No Plug-in Electric Vehicle Credit Where Golf-Cart Wasn't Delivered in Appropriate Tax Year.

(Parker Tax Publishing December 17, 2015)

Because a plug-in electric vehicle purchased by the taxpayers in 2009 was not ready and available for full service to the taxpayers until 2010, they were not entitled to the plug-in electric vehicle credit in 2009. Trout v. Comm'r, T.C. Summary 2015-66.

Background

In 2009, Zone Electric Car, LLC, manufactured electric vehicles. On October 1, pursuant to Notice 2009-54, Zone Electric submitted a request to the IRS to certify that its Spark NEV-48 EX golf-carts were qualified plug-in electric vehicles for purposes of Code Sec. 30D, which as of the date of the notice allowed a tax credit for qualified plug-in electric vehicles placed in service from January 1 to December 31, 2009. On October 7, 2009, the IRS issued a letter to Zone Electric stating that the Spark NEV-48 EX model "meets the requirements of the Qualified Plug-in Electric Vehicle Credit as a Qualified Plug-in Vehicle. This acknowledgment is valid only through December 31, 2009, at which time the vehicle will need to be re-submitted under the revised provisions of IRC 30D and any subsequent Notice covering that period." The letter went on to state that purchasers of the Spark NEV-48 EX could rely on the certification concerning the vehicle's qualification for the qualified plug-in vehicle credit (PEVC).

On December 29, 2009, John and Barbara Trout ordered a Spark NEV-48 EX online and paid approximately $7,200 (including shipping) for the vehicle. They received an email confirmation of the order and a certificate of origin and a bill of sale, both of which were dated December 29, 2009. The bill of sale described a conveyance of the Spark NEV-48 EX model electric vehicle which has a unique vehicle identification number (VIN). The bill of sale also purported to transfer title to the specifically identified vehicle "as evidenced by the accompanying Manufacturer's Statement of Origin." The certificate of origin also contained the date of the transaction and the VIN. The certificate of origin was signed by Zone Electric.

The Trouts were provided with the terms and conditions of sale when they ordered the vehicle. Under those terms and conditions, the seller would place the vehicle order with the appropriate manufacturer upon receipt of funds from the buyer. In pertinent part, the terms and conditions stated that the buyer and the seller agreed that title to the vehicle would pass to the buyer upon issuance of the Manufacturer's Statement of Origin (certificate of origin), notwithstanding later production, assembly or physical shipment of the vehicle to the buyer. The Trouts received their vehicle with a matching VIN on August 26, 2010. They subsequently submitted a golf cart permit application to their local authorities, who issued a permit.

The PEVC was originally enacted in 2008, effective for tax years beginning after 2008. Under Code Sec. 30D(a)(1), as in effect at that time, a taxpayer was allowed a one-time credit against income tax with respect to each new qualified plug-in electric drive motor vehicle placed in service during the tax year. The definition of a "new qualified plug-in electric drive motor vehicle" was amended for tax years after December 31, 2009, to exclude low-speed vehicles, such as those primarily for use on golf courses. Code Sec. 30D(a)(1), as in effect on the date of the Trouts' purchase, provided that low-speed vehicles could qualify for the PEVC if the vehicle was: (1) placed in service by the taxpayer in a tax year beginning after December 31, 2008; (2) acquired by the taxpayer on or before December 31, 2009; and (3) generally in compliance with the requirements of Code Sec. 30D.

The Trouts timely filed their 2009 federal income tax return and claimed a PEVC of $6,497. The IRS disallowed the credit and the Trouts took their case to the Tax Court.

Analysis

The parties did not dispute that the Spark NEV-48 EX was a low-speed electric vehicle and, for purposes of Code Sec. 30D, would not qualify for the PEVC under the more narrow definition of eligible vehicles to be applied after December 31, 2009. The IRS argued that the Trouts were not eligible for a PEVC for 2009 because the qualified vehicle was not placed in service on or before December 31, 2009. According to the IRS, the vehicle was placed in service when it was delivered in 2010. The Trouts countered that they paid for, and acquired title to, a qualified electric vehicle on December 29, 2009. They asserted that legal title passed to them on the date they entered into the purchase agreement and therefore they were entitled to a PEVC for 2009 because the vehicle was acquired before December 31, 2009.

The Tax Court sided with the IRS and held that the Trouts did not qualify for the PEVC for 2009. The statute effective on the date of purchase, the court stated, not only required that a qualified vehicle be purchased before 2010, it also required that the vehicle be placed in service on or before December 31, 2009. Thus, the court noted, the requirements for the Trouts to take the PVEC were twofold: (1) title to the vehicle had to be acquired after December 31, 2008, and (2) the vehicle had to be placed in service on or before December 31, 2009.

While noting that the term "placed in service" is not defined in Code Sec. 30D, there are other provisions that provide guidance, the court said. Specifically, the court looked to Code Sec. 38(a) and Reg. Sec. 1.46-3(d)(4)(i) in noting that property is considered placed in service when it is in a condition or state of readiness and available for a specifically assigned function. In addition, the court observed, case law required it to determine more specifically whether the asset in question was ready and available for full operation on a regular basis for its specifically assigned function. The court concluded that the vehicle purchased by the Trouts was not ready and available for full service to the Trouts until August 26, 2010, and thus they were not entitled to the PVEC.

For a discussion of the PVEC, see Parker Tax ¶101,705. (Staff Editor Parker Tax Publishing)

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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