Electric Vehicle Sweeteners Running Out?

by Tom Yamachika, President Tax Foundation Hawaii

If you are one of the lucky people who have managed to buy an electric vehicle and get a special plate for it, you probably know that several benefits came with that special plate, including the ability to park at government parking lots (including at the airport!) and street spaces for free, and the ability to jump into carpool lanes even though there is just one person in the car. You also might have gotten a federal tax credit for your car purchase.

Sadly, good things don’t last forever. The free parking benefit and the carpool lane benefit expired on June 30, 2020, according to the terms of the 2012 law that spawned them.

For tax benefits, the pendulum has started swinging in the other direction as well. The federal credit is up to $7,500 per qualified vehicle, depending on battery size. But a phase-out clock starts ticking on the federal credit given for a car manufacturer once the manufacturer has sold 200,000 units. Tesla was the first to hit the milestone, followed by GM, both in the second half of 2018. As a result, electric vehicle credits are no longer available for new purchases from these manufacturers…but there are plenty of other manufacturers. Here is a list of qualifying vehicles from the IRS.

From the State of Hawaii, electric vehicle owners now can expect a $50 surcharge on their annual vehicle registration fees, thanks to a 2019 law that went into effect on January 1, 2020. More is yet to come; the Department of Transportation has been pursuing the idea of funding improvements to highways and bridges with a Road Usage Charge, now called HiRUC, that will charge citizens per mile driven instead of (well, we think it’s instead of, but our lawmakers may have other ideas) charging for fuel purchases through our current fuel tax. Owners of hybrids, electric vehicles, and alternative fuel vehicles can expect to pay quite a bit more under HiRUC than they are now paying under the fuel tax system. We have written about it in more detail here.

Electric vehicles also benefit from laws such as HRS section 291-71 requiring places of public accommodation (shopping centers, for example) to dedicate some parking stalls for electric vehicle charging. These laws don’t seem to be going away any time soon. Instead, the momentum seems to be toward requiring more electric vehicle infrastructure such as chargers. The City & County of Honolulu, for example, recently adopted Ordinance 20-10 mandating that builders of new residential or commercial buildings follow new “electric vehicle readiness compliance pathways.” See section C406.8, Electric Vehicle Infrastructure, beginning on page 8 of the bill. (We had written about a previous incarnation of that bill as well.) For residential buildings, for example, if new construction or renovation adds eight or more new parking stalls, then at least 25% of the new stalls must be electric vehicle charger ready. If new construction or renovation of commercial buildings adds 12 or more new parking stalls, at least 25% of the newly added parking stalls must be electric vehicle charger ready. There are some exceptions and reductions in the requirements for cases such as retail establishments and affordable housing.

Government benefits for electric vehicles, then, appear to be past their peak. Some of them are starting to erode. Those who are in the market for a new vehicle now and are banking on government benefits should definitely do their homework to see if the benefits they are counting on still exist or are on their way out.