Senate Tax Reform Package Keeps Green Tax Credit, Despite Hints of Abuse

FILE - In this June 18, 2013, file photo, visitors to the Capitol inspect the Tesla Motors Model S electric sedan on display in Sacramento, Calif. A report issued from the Legislative Analyst's Office, Tuesday, Oct. 31, 2017, concludes that California lawmakers should end a $780 million business tax credit program because it creates an uneven playing field and its overall economic benefits are hard to determine. Tesla received a $15 million tax credit in 2015. (AP Photo/Rich Pedroncelli, File)

As the Senate proceeds towards consideration of its tax reform package, some tax reform proponents are privately venting that it preserves a green car tax credit—a tax credit that may have been unlawfully claimed by some buyers at the urging of a major green car company.

Public posts by purported customers of Tesla Motors indicate that company sales representatives may have urged customers to claim the green car tax credits preserved in the Senate package in tax years during which they did not actually possess the vehicles they had purchased.

That may sound like no big deal, but under tax law, in order to claim a green car tax credit, a car must have been purchased and physically taken into possession by the buyer—through delivery or driving off the dealership lot—in order for the buyer to claim the tax credit.

Multiple posts at Internet forums Reddit and Tesla Motors Club suggest that Tesla personnel suggested to buyers that they could claim the tax credit in advance of taking possession of their cars, which if done would constitute a violation of US tax law amounting to tax fraud.

In one Reddit post, a Tesla customer appears to claim the company offered to “complete the transaction” in 2016, but not physically deliver his car until January 2017. The buyer states that “I was told they are offering this to only a few select buyers and it will help with being able to take the federal tax credit in 2017 and not have to wait an additional year.” A fellow Redditor replied that this would mean the buyer could not legally claim the federal tax credit for 2016.

In another, a Tesla buyer claims that “Tesla reached out yesterday asking if I would prefer to take delivery at home in January – Pay for it before the end of this year, get the tax credit, then they would have a third party deliver to my house.” Again, a fellow Redditor noted that tax credits are to be claimed in the year in which the buyer takes possession of the car, not when it is ordered.

Another Redditor appears to have claimed a 2016 tax credit on a car that was not delivered until January 2017. Two further Reddit posters suggest Tesla had told them they could take a tax credit for a car purchased in one year that would not physically be in their possession until the following year—an action that would not comply with tax law.

None of the posters in question could be reached for interview or further comment, though two of the five did indicate they were willing to speak about their experiences and in the course of that communication, did not contradict what they had previously written. Another indicated he could not remember exactly what had happened, despite apparently having posted about it at the time.

While Reddit postings hardly constitute the hard evidence of an affidavit or in-court witness testimony, their content does point to a problem with preserving the green car tax credit, just like many other tax credits, deductions, and other provisions: The more complicated the tax code, the more opportunities exist for people to attempt to game the system, and engage in actual fraud in a manner that is not always immediately obvious.

The House tax reform bill eliminated this particular tax credit, but the Senate bill preserves it—partly, it appears, thanks to the efforts of Sen. Dean Heller and Sen. Charles Grassley. Heller’s home state of Nevada is home to a massive Tesla battery factory. Grassley has been a longtime proponent of tax provisions benefiting the green sector, in part due to the heavy presence of the wind energy industry in his home state of Iowa.

General Motors is also rumored to have flexed significant lobbying muscle in order to retain the green car tax credit in the Senate bill, likely due to its production investment in the Chevrolet Volt.

It is unclear whether Volt purchasers may have attempted to claim tax credits in the wrong tax years, as the Reddit and Tesla Motors Club posts suggest some buyers may have considered following alleged advice from Tesla salespeople. Were this the case, however, it is unlikely they would have received the advice from General Motors directly; while Tesla sells its cars directly, Chevrolet sells via dealerships.

The inclusion of the green car tax credit in the Senate plan and its omission in the House bill remains one of the many differences between the two chambers’ packages. Congress is widely regarded as working to a deadline of December 12 by which to pass a tax bill, given uncertainty surrounding the outcome of the Alabama Senate race.