Used Clean Vehicle Credit

[Ryan3]

Does the nature of a manufacturer buyback/lemon law have any special legal treatment such that we would no longer be considered the original owner?

I ask since there is a stipulation in the Used Clean Vehicle Credit (https://www.irs.gov/credits-deductions/used-clean-vehicle-credit) that to qualify for the credit for buying a previously owned, qualified EV, you must not be the original owner. I couldn't find any info justifying the stipulation, though my guess is that the spirit of the stipulation is to prevent people from abusing the credit (i.e. selling/trading in their car, then turning around and buying it back right away to get the credit).

I think my situation is different in that:

• My wife and I purchased our EV in 2019 and titled it in both of our names (possibly would have helped in this case had we picked just one of us rather than both. Details below.).
  • We claimed the New Clean Vehicle Credit at that time, but I don't remember if we had enough tax liability to actually receive any value from the credit.
• Owned the car until 2021 until we decided to pursue a manufacturer buyback due to the manufacturer's sketchy handling of a massive recall affecting the high voltage battery on every EV of that model, as well as safety concerns related to the recall.
  • We otherwise loved the car and would have kept it if not for the recall.
• Indicated to the manufacturer during the buyback process that we wanted to keep track of the car (same VIN #) in case we wanted to buy it again after the dust settled from the recall.
  • We were told there was no way to do that and that we were on our own to search for it should it ever end up on the market again.
• Fast forward to 2025 - I searched for the VIN # online and found the car is available for purchase at a dealership. I'm really excited for the possibility of re-buying our old car now that the battery has been replaced. Unfortunately, because we are the original owner, we appear to not be eligible for the tax credit. However, we can buy any other VIN # of the same make/model (certain eligibility rules apply) if we want, but I highly prefer our old car since we took good care of it, know its history, stuck some $ into it in upgrades, sentimental value, etc.
  • Note: the tax credit took effect on January 1, 2023. The manufacturer buyback happened in 2021, which is before the credit came into existence. So there were obviously no thoughts of abusing any tax credits.

For my situation, the letter of the law seems to say I am not eligible for the credit, but I'm guessing the spirit of the law would agree with my stance that I am not aiming to abuse the credit, particularly given the 4-year gap between the manufacturer buyback and this potential purchase.

Here's a couple of hypothetical scenarios where the letter of the law would be followed, but the spirit of the law would likely be violated:

• Someone who currently has an EV who might have received the new vehicle tax credit ($7500) sees there is now a used vehicle tax credit ($4000). He decides to trade his vehicle in for another EV that for all practical purposes is identical to the one he has with the exception of the VIN # (same make/model, mileage, color, features, etc.), and can legally receive the $4000 credit as well.
  • This would clearly be a blatant cash grab/abuse of the credit.
• 2 people go through the same scenario I am going through. Both repaired cars end up sitting side-by-side on a dealership lot. Both people want to buy their old cars back, though are not eligible for the Used Clean Vehicle Credit. However, if they bought each other's old car, both people would be eligible for the credit.
  • So both owners and both cars received both the New AND Used Clean Vehicle Credits.
  • I don't see how functionally different each person re-buying their own cars would be versus buying each other's car. So the credit being eligible for only buying each other's car makes no sense to me.

I am thoroughly confused as to why the above 2 scenarios would make the car buyers eligible for the credit, but I would not be eligible for the credit to re-buy my old car. The scenarios illustrate how nonsensical this stipulation is (at least for my situation) when there aren't other stipulations that prevent other potential abuses of the credit.

Circling back to my original manufacturer buyback/lemon law question, when doing a Google search, I came across an AI search result that mentions "If the repurchase is a manufacturer buyback (lemon law or otherwise), the manufacturer will title the vehicle in their name, preventing you from being the original owner." I could not find an actual article that confirms or elaborates on this, and I know AI searches are not the most reliable for accuracy, but I'm hoping someone can help me determine whether the manufacturer buyback "undoes" our status as the original owner so we could possibly be eligible for this tax credit. I know I'm grasping at straws here, but I'm out of other ideas for how we could be eligible for this tax credit for this particular vehicle/VIN #.

Also, the part I mentioned earlier about originally titling the car in both of our names is unfortunate because it might have been possible to have one of us be the original owner, and the other be the owner for the 2nd purchase, which might have allowed us to be eligible for the used vehicle credit.

In case it matters, we reside in Wisconsin which is where the manufacturer buyback occurred. The vehicle is currently for sale in Missouri.

Thanks in advance for any guidance!

 

[adjusterjack]

The IRS goes by the letter of the law, not the "spirit" of the law which is what you wish but is not reality.

Read the code.

(1) Previously-owned clean vehicle​

The term "previously-owned clean vehicle" means, with respect to a taxpayer, a motor vehicle-

(A) the model year of which is at least 2 years earlier than the calendar year in which the taxpayer acquires such vehicle,

(B) the original use of which commences with a person other than the taxpayer,

https://uscode.house.gov/view.xhtml?req=(title:26 section:25E edition:prelim)


Seems clear to me that you don't qualify for the deduction.

 

[Ryan3]

Thank you for your reply and the code does seem clear that I don't qualify. I'm very curious to know the "why" behind that stipulation. I'm just finding it difficult to understand why the code is written in a manner that allows people to intentionally abuse the credit, but blocks me from using the credit on a legitimate car purchase with no intent to abuse the credit.

Is there any avenue to plead a case with the IRS to see if they might make an exception? Kind of like when a police officer pulls you over for speeding and they can make a judgement call whether to write you a ticket or not.

 

[Zigner]

I'm very curious to know the "why" behind that stipulation.

You'll need to ask the folks who authored the code.

 

[adjusterjack]

I'm very curious to know the "why" behind that stipulation.

Congress writes the US Code. Write you congressperson. I'm sure you'll get an explanation.

(Snort).

 

[Taxing Matters]

Is there any avenue to plead a case with the IRS to see if they might make an exception? Kind of like when a police officer pulls you over for speeding and they can make a judgement call whether to write you a ticket or not.

The IRS must apply the tax as written. There is no provision in the Internal Revenue Code (IRC) allowing the IRS to grant exceptions to the law. There are things the IRS may be flexible about, but deviating from the requirements set in the IRC is not one them. My guess without researching the congressional record is that Congress put that in there to ensure taxpayers don't double dip benefits.

 

[LdiJ]

Thank you for your reply and the code does seem clear that I don't qualify. I'm very curious to know the "why" behind that stipulation. I'm just finding it difficult to understand why the code is written in a manner that allows people to intentionally abuse the credit, but blocks me from using the credit on a legitimate car purchase with no intent to abuse the credit.

Is there any avenue to plead a case with the IRS to see if they might make an exception? Kind of like when a police officer pulls you over for speeding and they can make a judgement call whether to write you a ticket or not.

There is no part of the tax code that is negotiable. The IRS can in no way "make exceptions" for any part of the tax code.

 

[Ryan3]

The IRS must apply the tax as written. There is no provision in the Internal Revenue Code (IRC) allowing the IRS to grant exceptions to the law. There are things the IRS may be flexible about, but deviating from the requirements set in the IRC is not one them. My guess without researching the congressional record is that Congress put that in there to ensure taxpayers don't double dip benefits.

I agree with you that it seems like a means to prevent double dipping, though the 2 hypothetical scenarios from my original post describe a couple ways that could still happen, with probably more ways yet I haven't thought of. It seems to me if the code was truly intended to prevent abuse and double dipping, they would have written more stipulations to tighten the requirements. However, due to the lack of tight requirements against double dipping, I wonder if they really even care about that. I am allowed to buy any other VIN # of an otherwise identical used car as my old one (same make, model, mileage, color, features, etc.) and be eligible for the credit provided the car meets some eligibility requirements, but I'd rather have my old one. The original owners of those other cars probably got the credit too, so why should my old car be ineligible? It been 4 years since the manufacturer buyback for my old car and this tax credit for used cars didn't even exist then, so I clearly didn't have tax credit abuse in mind.

My apologies for venting here, I'm just annoyed that I'm ineligible because the significance of the VIN # I choose seems trivial at this point, but the code doesn't see it that way.

 

[Ryan3]

Thank you everyone for taking time to give feedback on my inquiry.