bank "stole" my $7500 tax credit

[KERSPWR]

I got some troubling information from Mechanics Bank today. I leased my Model S with them about a year ago. A friend who also leased called me to tell me that his accountant discovered that the tax credit was applied to the bank. Yikes, so I called the bank VP and he was stunningly unhelpful indicating that they had likely already or intended to process my Federal Tax Credit as well. I informed them that was "not possible" as the rebate applies to the user/driver and the registered owner (me) not the lien holder. I informed them they couldn't possibly attest to the user requirement as they had never used or seen my car. They in effect told me to "pound sand" and stood by the opinions of their attorneys and CPAs. Well that has got me riled up a bit and I was wondering if anyone else has encountered such a brazen grab. There is no credit to me in the lease docs or any mention of them being beneficiaries of this. It is beyond sneaky to be first to the IRS and grab this. The IRS summary clearly says that it applies to lessee or buyer.

Anyone else encountered this? Advice? Am I missing something?

thx

 

[FlasherZ]

The plug-in vehicle tax credit is available to the purchaser only. If you leased the vehicle, you may not claim the tax credit because you do not own the car. Instead, what is supposed to happen is that the lessor rolls the savings from the tax credit into the lease amount.

See here for details.

The IRS says that the credit may be claimed for purchase or lease purposes, but that's just to prevent someone from purchasing the car to claim the rebate and resell the car. It doesn't mean the lessee gets to claim the credit.

 

[gameon]

First time to hear such thing and way bank VP talk to you sue them if you have time to pursue... but first dump them and go to different bank...no wonder America went downhill in 2008..bloodsucker banks...

I can totally understand if you get angry...

 

[FlasherZ]

First time to hear such thing and way bank VP talk to you sue them if you have time to pursue... but first dump them and go to different bank...no wonder America went downhill in 2008..bloodsucker banks...

I can totally understand if you get angry...

It's not the bank's fault here. If the IRS were to discover you were the lessee, it could demand that amount back in an audit.

 

[Shumdit]

I am not a CPA, but as mentioned earlier I understand that the owner of the car (which is the leasing company/bank) is who is legally entitled to the credit amount. They should have taken that into account and adjusted your lease payment accordingly up front, but if they claim they did and you can't prove otherwise you may be SOL

 

[RandyS]

It's very clear in the IRS documentation. The $7500 tax credit is only available to the original owner who purchases the car. In a lease situation, that is the lease company or OEM. Some OEMs like Nissan roll the tax credit back into the monthly payment to make it less and some OEMs aren't as generous.

A tangent issue...When you lease a car, you should try to not put down any or very much money up front. If you have an accident and total the car the very next day, your insurance will pay the car's owner (the leasing company or OEM) for the value of the car and your down payment is gone...You don't get a replacement car as part of the lease agreement.

 

[TurboFroggy]

When you lease, the real owner of the vehicle is the bank/lessor not the lessee. If you look carefully on your paperwork for the lease, you should see that there was a $7500 capitalized cost reduction in there someplace that accounts for the tax credit that should have been passed onto you by your lease company/bank.
When people lease a car like the Nissan Leaf, this is very common, and how you can effectively get the $7500 tax credit (via the cap reduction) if you don't have enough income to take the entire $7500 in a single tax year.

 

[KERSPWR]

"The vehicles must be acquired for use or lease and not for resale. Additionally, the original use of the vehicle must commence with the taxpayer and the vehicle must be used predominantly in the United States. For purposes of the 30D credit, a vehicle is not considered acquired prior to the time when title to the vehicle passes to the taxpayer under state law."

Ok so maybe I'm screwed. Above is from the IRS and I don't see how the bank could claim original use with the taxpayer. Also I am listed as the registered owner on my CA reg they are the lienholder.

appreciate the insight

 

[SFOTurtle]

"The vehicles must be acquired for use or lease and not for resale. Additionally, the original use of the vehicle must commence with the taxpayer and the vehicle must be used predominantly in the United States. For purposes of the 30D credit, a vehicle is not considered acquired prior to the time when title to the vehicle passes to the taxpayer under state law."

Ok so maybe I'm screwed. Above is from the IRS and I don't see how the bank could claim original use with the taxpayer. Also I am listed as the registered owner on my CA reg they are the lienholder.

appreciate the insight

Are you leasing or are you financing it? The way you describe it, if the Bank is just a lien holder and you are the registered owner, I'm not sure how you are a lessee.

 

[stopcrazypp]

Are you leasing or are you financing it? The way you describe it, if the Bank is just a lien holder and you are the registered owner, I'm not sure how you are a lessee.

Yes, this is the critical point. And what actually matters if in the case the bank took the credit, did they properly apply it to reducing your lease amount.

In lease terms, the "adjusted capitalized cost" part of the lease should reflect the tax credit (it'll be lower than the sales price of the car). Tax credit should be included in the "capitalized cost reduction".

 

[KERSPWR]

I leased it as a standard automotive lease.

I am listed as the registered owner on the registration and them the lienholder.

No cap cost or any credit for the rebate was given.

Ugh!

 

[stopcrazypp]

I leased it as a standard automotive lease.

I am listed as the registered owner on the registration and them the lienholder.

No cap cost or any credit for the rebate was given.

Ugh!

In California, both the lessor and lessee is on the registration for a car lease, so you can't tell for sure just because your name is on it.
https://www.dmv.ca.gov/pubs/vctop/d03/vc4453_5.htm

If what you did was a lease (meaning you are only paying monthly payment for depreciation and you have to return the car after all your monthly payments or pay a lump sum at the end to own) then I'm afraid you are SOL, as the bank is entitled to the tax credit. The only thing you might be able to do is try to get the bank to reduce the cap cost and amend your lease.

If what you did was a loan (meaning you own the car after you make all the monthly payments), then you are the one entitled to the credit (not the bank). However, if they already applied for it, I'm not sure how you can get the money back. Maybe accountants will know. I suspect it would have to be reported to the IRS and then trigger an audit somehow to invalidate their request.

 

[jayhawk]

If what you did was a loan (meaning you own the car after you make all the monthly payments), then you are the one entitled to the credit (not the bank). However, if they already applied for it, I'm not sure how you can get the money back. Maybe accountants will know. I suspect it would have to be reported to the IRS and then trigger an audit somehow to invalidate their request.

It is confusing the way you are using the term "lease" and "lien". Either you took out a loan for the car, or you leased the car. They are not the same thing. If you took out a loan, you get the $7500, if you leased, the leasing company does. By the way, I am not aware of anyone leasing a Tesla (at least Tesla won't set it up for you).

 

[markb1]

In California, both the lessor and lessee is on the registration for a car lease, so you can't tell for sure just because your name is on it.
https://www.dmv.ca.gov/pubs/vctop/d03/vc4453_5.htm

But, according to your link, the registration card should say "lessor" and "lessee", so it should be clear.

 

[Mnlevin]

I think when you sat down to work out the terms of payment the question of the tax credit should have come up. If you assumed you would get it, then you made a mistake. My question also would be who decided if this would be a lease vs a financing arrangement? If the bank told you they could finance the car for X months for Y payment with a Z down payment, or LEASE you the car for X per month with Y down then you should have asked all the questions. Another question would be "how in the world did a BANK come up with terms of the lease?" The one factor any leasing company needs to know is what will be the value of the item at the term of the lease and that was impossible to assess as this car has no historical market. I am more surprise at a Bank offering to lease you a Tesla. Their auto financing guy was pretty darn creative. But I think you are probably screwed.

 

[Lloyd]

I leased it as a standard automotive lease.

I am listed as the registered owner on the registration and them the lienholder.

No cap cost or any credit for the rebate was given.

Ugh!

Registered owner does not make you the legal owner. Sad part is that unless the leasing company has filed, and can use the tax credit, it will go lost. As a lease, the leasing company purchased the car (they are the owner) and entered into a contract to allow you to use it. Any cap cost or payment reduction HAS to be negotiated upfront with the leasing company. I'll bet they were not even aware of the credit due to the buyer.

 

[Ven Rala]

I had looked into leasing my model S through several private leasing companies, but none of them would pass on the $7500 tax credit to me, so I ended up getting a loan.Unfortunately, if you lease, the leasing company has the right to the tax credit.
You should be upset with your bank as they should have explained this to you upfront and passed on the $7500 savings to you.

 

[ItsNotAboutTheMoney]

"The vehicles must be acquired for use or lease and not for resale. Additionally, the original use of the vehicle must commence with the taxpayer and the vehicle must be used predominantly in the United States. For purposes of the 30D credit, a vehicle is not considered acquired prior to the time when title to the vehicle passes to the taxpayer under state law."

Ok so maybe I'm screwed. Above is from the IRS and I don't see how the bank could claim original use with the taxpayer. Also I am listed as the registered owner on my CA reg they are the lienholder.

appreciate the insight

That's a problem with CA's language on the Reg, The more important question is the Title: if you have truly leased the vehicle they should have the Title, with you listed as a lessee and they the lessor and the primary lienholder.

The language on the IRS applies (and it's actually in the business section) to any taxpayer, whether a company or an individual that bought the vehicle. In the case of a leased vehicle the company bought the vehicle and made an agreement for you to use it for 3 years. At this point they haven't actually sold it to you.

 

[MsElectric]

For current leases does the bank still essentially "take away" your $7,500 tax credit for acquiring a new car or do they reduce the cost of the car being leased by $7,500 (as they should)?

 

[yobigd20]

For current leases does the bank still essentially "take away" your $7,500 tax credit for acquiring a new car or do they reduce the cost of the car being leased by $7,500 (as they should)?

if they don't reduce the cost of the car by $7500 , I sure as hell wouldn't sign that lease. from what I've heard, they reduce it. definitely something to check on though so you don't get screwed.