In support of Ford and Tesla, the Treasury Department is changing tax rules for electric vehicles, making it easier to qualify an SUV.



CNN

Is the Ford Mustang Mach-E an SUV? How about the Tesla Model Y? Depending on which branch of the US government you ask, the answer may be “Yes”, “No”, or “It depends”.

Now with new rules for electric car tax breaks in place, this response could mean thousands of dollars for some car buyers and big bucks for automakers’ profits. Under the new rules, car buyers cannot claim tax credits for vehicles over $55,000. But for SUVs, the sticker price can be as high as $80,000. Until now, the Treasury Department has treated the Mustang Mach-E as a car, not an SUV, for tax credit purposes. Same with the Tesla Model Y, unless it was equipped with a third row of seats.

However, if you search for electric SUVs on the EPA’s FuelEconomy.gov website, you’ll find that both of these models will show up in your search no matter how many seats they have. The tax rules seemed to defy both common sense and what the EPA was saying. As such, the Treasury Department announced on Friday that it is changing things up so that the Treasury Department’s definition of an SUV now meets the “appeal to consumer” standard that the EPA uses on fuel economy labels and on its website.

Previously, the Treasury Department relied on vehicle definitions used by the National Highway Traffic Administration to govern corporate average fuel economy rules. The so-called CAFE vehicle definitions are often different from what the average American might think based on the shape of the vehicle. Also, under the CAFE definitions, the same vehicle can be defined as an SUV if equipped with certain options, but as a vehicle without those features.

The Volkswagen ID.4 will be considered an SUV under CAFE if equipped with all-wheel drive, but a car if not. According to the standards usede EPA for your websitethese cars are SUVs, no matter how they are equipped.

“This change will allow crossovers that have similar characteristics to be consistently processed,” the Treasury Department said in a statement.

However, not every vehicle that an automaker markets as an SUV is necessarily compliant. For example, the Chevrolet Bolt EUV retains the $55,000 cap, even though GM called it a crossover version of the Bolt hatchback. The lines separating cars from SUVs are blurry in many cases, said Chris Harto, senior policy analyst at Consumer Reports.

“In many cases, they are just hatchbacks and wagons with slightly better marketing,” he said.

People who purchased a vehicle from January 1, 2023 and were not eligible for the tax credit under the old rules can now claim it, the Ministry of Finance said in a statement. According to the Ministry of Finance, no vehicle loses eligibility due to this rule change.