The new climate, tax and health law signed by President Biden extends a credit for electric vehicle buyers. But there are new strings attached that kick in at different times.
WASHINGTON — If you’re a well-paid lawyer eyeing an electric Rivian sport-utility vehicle, you might want to buy it before New Year’s Day. If you’re a middle-class nurse saving up for a compact Chevrolet Bolt, you might want to wait until January.
Those calculations — and a host of others pertaining to the red-hot electric vehicle market — come courtesy of an energy, tax and health care law that President Biden signed on Tuesday. It includes more than $370 billion in spending and tax incentives meant to address climate change, largely by encouraging people, businesses and electric utilities to reduce their use of fossil fuels. One incentive is the extension of a tax credit for the purchase of electric cars and trucks that can be worth up to $7,500.
The new law, passed with only Democratic votes in the House and Senate, contains lots of new rules that do not all take effect at the same time. Many of those new conditions were added to win over Senator Joe Manchin III of West Virginia, who has expressed reservations about offering subsidies for electric vehicle models that are so popular they have waiting lists stretching out for months.
A central feature of the extension is that it will allow vehicles made by General Motors or Tesla to qualify for the tax credit. Cars made by the two companies had lost access to the credit in recent years because the companies had each already sold more than 200,000 electric vehicles, a quota that the new law does away with, but only starting next year.
Another part of the extension has made other vehicles ineligible for the credit, even if they did qualify a few days ago. That’s because the law immediately restricts the credit to vehicles that are assembled in North America — a limit that rules out several electric cars made by Hyundai, Porsche, Toyota and Kia.
- What’s in the Inflation Reduction Act
A substantive legislation. The $370 billion climate, tax and health care package that President Biden signed on Aug. 16 could have far-reaching effects on the environment and the economy. Here are some of the key provisions:
- Auto industry. Until now, taxpayers could get up to $7,500 in tax credits for purchasing an electric vehicle, but there was a cap on how many cars from each manufacturer were eligible. The new law will eliminate this cap and extend the tax credit until 2032; used cars will also qualify for a credit of up to $4,000.
- Energy industry. The legislation will provide billions of dollars in rebates for Americans who buy energy efficient and electric appliances. Companies will get tax credits for building new sources of emissions-free electricity. The package also includes $60 billion set aside to encourage clean energy manufacturing and penalties for methane emissions that exceed federal limits starting in 2024.
- Health care. For the first time, Medicare will be allowed to negotiate with drugmakers on the price of some prescription medicines. The law also extends subsidies available under the Affordable Care Act, which were set to expire at the end of the year, for an additional three years.
- Tax code. The law introduces a new 15 percent corporate minimum tax on the profits companies report to shareholders, applying to companies that report more than $1 billion in annual income but are able to use credits, deductions and other tax treatments to lower their effective tax rates. The legislation will bolster the I.R.S. with an investment of about $80 billion.
- Low-income communities. The package includes over $60 billion in support of low-income communities and communities of color that are disproportionately burdened by climate change. Among the provisions are grants for zero-emissions technology and money to mitigate the negative effects of highways and other transportation facilities.
Fossil fuels industry. The legislation requires the federal government to auction off more public space for oil drilling and expand tax credits for coal and gas-burning plants that rely on carbon capture technology. These provisions are among those that were added to gain the support of Senator Joe Manchin III, Democrat of West Virginia.- West Virginia. The law is expected to bring big benefits to Mr. Manchin’s state, the nation’s second-largest producer of coal, making permanent a federal trust fund to support miners with black lung disease and offering new incentives to build wind and solar farms in areas where coal mines or coal plants have recently closed.
Only 21 car and truck models, including three from Rivian and a half dozen from under the Ford umbrella, for 2022 and 2023 are eligible to receive the credit if buyers snag them after Tuesday but before the end of the year. The Energy Department released a list of vehicles that probably still qualify.
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