Key considerations for your vehicle electrification program
The Inflation Reduction Act of 2022 is the federal government’s largest investment in clean energy and includes substantial incentives aimed at accelerating the adoption of electric vehicles in America. Although many provisions of the legislation, such as new and amended tax credits, encourage individual consumers to purchase a new or used electric vehicle, these measures can also benefit companies making a similar decision on a larger scale. ladder. The signing of the nation’s most significant climate bill has created a unique opportunity for business leaders to maximize their investments in sustainability, as well as a sense of urgency for organizations that have long considered alternatives to petrol and diesel fleets to act.
Several factors influence an organization’s decision to transition its fleet of traditional internal combustion vehicles to a vehicle program that supports corporate sustainability initiatives. Let’s explore how a company can better position itself for long-term financial, operational, environmental, social and governance (ESG) success by electrifying its vehicle program.
Reduction of organizational carbon emissions
In response to the rapidly changing emissions landscape in the United States and the resurgence of consumers concerned about the impact of their decisions on the environment, companies have set ambitious sustainability goals. While setting these benchmarks, such as becoming carbon neutral by 2030, can motivate organizations to re-evaluate their business decisions, missing these benchmarks can lead to a greater negative impact on the environment, a diminished perception of public and increased pressure from stakeholders, ranging from activists and communities. to employees and customers. Companies embarking on sustainability initiatives should begin by understanding and quantifying the carbon footprint of their vehicle programs, as it is most often the largest contributor to an industry’s carbon emissions.
By phasing out existing vehicles and replacing them with electric or plug-in hybrid alternatives, organizations will reduce their emissions while making themselves more attractive to potential and current customers, investors and employees. Additionally, as the sustainability movement continues to grow beyond consumers and up to the highest levels of government, business leaders can support the ongoing climate actions set out by the White House and the Securities and Exchange Commission. United States Exchange Commission. The Biden administration has expressed its intention to Halve economy-wide greenhouse gas emissions by 2030 while the The SEC has proposed a requirement that public companies disclose climate-related risks, financial measures and greenhouse gas emissions in their documents.
Reimburse employees for business use of their electric vehicles
Employers who have struggled with a limited vehicle inventory or who have chosen to dispose of company assets to maintain organizational agility are now reimbursing their employees for the business use of personal vehicles. This reduces overhead for business owners and provides their employees with the flexibility and comfort of driving their favorite vehicle. The Cut Inflation Act consumption tax credits are applied at the point of sale, making it more attractive than ever for an individual to purchase their own electric vehicle (EV) by reducing the obligation financial upfront and monthly recurring payment, rather than reducing a tax bill months later. These incentives include a tax credit of $7,500 for new electric vehicles and $4,000 for used models, replacing existing benefits that only applied to new electric vehicles.
Companies committed to supporting the adoption of electric vehicles within their organization can create internal incentives, such as providing cash rebates to eligible employees and electric vehicles, as they will be financially compensated by the lower costs of repayment. By supporting a transition from gas to electric among employees who drive their personal vehicles for work, companies can not only empower their employees to have a positive impact on the environment in their personal and professional lives, but it can also reduce the operational costs of driving the vehicle. , and therefore reimbursement costs. Continued volatility in fuel markets has pushed the national average for a gallon of regular gasoline at an all-time high by more than $5 this summer, the cost of a barrel of oil having almost doubled from one year to the next. This led to a mid-year increase in IRS mileage standard for the first time in over a decade. By shifting the energy source from gasoline to electricity, drivers and their employers reduce their fuel costs by more than $2,000 per year.
Understand which electric vehicles are eligible for subsidies
Several qualifiers are associated with the new tax credits for new and used “clean cars” in the Inflation Reduction Act. It is critically important for business leaders to understand how existing federal electric vehicle tax credits have changed and the timeline for implementing updated policies. The law created an adjustment period where some rules went into effect immediately, while the majority of benefits will be phased in after Dec. 31, 2022. The pre-existing federal electric vehicle tax credit, which provides a credit of $2,500 to $7,500 for vehicles with a battery capacity of at least 5 kilowatt hours, begins to disappear after the purchase of the first 200,000 eligible electric vehicles from manufacturers and will expire in 2023. Effective January 1, consumers can receive up to $7,500 regardless of how many cars were sold, which means vehicles made by Tesla, GM and Toyota will once again be eligible for the consumer subsidy if they meet all of the criteria. other conditions.
Companies interested in advancing sustainability within their organization should know the details of these caveats to identify ways to engage their employees to reduce their carbon emissions. For example, there is currently no income requirement for who can qualify for tax credits, but two main consumption restrictions will be introduced in 2023. First, the buyer must have a gross income less than or equal to $150,000 if he is a single filer. , $300,000 for married couples filing jointly and $225,000 for those filing as head of household. There is also a new limit on the final price of the model-specific eligible electric vehicle. For new vehicles to qualify, the MSRP must be less than $55,000 for sedans and $80,000 for vans, trucks and SUVs.
As business leaders continue to identify opportunities to advance sustainability initiatives and reduce their company’s carbon footprint, reducing their emissions should be a top priority. Transportation, which includes corporate vehicle programs that depend on petroleum-based fuel, continues to be the main source of these greenhouse gases. Organizations can make an immediate impact by reassessing their existing programs and switching to electric vehicles or plug-in hybrids.
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