Courtesy of David & Mary Mellem, EAs
Cash for Clunkers (not a tax issue but…)
This is not a tax issue, but contains a part you may be interested in knowing about. We have already heard from clients asking about this so we figured we’d share what we found.
HR 2346 was passed by the House and Senate and forwarded to President Obama, who is expected to sign it. The official title of the Cash for Clunkers portion of HR 2346 is the “Consumer Assistance to Recycle and Save Act of 2009”. The program is established in the National Highway Traffic Safety Administration. Here are the rules we have found:
1) The Secretary shall authorize the issuance of an electronic voucher to offset the purchase price or lease price for a qualifying lease (not less than 5 years) of a new fuel efficient automobile upon the surrender of an eligible trade-in vehicle to a dealer participating in the program.
2) The Secretary will register dealers for participation in the Program and require that all registered dealers:—a) Accept the vouchers as partial payment or down payment for the purchase or qualifying lease of any new fuel efficient automobile offered for sale or lease by that dealer, and—b) To transfer the trade-in vehicle to an entity for disposal.
Eligible trade-in vehicles must:
1) Be in drivable condition,
2) Been continuously insured consistent with applicable State law and registered to the same owner for a period of not less than one year immediately prior to the trade-in,
3) Was manufactured less than 25 years before the date of the trade-in, and
4) In the case of an automobile, has a combined fuel economy value of 18 miles per gallon or less.
The new vehicle must:
1) Be a vehicle where the equitable or legal title has not been transferred to any person other than the ultimate purchaser,
2) It carries a manufacturer’s suggested retail price of $45,000 or less,
3) It meets certain standards under various sections of Title 40, Code of Federal Regulations, and
4) That meets the mpg ratings of at least 22 (automobile), 18 (category 1 truck), or 15 (category 2 truck).
Qualifications for vouchers (and their value):
1) $3,500 if the new vehicle:—a) Is a passenger automobile and the combined fuel economy value is at least 4 mpg higher than the qualifying old vehicle,—b) Is a category 1 truck and is at least 2 mpg higher than the old vehicle,—c) Is a category 2 truck that is at least 15 mpg and——i) The new vehicle is a category 2 truck with an mpg at least 1 mpg higher than the old vehicle, or——ii) The old vehicle is a category 3 truck of model year 2001 or earlier, or—d) Is a category 3 truck and the old is a category 3 truck of model year of 2001 or earlier and is of similar size or larger than the new as determined in a manner prescribed by the Secretary.
2) $4,500 if the new vehicle:—a) Is a passenger automobile with an mpg at least 10 higher than the old vehicle,—b) Is a category 1 truck with an mpg at least 5 higher than the old vehicle,—c) Is a category 2 truck with at least 15 mpg and is at least 2 mpg higher than the old vehicle AND the trade-in vehicle is a category 2 truck.
Limitations:
1) These vouchers only apply to purchases or qualifying leases that occur between July 1, 2009 and November 1, 2009.
2) Not more than one voucher can be issued for a single person, not more than one voucher can be issued for the joint registered owners of a single eligible trade-in vehicle, and not more than one voucher can be applied toward the purchase or lease of a single new fuel efficient automobile.
3) The availability or use of a Federal, State, or local incentive or a State-issued voucher for the purchase of a qualifying vehicle does not limit the value of the voucher under this program.
4) The Department has a one billion dollar limit on the vouchers and not more than 7.5% of the total limit can be used on category 3 trucks.
5) Dealers cannot charge a fee for the use of the voucher but is allowed to retain $50 of any amounts paid to the dealer for scrapping of the trade-in.
6) The dealers will have to certify that they are transferring the clunker for disposal and are not selling, leasing, exchanging, etc. the clunker. The disposal company can sell any parts of the disposed vehicle other than the engine block and drive train, although the drive train could be sold as the separate parts of the transmission, drive shaft, and rear end.
Definitions:
PASSENGER AUTOMOBILE This is a passenger automobile, as defined iin §32901(a)(18) of Title 49 USC, that has a combined fuel economy value of at least 22 miles per gallon.
CATEGORY 1 TRUCK This is a nonpassenger automobile, as defined inn §32901(a)(17) of Title 49 USC, that has a combined fuel economy value of at least 18 miles per gallon AND that is not a Category 2 truck.
CATEGORY 2 TRUCK This is a large van or a large pickup, as categoorized by the Secretary using the method used by the EPA and described in the report entitled “light-Duty Automotive Technology and Fuel Economy Trends: 1975 through 2008”.
CATEGORY 3 TRUCK This is a work truck, as defined in §32901((a)(19) of Title 49 USC.
COMBINED FUEL ECONOMY VALUE This is the number in mpg centered beelow the words “Combined Fuel Economy” on the label required to be affixed to a new automobile.
For the trade-in vehicle it is the amount under “Estimated New EPA MPG” for vehicles of model year 1984 through 2007, the amount under “New EPA MPG” for vehicles of model year 2008 or later, found on the fueleconomy.gov website of the EPA for the make, model, and year of such vehicle.
If you or a client has questions on this program, they can probably be best answered by the dealers or the Department of Transportation.
This Act can be found by going to Thomas.loc.gov and searching for HR 2346.
https://thomas.loc.gov/cgi-bin/bdquery/z?d111:HR2346:|/bss/111search.html|
This provision of the Bill is near the bottom under Title XIII-Consumer Assistance to Recycle and Save Program. We can also send you a pdf copy attached to an email upon request.
This text has been shared with you courtesy of: David & Mary Mellem, EAs & Ashwaubenon Tax Professionals, 920-496-1065 (920-496-9111). davidmellem@yahoo.com, davidmellemea@yahoo.com, marymellem@yahoo.com, marymellemea@yahoo.com.
©2009 Ashwaubenon Tax Professionals. No reproduction of this article is permitted without the express written consent of Ashwaubenon Tax Professionals, 2140 Holmgren Way, Suite 1040, Green Bay, WI 54304.
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- HR 2346 – Public Law No: 111-32 :: Consumer Assistance to Recycle and Save Act of 2009
