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Discussion Starter · #1 ·
I know I should post an intro first, but I've got a burning question before I start planing a build. Big thoughts, tiny brain, so I've got to off-load.

There have been plenty of discussions about how federal and state tax credits don't apply to conversions (other than CO). At the federal level, and most states, the credit is limited to new vehicles. However, a kit car is a new vehicle and building one would appear to meet all of the applicable requirements. I've tried searching, but I haven't been able to find anyone discussing the tax credit for new kit cars, so I thought I'd start a thread.

TL/DR: I think the credit applies for kit cars.

Here is my read of the requirements. I am not a lawyer, but sorry for pointing to all the specific codes. However, i wanted to provide the real requirements, along with my read, to avoid misinterpretations for anyone able to tell me what I'm missing.

IRS code 30d (26 USC 30D) lays out the requirements for qualified plug-in electric drive motor vehicles. To qualify for a credit a vehicle must:
1) commence use with the taxpayer. I've met the taxpayer/first owner and he is me.
2) be acquired for use, not resale. Met if I'm using the car myself.
3) be made by a manufacturer, as defined by Title II of the Clean Air Act (42 USC 7521). "Manufacturer" is defined in 42 USC Code 7550 for section 7521 and the applicable words are "any person engaged in the manufacturing or assembling of new motor vehicles, new motor vehicle engine, new nonroad vehicles, or new nonroad engines". I meet the definition of manufacturer as the person building the car. So does the kit manufacturer.
4) The car must be treated as a motor vehicle for the Clean Air Act. This is met, since it just means a self propelled vehicle for use on public streets, roads, and highways.
5) The car's weight must be less than 14,000 lbs. This is easy to meet, no-one makes a kit car semi.
6) The car is propelled by electricity with a battery capacity >4kwh and is capable of being recharged externally. By definition an EV will meet this one.

So, I'm pretty sure a kit car build will meet all the requirements for the tax credit. However, the the IRS has also issued Notice 2009-89 allowing manufacturers to certify that their cars will meet the requirements of 30D. Technically, this notice only supports manufacturers getting pre-approval so they don't end up lying to buyers about the credit. However, applicability is ambiguous to my kit car idea.

The purpose of notice 2009-89 is discussed here and the text is here. Section 5 of the notice lays out the information a manufacturer should submit to the IRS. I won't go over all 17 points, only one isn't trivial (e.g., applying emissions requirements to an EV). Item 16 requires meeting the safety requirements of 49 USC 30101 through 30169. However, an exception to the safety requirements was carved out for kit cars (see this article). Currently 49 USC section 30114 provides an exemption for low volume manufacturers of replica cars. Well, 1 is less than 325.

In fact, a kit car manufacturer may be able to get their kit certified as an EV kit with the low volume manufacturer exception. low volume manufacturer allows selling an unlimited number of incomplete cars and selling the incomplete car still meets the definition of "manufacturer" for IRS code 30d (back at the start of this journey). Buying the kit from a manufacturer and finishing it prior to putting the car in use meets IRS code 30D.

So, if you're still following, I think it is possible to get the federal tax credit when building yourself a new EV kit car. I would love to see anyone else's opinion on this before I try reaching out to the IRS and/or factory five.
 

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skimmed your post, so forgive me if you told us, but what State are you in?

and you are stretching meeting the term "Manufacturer" you do not make EV parts, you are just going to do an R&R ie Remove and Replace

sorry not being rude, just I wouldn't allow the Feds to slow up or or dictate your course of action
 

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I am following your logic. When a kit car gets registered, the owner has to jump thru safety, state inspection and emissions hoops as if it is a new car. As the manufacturer, I am allowed to call it anything. If I were in your shoes, I would print the application and pretend to fill it out, looking for any "gotchas" that would void elegibility in the eyes of the IRS. I would be shocked if an kit car company would support the effort. Too much liability for companies that sell kit cars parts.

* I built a Factory Five Cobra in Cal years ago and have an Exocet underway in Nevada.
 

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Discussion Starter · #4 ·
skimmed your post, so forgive me if you told us, but what State are you in?

and you are stretching meeting the term "Manufacturer" you do not make EV parts, you are just going to do an R&R ie Remove and Replace

sorry not being rude, just I wouldn't allow the Feds to slow up or or dictate your course of action
Sorry about that, I'm in Maryland.

To be clear, I'm talking about build a car up from scratch. You are right that removal and replacement does not quality. Even if I stretch ":manufacturer" to the breaking point, it wouldn't be a new car. I am looking to order a kit from someone like factory five, which comes with a frame and body but no powertrain, steering, or suspension and then assembling and titling a new car myself.

Truth be told, I am also interested in whether I can push "manufacturer" off onto factory five, or others. That seems like a win-win, they get new customers and the customers get a discount.

You aren't wrong about not letting the fed dictate what I do either. However, $7.5K would influence whether I build myself a kit car or look for a decent donor for a conversion. Spending 10k on a kit is hard to justify when good donors can be had for much less. If the kit only runs me $2.5K, it is a lot more competitive as an option. The fact that the administration, and my state, are looking at expanding the benefits only makes the question more interesting (who could say no to a free donor or one that comes free money to put towards batteries).

I am following your logic. When a kit car gets registered, the owner has to jump thru safety, state inspection and emissions hoops as if it is a new car. If I were in your shoes, I would print the application and pretend to fill it out, looking for any "gotchas" that would void elegibility in the eyes of the IRS. I would be shocked if an kit car company would support the effort. Too much liability for companies that sell kit cars parts.

* I built a Factory Five Cobra in Cal years ago and have an Exocet underway in Nevada.
You're probably right, but I am hoping that the 2015 exemption for replicas and low volume manufacturers might sidestep the federal safety issues (or prevent them from getting worse). The worst they can say is no.
 

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thanks for the additional info, I was just hoping and praying you were not in California, I know we are talking about Federal tax credit, but even if you qualified for that here in this dreaded state of regulations on top of regulations you still might not be able to get it on the road, ha ha

So I think if anything Factory Five may qualify for such a Fed Tax credit and still not you, though I wonder if they have to meet some sort of output like 50 cars per year, you know the Feds they always get you somehow, but I don't know all my Fed level battles have been lost ha ha, so I wish you luck and keep us updated
 

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Discussion Starter · #6 ·
Yah, I'm glad i'm not in California for this project. I've already got one car stuck in their bureaucracy and I don't even live there anymore. I let the registration expire on a car in storage and the DMV deleted the electronic records. It is a mess trying to get a new copy of the title. I'm thinking I may be best off "abandoning" the car at a family member's house and going through the process of claiming abandoned goods.

Truth be told, Factory Five being the manufacturer would actually be a good thing. This is the credit the buyer gets when they buy a production electric vehicle. If Factory Five qualifies, then it all still works out... assuming they are willing and the fed doesn't just say no.
 

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Yah, I'm glad i'm not in California for this project. I've already got one car stuck in their bureaucracy and I don't even live there anymore. I let the registration expire on a car in storage and the DMV deleted the electronic records. It is a mess trying to get a new copy of the title. I'm thinking I may be best off "abandoning" the car at a family member's house and going through the process of claiming abandoned goods.

Truth be told, Factory Five being the manufacturer would actually be a good thing. This is the credit the buyer gets when they buy a production electric vehicle. If Factory Five qualifies, then it all still works out... assuming they are willing and the fed doesn't just say no.
If you are serious I can help you get the vehicle registered all legally and above board, I was reluctant to use this company but my law officer friend convinced me to do it and they helped me register two trucks for me now one a 1971 GMC truck which the idiots at DMV would not register in my name because I said I bought it from a guy and his wife both first initials were "A" well in fact it was registered to the guy and his son who's first initials were also A

the second truck was from Nevada a 1954 truck and this company also registered it in a split second cause the owner of said company owns a 1953 truck and was willing to help out

so email me for their info muszyngr at yahoo dot com again its all legal they are a partner of DMV but work as a third party and can even come out to you to inspect the VINs instead of you having to tow your car to them or the CHP
 

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and you are stretching meeting the term "Manufacturer" you do not make EV parts, you are just going to do an R&R ie Remove and Replace
Neither do most EV manufacturers. For example, Zero Motorcycles uses off-shelf Sevcon motor controllers, Gigavac contactors, and Motenergy motors. Most auto manufacturers get battery cells from outside vendors.
 

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So, if you're still following, I think it is possible to get the federal tax credit when building yourself a new EV kit car. I would love to see anyone else's opinion on this before I try reaching out to the IRS and/or factory five.
I think you've done some homework, but it doesn't matter. IRS may still go after you in the end, so the real question is if you can force them to accept your take on it. You basically want to have a tax law specializing attorney look at it, and tell you if they'd sue IRS on your behalf should IRS disagree an penalize you. Speaking to IRS about a narrow interpretation of the law is like speaking to a patrol police officer about Lambert v. California.
 

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"The manufacturer or domestic distributor should be able to provide you with a copy of the IRS letter acknowledging the certification of the vehicle."

I haven't been able to find any info on applying for certification as if I was a new manufacturer trying to get my new whizbang EV added to the list.
 

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While a manufacturer (of battery-electric or ICE-equipped vehicles) normally uses components from other companies, they produce an operating vehicle; it is the product, not the sources of components, which define the status of "vehicle manufacturer". Companies which make chassis-cab trucks and stripped chassis for motorhomes or other specialty vehicles are considered manufacturers of "incomplete vehicles", which are functional vehicles but not useful for the intended purpose until completed with a body.

I doubt that a kit car company would qualify as a "vehicle manufacturer" because their product is not an operable vehicle, and I suspect that they don't want to be legally considered vehicle manufacturers due to the regulatory requirements of that business. As a practical issue, the kit car company could sell a kit with a complete structure, suspension, and even body, and has no control over what powertrain it receives, so they could manufacture an incomplete vehicle without even knowing whether it will be an EV or not... and that seems likely to be problematic.

In general I would expect the purchaser/builder to be the designated manufacturer of any vehicle built from a kit, whether that is a car or an airplane. In aircraft, they're called "amateur-built", because the vehicle manufacturer is the owner/builder, not the kit manufacturer.
 

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Yep. I have built three kit aircraft. If we can find the IRS process for manufacturers to be listed, we could figure out the process and cost to become a manufacturer. Have an open mind until we know the process.
 

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Discussion Starter · #13 ·
The IRS procedure is written out in notice 2009-89 (though they updated the mailing address in Notice 2016-51). In Section 5.03 of that link, the IRS lays out the process. Nominally, I'll need to certify that each bullet is met in a signed letter to the IRS. Most of the criteria are pretty simple (statements along what I had in the original post). However, some of them will take some effort. For example, I'll need to certify that the car meets the provisions of the clean air act (which is easy for a full EV but tedious to list specific requirements) and I'll need to certify compliance with the vehicle safety provisions of 49 USC 301 (where I think I can use the "low volume manufacturer" exemption, but that may invoke other steps to certify myself).

Technically, the process is intended to allow manufacturers to certify compliance with the actual IRS code (section 30d), so it doesn't really apply for amateur built cars. All the forms and processes for requesting a credit are geared around the IRS providing certification first (they build a list of valid VINs based on quarterly manufacturer reports and then later check tax credits against the list). I figure the only reasonable chance of success is to put together a request and trying to send it in. To Cricketo's point, forcing the IRS to change is the job of a lawyer.

I'll try and put together at least a draft letter this weekend.




.
 

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".05 Manufacturer. The term “manufacturer” has the meaning given that term in the Clean Air Act regulations."

Manufacturer has the meaning given in section 216(1) of the Clean Air Act (42 U.S.C. 7550(1)).

"(1) The term “manufacturer” as used in sections 7521, 7522, 7525, 7541, and 7542 of this title means any person engaged in the manufacturing or assembling of new motor vehicles, new motor vehicle engines, new nonroad vehicles or new nonroad engines"

What's a new motor vehicle, then?

"(3) Except with respect to vehicles or engines imported or offered for importation, the term “new motor vehicle” means a motor vehicle the equitable or legal title to which has never been transferred to an ultimate purchaser"

So, it looks like you can be a manufacturer as long as the vehicle has never had a legal title transferred from an MCO (Manufacturer's Certificate of Origin).

My interpretation is, if you do a conversion of an existing vehicle, you're screwed.

If you do a kit, the "equitable title" is where the lawyers get paid the big bucks...win or lose, both sides get paid.

My understanding is that you can petition the IRS for an interpretation of its rules.

I'm not a lawyer, so my opinion's worth what you paid me for it.

For what it's worth, my state keeps a list of approved manufacturers for EV rebates. Startups, like Lightning Motorcycles, aren't on that list.
 

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The safety requirements may/will draw you into any lawsuits that arise from accidents. If we can get a waiver/transfer of this liability to the kit builder, it would be better. Since GM and others offer an e crate motor, getting the IRS to recognize kits would be ideal.
 

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Discussion Starter · #16 ·
So, quick update. Turns out that the reason kit cars are not held to federal safety standards (i.e., why you don't need to crash test your build) is that the NHTSA considers kit cars to be used vehicles since they typically reuse the drivetrain from a used vehicle. To get the electric vehicle credit, I need to present the vehicle design as new and convince the NTHSA to waive a few specific requirement in 49 CFR 571.

Most of the requirements in 49 CFR 571 will be either met by using qualified parts from a used vehicle (e.g. maximum steering column crush load or windshield wiper performance) or meeting the spec directly (installing a rear-view camera and adding side lights). I can even program my own ESC system for my application. However, I'll need to get waivers for some of the confirmatory tests, especially the destructive tests in the series 200 and 300 requirements. Specifically, I'd need waivers for crush testing, impact testing, ejection, and the post accident battery leakage requirements. the NHTSA does offer exemptions for these type of requirements for small volume vendors, but I'm still figuring out how to apply. An NHRA spec cage should be good enough. From what I do know, it will take a few months at best. On the other hand, If the NHTSA is convinced, the IRS portion should be trivial.
 

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I would go down the road of lobbying the regulators of air quality and present a business plan for a conversion kit rebate. I would start in California where it is the rage right now. Even if the EV market is wildly successful, there will still be millions of ICE vehicles on the road for decades. The regulators just might jump at a way to convert existing cars sooner by offering a rebate for kits. The kits need to be more complete in my opinion. There are still too many pieces and parts. Motor, battery, brains, and chargers with plugs between them is within reach.
 

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... If the NHTSA is convinced, the IRS portion should be trivial.
I understand the kit car logic, and perhaps the automotive regulations can be handled, but I'm not convinced that the tax benefit for EV conversion automatically follows. If the intent of the tax credit is to replace ICE vehicles with EVs, then scrapping an EV to get the parts for a conversion (instead of fixing the EV) would not meet that intent - the conversion should net add an EV, by using new rather than salvaged parts. Of course, logic does not always determine government actions.
 

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True, but using parts from a wrecked EV off the road to put a conversion back on the road results in a plus 1 result.
Ideally, yes. Would using the same parts to put a production EV with a failed battery or inverter back on the road qualify, since it is also a plus 1 change from not using the wrecked parts or fixing the failed EV? Not likely. It's an interesting issue of public policy.
 
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