IRS Will Stop Handing Out Subsidies Tesla Buyers In 2020

The Treasury Department announced it would phase out electric vehicle subsidies for Tesla buyers at the beginning of next year. By 2020, those tax subsidies would completely disappear.

It’s an announcement that Treasury’s Internal Revenue Service (IRS) will be making more of in the coming years as automakers produce enough electric cars to trigger a phase out of tax subsidies.

“Tesla, Inc. has submitted reports that indicate that its cumulative sales of qualified vehicles reached the 200,000-vehicle limit during the calendar quarter ending September 30, 2018,” reads an IRS notice published Friday.

“Accordingly, the credit for all new qualified plug-in electric drive motor vehicles sold by Tesla, Inc. will begin to phase out January 1, 2019,” the IRS noted.

Tesla hit the 200,000-vehicle mark over the summer, triggering tax subsidies to phase out. Tesla buyers are still eligible for a $7,500 tax credit through the end of the year, but subsidies fall to $3,750 per vehicle for the first half of the year before declining to $1,875 in the second half.

By 2020, Tesla buyers will no longer receive federal tax credits, though they may still get state and local subsidies for electric car purchases. Congress may also extend electric car subsidies, which were put in place in 2008 when lawmakers worried about high oil prices.

Tesla and GM, the only other automaker to face a subsidy phase out next year, are part of the EV Drive Coalition, which is pushing to extend subsidies for electric vehicles. The group claims subsidies are “essential to the continued development of the EV market.”

However, Tesla co-founder and CEO Elon Musk has in the past suggested Tesla didn’t need government subsidies to thrive.

“If I cared about subsidies, I would have entered the oil and gas industry,” Musk said in 2015.

Conservative activists oppose extending electric car subsidies, arguing it primarily benefits high-income Americans at the expense of the working class and poor.

“They’re basically subsidizing rich people, but mostly rich Californians,” Tom Pyle, president of the American Energy Alliance (AEA) that opposes electric car tax credits, told The Daily Caller News Foundation in December.

Pyle called electric car tax credits a “reverse Robin Hood tax credit.” Republicans, including Wyoming Senator John Barrasso, agree that electric vehicles subsidies should be ended.

Barrasso introduced legislation to end the tax credit and slap a fee on electric vehicles, which would go towards the Highway Trust Fund. However, Nevada Senator Dean Heller, a Republican, lift the subsidy cap and phase out tax credits in 2022.

A bill from Democratic Vermont Rep. Peter Welch in the House would completely remove the cap for the next ten years.