A funny thing has been happening with the $7,500 plug-in electric vehicle tax credits that GM has been dangling before prospective buyers of its Chevrolet Volt: In many cases dealers rather than customers have been getting the tax breaks.

The tax credits are supposed to go to buyers of the vehicles to stimulate demand for alternative energy cars. But instead, dealers have been able to claim the tax credits by selling the Volt to each other and then reselling the vehicles as used cars to customers, with low mileage on the odometer. Technically, the tax credits are supposed to go to the buyers, but it isn’t illegal for the dealerships to claim them. However, they are supposed to inform customers that the tax credit is not available to them when someone else is claiming the credit for that car.

Last week, the Los Angeles Times reported that some dealerships in California are selling the Volt to customers for up to $20,000 more than GM’s $41,000 suggested retail price, making the tax credits an even more necessary incentive for buyers. GM is claiming that the cars are in high demand, which would make sense given the recent spike in gasoline prices. As gas prices are starting to head back down, though, that may well temper demand for the vehicles. The cars are supposed to get the equivalent of 93 miles per gallon on an electric charge, or 37 on gas.

Nevertheless, as Mark Modica of the National Legal and Policy Center first noted on the NLPC’s blog, the cars are readily available, and GM is nowhere near up to producing them at capacity. Modica also wrote in a follow-up post that the car maker claims to be able to produce 17,000 Chevy Volts per year, but it managed to sell only about 425 per month in the first four months of this year. You can find a link to a Fox Business video and to the NLP blog posts about the issue on the TaxProf blog here.

GM told Automobile magazine and Motor Trends that the two dealers identified by the NLPC so far have been forthcoming to their customers about the tax credits being claimed, and that some of the dealers who have been selling the cars as used don’t have the right to sell them as new anyway. One was a Kia dealership and the other wasn’t allowed to sell the car as new in Illinois, which is apparently outside the Volt’s “launch markets.”

Be that as it may, it’s easy to imagine that many auto dealers would be less than forthcoming about whether the tax credits could be claimed, and would encourage customers to go ahead and claim the tax credits anyway.

It isn’t clear if the IRS has the ability to closely track which vehicles have had the tax credit claimed more than once. The NLPC noted that the IRS form for the tax credit currently lacks a space for a vehicle identification number and suggested that the IRS add a space on the form to keep the credits from being claimed twice.

If double-claiming of tax credits for hybrid electric plug-in vehicles becomes a problem, the IRS may decide to not only revise the forms, but also start requiring taxpayers to document that they bought the vehicles as new and that the dealer has certified that the tax credit hasn’t already been claimed. That could be an extra record-keeping burden for accountants and tax preparers to worry about, but it could also keep their clients from being penalized for claiming tax credits that a dealer has already claimed for himself.

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