[TheFatArmadillo]

Originally Posted by Hank Moody

The "written binding contract" rule only applies to cars delivered after 2022. The old rules apply to cars delivered through 12/31/22 irrespective of contract terms.

Unfortunately the made in America provision went into effect immediately, as such the i4 is immediately disqualified.

[Hank Moody]

Originally Posted by TurtleBoy

Can you give the California code concerning binding contracts not being allowed in the state? It would be interesting to see the wording on that versus the guidance.

Personally, I believe the US Treasury will issue regulations softening the rules, but in CA, here's the language from CVC 11736(c):

It is unlawful for any dealer licensed under this article to do any of the following when brokering a retail sale:

(c) Fail to refund any purchase money, including purchase deposits, upon demand by a consumer at any time prior to the consumer's signing of a vehicle purchase agreement with a selling dealer and taking delivery of the vehicle described in the brokering agreement.

[Hank Moody]

Originally Posted by TheFatArmadillo

Unfortunately the made in America provision went into effect immediately, as such the i4 is immediately disqualified.

I'm not sure about that. Got a cite?

[Maverick241]

Originally Posted by Hank Moody

I'm not sure about that. Got a cite?

Its 100% true it's in the bill. As soon as biden signed it it went into effect immediately. As of today no electric BMW except the X5e and 3 series plug in qualifies for the credit (along with a ton of other foreign built EVs). If you already put 5% down and have a binding contract for sale then you can still get the credit under the old rules, but if you haven't you are out of luck

[bavarianride]

Originally Posted by Hank Moody

Personally, I believe the US Treasury will issue regulations softening the rules, but here's the actual language from CVC 11736(c) cited above:

It is unlawful for any dealer licensed under this article to do any of the following when brokering a retail sale:

(c) Fail to refund any purchase money, including purchase deposits, upon demand by a consumer at any time prior to the consumer's signing of a vehicle purchase agreement with a selling dealer and taking delivery of the vehicle described in the brokering agreement.

I do prefer this consumer protection law's language(e.g. in CA) of refundable deposit.

It feels that IRA is specific about this, namely, if there is a committed delivery(e.g. paid on full without backing out), then it will be considered as purchased before IRA enactment.

[TurtleBoy]

Originally Posted by Hank Moody

Personally, I believe the US Treasury will issue regulations softening the rules, but here's the actual language from CVC 11736(c) cited above:

It is unlawful for any dealer licensed under this article to do any of the following when brokering a retail sale:

(c) Fail to refund any purchase money, including purchase deposits, upon demand by a consumer at any time prior to the consumer's signing of a vehicle purchase agreement with a selling dealer and taking delivery of the vehicle described in the brokering agreement.

No, that doesn’t prohibit a binding contract as far as I can see. That has to do with non-refundable deposits.

[bavarianride]

Originally Posted by TurtleBoy

I have seen that one already but that doesn't prohibit binding contracts from what I can see. The deposit wouldn't exclude it since you can have a binding contract with unspecific/unlimited damages and meet the Transition rule requirements.

Does IRA say the damage needs to be 5% or more? If so, I think CA does not qualify since CA can't have deposit of more than 2.5%.

[TurtleBoy]

Originally Posted by bavarianride

Does IRA say the damage needs to be 5% or more? If so, I think CA does not qualify since CA can't have deposit of more than 2.5%.

Only if the damages are limited in the contract.

[scLA]

Originally Posted by TurtleBoy

No, that doesn’t prohibit a binding contract as far as I can see. That has to do with non-refundable deposits.

The binding agreement doc one CA dealer sent me was only binding if I made a deposit non-refundable. Several other CA dealers reviewed that doc and said they don't believe they can accept a non binding deposit in CA and were not comfortable doing so given their interpretation of CA laws.

All I know for sure is this situation is messy and was rushed.

[TurtleBoy]

Originally Posted by slazLA

The binding agreement doc one CA dealer sent me was only binding if I made a deposit non-refundable. Several other CA dealers reviewed that doc and said they don't believe they can accept a non binding deposit in CA and were not comfortable doing so given their interpretation of CA laws.

All I know for sure is this situation is messy and was rushed.

Yes, that is true for non-refundable deposits. One is not needed though to have e binding contract.

[TheFatArmadillo]

Originally Posted by Hank Moody

I'm not sure about that. Got a cite?

https://afdc.energy.gov/laws/inflation-reduction-act

[Maverick241]

Originally Posted by bavarianride

Does IRA say the damage needs to be 5% or more? If so, I think CA does not qualify since CA can't have deposit of more than 2.5%.

yes it does

[jgunnz]

Originally Posted by Squeak825

IRS Guidance:

https://www.irs.gov/businesses/plug-...30-and-irc-30d



If your didn't put down at least 5% as a non-refundable deposit, you do not have a binding contract.

Based on this language, I don't think I agree with this interpretation. Looks to me like a 5% deposit creates a *presumption* of a binding contract, but is not required to establish a binding contract. So if you *did* make a 5% deposit, it will be hard to argue it's not a binding contract. But a binding contract is simply one that is enforceable and doesn't limit damages. And I'm sure there are theories of damage other than the amount of the deposit in the event the car not be delivered. Perhaps the loss of value on a trade in, or increased financing costs.

[TurtleBoy]

Originally Posted by jgunnz

Based on this language, I don't think I agree with this interpretation. Looks to me like a 5% deposit creates a *presumption* of a binding contract, but is not required to establish a binding contract. So if you *did* make a 5% deposit, it will be hard to argue it's not a binding contract. But a binding contract is simply one that is enforceable and doesn't limit damages. And I'm sure there are theories of damage other than the amount of the deposit in the event the car not be delivered. Perhaps the loss of value on a trade in, or increased financing costs.

Correct

[jayp98]

I have a take on this situation that I wanted to flush through you all. A contract is set in place for two sides to agree on something and so the other doesn't break it. If you purchase the vehicle that contract has been executed and any written contract before is pretty much useless once the actual transaction happens and keys exchange hands. So why are the rules so strict around the binding document before August 16th. If the transaction goes through any agreement and conversation made before hand shows intent to purchase on our end and intent to sell on the dealers end. Neither party will argue the prior agreement is null and it is only for IRS documentation. This is just a thought I had and by no means my opinion but rather me wanting to hear some peer review. What I'm trying to get at is that once the official transaction occurs and keys change hand, can we use our communication from before 8/16 as proof both parties always intended to execute (buyer purchases, dealer sells) the transaction such as emails, VIR, and deposit? I feel like that should be sufficient.

[techwhiz1]

Originally Posted by TurtleBoy

I have seen that one already but that doesn't prohibit binding contracts from what I can see. The deposit wouldn't exclude it since you can have a binding contract with unspecific/unlimited damages and meet the Transition rule requirements.

It actually does by inference.
If all monies are refundable until a car is driven off the lot then a contact non-binding.

A contract that is not for a legal purpose is no contract at all.

[TurtleBoy]

Originally Posted by techwhiz1

It actually does by inference.
If all monies are refundable until a car is driven off the lot then a contact non-binding.

A contract that is not for a legal purpose is no contract at all.

Not true at all. There is no need to have a deposit in order to make it binding. Read the IRS guidance, it may help.

[TurtleBoy]

Originally Posted by jayp98

I have a take on this situation that I wanted to flush through you all. A contract is set in place for two sides to agree on something and so the other doesn't break it. If you purchase the vehicle that contract has been executed and any written contract before is pretty much useless once the actual transaction happens and keys exchange hands. So why are the rules so strict around the binding document before August 16th. If the transaction goes through any agreement and conversation made before hand shows intent to purchase on our end and intent to sell on the dealers end. Neither party will argue the prior agreement is null and it is only for IRS documentation. This is just a thought I had and by no means my opinion but rather me wanting to hear some peer review. What I'm trying to get at is that once the official transaction occurs and keys change hand, can we use our communication from before 8/16 as proof both parties always intended to execute (buyer purchases, dealer sells) the transaction such as emails, VIR, and deposit? I feel like that should be sufficient.

I think most of us would have agreed until the IRS issued the guidance on what was required.

[bavarianride]

Originally Posted by TurtleBoy

Yes, that is true for non-refundable deposits. One is not needed though to have e binding contract.

This is an interesting article:

https://www.jdsupra.com/legalnews/le...ng-writ-30614/

IRS Notice 2013-19 on 4/15/2013 originally says that written binding contract cannot have liquidated damages above a specified threshold.

However, a later clarification on 4/25/2013 says damages limited to at least 5% will not be treated as limiting damages to a specified amount.

My interpretation is that it is a binding contract when damage is clearly stated/written(and signed to acknowledge) as at least 5%.

I think in the context of IRA's EV binding contract, one needs to hold a contract that explicitly states that damage is at least 5%(may or may not be paid as upfront deposit) to be considered as binding.

[bavarianride]

Originally Posted by TurtleBoy

I think most of us would have agreed until the IRS issued the guidance on what was required.

Yes, that guidance is Notice 2013-19.

[bavarianride]

Originally Posted by jayp98

I have a take on this situation that I wanted to flush through you all. A contract is set in place for two sides to agree on something and so the other doesn't break it. If you purchase the vehicle that contract has been executed and any written contract before is pretty much useless once the actual transaction happens and keys exchange hands. So why are the rules so strict around the binding document before August 16th. If the transaction goes through any agreement and conversation made before hand shows intent to purchase on our end and intent to sell on the dealers end. Neither party will argue the prior agreement is null and it is only for IRS documentation. This is just a thought I had and by no means my opinion but rather me wanting to hear some peer review. What I'm trying to get at is that once the official transaction occurs and keys change hand, can we use our communication from before 8/16 as proof both parties always intended to execute (buyer purchases, dealer sells) the transaction such as emails, VIR, and deposit? I feel like that should be sufficient.

My thought is that any transaction completed before August 16th is binding as merchandise and money have already changed hands.

IRA provides a clause to allow future transaction (August 16, to Dec 31, 2022?) to be treated as completed transaction if the written binding contract definition is met.

Since IRS has Notice 2013-19 issued since 2013, my thinking is that Notice 2013-19 will be used to guide the 2022 1040 form.

[bavarianride]

Actually, another poster posted this on another thread, IRS already states the below, so all CA customers do not have binding contracts on their i4.

"For tax purposes in general, a contract provision that limits damages to an amount equal to at least 5 percent of the total contract price is not treated as limiting damages to a specified amount. For example, if a customer has made a non-refundable deposit or down payment of 5 percent of the total contract price, it is an indication of a binding contract. A contract is binding even if subject to a condition, as long as the condition is not within the control of either party. A contract will continue to be binding if the parties make insubstantial changes in its terms and conditions."

https://www.irs.gov/businesses/plug-...30-and-irc-30d