Tesla Model 3 cars.
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The IRS has updated the rules on what electric vehicles qualify for purchase tax credits. Shares of Tesla and other auto makers are up, although investors still don’t know all they need to.
It isn’t clear what cars qualify for what credits. “What we need here is a simple list of qualifying vehicles,” says accounting expert Bob Willens.
According to guidance the Treasury Department provided Friday, an EV must be assembled in North America to qualify for a full credit. That hasn’t changed, but requirements regarding the sourcing of critical minerals “and/or” battery components were added.
The full credit remains $7,500. Half is dependent on a vehicle meeting rules governing battery materials, while the other half is based on requirements for battery components.
To qualify for the materials portion of the credit, the share of critical minerals “extracted or processed in the United States, or in any country with which the United States has a free trade agreement in effect, or…recycled in North America” must be above a certain level. The percentage to pass muster begins at 40% in 2023 and increases 10 percentage points a year to 80%, says Willens.
Calculating the 40% won’t be a trivial matter.
for instance, is essential for lithium ion batteries. Lithium raw materials are extracted mainly in Australia and Chile, two countries that meet the government’s requirements. But more than half of lithium processing is done in China, which isn’t listed in the Internal Revenue Service’s guidance.
Batteries also can’t contain critical…