A new report from a U.S. Treasury Department watchdog group says taxpayers may have improperly claimed nearly $74 million in federal electric vehicle tax credits for purchasing vehicles not eligible for the credits.
The finding comes from a Sept. 30 report from the Treasury Inspector General for Tax Administration (or TIGTA, if you love government-bureaucracy acronyms), as reported by Bloomberg. Investigators found that the IRS lacks an effective process to identify and prevent erroneous claims for the EV credit, which tops out at $7,500 and is intended to offset the cost of purchasing a plug-in electric vehicle.
The watchdog agency analyzed EV tax credits for the 2014 through 2018 processing years. It found 16,510 tax returns that resulted in roughly $73.8 million in potentially erroneous EV tax credits. That’s out of a total of roughly $1.4 billion in tax credits from 239,422 taxpayers over the five-year period. It redacted details about how exactly taxpayers were improperly claiming the credits.
It said IRS examiners “are generally not reviewing questionable claims for the Plug-In Credit during examination when IRS filtering does not identify the credit,” and it made four recommendations, which are also partly redacted to the public, including using VIN numbers provided by taxpayers and submitted by leasing agencies to verify eligibility. The IRS agreed to implement the changes and said it would launch a program to recover improperly awarded tax credits.
Congress first enacted the EV tax credits in 2008 and amended them as part of the 2009 economic stimulus package to include plug-in electric vehicles purchased after Dec. 31, 2009. They apply to each automaker up to the first 200,000 qualifying EVs sold.
So far, only General Motors and Tesla have passed the 200,000 sales mark, with 211,652 and 369,305 electric vehicles sold to date, according to the IRS. That triggers a phase-out that drops the tax credit to $3,750 for two quarters, then $1,875 for another six months until EV tax credits are no longer available. Tesla reached the 200,000 mark in the third quarter of 2018 and will no longer be eligible for any amount of credit starting in January, while GM hit it in the fourth quarter of 2018. President Trump has proposed scrapping the EV credit altogether, although automakers support extending the credit beyond the 200,000-vehicle threshold.