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Washington State Rises Threshold For Electric Car Tax Exemption Program, Paves Way For 200-Mile Affordable EVs

As one of the more electric vehicle friendly states in the U.S., the Pacific Northwest state of Washington has offered its own electric vehicle incentive program for many years, helping those who buy a new electric car offset the traditionally higher sticker price associated with plug-in vehicles when compared to similar-specification gasoline vehicles. That program took the form of a sales tax exemption on all new electric vehicles, saving the average new electric car buyer more than $10,000 off list price when paired with the long-standing $7,500 U.S. Federal Tax rebate offered to all U.S. residents buying a qualifying plug-in in car.

Last year however, as part of a package to extend the state’s then-expiring tax exemption program for electric vehicles for another four years, the Washington state legislature agreed to enact a cap designed to limit the exemption to new electric cars costing less than $35,000 new. Similar to the tiered system of incentives now in operation in the state of California, the cap was designed to prevent those who could afford to buy more expensive electric cars like the Tesla Model S, Tesla Model X and BMW i3 from gaining the same tax exemption as those buying far more affordable plug-in vehicles.

The Tesla Model 3 will be one car to benefit from the new legislation.

The Tesla Model 3 will be one car to benefit from the new legislation.

But yesterday, Washington Governor Jay Inslee signed HB 2778 into law, a modification to existing Washington state electric vehicle statute designed to raise the cutoff threshold for electric vehicle sales tax exemption from $35,000 to $42,500. It’s a move that continues to prevent high-end Tesla Model S and Tesla Model X electric car customers from benefiting from the sales tax exemption but ensures that customers who sign up for a next-generation, long-range, mid-market electric car like the upcoming 2017 Chevrolet Bolt EV, next-generation Nissan LEAF and 2018 Tesla Model 3 will be able to benefit from the tax break.

“This bill will help get more Washington residents behind the wheel of a great EV,” JJ McCoy, volunteer Legislative Director for the Seattle Electric Vehicle Association said in an official statement issued yesterday. “Several exciting mid-market cars with 200 miles of range will be in showrooms soon, and Washington’s incentive will give them a boost.”

The 2017 Chevy Bolt EV will also benefit from the new rules.

The 2017 Chevy Bolt EV will also benefit from the new rules.

While HB 2778, sponsored by Rep. Jake Fey (D-Tacoma), supported across the aisle by Rep. Ed Orcutt (R-Kalama) and backed by House and Senate Transportation Chairs Rep. Judy Clibborn (D-Mercer-Island) and sen. Curtis King (R-Yakima) has already been signed into law, it won’t become effective until July 1, 2016. It will run from then until July 1, 2019 or one month after the state sells 7,500 electric vehicles that qualify for the exemption, whichever is sooner.

That, says SEVA, will likely happen early in 2018.

The specifics of the new law will depend slightly on where you live and what vehicle you buy. Under the basic text of the bill, all vehicles must be brand-new (ie, they must not have been registered before either in or out-of-state) and they must be a plug-in hybrid or electric vehicle with at least 30 miles of range and a base-model MSRP of under $42,500. This should mean by definition that someone who orders a Tesla Model 3 electric car (which Tesla says will sell for $35,000 before incentives) will be eligible for the tax exemption, even if they add optional extras and packages that push total sticker price above the $42,500 limit.

Similarly, the same should be true of customers who opt for the 2017 Chevrolet Bolt. While the range-topping model is likely to command a higher price tag than the threshold, the entry-level Bolt EV should come in far below the $42,500 limit.

SEVA cautions that Washington residents may find the tax rates vary according to local and city taxes. Nevertheless, those who buy or lease a new electric car from July 1 this year should benefit from the tax break in some form or another.

Buying a Model S or Model X? Sorry, youll still have to pay sales tax.

Buying a Model S or Model X in WA? Sorry, you’ll still have to pay sales tax.

It’s worth noting too that unlike some states — which either offer residents a mail-in rebate or tax credit at the end of the year — Washington’s electric car incentive is applied at the point of purchase. In fact, it’s one of the more simple schemes in operation as the dealer does all the extra paperwork required to qualify a customer for the sale exemption, simply knocking off the effective price form the total bill. (Sadly, unless you lease your new car, you’ll have to file for the Federal tax credit as usual).

With existing legislation offering tax exemption for cars like the Nissan LEAF, we don’t’ think there will be much of an electric car sales slowdown in the coming months. That’s primarily because the only car that will benefit from the legislation on July 1 will be the BMW i3 electric car. Come this fall when the 2017 Chevrolet Bolt is due to hit the streets however, and we think plenty will be taking advantage of this revision to Washington state incentives for EVs.

Do you live in Washington state? Do you plan on taking advantage of the new legislation? And do you think it’s going to encourage more people to plug in?

Leave your thoughts in the Comments below.


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  • TonyWilliamsSanDiego

    We are anxiously waiting for Washingron state to bring the West Coast Electric Highway to the eastern part of the state.

  • Cypress Van Horn

    Hey! That’s good news. I pinged my reps, senator, and the governor about this earlier this year when I learned of the $30K cap and suggested they should fix that.

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