In a pair of cases (Trout v. Commissioner, TC Summary Opinion 2015-66 and Podraza v. Commissioner, TC Summary Opinion 2015-67) the Tax Court applied the standard of “placed in service” to determine if the taxpayers in each case properly claimed a credit for purchase of an electric vehicle.
In both cases the taxpayers were racing to acquire a low speed electric car for which a credit could be claimed under IRC §30D as in effect at that time. The taxpayers needed to meet the requirements by December 31, 2009 because, as the Court noted:
After December 31, 2009, the definition of qualified motor vehicles would effectively exclude low-speed vehicles from eligibility for a PEVC. As a result, a taxpayer who intended to claim a PEVC for a low-speed electric vehicle must have been in compliance with the provisions of section 30D on or before December 31, 2009. [Trout v. Commissioner]
Of course the number of people racing to obtain these vehicles before the end of 2009 would not necessarily be fewer than the supply of available vehicles at that point—and it appears these taxpayers may have run into that problem.
In both cases the taxpayers ordered and submitted payment for an electric car before the end of 2009. Both received an acknowledgement of their order along with the vehicle identification number (VIN) of their specific vehicle and, by agreement, the title to the vehicle passed to the taxpayers. But in both cases the vehicle itself wasn’t delivered to the taxpayers until the summer of 2010.
The provision in the law provided that a credit was available if:
· The vehicle was acquired by the taxpayer on or before December 31, 2009 and
· Placed in service on or before that date
The IRS objected that while the taxpayers may have acquired the vehicles before that date, the vehicles were not placed in service until the taxpayers actually received them the following summer.
The Tax Court noted the following regarding the definition of “placed in service:”
Although "placed in service" is not explicitly defined for purposes of section 30D, other sections of the Code provide guidance. Section 38(a) provides a business credit against tax with respect to property in the first taxable year in which qualified property is placed in service by the taxpayer. See also sec. 1.46-3(d)(4)(i), Income Tax Regs. Property will be considered placed in service when it is in a condition or state of readiness and availability for a specifically assigned function. Id. subpara. (1)(ii); see also Consumers Power Co. v. Commissioner, 89 T.C. 710 (1987) (referring to investment credit for purposes of section 38(a)). [Trout v. Commissioner]
Looking at the issue, the Court found a real problem existed noting:
…[T]he terms and conditions expressly stated that the vehicle order would be submitted to the manufacturer after payment was received by Drive Electric. Although the actual date of production is unknown, petitioners received the finished vehicle on August 26, 2010. Consequently, the Court must find that the vehicle was not ready and available for full service to petitioners until August 26, 2010. Because the vehicle was not placed in service in 2009, petitioners are not eligible for a PEVC for that year. [Trout v. Commissioner]
So while it seems very likely that the vehicles did not exist at December 31, 2009, the Court also noted that mere existence would not be enough. As the Court noted in the Podraza opinion:
Petitioners have not offered evidence to show the vehicle was available for their use, much less fully manufactured. In fact, the vehicle was not delivered until June 8, 2010, making it impossible for the vehicle to be available for use until that date. Even if the Court were to assume the vehicle was fully manufactured and operational while awaiting shipment to petitioners, Brown and Noell tell us that the vehicle could not be considered placed in service unless and until the vehicle was readily available to serve its assigned function for petitioners' personal use on a regular basis.