Posts Tagged tax incentives

In Illinois? Want a Brammo? Get Best Buy on it.

Brammofan is on the Tax Incentive Warpath.  We’ve looked at Colorado, California, and, just yesterday, Oklahoma.

Today, it’s Illinois’ turn.

Disclaimer: Don’t get your tax or other financial advice from anyone whose online name ends in -fan.  This means: do your own homework on this purchase.  I’m just trying to get you to think.

Before we begin, close your eyes and imagine walking into your favorite Chicagoland Best Buy.  The doors open, beckoning you inside.  To your left is Stu, the burly guy who normally checks your receipt as you leave.  As you enter, he also would put a magic sticker on the laptop you were bringing to Fred, the Geek Squad guy, for him to repair and copy the hidden porn directory onto his thumb drive.  Stu sizes you up as you enter and sees you have no merchandise in your hands.  He notices that you are looking straight ahead.  He sees your eyes focus on the display in the front of the store: Electric Vehicles at Best Buy.  Specifically, he sees the look of ecstasy as you spy this:

Now, open your eyes.

You’ve gotten a glimpse at the future in Illinois, but I have no idea when that future will become our reality.  Until it does, none of the tax incentive information I’m about to share will apply to the Enertia.  Why?  Read on, and all will be revealed.

Illinois has a great program called the “Alternate Fuels Rebate Program” that states:

Vehicle Rebate applies to the incremental cost of an alternate fuel vehicle purchased from a dealership or similar vendor as compared to the cost of its gasoline or diesel counterpart.  The vehicle must be purchased from an Illinois dealership or similar company doing business in Illinois.

The amount of the Vehicle Rebate is for 80% of the incremental cost of the alternate fuel vehicle versus the same type of gasoline or diesel vehicle, up to $4,000.

Translation:  If you buy an Enertia from an Illinois dealership or similar company, you should qualify for a rebate for 80% of the difference in cost between the Enertia and “the same type of gasoline or diesel vehicle.”

Brammo has claimed, fairly consistently, that the Enertia is comparable to a 250cc internal combustion engine (ICE) motorcycle.  For instance, the Ninja 250R has a suggested retail price of $4300 – $4500.  The “incremental” cost of the Enertia would be $7995 – $4300 = $3695.  In other words, an Enertia buyer is paying a $3695 premium to get an electric motorcycle, rather than a comparably-powerful ICE motorcycle.

The rebate would equal 80% of $3695, or $2956.  The Federal tax credit is $799.  7995 – 2956 – 799 = $4240.

So the out-of-pocket on the retail price of the Enertia would be $4240 . . . PROVIDED, however, that you bought it from an “Illinois dealership or similar company.”  So far, no such dealerships exist in Illinois.

There are plans to roll out the Enertia to select Best Buy stores in Illinois.  Those plans are dependent upon powerful Best Buy people who wear ties almost every day,  like Kai Patel, the Executive Vice President of Emerging Business, and Rick Rommell, the Senior Vice President of Emerging Business. Because I’m certain they read my blog each day, I’ll ask them to reply in the comments to the question, “When will the Enertia be sold in Illinois Best Buy stores?”

Just to sprinkle a little rain on your happy thoughts of the future, I want to remind you that certain taxes and fees may apply to your Brammo Enertia purchase in future-Chicago.  For example, Illinois has a 7.25% sales tax on items to be titled or registered, but if you lived in Chicago, you’d end up paying about 8.5% in sales tax. That would add about $680 onto the cost.  In 2009, the Federal stimulus bill allowed you to take an income tax credit for your sales tax on vehicles purchased that year, but this law has lapsed.  I don’t know about fees such as registration/title/license fees that might be charged, but you should consider that.  Also, you’ll have to insure your Enertia, buy a great helmet, protective hear, a hefty stick to beat off admirers, and electricity.

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Oklahoma – Time to buy a Brammo Enertia

UPDATE: Looks like Oklahoma amended the statute and phased this out after July 2010.  Sorry, Okies.

 

We’ve talked about California and Colorado and the tax incentives that those states have for electric vehicles (including the Brammo Enertia electric motorcycle).  I know your next question:

What about Oklahoma?

Oklahoma.  Imagine riding an Enertia and actually being able to hear it when the wind comes right behind the rain.  Imagine being able to smell the waving wheat, which can sure smell sweet, at least when you aren’t overcome by the smell of burning fossil fuels.

Oklahoma, the state where, every night, your honey lamb and you can sit alone and talk about one of the best tax incentives for electric vehicles in the United States.

Disclaimer: Don’t get your tax or other financial advice from anyone whose online name ends in -fan.  This means: do your own homework on this purchase.  I’m just trying to get you to think.

Let’s start at the beginning:

Oklahoma Statutes Title 68, Section 2357.22 – “One-Time Credit Against Income Tax for Investments in Qualified Clean-Burning Motor Vehicle Fuel Property.”  With an alluring title like that, you know you’re in for a treat if you did a little deeper, right?  Here’s the basic language, followed by my translation:

For tax years beginning before January 1, 2015, there shall be allowed a one-time credit against the income tax imposed by Section 2355 of this title for investments in qualified clean-burning motor vehicle fuel property placed in service after December 31, 1990, and for investments in qualified electric motor vehicle property placed in service after December 31, 1995.

Translation: Buy a Brammo? Get a tax credit.  Oklahoma does not discriminate against motorcycles – the law says that a motor vehicle has to be “originally designed by the manufacturer to operate lawfully and principally on streets and highways.”

Question: How much is the credit?  Again, here’s the basic language, followed by my translation:

There shall be a one time credit allowed for . . . investments in qualified electric property. The credit shall be 50% of the cost of . . .  qualified electric motor vehicle property as defined in Title 68 O.S. Section 2357.22 and Rule 710:50-15-81.

Translation: Buy a Brammo? Get a $3997 tax credit (50% of the $7995 cost of the Brammo Enertia).

Question: How do I get this tax credit?  (Do I have to do everything for you?  Okay, here you go, but please keep it to yourself — if Ms. Brammofan finds out about this, she might make me do the taxes this year) When you are filling out your State Income Tax forms, you would grab the “Other Credits” form (Form 511CR) and fill in Line #3 with this number: 3997.  You will also need to attach a copy of the paid invoice for the vehicle.

Question: When do I get my check?  Okay, Einstein, you don’t really “get a check,” as this is not a rebate like you would get if you lived in California. Rather, it reduces the amount you would have to pay in Oklahoma State income tax.  So, for example, if you owed $10,000 in Oklahoma State Income taxes for 2010, then this tax credit would reduce your tax liability to $6003.00.  And, if you couldn’t use the tax credit all in one year because your income tax liability was less than $3997, the law allows you to use it over the course of three years.

Question: So, my final out of pocket cost on the Brammo Enertia in Oklahoma is $3997? No, it’s actually better than that.  You still get the Federal tax credit of 10 percent the cost of the bike: $799.  So. . .

7995 (Cost of Enertia) – 3997 (Oklahoma tax credit) – 799 (Federal tax credit) = 3199.

$3199

Before you celebrate by going to brammo.com/store ,  there are some other variables to consider: Brammo charges a shipping charge of “$500 or less” plus applicable taxes.  According to this chart, Oklahoma charges 4.5% on sales.  That would add about $360 to the initial out-of-pocket cost.  There may be other fees and taxes I don’t know about (like county and city taxes), but let’s assume you get the full $500 delivery charge plus the $360 sales tax.  That would bring the initial out of pocket to: 7995 + 500 + 360 = 8855.  Applying the tax credits to that amount (8855 – 3997 – 799) = 4059, which is still pretty awesome.

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Brammofan-tasy: Lowest Out-Of-Pocket on a Brammo Enertia (hint: move to Colorado)

After all the tax credits and discounts and incentives and gift cards are applied, and your new Brammo Enertia is parked in your garage, what’s left in your wallet?  It depends, of course, on where you live. And where you bought it.  And who you bought it from.

Disclaimer: Don’t get your tax or other financial advice from anyone whose online name ends in -fan.  This means: do your own homework on this purchase.  I’m just trying to get you to think.

United States of America

Let’s assume for the sake of simplicity and Ameri-centrism, that you are a citizen of the U.S.  You have just bought a Brammo Enertia powercycle, and it cost $7,995.  (Note: by waiting until the middle of November, you already saved $4,000.)

Thanks to the Federal Government, you are eligible for a tax credit on 10 percent of your purchase price.  This isn’t a rebate, so you don’t get the “benefit” of the money until you file your income tax return for the year.  Since we’re looking at ultimate out-of-pocket, let’s go ahead and credit that amount: 10% of $7995 is $800 (we’re rounding up) which brings the out-of-pocket to: $7195.

Let’s also lump the state sales taxes and any excise taxes you might have had to pay here.  At least for Enertias purchased before December 31, 2009, you will get to take a deduction for those taxes.  Here, it gets a bit sloppy as it’s a deduction, not a credit, so it doesn’t directly subtract from your tax liability… rather, it acts as a decrease in the amount of your gross income.  I can see your eyes glazing over, so let’s just pretend that we’re not going to have to worry about sales taxes, okay?

State Tax Incentives

I’m not going to give 50 examples of how you may be able to decrease your out-of-pocket cost depending upon your state, but I do want to mention one noteworthy example. (Really good 50 state starting point is here.)

Colorado:

Colorado has an amazing tax credit that may save you big bucks.  Recently, there was a news report that if you bought a Tesla in Colorado, you could get a $42,000 state tax credit.  Lots of “ifs” here: Had to purchase by December 31, 2009, had to be a resident of the state, had to purchase from a manufacturer or vendor in the state, etc.  So… how might it apply to the purchase of a Brammo?  Bear with me, as it’s a bit circuitous, and that big disclaimer definitely applies here: I am not a tax expert, a tax attorney, or anyone you should give any more credibility to than the Sham Wow guy.

IF you bought your Brammo from Best Buy in Colorado . . . Alright, here’s our first hurdle.  None of the Best Buys in Colorado actually sell the Brammo.  But lets say, for the sake of our BrammoFantasy here, that you could order the bike from the order desk of your local Colorado Best Buy, and have it shipped to that store.  (Surely they must be working on something like this).  You give them the check for $7995, they give you the bike.

Another “if”: If a two-wheeled vehicle is eligible for the tax credit.  I’ve looked at the law and it’s much more confusing than it needs to be.  In one part it says that a “light duty vehicle” does not include a two wheeler.  However, the operative language of the tax credit just says the credit applies to a “motor vehicle” and that term refers to a vehicle that is required to be licensed and registered to operate on the highways of the state.  Thus, it does not appear to limit the credit to two wheelers.  One astute person suggested “take the credit” and let them try to prove that two-wheelers aren’t included.  Ah yes, the ol’ “it’s better to ask for forgiveness than to ask for permission” school of thought.  (It’s good that I can just theorize, rather than actually have to pull something like this off in practice.)

Okay… stay alert… we’re almost to the good part.

According to the Colorado law, for an electric (zero emission) vehicle, you can take a tax credit of 85% of the cost of the vehicle, up to a $6000 ceiling, but “the total amount of any Federal tax credits or other incentives combined with the state tax credit cannot exceed […] the difference between the actual cost and the cost of a similar traditional fueled vehicle.

Breaking it down . . . The total amount of any Federal Tax Credits or other incentives = $800
the state tax credit ($6000=the ceiling, because 85% of $7995 is greater than $6000)
“Combined” $800 + $6000 = $6800
“the difference between the actual cost ($7995) and the cost of a similar traditional fueled vehicle” ($?) Let’s take a $3500 assumption on a 250cc Ninja. $7995 – $3500 = $4495. So… wouldn’t the max Colorado credit be $4495? Bringing the cost of the bike to… 7995 – 800 – 4495 = $2700.

$2700

Holy crapballs.  Pardon my French.  Now we’re talking chicken feed, right? I mean, this guy’s white shirt probably cost more than that.

BUT WAIT!

I know what you’re thinking. ” But Brammofan, surely it can’t get better than this?”

Just hold on to your butts.  The ride’s not over.

Remember that check for $7995 that you handed over to Best Buy?  You didn’t really pay by check, did you?  Of course you didn’t.  You used your Reward Zone card, didn’t you? So you basically earned $5 for every $250 you spent at Best Buy.  So you ended up with an extra $160 you can spend at Best Buy, bringing that $2700 down to $2540.

$2540

(Disclaimer - It's not a real ad. It's just a BrammoFantasy)

So, Einstein… how much are you going to be saving at the gas pump this year because you’re not driving your Landcrusher back and forth to work?

Hey, Judy…how much money are you going to save because guys are buying all your drinks so they can sit next to the “Powercycle Chick” at the biker bar?

Just some questions to ponder this week as you get ready to do your Christmas shopping.

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