Federal Tax Credit

[EdmondLeaf]

Letter from the IRS said " We changed the total credits on line 54 of your 1040. Some credits are limited to the difference between your tax before credits and the tentative minimum tax from Form 6251, AMT-individuals. Although you were not liable for this additional tax, your credits were still subject to the limitations."

8936 EV credit is NOT subject to TMT, AMT
8911 EVSE credit is subject to TMT as stated in line 17

 

[zarwin]

To follow up. Spoke with someone in the 'complex tax department' at the IRS. Seems they can't see your return and can only speculate as to why something may be a certain way based on asking you questions about what is on your return. So basically I got nothing from this. The only speculation is that it might possibly have something to do with not filing the AMT form, even though they don't see any requirement for me to file that form. This makes no sense to me and I used turbo tax online which files all forms required. Something is screwed up big time. This is the correspondence I'm mailing out today with my return attached as well as other info attached:

The adjustment referenced on Notice CP12 appears to be in error. The notice states that:

“We changed the total credits on Line 54 of your Form 1040. Some credits are limited to the difference between your tax before credits and tentative minimum tax from form 6251, Alternative Minimum Tax-Individuals. Although you were not liable for this additional tax, your credits were still subject to the limitation.”

The only credit being claimed is the Form 8936 Qualified Plug-in Electric Drive Motor Vehicle Credit of $7500. This is the total of line 54.

This credit should not be reduced based on AMT or TMT as stated in section 1141 and 1144 of the Energy Provisions of the American Recovery and Reinvestment Act of 2009. See below:


Plug-in Electric Drive Vehicle Credit (Section 1141): The new law modifies the credit for qualified plug-in electric drive vehicles purchased after Dec. 31, 2009. To qualify, vehicles must be newly purchased, have four or more wheels, have a gross vehicle weight rating of less than 14,000 pounds, and draw propulsion using a battery with at least four kilowatt hours that can be recharged from an external source of electricity. The minimum amount of the credit for qualified plug-in electric drive vehicles is $2,500 and the credit tops out at $7,500, depending on the battery capacity. The full amount of the credit will be reduced with respect to a manufacturer's vehicles after the manufacturer has sold at least 200,000 vehicles.

Treatment of Alternative Motor Vehicle Credit as a Personal Credit Allowed Against AMT (Section 1144): Starting in 2009, the new law allows the Alternative Motor Vehicle Credit, including the tax credit for purchasing hybrid vehicles, to be applied against the Alternative Minimum Tax. Prior to the new law, the Alternative Motor Vehicle Credit could not be used to offset the AMT. This means the credit could not be taken if a taxpayer owed AMT or was reduced for some taxpayers who did not owe AMT.

I'll follow up again, whenever I finally get a resolution to this. Have a feeling its going to be a long long time though...

-Zarwin

Edit reference links:
http://www.irs.gov/newsroom/article/0,,id=206871,00.html" onclick="window.open(this.href);return false;
http://www.irs.gov/pub/irs-pdf/f8936.pdf" onclick="window.open(this.href);return false;

 

[EdmondLeaf]

The only speculation is that it might possibly have something to do with not filing the AMT form, even though they don't see any requirement for me to file that form.

I checked quite few credit forms, and if that credit is subject to TMT, AMT or income threshold, calculation of mentioned is right there, on that particular form. I only hope that by the time they process my return your case will be resolved.

 

[Weatherman]

I was one of the lucky ones who used TurboTax to e-file my return and quickly got the $7,500 credit back with no delays or fuss (even though my total tax liability was around $20,000 and my AMT was around $15,000). However, the IRS does have up to three years to send their little notes out recommending changes to my return.

It might be a good idea for everyone to keep printed copies of any reference they can find to Section 1141 and 1144 of the American Recovery and Reinvestment Act (preferably with an IRS banner). The law clearly states that the personal tax credit for Alternative Motor Vehicles (which the LEAF clearly is), can be applied against AMT. So, as long as your total tax liability for 2011 was over $7,500, there’s no excuse for your credit being reduced.

 

[mwalsh]

It might be a good idea for everyone to keep printed copies of any reference they can find to Section 1141 and 1144 of the American Recovery and Reinvestment Act (preferably with an IRS banner). The law clearly states that the personal tax credit for Alternative Motor Vehicles (which the LEAF clearly is), can be applied against AMT. So, as long as your total tax liability for 2011 was over $7,500, there’s no excuse for your credit being reduced.

Good tip. I just did. This pretty much makes it clear, and it's from March 12 of this year:

6. Treatment of Alternative Motor Vehicle Credit as a Personal Credit Allowed Against AMT Starting in 2009, ARRA allows the Alternative Motor Vehicle Credit, including the tax credit for purchasing hybrid vehicles, to be applied against the Alternative Minimum Tax. Prior to the new law, the Alternative Motor Vehicle Credit could not be used to offset the AMT. This means the credit could not be taken if a taxpayer owed AMT or was reduced for some taxpayers who did not owe AMT.

http://www.irs.gov/newsroom/article/0,,id=237190,00.html" onclick="window.open(this.href);return false;

 

[lpickup]

However, the IRS does have up to three years to send their little notes out recommending changes to my return.

This is the other surprising thing about everyone getting their 2011 returns examined. I also did get a letter from the IRS regarding a discrepancy on my tax return (unrelated to the EV credit). In the end the error was in fact mine, although the end result is that my refund actually went up! At first though I figured that my return was being singled out because I had claimed such a large credit, but upon looking at it more closely, it was actually for tax year 2010. Still, I figured that it must've been some kind of error and submitted my supporting documentation for tax year 2011. Then I got a call from the examiner who told me I had sent the wrong year's information. Sure enough, I had made the same mistake in tax year 2010 (and it was a real mistake on my part). The examiner told me that they were just now wrapping up tax year 2010 and wouldn't be starting on 2011 for another month or two.

I compiled and sent my supporting documentation for tax year 2010 to the examiner and they closed my case, and they forwarded my documentation for tax year 2011 to the "appropriate department". All in all it was actually pretty decent dealing with them. I feel bad that you guys are getting the run-around on your credit. Hopefully one or two of you can straighten them out and provide a reference to others having the same problem so they can get it resolved easily.

 

[zarwin]

This is the other surprising thing about everyone getting their 2011 returns examined.

Yes, I was a bit surprised that not only was it examined, but it was not due to an error and then a HUMAN error was made AFTER it was flagged to be examined (at least that's what I assume). I had nothing special on that return that would throw flags to be examined. Pretty straight forward return with very little claimed for deductions other than standard mortgage deductions. This tells me that perhaps all returns that claim the 7500 credit were flagged and hand examined? I really don't care if I was 'profiled', but at least they could have gotten it right.

Either that or the automated analysis they do is horribly flawed and applying AMT/TMT limitations incorrectly to the credit.

Edit: Just read this:
http://www.usatoday.com/money/perfi/columnist/block/2011-03-14-tax-credits-for-hybrids.htm" onclick="window.open(this.href);return false;
At the very end:
"In response[to excessive fraudulent claims of the credit], the IRS said it has beefed up scrutiny of tax returns that claim the credit."

Hopefully one or two of you can straighten them out and provide a reference to others having the same problem so they can get it resolved easily.

I certainly plan to do that as soon as I have a response back. My case should be really cut and dry since I have no other credits being claimed. IRS told me it could take as long as 45 days to get a reply, but I will certainly post what I receive here, including a reference case if such a thing exists.

I can't count the number of times I have tried to resolve a problem by reading similar problems in forums (not this one) and get to the last entry that goes something like.. "ok, cool guys, thanks for the help but I figured it out on my own and got it working!" Of course with no explanation of what the hell they did to fix the problem. Or forum entries with dozens of me-too posts for a problem and the last post is over a year old...

I'll be back!

-Zarwin

if anyone would like to contact me directly, my forum name followed by [email protected] is my email. (this is to avoid spam, so if my forum name were taco, it would be [email protected], but it is not)

 

[zarwin]

Ok, now I'm even more confused and a little concerned. Talk me down from this.

Alternative Motor Vehicle Credit is not the Plug-in Electric Drive Vehicle Credit. This is the Alternative Motor Vehicle Credit:

http://www.irs.gov/pub/irs-pdf/i8910.pdf" onclick="window.open(this.href);return false;

In there it states:

If a vehicle qualifies for the qualified plug-in electric drive motor vehicle credit on Form 8936, Qualified Plug-In Electric Drive Motor Vehicle Credit, the vehicle does not qualify for the alternative motor vehicle credit.

That's fine and all, EXCEPT... Everywhere I have found on fueleconomy.gov and IRS.gov as well as external sites that references the AMT not applying to the $7,500 tax credit for new plug-in vehicles, links back to here:

http://www.irs.gov/newsroom/article/0,,id=206871,00.html" onclick="window.open(this.href);return false;

Treatment of Alternative Motor Vehicle Credit as a Personal Credit Allowed Against AMT (Section 1144): Starting in 2009, the new law allows the Alternative Motor Vehicle Credit, including the tax credit for purchasing hybrid vehicles, to be applied against the Alternative Minimum Tax. Prior to the new law, the Alternative Motor Vehicle Credit could not be used to offset the AMT. This means the credit could not be taken if a taxpayer owed AMT or was reduced for some taxpayers who did not owe AMT.

Further, looking into the actual bill itself, I see that again section 1144 shown above and a sorta kinda somewhat tie under "conversion kits" between the Alternative Motor Vehicle Credit and the Plug-in Electric Drive Vehicle Credit, but its written in a language that makes my brain hurt.

http://www.gpo.gov/fdsys/pkg/BILLS-111hr1enr/pdf/BILLS-111hr1enr.pdf" onclick="window.open(this.href);return false; (starts on page 212)

Anyone else out there want to take a look and maybe find some hard reference/link between the reference to the AMVC and the PEDVC? Have we all just been punked by the government? I'm so confused.

 

[Weatherman]

I believe that, in looking at the text of the Act, you have to remember that it's making amendments to existing tax code, it's not establishing new law. The primary amendments refer to Section 30D and Section 30B of the tax code.

Here's a link to Section 30B:

http://www.law.cornell.edu/uscode/text/26/30B" onclick="window.open(this.href);return false;


Scroll down to subsection (g) in the above document, and you'll see the text from Section 1144 of the Act.


Section 1141 of the Act mostly deals with amendments to Section 30D. Here's a link to Section 30D:

http://www.law.cornell.edu/uscode/text/26/30D" onclick="window.open(this.href);return false;


If you scroll down to subsection (c) in this document, you'll notice it has nearly same text as is in Section 1144 of the Act and subsection (g) of tax code Section 30B, with the exception of a couple of references to other sections of the tax code.


Bottom line is that all the subsections under Part V of the Act are referring to the same section of the tax code (Section 30B and 30D), and this section of the tax code applies to all “New Qualified Plug-in Electric Drive Motor Vehicles”.

 

[EdmondLeaf]

Plug-In Electric Drive Motor Vehicle is an Alternative Motor Vehicle (period)

 

[zarwin]

Thanks Weatherman, nice to see more of a concrete connection. Trying to figure this out was starting to feel a little like i was dealing with circular references.

-Zarwin

 

[Weatherman]

Just so there's no question about the interpretation of the tax code...

Check out subsection (d) of Section 30C.

http://www.law.cornell.edu/uscode/text/26/30C" onclick="window.open(this.href);return false;

Section 30C refers to our EVSEs and we all know the EVSE credit is limited by our AMT. I highlighted the key words:

(2) Personal credit
The credit allowed under subsection (a) (after the application of paragraph (1)) for any taxable year shall not exceed the excess (if any) of—
(A) the regular tax liability (as defined in section 26 (b)) reduced by the sum of the credits allowable under subpart A and section 27, over
(B) the tentative minimum tax for the taxable year.


There's no ambiguity here. The credit is limited by the TMT (AMT), or, more specifically, the difference between your regular tax liability and your tentative minimum tax.

Tax code Section 30D applies to the LEAF. Notice the difference in the text for the personal credit:

(2) Personal credit
(A) In general
For purposes of this title, the credit allowed under subsection (a) for any taxable year (determined after application of paragraph (1)) shall be treated as a credit allowable under subpart A for such taxable year.
(B) Limitation based on amount of tax
In the case of a taxable year to which section 26 (a)(2) does not apply, the credit allowed under subsection (a) for any taxable year (determined after application of paragraph (1)) shall not exceed the excess of—
(i) the sum of the regular tax liability (as defined in section 26 (b)) plus the tax imposed by section 55, over
(ii) the sum of the credits allowable under subpart A (other than this section and sections 23 and 25D) and section 27 for the taxable year.


I can't think of anything which more clearly shows that the $7,500 tax credit for our LEAFs is not limited by the TMT (AMT). If it was, it would clearly state it, as it does in the Section 30C document.

 

[zarwin]

Further, subpart A, referred to by all of the other sections (30B/30C/30D) states:

(a) Limitation based on amount of tax
(1) In general
The aggregate amount of credits allowed by this subpart (other than sections 23, 24, 25A (i), 25B, 25D, 30, 30B, and 30D) for the taxable year shall not exceed the excess (if any) of—
(A) the taxpayer’s regular tax liability for the taxable year, over
(B) the tentative minimum tax for the taxable year (determined without regard to the alternative minimum tax foreign tax credit).

30B and 30D are excluded and 30C is not, showing 30B and 30D not having the TMT limit and 30C having it.

So now I know I'll get my credit back (they withheld half of it), eventually...

I'm going to try to summarize all this good information for others to use if needed. Thanks everyone.

 

[EdmondLeaf]

Zarwin, Weatherman thank you very much for your hard work, and proving that 8936 and 8911 were compiled correctly based on applicable law. Eventually whole EV tax credit will be ours.

 

[zarwin]

As promised, here is the document with the information consolidated:

http://goo.gl/l3w8W" onclick="window.open(this.href);return false;

pass it along and please let me know if there are any errors or missing information. You can comment on it by clicking "Comment" in the top right corner. I may add a little more to it, but am pretty sure what is there is more than enough.

-Zarwin

EDIT: The only piece I was not clear on, and it doesn't really matter that much, is where the "Qualified Plug-in Electric Vehicles" (form 8834) is referenced in the tax code. Since that is for 2-3 wheel and low speed 4 wheel, it doesn't apply to the Leaf, but could be used as a comparison since it shows a TMT requirement.

 

[TickTock]

Just got my Notice CP18 stating:

• We have delayed sending you part of your tax refund
  The refund check we mailed to you recently was not for the full amount of the overpayment shown on your tax return. We have delayed sending you the rest of your refund because we have questions about some of the items claimed on your return.
  
  There is no need to contact us at this time. We will contact you within three weeks to tell you what you need to do to explain the items in question. At that time, we will give you the name a telephone number of a person to call if you need more information about this review. If we accept your explanations of the items in question, we will not change the tax or credits on your return. We will send you the rest of your refund.
  ...

My refund deposit was exactly $7500 less then what I expected so clearly the issue is with the Leaf rebate. AMT did kick in for me this year so I guess they think I shouldn't get any of it. Not really concerned - I'm sure it will work out. Someone of authority just got confused and they are trying to sort out the mess.

 

[Weatherman]

The only piece I was not clear on, and it doesn't really matter that much, is where the "Qualified Plug-in Electric Vehicles" (form 8834) is referenced in the tax code. Since that is for 2-3 wheel and low speed 4 wheel, it doesn't apply to the Leaf, but could be used as a comparison since it shows a TMT requirement.

Form 8834 applies to Section 30 of the tax code, and you may have identified why there's so much confusion, right now. Section 30(c)(2)(B) is very clear that the tax credit is limited by the difference between your regular tax liability or your AMT (whichever is greater), and the sum of most of the credits under Subpart A.

http://www.law.cornell.edu/uscode/text/26/30" onclick="window.open(this.href);return false;

However, Form 8834 limits your credit by the difference between your regular tax liability and your AMT. In order to do this, the tax code would need to be written as it is in Section 30C(d)(2).

http://www.law.cornell.edu/uscode/text/26/30C" onclick="window.open(this.href);return false;

Unless there has been a recent change to the tax code, it sure looks to me that tax form 8834 is wrong.


Edit: Form 8834 is not wrong.

If you were filling out this form, you would need to be careful to stop at line 23 (the conclusion of Part I), which is where you would transfer the information to Form 1040. Don't go on to Part II. There is no TMT limitation in Part I, just like the tax code (Section 30) says.

 

[astrorob]

My refund deposit was exactly $7500 less then what I expected so clearly the issue is with the Leaf rebate. AMT did kick in for me this year so I guess they think I shouldn't get any of it. Not really concerned - I'm sure it will work out. Someone of authority just got confused and they are trying to sort out the mess.

i'm sure it will. i received CP18 as well but as it turns out, they have held back the amount of my foreign tax credit (which is pretty small). the full $7500 EV credit was given to me.
we may have deducted the foreign tax credit twice by accident since it shows up on the AMT form and then again in the list of credits on the main form 1040. i suspect that taking the EV credit automatically flags your return for review, and so they noticed this mistake.

i wonder if this is a regional IRS thing. what city do you send your tax returns to?

 

[TickTock]

Phoenix

 

[harryjpowell]

Good news on the "AMT" reduced credit! I sent in an amendment 1040X for something unrelated and included a note that I believed they incorrectly reduced my Form 8936 credit stating some AMT reason. I said that the 8936 credit was not subject to any reduction and asked them to re-calculate my return.

Waited for about 2 months and got my 1040x change in a a check and I called about the 8936. After 30 min on hold the lady said well it looks like there is a 4k credit on your account. She said I guess they agreed with your 1040X question. Well two weeks later bam, direct deposit in my checking from the IRS...

Finally, Form 8936 7,500 paid in full now!

There is hope for those waiting!