With so much going on in the dealership world, it is easy for items like filing deadlines and tax credits to fall by the wayside. While these mundane things can often get lost in the shuffle, keeping these items at the forefront is imperative. They can potentially result in heavy penalties for missed deadlines or lost opportunities for dealers to save money.
As we are still early in the new year, it is the right time for a refresher on several key tax and filing requirements happening in 2024. Here are four that you want to keep in mind.
Beginning January 1, 2024, individuals purchasing a new or used electric vehicle (“EV”) can transfer the related federal income tax credit, up to $7,500 for a new vehicle or $4,000 for a used vehicle, to the dealership at the point of sale and immediately receive the benefit of that tax credit as part of the deal. Previously, customers purchasing an EV could only apply for the credit on their individual federal income tax return, forcing them to wait up to a year or longer after purchasing the vehicle to realize the tax credit benefit. While claiming the credit on their own tax return is still an option for customers, it is not nearly as beneficial as the new advance payment option.
The IRS requires dealerships to register with their online portal for the advanced payment option and for customers claiming their tax credit. Per the IRS, once registered and approved online, a dealership is reimbursed for any advance payments requested within 72 hours. This quick turnaround ensures any cash flow impact at the dealership is negligible. Registering for the advanced payment option will keep your dealership competitive, as many dealers plan to participate in the program.
The Inflation Reduction Act of 2022 (“IRA”) reestablished the Alternative Fuel Vehicle Refueling Property Credit under Section 30C of the Internal Revenue Code (“IRC”). It extended the life of the credit through December 31, 2032. Businesses were eligible for the revamped credit beginning
January 1, 2023. The IRA also amended the tax credit limit up to $100,000 per EV charger for installation projects completed after December 31, 2022. The revised credit is now capped at 6% for depreciable property unless certain prevailing wage and apprenticeship requirements are met during the property’s installation. The credit can increase to 30%. To qualify for the credit, the qualifying property must also be installed in a population census tract in a low-income community or non-urban area.
In January 2024, the IRS released Notice 2024-20, which provides guidance about whether a dealership is in an eligible census tract and frequently asks questions about the eligible census tracts. To supplement the potential tax credit on EV charger installation, dealerships should also check with their local electric company, as many offer financial assistance packages for installation as well.
The Corporate Transparency Act (“CTA”) was enacted into law by Congress in 2021 and requires certain “reporting companies” to report information to the Financial Crimes Enforcement Network (“FinCEN”). The law went into effect as of January 1, 2024, although companies that already existed as of January 1, 2024, have until January 1, 2025, to file their first report. FinCEN projects that this filing requirement will affect over 32 million businesses in the first year. The law was enacted to help prevent lawbreakers from engaging in corruption, money laundering, fraud, drug trafficking, tax evasion, and other criminal activities via anonymous shell companies.
A “reporting company” is defined as a corporation, LLC, or other entity created by filing a document with a secretary of state or any similar office under the law of a State or Indian tribe. Certain foreign companies must also report. The additional reporting requires each reporting company to provide beneficial ownership information, including the name, date of birth, residential address, and driver’s license or passport number (including copies of these documents) of their beneficial owners. Beneficial owners include those who exercise substantial control over the reporting company or those who own or control at least 25% of the reporting company’s ownership interest.
There are 23 exemptions from this law, including large operating companies that employ more than 20 full-time employees in the United States, have an operating presence at a physical office within the United States, and have filed a Federal income tax or information return in the United States for the previous year demonstrating more than $5,000,000 in gross receipts or sales. For auto dealerships, the operating company of the dealership may be exempt from reporting. Still, realty companies or other related LLCs will likely be subject to the reporting requirements of the Corporate Transparency Act. Not complying with the CTA could result in daily fines of $500 up to a $10,000 maximum and potential
jail time.
Similar to the Corporate Transparency Act, Form 8300, Report of Cash Payments Over $10,000Received in a Trade or Business is another tool used by FinCEN to deter those who are engaged in nefarious financial activities. As of January 1, 2024, certain businesses that receive payments over $10,000 in cash must electronically file their Form 8300s rather than file it on paper. This requirement applies to businesses that file at least ten information returns of one or more types in 2024 other than Form 8300. The additional information returns may include items such as W-2s or 1099s. With Form 8300 filing commonplace at auto dealerships, ensuring your dealership is filing correctly is crucial.
Participating and abiding by these new regulations is critical to remain in good standing with the government while thriving in the competitive business environment that 2024 will surely bring.
*Disclosure – This article is not meant to be financial or professional advice. The dealer should evaluate its options with its accountant or other financial advisors to develop a prudent approach.
For more information on this topic, please contact a member of our team.
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