Fisker finesses the Inflation Reduction Act tax credit changes with binding sales contract; “Transition Rule”
08 August 2022
The US Senate has passed the Inflation Reduction Act, with nearly $400 billion in funding over 10 years for climate- and energy-related programs; among the myriad provisions in the 755-page bill are changes to the electric vehicle Federal tax credit of $7,500.
The bill renews the credit starting in January 2023, and carries it through until the end of 2032. The new credit removes the former 200,000-vehicle cap; all manufacturers have access to unlimited credits as long as they fulfill the other requirements of the bill. The credit will be available at the point of sale.
However, new requirements include that the cars must be assembled in North America and that critical minerals in the battery must come from the US or a country with a free-trade agreement with the US. Further, vehicles must have an MSRP of less than $55,000 for cars and $80,000 for SUVs and trucks.
The bill also imposes a household income cap of $150,000 for single filers and $300,000 for couples filing jointly.
However, the bill also contains a “Transition Rule” for the tax credit, which allows a taxpayer who—after 31 December 2021, and before the date of enactment of the bill—purchased, or entered into a written binding contract to purchase, a new qualified plug-in electric drive motor vehicle (as defined in the IRS code as in effect before the enactment of the bill), to treat the vehicle as having been placed in service on the day before the date of enactment.
The bill, as currently written, would make the Fisker Ocean electric SUV, which will be built in Austria starting in November, ineligible. However, Fisker believes customers may be able to retain eligibility for the full $7,500 credit for the 2022 tax year by converting their existing reservations into a binding sales contract for the purchase of the Fisker Ocean, per the Transition Rule.
Many of our reservation holders are looking forward to the tax advantages of purchasing an electric vehicle. Therefore, we acted swiftly and proactively to protect access to existing tax credits for qualifying Fisker Ocean buyers should the Inflation Reduction Act become law. We are focused on a clean future for all, so we are building the Fisker Ocean in one of the world’s most sustainable production facilities, Magna’s carbon-neutral factory in Graz, Austria.
Our reservation holders have given us a vote of confidence, with 5,000 recently committing $5,000 each to secure a Fisker Ocean One launch edition vehicle. So, we need to do this work on their behalf to show that we have their best interests at heart.—Chairman and CEO Henrik Fisker
Fisker is not requesting additional payments from reservation holders but instead converting the existing $250 for the first reservation and $100 for the second reservation deposits to non-refundable orders. This ordering system remains in effect until The Inflation Reduction Act is passed and signed into law. At that time, this order process will close.
Fisker cautions that it is not providing legal or tax advice regarding the provisions of the Inflation Reduction Act, including the Transition Rule. Reservation holders should consult with a tax professional to determine eligibility for any federal tax credit and should not rely upon such tax credit when making a purchase decision.
In the US, the Fisker Ocean starts at $37,499 in the base Sport. The Ultra trim retails for $49,999 and the top trim Extreme is priced at $68,999. The five-passenger SUV is designed and engineered in Manhattan Beach, California.
On 3 August 2022, Fisker reaffirmed its start of production date for 17 November 2022, and its 2023 production plans of 40,000-50,000 Fisker Ocean units, aligned with the company’s financial strategy and timeline.