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Some Volt dealers take tax credit for themselves

Some dealers apparently are gaming the system to claim a $7,500 tax credits for themselves on the new Chevrolet Volt, which is on sale in only a few markets and in limited supply.
Image: Transportation Secretary LaHood And EPA Head Jackson Make Fuel Economy Announcement
An enlarged label shows fuel economy information for a 2011 Chevrolet Volt. GM sold fewer than 500 Volts in May as it slowly ramps up production.Alex Wong / Getty Images

If you’re desperate to get yourself into a Chevrolet Volt you might make a visit to the Kia dealer in Glendale, Calif. Though most Chevy dealers in the seven initial launch markets for the plug-in hybrid claim to be on back order, three “used” Volts are sitting on the Kia dealer’s lot.

But don’t expect much of a bargain. True, the asking price of $39,995 is a modest discount off the $41,000 sticker price. But a salesman at the suburban Los Angeles showroom said he did not believe the three Volts would qualify for the $7,500 federal tax credit allocated for buyers of new battery vehicles.

The salesman's comment suggests there is truth to reports that some dealers are gaming the system to claim battery car tax credits for themselves, as first reported by a conservative think tank called the National Legal and Policy Center.

“Many Volts with practically no miles on them are being sold as ‘used’ vehicles, enabling the dealerships to benefit from the $7,500 credit supplied by the American taxpayers on each car,” NLPC’s Mark Modica said in a blog post on the practice. “The process of titling the Volts technically makes the dealerships the first owners of the vehicles, which gives them the ability to claim the subsidies. The cars are then offered to retail customers as ‘used’ vehicles."

Modica, a former Saturn dealership manager, said in an interview he was reluctant to call the process a “scam,” preferring to describe it as “gaming the system.” Though it may technically be legal, “it is not right,” he said.

Exactly how many Volts have been sold from one dealer to another, and how many of them have taken the tax credit, rather than passing it on to consumers is uncertain. Modica suggests the number could be in the dozens.

A spokesman for General Motors acknowledged that the company is aware of 10 instances when one dealer sold a Volt to another retailer -- though it insists it has not confirmed a single instance where any of those dealers have taken the tax credits. But and others have found clear evidence that this has happened on one or more occasions

“The notion that this is rampant is a misnomer,” said Rob Peterson, who handles public relations for the Volt.

Peterson stressed that in at least half of the cases the company is aware of, Chevy dealers in one of the launch markets — which include California, Texas and Michigan — sold a Volt to a dealer in a state where the vehicle will not be offered until later this year.

In one case an Atlanta dealer purchased a Volt from a Chevy store in New York and has been using the plug-in hybrid to demonstrate the technology to his customers, hoping to build demand once GM starts distributing Volts in Georgia. In that case the dealer who sold the Volt would clearly qualify for the tax credit, according to several sources.

But in the case of the Glendale dealer, the rules are a bit murkier.

A spokesman for the Internal Revenue Service declined to comment beyond pointing to the language of the tax code passed by Congress to help promote the sale of battery vehicles. According to Title 26 Section 30D, a vehicle qualifies for the credit when:

(a) The original use (of the vehicle) "commences with the taxpayer," or
(b) The vehicle "is acquired for use or lease by the taxpayer and not for resale."

That would suggest the Glendale dealer would have to lease out the vehicles rather than sell them to qualify for the tax credit.

Peterson said GM “strongly discourages"  dealers from the pocketing the tax credit on battery cars but added, “There’s nothing we can do. They’re independent franchisees.”

Is there something anyone can do? Consumers, of course, could simply looking elsewhere for a Volt that qualifies for a tax credit, especially if they’re willing to wait, though some early adopters are clearly desperate to get their hands on the plug-in hybrid.

Dealers are already making out well. Auto data tracking site shows that the average buyer is shelling out $42,070 for a Volt, a solid grand over sticker.

Dealers are required by law to disclose whether a vehicle already has been titled or whether  the tax credit already was applied for.

Still, consumers could inadvertently apply for a second tax credit on the same vehicle. Complicating matters, the federal form used to request the credit does not require a vehicle’s VIN, or vehicle identification number, something that would seemingly make such duplications difficult.

In fact, the Treasury's inspector general for tax administration revealed earlier this year that as much as $33 million in improper battery car tax credits had so far been claimed, as much as $7 million of that figure considered unrecoverable.

That is clearly worrisome, though it is debatable whether the “gaming” of credits for the Volt, as NLPC’s Modica puts it, should also be cause for concern. The center has taken an activist position in opposition to the 2009 federal bailouts of General Motors and Chrysler. And Modica lost his job when his Saturn dealership closed.

Those facts do not necessarily mean his report was unfairly biased. But he clearly has a thumbs-down attitude towards the Volt, insisting that “retail sales are dismal.”

It’s true that Chevy has been selling less than 500 Volts a month, fewer than half the number of Leaf battery-electric vehicles sold by rival Nissan. But GM has insisted all along that there would be a slow “ramp-up,” reflecting the complexity of the vehicle and the need to ensure both line workers and dealers can handle the new technology.

Paul Harriman, an Ann Arbor, Mich., artist and designer, had been told he wouldn’t be able to take delivery of a Volt until late 2012 or even 2013. But he is hoping that might be accelerated now that GM has announced plans to boost production after the factory in Detroit returns from its summer break.

The current production rate will triple to around 16,000 Volts annually, something that would seem unjustified if the pent-up demand wasn’t there, said several analysts.

At least initially, though the question is whether buyers will continue to wait in line longer-term — especially if dealers were to keep the tax credit for themselves.