Chevy Volt 60-Day Return Makes Tax Credit Abuse Likely

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General Motors has announced a 60 day money back guarantee policy for all new Chevy models, including the Chevy Volt. The move sets up a scenario where purchasers can buy a Volt, claim the $7,500 federal tax credit (and most likely state credits) and return the vehicle for a refund within 60 days. Did GM really not consider this glitch, or is this just another way for Government Motors to prop up politically important Volt sales leading up to November elections?

IRS tax form 8936, for plug-in motor vehicle credit, does not have any minimum time requirement for buyers to own their qualified vehicles. The vehicle only has to be new and purchased during the tax year being claimed. Buyers of Volts will have documentation and VIN numbers for qualifying vehicles. The 60 day return policy lays the groundwork for a very easy way to scam the IRS out of $7,500. Buyers will most likely have to eat registration fees and sales tax paid that will be deducted from refund. So, in an effort to save taxpayers millions of dollars on the potential scam and save GM and its shareholders from losing more millions of dollars on the Volt, I suggest the Volt be exempted from the return program.

Of course, there is the possibility that Government Motors is aware of the situation. Volt sales should pick up, millions of dollars in tax credits will be claimed and GM can tout improved sales. GM will then have returned Volts to sell that will no longer qualify for the tax credits; the vehicles will be sold as used for thousands of dollars less. GM will have to reimburse dealerships for some portion of the losses. And unless the IRS has a database of VIN numbers for qualified vehicles, buyers of used Volts with low mileage may be tempted to claim the tax credit again, upping the federal subsidy to $15,000 per vehicle. Hopefully the IRS has safeguards to prevent double claiming of EV credits. In the past, the IRS did not seem too concerned as there was not even a field on prior year forms for VIN numbers, something that changed after my criticism of GM dealerships taking tax credits.

So, for the sake of taxpayers, let's hope that GM tries to rely on GE to purchase a bunch of Volts to prop up sales instead of costing taxpayers lost revenue on an easy scam by purchasers of Volts. I'll be in contact with GM to share my suggestion and update article as appropriate. The IRS should also consider a minimum term of ownership for buyers of plug-in vehicles to qualify for tax credits. Better yet, repeal the costly EV tax credits that do little to help with foreign oil dependence and only further enrich already wealthy electric car buyers.

Mark Modica is an NLPC Associate Fellow.  

Update: A local Chevy dealer informed me that sales tax is refundable. GM sales spokesman, Jim Cain, says returned Volts will be resold by dealerships as used and it is up to buyers as to whether or not they claim tax credits.