The Federal EV tax credit is intended to encourage consumers to purchase electric vehicles, furnishing a $7,500 tax break with the purchase or lease of an eligible EV. The U.S. Treasury and IRS recently revealed new guidelines for vehicles to be eligible for this tax credit, and surprisingly, the Cadillac Lyriq received a strange classification that renders it ineligible.
As it turns out, the Lyriq is not classified as a utility vehicle, thus placing it outside the parameters necessary for its buyers to receive the tax credit. Instead, the U.S. Treasury considers the Lyriq a “passenger vehicle,” meaning that its retail price cannot exceed $55,000 in order to qualify for the tax credit benefits. Currently, the Lyriq’s starting MSRP is $62,990 for the base Luxury trim.
Understandably, Cadillac’s parent company, General Motors, is not satisfied with this classification, as it could negatively impact sales of the luxury electric crossover.
“We are addressing these concerns with Treasury and hope that forthcoming guidance on vehicle classifications will provide the needed clarity to consumers and dealers, as well as regulators and manufacturers,” a GM representative was quoted as saying. The automaker also argued that the Treasury should utilize criteria and processes similar to the Department of Energy in order to “[drive] consistency across existing federal policy and clarity for consumers.”
It’s worth noting that the Cadillac Lyriq was not the only electric vehicle to receive an odd classification. The Ford Mustang Mach-E, Ford Escape PHEV and Lincoln Corsair are also considered passenger vehicles, not utility vehicles. The Tesla Model Y is not considered an SUV with the two-row, five-passenger layout, but its counterpart with a third row and seven-passenger seating capacity is. The Volkswagen ID.4 is also not considered an SUV, but gains the classification when outfitted with all-wheel-drive.
For reference, here is section 523.5 from the Code of Federal Regulations pertaining to the federal EV tax credit:
A non-passenger automobile means an automobile that is not a passenger automobile or a work truck and includes vehicles described in paragraphs (a) and (b) of this section:
The Treasury defends its position, stating that its decisions are based on fuel economy standards “which are pre-existing – and longstanding – EPA regulations that manufacturers are very familiar with. These standards offer clear criteria for delineating between cars and SUVs.”
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