House has legislation that would make GM and Tesla very happy.

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Back in 2019, Tesla and General Motors approached the cap after selling enough qualifying electric and plug-in hybrid cars that would exclude each automaker from future federal EV tax credits. Despite pushes in Congress to extend them, the measures ultimately failed. However, on Feb. 5, Democrats in the House of Representatives reintroduced the GREEN Act, which among many other tax code revisions would once again open Tesla and GM to federal EV tax credits.

Representative Mike Thompson (D-CA) and Chairman of US House Ways and Means Subcommittee on Select Revenue along with every other Democratic leader on the subcommittee signed onto the bill, hoping Congress will take it up under a Democratic-controlled Senate and the Biden administration. A similar bill was introduced in June of 2020, though it failed. The 2021 iteration of the GREEN Act is largely the same bill, but like its predecessor, it makes some notable changes to the current EV tax credit system.

Foremost, the max amount of money eligible drops by $500. Today, qualifying vehicles are eligible for up to a $7,500 tax credit; the new bill reduces the max amount to $7,000. Just like today’s system, the amount follows an electrified vehicle’s energy storage capacity. Essentially, the bigger the battery, the more money buyers can claim on their taxes with totally battery-electric cars eligible for the full amount. Plug-in hybrids often qualify for less since the battery only does part of the work powering the vehicle.

Most importantly, the provision includes nixing the 200,000 ceiling on these credits — the cap Tesla and GM passed in 2019 and early 2020, which triggered a sunset period for the credits. Throughout 2019, Tesla’s credits started to reduce, in accordance with the current law, and buyers snapped up all credits by the end of 2019. By March of 2020, GM ran dry, too.

Removing the ceiling would give Tesla and GM fresh ammunition to sell their EVs, and the 2021 GREEN Act would instead cap the credits at 600,000 qualifying vehicles sold. Just as importantly, the federal government would give automakers that already blew past the 200,000 cap a pass on any cars sold in the meantime. In other words, the vehicles Tesla and GM sold between the time their credits ran out and the day President Biden potentially signs the bill don’t count toward the 600,000 figure. Instead, they start at 200,000.

And when an automaker reaches 600,000 vehicles sold that qualify for the credit, the latest bill changes the phaseout period. Instead of gradual reductions over four quarters, the credit reduces by 50% for a single quarter before the government eliminates them altogether. 

The GREEN Act would give the used EV market a big boost, too. Lawmakers included a provision for used buyers to claim up to a $2,500 tax credit when purchasing a preowned electric car. The bill specifies a qualifying EV must be at least two years old and the sale price cannot exceed $25,000. Income caps for individuals and spouses filing taxes jointly may result in smaller credits, however. On the flip side of personal vehicles, the bill would also create tax breaks for companies and municipalities purchasing electric heavy-duty vehicles, including zero-emissions busses. Up to 20% of the sales price would be eligible for sales over $100,000.

The Biden administration came out swinging in favor of EVs in the early days of the administration. Now, we’ll have to see how each branch handles legislation that could significantly alter the auto industry.

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By Harriet