5 things to know about updated EV charging tax credit and more

Published by
Peter Kavinsky

Article by Samantha Houston, Senior Vehicle Analyst for the Alliance of Concerned Scientists’ Clean Transportation Program.

The Inflation Reduction Act (IRA) provides a tax credit that can be used for electric vehicle charging infrastructure. You may have missed it because its name is a little wordy and doesn’t contain the words “electric” or “charging”. The loan is called a real estate loan for refueling alternative fuel vehicles. Essentially, this means a loan for businesses or individuals investing in infrastructure that is used to refuel vehicles running on certain so-called alternative fuels, which include electricity. For the sake of brevity, I’ll call it the Alternative Fuel Infrastructure Tax Credit.

Why now and why in 2032?

The Alternative Fuel Infrastructure Credit has been around for some time after several rounds of expiration and renewal. The most recent renewal expired at the end of 2021. Due to the intermittent nature of the availability of credit, it was difficult for some individuals and fee collection companies to rely on it. This loan is important currently as well as reliably for the coming years because it is one of our tools to accelerate the decarbonization of the transport sector, a necessary step to limit global warming and prevent a climate catastrophe. Electric vehicles, trucks and buses are a key technology for reducing warming emissions and harmful local air pollution, and these vehicles need easily accessible charging infrastructure. We need federal support for electric vehicle charging, as well as additional policies at all levels to increase the number of zero-emission vehicles and reduce the need to drive and haul goods.

What’s the news?

It’s worth noting some important changes to this credit from the previous version, and it’s nice to see some of the updates reflect changes that UCS has been championing for quite some time. The five key changes to the letter of credit include:

1. Long term confidence. The upgraded alternative fuel infrastructure loan runs until the end of 2032, meaning the loan will provide reliable and long-term support for the charging infrastructure. Confidence in the availability of credit is something that has been lacking lately. A commitment to a ten-year tax break will go a long way in accelerating and sustaining the transition to electric vehicles over the next decade.

2. Increasing the business cap. This credit update clarifies that it applies to every one item qualified fueling property (for example, each charger) and adjusted the maximum credit amount for business property. Credit for chargers installed for commercial purposes is six percent of the value of the property (30 percent if certain requirements are met, see figure five below) and the cap has been raised to $100,000 per unit. The increased dollar limit means the credit could provide more efficient DC fast charging, the speed needed to service long-distance drivers and heavy trucks with very large batteries. Meanwhile, credit for drivers installing chargers at home remains the same at 30 percent, with a cap of $1,000 per unit.

3. Bi-directional chargers and chargers for 2- and 3-wheel electric vehicles are compliant.. The updated loan expressly allows bi-directional charging equipment as a qualified infrastructure for the loan. This is important because it encourages charging station operators to consider bi-directional charging so that vehicles have the ability to export energy to a local load or to the electrical grid. These capabilities are critical to allow vehicles to provide backup power to facilities or maintain a stable grid operation, including the integration of renewable energy sources. Notably, participating in network support can be an income generating opportunity for drivers and charging operators. The upgrade also includes the right to use infrastructure that caters for two- and three-wheeled electric vehicles that operate on public roads, giving drivers more options when choosing a vehicle that suits their needs.

4. Targeted support for low-income and rural areas. The credit update adds a qualifying requirement that the charging infrastructure must be located in low-income Census areas or outside of the city. It is hoped that this tax credit provision will target those most in need of supporting the charging infrastructure. However, locating charging infrastructure in low-income and non-urban areas is not ideal for meeting the charging needs of drivers living in those areas, or for electrifying commercial vehicles operating in those areas—say, a truck delivering packages to a specific area. A nearby charging station may be financially unaffordable for drivers due to the high cost of charging if the station is built with high power fast charging only. Powerful fast charging costs more to install and operate, and it usually costs more to cover the high costs. Additionally, limiting payment options to memberships or certain types of card readers may also exclude some drivers, especially those that are unserved or underbanked. For commercial vehicles, vehicles that do most of their mileage in low-income or out-of-town areas may be charged at a depot that is outside of those eligible areas. Care will need to be taken to ensure that these cases are supported by other policies and programs so that drivers in such circumstances are not left behind in the transition to electric vehicles.

5. Support for a highly skilled workforce. The revised IRA adds prevailing salary and training requirements that increase the loan amount for qualified projects established as commercial property. Attaching these wage and apprenticeship provisions to an increased loan amount can help create a flow of highly skilled workers and incentivize higher wages, which can attract road contractors, create economic benefits for communities, and more.

big picture

As noted above, the Alternative Fuel Infrastructure Credit is just one tool in our collective toolbox for addressing warming emissions and local air pollution. Combined with electric vehicle and commercial truck tax credits, other additional IRA provisions, and investments in electric vehicle charging, electric vehicles and school buses, etc. under the Infrastructure and Jobs Investment Act; federal policy has forced the transportation sector to move rapidly towards an electrified future that we must achieve as quickly as possible.

Originally published by the Union of Concerned Scientists, The Equation.

Related Story: 10 Big Benefits of Cleantech in the Inflation Reduction Act


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Peter Kavinsky

Peter Kavinsky is the Executive Editor at cablefreetv.org

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