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      08-15-2022, 04:27 PM   #1
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BMWNA CEO's letter to dealers regarding Inflation Reduction Act

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Here is a message sent from the CEO of BMW North America to US BMW dealers:

We would like to provide you with an update on the Inflation Reduction Act that will result in an immediate impact on our business once signed by President Biden. In the following, we will provide guidance on how this affects the eligibility of our product portfolio and the implications when answering customer questions.

On Friday, August 12, the United States House of Representatives followed the U.S. Senate’s lead and voted to pass the Inflation Reduction Act (IRA) of 2022 which is expected to be signed into law by President Biden this week. The new program will go into effect upon its signing and run through December 31, 2032.

A number of factors will determine whether a vehicle/customer is eligible to receive the tax credit contained in the IRA. Firstly, the “final assembly” of the vehicle must occur “within North America,” i.e., the U.S., Mexico, or Canada. In addition, new income and MSRP caps will be implemented immediately. The Average Gross Income (AGI) caps will be $150,000 for single filing, $225,000 for head-of-household and $300,000 for joint filing. MSRP caps for pickup trucks, SUVs, and vans will be $80,000, while all other vehicles will be $55,000. And also, the battery size must be greater than 7 kWh, which will impact the PHEV business.

These changes mean that our vehicles, which currently qualify for up to a $7,500 federal tax credit today, will no longer qualify as soon as the President signs this legislation. Additionally, a number of customers will not qualify, as their income exceeds the AGI caps.

We recognize that there are questions regarding customers who have reserved an EV and not yet taken delivery. The IRA includes a transition rule to address this group. It states that customers who enter into a “written binding contract to purchase” a qualified electric vehicle with their dealer prior to President Biden signing the IRA into law, would still have the ability to claim the credit – even if they take delivery of the vehicle after the signing of the law. This also means that customers with non-binding vehicle orders would lose their ability to claim the EV tax credit. We are working to understand the details of what constitutes a “written binding contract to purchase” and what is required to ensure that customers can qualify.

You will have noted that the volume cap of 200k units per manufacturer that applies under the current set of rules will be eliminated with the new criteria upon signature of the Bill.

Beyond the rules stated above, supply chain criteria relating to critical minerals and battery production will increasingly apply over the coming years and add further hurdles in qualifying for the EV credit.

We understand that you may have received inquiries from customers looking to ensure their ability to claim the credit on current vehicle orders. We appreciate all that you are doing to support customers in understanding the changes and in their decision-making. As the President is expected to sign the IRA into law early this week, we encourage you to work with your customers to convert vehicle orders into binding sales as quickly as possible.

This issue has moved through Congress at an unprecedented pace, and we can expect further detailing of the rules going forwards. We will provide regular updates on progress and implications for our mutual business. We appreciate your patience as we have worked to understand the implications of the Act and kindly ask that you remain patient as we work through the steps that lie ahead – in Washington D.C. and across the nation – in the full implementation of the Bill.

Sebastian Mackensen
President & CEO
BMW NA
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      08-15-2022, 04:32 PM   #2
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He says they are working to understand what constitutes a binding contract and then encourages dealerships to offer binding contracts.
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      08-15-2022, 04:42 PM   #3
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That seems like a CYA memo to make it look like they were being proactive with the situation. In all fairness though, really not much they can do under the dealership model since dealers are responsible with working directly with the clients.

It should also be noted they are incorrect about the implementation of certain aspects of the legislation. The MSRP and income are not implemented immediately but rather for vehicles delivered after 12/31/22.
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      08-15-2022, 04:53 PM   #4
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Quote:
Originally Posted by TurtleBoy View Post
That seems like a CYA memo to make it look like they were being proactive with the situation. In all fairness though, really not much they can do under the dealership model since dealers are responsible with working directly with the clients.
Pretty much. At a minimum, it gives us the green light to send contracts to our clients without fear of consequence/disciplinary action from BMW.

Even if sending contracts this early is ultimately unnecessary, I feel better knowing I've done everything I could to make sure my customers (and some others on this forum) are aware & protected
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      08-15-2022, 04:54 PM   #5
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Quote:
Originally Posted by jtrock97 View Post
Pretty much. At a minimum, it gives us the green light to send contracts to our clients without fear of consequence/disciplinary action from BMW.

Even if sending contracts this early is ultimately unnecessary, I feel better knowing I've done everything I could to make sure my customers (and some others on this forum) are aware & protected
And we wish all CA's were as conscientious as you are.
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      08-15-2022, 07:02 PM   #6
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The President signs the bill on Tuesday....
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      08-15-2022, 07:04 PM   #7
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So if we have already taken delivery, this doesn't apply to us? We still can claim the credit next tax filing?
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      08-15-2022, 07:05 PM   #8
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Quote:
Originally Posted by rakhred View Post
So if we have already taken delivery, this doesn't apply to us? We still can claim the credit next tax filing?
That is correct.
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      08-15-2022, 07:19 PM   #9
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Quote:
Originally Posted by rakhred View Post
So if we have already taken delivery, this doesn't apply to us? We still can claim the credit next tax filing?
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      08-16-2022, 06:28 AM   #10
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I am a little lost here. I submitted my order on 7/28/22. It was accepted by BMW but I still have no production number. Now, the dealer is letting me to sign a retail purchase agreement dated the same as the order and it shows my refundable deposit as downpayment. Is that enough to claim 7/28 as the purchase date? Or the actual delivery date is the one that matters?
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      08-16-2022, 06:53 AM   #11
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Quote:
Originally Posted by MAMOHT View Post
I am a little lost here. I submitted my order on 7/28/22. It was accepted by BMW but I still have no production number. Now, the dealer is letting me to sign a retail purchase agreement dated the same as the order and it shows my refundable deposit as downpayment. Is that enough to claim 7/28 as the purchase date? Or the actual delivery date is the one that matters?
Your chance to take the credit with the delivery date has passed. You will need that purchase agreement in order to take the credit under the Transition rule.
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      08-16-2022, 09:19 AM   #12
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Quote:
Originally Posted by MAMOHT View Post
I am a little lost here. I submitted my order on 7/28/22. It was accepted by BMW but I still have no production number. Now, the dealer is letting me to sign a retail purchase agreement dated the same as the order and it shows my refundable deposit as downpayment. Is that enough to claim 7/28 as the purchase date? Or the actual delivery date is the one that matters?
I actually think this works, if the agreement is dated for July 28th. I am trying to get my dealer to do the same
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      08-16-2022, 11:53 AM   #13
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Methinks there's going to be lots of pissed off folks come tax time. Dealers aren't known for being forthright about things like this.
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      08-16-2022, 11:53 AM   #14
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The i4 is assembled in Germany. Given the wording of this regarding "North America assembly" etc does this not apply?
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      08-16-2022, 11:59 AM   #15
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Background: I split my drive time between a F97 (x3Mc) and a Tesla model Y. (and have another F90 (M5c) on order.)

Personally I like the NA CEO's message here. We just had a major blow towards our electrification efforts - please do all you can to pre-date your orders into sales in order to look out for the best interests of our customers.

I don't even understand the purpose of this legislation other than to punish high income tax payers.

The administration is hell bent on driving us green - this is fine, while I enjoy my 625 HP ICE engine, I can get behind conservation efforts. Yet nothing in the EV credit section of the bill make sense.

EVs are (due to their tech nature) more expensive than their ICE counter parts - putting EVs out of the reach of the average car shopper. In some cases the tax incentives available DO bring those vehicles in reach of the slightly higher than average income earner - and yet we're taking that tax credit away.

Next, we all know that when we look at the lifecycle of a EV compared to an equivalent ICE counterpart the EV is actually more polluting. So for higher income buyers who want to at least convey the image that we're doing something good for the environment, we have the benefit of the tax credit. Remove the tax credit and you're removing a reason a lot of people (my neighbor for example) are willing to pay more for a car that pollutes less (but more over its lifespan).

None of this seems like a way to get the already skeptical population to buy more EVs and actually achieve reduced carbon emissions. You're taking an already expensive product, making it even more expensive, not making it more broadly available, nor doing anything to improve the substantially lacking electrical infrastructure needed to truly make EVs a reality.

What am I missing here?
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      08-16-2022, 12:07 PM   #16
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Once again - the government is picking winners and losers.
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      08-16-2022, 12:15 PM   #17
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He says "These changes mean that our vehicles, which currently qualify for up to a $7,500 federal tax credit today, will no longer qualify as soon as the President signs this legislation."

But doesn't the PHEV X5 45e plug-in still qualify if its MSRP is below $80k? It's assembled in North America as far as I'm aware and it meets the minimum battery size requirement
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      08-16-2022, 12:28 PM   #18
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Quote:
Originally Posted by M3AWD View Post
He says "These changes mean that our vehicles, which currently qualify for up to a $7,500 federal tax credit today, will no longer qualify as soon as the President signs this legislation."

But doesn't the PHEV X5 45e plug-in still qualify if its MSRP is below $80k? It's assembled in North America as far as I'm aware and it meets the minimum battery size requirement
Seems like it should depending on your household income.
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      08-16-2022, 12:33 PM   #19
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Quote:
Originally Posted by MackSea70 View Post
Background: I split my drive time between a F97 (x3Mc) and a Tesla model Y. (and have another F90 (M5c) on order.)

Personally I like the NA CEO's message here. We just had a major blow towards our electrification efforts - please do all you can to pre-date your orders into sales in order to look out for the best interests of our customers.

I don't even understand the purpose of this legislation other than to punish high income tax payers.

The administration is hell bent on driving us green - this is fine, while I enjoy my 625 HP ICE engine, I can get behind conservation efforts. Yet nothing in the EV credit section of the bill make sense.

EVs are (due to their tech nature) more expensive than their ICE counter parts - putting EVs out of the reach of the average car shopper. In some cases the tax incentives available DO bring those vehicles in reach of the slightly higher than average income earner - and yet we're taking that tax credit away.

Next, we all know that when we look at the lifecycle of a EV compared to an equivalent ICE counterpart the EV is actually more polluting. So for higher income buyers who want to at least convey the image that we're doing something good for the environment, we have the benefit of the tax credit. Remove the tax credit and you're removing a reason a lot of people (my neighbor for example) are willing to pay more for a car that pollutes less (but more over its lifespan).

None of this seems like a way to get the already skeptical population to buy more EVs and actually achieve reduced carbon emissions. You're taking an already expensive product, making it even more expensive, not making it more broadly available, nor doing anything to improve the substantially lacking electrical infrastructure needed to truly make EVs a reality.

What am I missing here?
I think the government is trying to encourage EV adoption in the lower income brackets but as usual it's misguided and wholly missed the mark.
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      08-16-2022, 12:34 PM   #20
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Quote:
Originally Posted by MKParris View Post
Once again - the government is picking winners and losers.
The gubberment has always done that.

What is new is the chaotic implementation of new tax policy. Most new policy is enacted the following tax year to give taxpayers time to figure and plan. Was this timeframe really necessary?
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      08-16-2022, 12:35 PM   #21
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I'm so happy Biden is making America great again
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      08-16-2022, 01:04 PM   #22
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Quote:
Originally Posted by allinon72 View Post
Methinks there's going to be lots of pissed off folks come tax time. Dealers aren't known for being forthright about things like this.
I agree. These guys better stop relying on their dealer to explain tax laws and speak to a local tax accountant. Next April y'all will be pissed.
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