[TurtleBoy]

Originally Posted by falconey

Ok we are down to 7 models lol. Rivians you aren't getting this year unless you already ordered. 45e would be real tight getting this year. Mach e and lightning are going 10 to 20k over msrp. I don't know much about the other 3.

None of that matters in regards to our discussion. I follow the 45e's fairly closely, they can be had in time.

[TurtleBoy]

Originally Posted by falconey

Ok we are down to 7 models lol. Rivians you aren't getting this year unless you already ordered. 45e would be real tight getting this year. Mach e and lightning are going 10 to 20k over msrp. I don't know much about the other 3.

NADA sent out a notice to member dealers regarding the new legislation. As we have been saying, the made in NA clause will go into effect as soon as Biden signs the bill.

They quote a trade group as saying there will be 25 vehicles remaining eligible for the credit after signing. There are currently 72.

https://electrek.co/wp-content/uploa...y=82&strip=all

[sfi4]

At least one Polestar dealer (Denver) is sending out an email to customers with cars on order, that they’ll provide a binding purchase agreement via DocuSign this weekend. They caveat that they’re not tax lawyers and can’t guarantee it’ll be accepted by the IRS, but they do have a legal document for customers to sign. Not that this helps us, but at least one company is doing it.

[pharding]

What I assumed to be a deposit, was labeled "Down Payment" on the order receipt from my BMW dealer for my 2023 i4 M50. I take that to be a binding contract. Hopefully we will receive a favorable interpretation from the IRS on the new law.

[Squeak825]

Originally Posted by pharding

What I assumed to be a deposit, was labeled "Down Payment" on the order receipt from my BMW dealer for my 2023 i4 M50. I take that to be a binding contract. Hopefully we will receive a favorable interpretation from the IRS on the new law.

Was the deposit at least 5% of the purchase price, and non-refundable? If not, will not be a binding contract per latest IRS guidance.

https://www.irs.gov/businesses/plug-...30-and-irc-30d

[techwhiz1]

Originally Posted by Squeak825

Was the deposit at least 5% of the purchase price, and non-refundable? If not, will not be a binding contract per latest IRS guidance.

https://www.irs.gov/businesses/plug-in-electric-vehicle-credit-irc-30-and-irc-30d

In California deposits are capped at 2.5%.

I'll argue that what they require is impossible in CA.

[Squeak825]

Originally Posted by techwhiz1

In California deposits are capped at 2.5%.

I'll argue that what they require is impossible in CA.

And the IRS would argue that is an issue to take up with CA. Their rules/guidance is consistent for all taxpayers, all states.

[scLA]

Originally Posted by techwhiz1

In California deposits are capped at 2.5%.

I'll argue that what they require is impossible in CA.

Where is the 2.5% referenced in CA vehicle sales code?

[techwhiz1]

Originally Posted by Squeak825

And the IRS would argue that is an issue to take up with CA. Their rules/guidance is consistent for all taxpayers, all states.

The California legislature has decided that binding automotive contracts go against good public policy.

The rules might be consistent but the possibility of following the rules are not. Previous cases have found that requiring an impossibility creates an insurmountable burden on the tax payer and therefore treats the tax payer differently.

It's only an issue in an audit. We'll find out in about 8 months.

[Technic]

Originally Posted by Squeak825

And the IRS would argue that is an issue to take up with CA. Their rules/guidance is consistent for all taxpayers, all states.

May not be that consistent: the IRS stated that binding contracts are determined by State law. So what constitutes a “written binding contract” is determined by state and not by the IRS. What the IRS stated is their tax purposes definition of a binding contract by the amount of the deposit that shall be non refundable - 5%.

So if a state defines by law that there are no “written binding contracts” for car purchases then the IRS may have to consider whatever the state law consider “the intent to buy a car” as the “written binding contract” for tax purposes, IMO. Otherwise the IRS would be applying a consistent rule to all states regardless of their state laws. You do not have to be a lawyer to know that this is not right somehow.

[scLA]

Originally Posted by Technic

May not be that consistent: the IRS stated that binding contracts are determined by State law. So what constitutes a “written binding contract” is determined by state and not by the IRS. What the IRS stated is their tax purposes definition of a binding contract by the amount of the deposit that shall be non refundable - 5%.

So if a state defines by law that there are no “written binding contracts” for car purchases then the IRS may have to consider whatever the state law consider “the intent to buy a car” as the “written binding contract” for tax purposes, IMO. Otherwise the IRS would be applying a consistent rule to all states regardless of their state laws. You do not have to be a lawyer to know that this is not right somehow.

I also think the fact nearly all CA dealers refused to do binding contracts has to factor into this somehow. If you have documentation that you tried to enter into a binding agreement with a non-refundable deposit and dealers refused, I would think that would factor into an auditor's assessment.

[Squeak825]

Originally Posted by slazLA

I also think the fact nearly all CA dealers refused to do binding contracts has to factor into this somehow. If you have documentation that you tried to enter into a binding agreement with a non-refundable deposit and dealers refused, I would think that would factor into an auditor's assessment.

I don't get that logic. You have to have consensus from both parties to have a binding contract. So by that definition if the dealers were not willing to enter into that contract with you, you do not have a binding one.

You can't force another party to be bound to a contract they did not agree to just because it helps your circumstances and despite how much you try to enter into it -- the contract doesn't exist.

[TurtleBoy]

I'm hoping someone will supply a link to the CA code regarding binding contracts on vehicles being prohibited. It would be good to see the wording and showing it can or cannot be used regarding the Transition rule. In my brief searches I couldn't find anything.

[scLA]

Originally Posted by Squeak825

I don't get that logic. You have to have consensus from both parties to have a binding contract. So by that definition if the dealers were not willing to enter into that contract with you, you do not have a binding one.

You can't force another party to be bound to a contract they did not agree to just because it helps your circumstances and despite how much you try to enter into it -- the contract doesn't exist.

I'm not a lawyer but I know intent matters in disputes about laws and regulations. The written binding contract part of the transition provision is about establishing and documenting the buyer's intent to purchase the car. That's why the IRS references the size of the buyer's deposit in their definition, not the dealer's obligations to deliver the car.

A buyer in CA could have had every intent to enter into a written binding agreement and purchase the car. They made a deposit, sent their build to the dealer, and even requested a written binding agreement. If dealers respond saying the state won't allow them to enter into such agreement, there is nothing more the buyer can do.

I'm not a lawyer and you may disagree, but IMO, this intent and attempt to enter into a written binding agreement could matter when determining whether the credit can be received by the buyer.

[techwhiz1]

The actual code is around here in a thread somewhere.

California auto purchase contracts are explicitly non-binding until the contract is signed and a car driven off the lot.

Anything before those two actions does not constitute binding.

The only thing a person in California can do is show intent. Allow a dealer to run credit, order a car with a VIR, term sheet. A California dealer will not write a contract before a car is on the lot. It is illegal to do so and a contract that isn't legal to write is not a contract for a legal purpose. The dealer can get their license pulled.

I'm not a lawyer but I have done my share of real property purchase contracts as a Real Estate Broker.

[TurtleBoy]

Originally Posted by techwhiz1

The actual code is around here in a thread somewhere..

I keep seeing that said here and other places but never have seen the code.

[WER2XU]

Report issue here please;
https://apps.irs.gov/app/sams

[HopefulFred]

I finally heard back from my CA after forwarding him the contracts posted to this forum from a dealer looking to solidify their eligibility. The pertinent portions of his email pasted here:

"Our legal team has determined that the quote you signed along with the deposit you placed are a binding agreement and no additional documents are required. Of course, we cannot guarantee how things will play out, that would be for your tax accountant, but there are no additional documents our company will allow to be signed."

This sounds half-baked, right? I get that it's too late anyway; so from his perspective, he just wants to keep me from backing out. But maybe the IRS will let this stand?

[Raille]

Originally Posted by HopefulFred

I finally heard back from my CA after forwarding him the contracts posted to this forum from a dealer looking to solidify their eligibility. The pertinent portions of his email pasted here:

"Our legal team has determined that the quote you signed along with the deposit you placed are a binding agreement and no additional documents are required. Of course, we cannot guarantee how things will play out, that would be for your tax accountant, but there are no additional documents our company will allow to be signed."

This sounds half-baked, right? I get that it's too late anyway; so from his perspective, he just wants to keep me from backing out. But maybe the IRS will let this stand?

Based on the latest guidance I see two potential plays by the IRS.

1) They proceed as usual and if you are unlucky they may select you to provide evidence of a binding contract.

2) The flag everybody who claims the credit to provide evidence that their car meets criteria, if you don't then you don't get the credit.

Both are inefficient and I could see them taking different approaches depending on what information will be required on this years tax forms. Unfortunately nobody knows how it'll play out just yet. I'm hoping BMW decides we can do a backdated update for tax filing purposes. The irony is that almost every single one of us would gladly have filed a binding contract to keep our credit and our car.

[scottyshaps]

Just to be clear - if we have a 2023 i4 eDrive40 on order, but will not be receiving it until 1Q2023, then our car just went up in cost by $7500, right? And we got screwed, not just by the new EV credit rules, but by our dealership that did not take action to make it a binding contract before yesterday? Great... is there any hope of a revision or grace period? Or are people cancelling orders now?

[HopefulFred]

I suspect a lot of people may cancel orders. Potentially, I may be one of them.

My CA/dealer says they think my order (code 047) and $1000 deposit are a written binding contract. The FAQ from IRS/Treasury yesterday would disagree.

What Is a Written Binding Contract?
In general, a written contract is binding if it is enforceable under State law and does not limit damages to a specified amount (for example, by use of a liquidated damages provision or the forfeiture of a deposit). While the enforceability of a contract under State law is a facts-and-circumstances determination to be made under relevant State law, if a customer has made a significant non-refundable deposit or down payment, it is an indication of a binding contract. For tax purposes in general, a contract provision that limits damages to an amount equal to at least 5 percent of the total contract price is not treated as limiting damages to a specified amount. For example, if a customer has made a non-refundable deposit or down payment of 5 percent of the total contract price, it is an indication of a binding contract. A contract is binding even if subject to a condition, as long as the condition is not within the control of either party. A contract will continue to be binding if the parties make insubstantial changes in its terms and conditions.

https://www.irs.gov/businesses/plug-...30-and-irc-30d

[Maverick241]

Originally Posted by scottyshaps

Just to be clear - if we have a 2023 i4 eDrive40 on order, but will not be receiving it until 1Q2023, then our car just went up in cost by $7500, right? And we got screwed, not just by the new EV credit rules, but by our dealership that did not take action to make it a binding contract before yesterday? Great... is there any hope of a revision or grace period? Or are people cancelling orders now?

Nope unfortunately you are screwed sorry to say. They tried to lobby for a grace period of some sort but manchin was firm that he would not change his terms. A revision would require another bill passed through congress the chances of that are zero.