EV Tax Credit and AMT/TMT

EV Tax Credit and AMT/TMT

 

Due to many people (including myself) getting Notice CP11 or CP12 from the IRS regarding a reduction in the $7,500 tax credit due to AMT/TMT, myself and other intelligent individuals from mynissanleaf.com have put together material showing that the IRS is unquestionably in error.

 

The CP12 notice from the IRS regarding the reduction reads as follow:

 

We changed the total credits on Line 54 of your Form 1040. Some credits are limited to the difference between your tax before credits and tentative minimum tax from form 6251, Alternative Minimum Tax-Individuals. Although you were not liable for this additional tax, your credits were still subject to the limitation.

 

To begin with, an article titled Energy Provisions of the American Recovery and Reinvestment Act of 2009 on IRS.gov shows:

 

Treatment of Alternative Motor Vehicle Credit as a Personal Credit Allowed Against AMT (Section 1144): Starting in 2009, the new law allows the Alternative Motor Vehicle Credit, including the tax credit for purchasing hybrid vehicles, to be applied against the Alternative Minimum Tax. Prior to the new law, the Alternative Motor Vehicle Credit could not be used to offset the AMT. This means the credit could not be taken if a taxpayer owed AMT or was reduced for some taxpayers who did not owe AMT.

 

The only possible issue here is the reference to the Alternative Motor Vehicle Credit, which is not the credit applied to current EVs. See the EV credit table below for a break-down.  This article implies, however, that all EV tax credits are covered by this clause, which is not necessarily true.

 

Now if we look at other references such as the Federal Tax Credits for Electric Vehicles page on fueleconomy.gov, which lists the Leaf, Volt, and other current EVs, we see the same Energy Provisions of the American Recovery and Reinvestment Act of 2009 referenced at the bottom and this statement listed under “Claiming the credit”:

 

For vehicles purchased in 2010 or later, this credit can be used toward the alternative minimum tax (AMT).

 

Note: Items shown with a green background are in reference to the tax credit applicable to current EVs (Leaf/Volt/Etc)

 

From the current US Tax code there are four sections relevant, 30, 30B, 30C, and 30D.  They are applicable as follows:

Tax Code

Credit Name

IRS Form

Notes

Reduced by AMT/TMT

30

Qualified Plug-in Electric Vehicles

IRS Form 8834

2 and 3 wheel and low speed 4 wheel EVs

???

(see update 1 at end of doc)

30B

Alternative Motor Vehicle Credit

IRS Form 8910

Not for new EVs, but repeatedly referenced as applicable

NO

30C

Alternative Fuel Vehicle Refueling Property Credit

IRS Form 8911

EVSE credit

YES

30D

New Qualified Plug-in Electric Drive Vehicles

IRS Form 8936

EV credit that all new EVs (Leaf/Volt/etc)fall under.

NO

 

Going deeper and comparing tax code sections below shows that 30B and 30D do not state limitations based on AMT/TMT while 30C explicitly does.

From Section 30B [Alternative Motor Vehicle Credit]

http://www.law.cornell.edu/uscode/text/26/30B

(2) Personal credit

(A) In general

For purposes of this title, the credit allowed under subsection (a) for any taxable year (determined after application of paragraph (1)) shall be treated as a credit allowable under subpart A for such taxable year.

(B) Limitation based on amount of tax

In the case of a taxable year to which section 26 (a)(2) does not apply, the credit allowed under subsection (a) for any taxable year (determined after application of paragraph (1)) shall not exceed the excess of—

(i) the sum of the regular tax liability (as defined in section 26 (b)) plus the tax imposed by section 55, over

(ii) the sum of the credits allowable under subpart A (other than this section and sections 23, 25D, 30, and 30D) and section 27 for the taxable year.

 

From Section 30C [Alternative Fuel Vehicle Refueling Property Credit]

http://www.law.cornell.edu/uscode/text/26/30C

(2) Personal credit

The credit allowed under subsection (a) (after the application of paragraph (1)) for any taxable year shall not exceed the excess (if any) of—

(A) the regular tax liability (as defined in section 26 (b)) reduced by the sum of the credits allowable under subpart A and section 27, over

(B) the tentative minimum tax for the taxable year.

 

From Section 30D [New Qualified Plug-in Electric Drive Vehicles]

http://www.law.cornell.edu/uscode/text/26/30D

(2) Personal credit

(A) In general

For purposes of this title, the credit allowed under subsection (a) for any taxable year (determined after application of paragraph (1)) shall be treated as a credit allowable under subpart A for such taxable year.

(B) Limitation based on amount of tax

In the case of a taxable year to which section 26 (a)(2) does not apply, the credit allowed under subsection (a) for any taxable year (determined after application of paragraph (1)) shall not exceed the excess of—

(i) the sum of the regular tax liability (as defined in section 26 (b)) plus the tax imposed by section 55, over

(ii) the sum of the credits allowable under subpart A (other than this section and sections 23 and 25D) and section 27 for the taxable year.

 

 

Looking at the tax forms we see that form 8911 and 8834 have TMT listed as shown here:

 

8911 Alternative Fuel Vehicle Refueling Property Credit

 

8834 Qualified Plug-in Electric Vehicles

 

Forms 8910 and 8936 do not have TMT listed as shown here:

 

8910 Alternative Motor Vehicle Credit

 

8936 New Qualified Plug-in Electric Drive Vehicles

 

Here is a great summary and reference from mynissanleaf.com user Weatherman:

To put it in its most simple form...

Since 2011 and 2012 Nissan LEAFs qualify as New Qualified Plug-in Electric Drive Motor Vehicles, the application of the Personal Credit is subject to Section 30D(c)(2)(b) of the tax code, which states:

(B) Limitation based on amount of tax

In the case of a taxable year to which section 26 (a)(2) does not apply, the credit allowed under subsection (a) for any taxable year (determined after application of paragraph (1)) shall not exceed the excess of—

(i) the sum of the regular tax liability (as defined in section 26 (b)) plus the tax imposed by section 55, over

(ii) the sum of the credits allowable under subpart A (other than this section and sections 23 and 25D) and section 27 for the taxable year.

For 2011, unless your regular tax liability is reduced by the foreign tax credit, section 26(a)(2) does not apply. Therefore, your personal tax credit is limited by the difference between your regular tax liability plus any additional taxes imposed by the AMT (Section 55), and the sum of credits allowable under subpart A (other than Section 30D and 25D) and Section 27 for the taxable year.

This means that, if you took no additional credits under subpart A, your credit under Section 30D can not exceed your regular tax liability, or your AMT (whichever is larger).

Therefore, not only is the AMT not a limitation to your credit, it may, under certain circumstances increase your available credit under Section 30D.

For example, if your regular tax liability is $5,000, but the tax imposed by Section 55 increases your total tax by $2,500, you can take a $7,500 tax credit under Section 30D of the tax code, even though that's more than your regular tax liability for the year.

The CP12 notice from the IRS is true, for "some credits", however it is not true for the credits specified in Section 30D of the tax code.

The simplest defense against the CP12 notice is to refer to Section 30D(c)(2)(b) of the tax code.

 

This should be enough to resolve the issue with the IRS.  Special thanks to Weatherman and others on mynissanleaf.com for helping to compile this information.

 

I’ll continue to update this doc with status of my issue with the IRS.  I mailed out my objection to the notice on May 1, 2012.  This simply consisted of returning the notice to the address on it with my return and other supporting material and written objection. I was told by someone at the IRS that it should take 45 days to get a response.

 

When I get a response, I will update this doc with the contents of the response as well as any reference number to the case they include.  If you want me to email you when I get a response, email me and I’ll keep a list of people interested.

 

To contact me directly, please email:

-Zarwin

(URL http://goo.gl/l3w8W)

 

UPDATE 1 - Addition May-04-2012 - Probable error on Form 8834

If you are already confused, you should probably stop reading now since this added info doesn’t impact the issue with the $7,500 credit and will just hurt your brain more.  The following is a separate issue with form 8834 (2 and 3 wheel and low speed 4 wheel EVs).  This issue may help explain part of the source of the confusion, however.

 

Again, MYN user Weatherman found this issue:

Form 8834 applies to Section 30 of the tax code. Section 30(c)(2)(B) is very clear that the tax credit is limited by the difference between your regular tax liability or your AMT (whichever is greater), and the sum of most of the credits under Subpart A.

http://www.law.cornell.edu/uscode/text/26/30

However, Form 8834 limits your credit by the difference between your regular tax liability and your AMT. In order to do this, the tax code would need to be written as it is in Section 30C(d)(2).

http://www.law.cornell.edu/uscode/text/26/30C 

Unless there has been a recent change to the tax code, it sure looks to me that tax form 8834 is wrong.

 

UPDATE 2 - Aug-01-2012

IRS resolved the issue with me and deposited the balance of the tax credit in my account.  If the above information did not help resolve this issue for you, contact me at [email protected] and I can relay information such as CP notice number that may help reference this case.  I don’t have a case number or any other reference number as of now.

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