13 July 2023
The federal government extended electric vehicle tax credits up to $7,500 as part of the massive Inflation Reduction Act last year. And this year, Minnesota lawmakers passed a new rebate up to $2,500 of their own, hoping to significantly reduce the up-front price of an EV and stimulate a market in Minnesota that has lagged behind many other states.
This is just one of an array of new rebates and tax credits for carbon-free technology in Minnesota greenlit by DFL legislators. But the cost of the EV program in Minnesota — $15.7 million — makes it among the most expensive and prominent initiatives. It has also drawn lots of attention from both interested consumers and Republican lawmakers critical of the program’s lack of income caps.
“The dealers are getting calls from consumers about it,” said Scott Lambert, president of the Minnesota Automobile Dealers Association. Lambert’s organization advocated for a rebate despite its opposition to stricter auto emissions standards implemented by Gov. Tim Walz. “We think incentives are better than mandates.”
The Minnesota Department of Commerce has not yet launched the program for doling out rebate money. That means some details are still unclear. But for now, here is what we know about the EV rebates and who can get them.
How much is the rebate?
The rebate for a new electric vehicle — purchased or leased — is $2,500. For a used car, it’s $600.
What types of cars are eligible?
Not just any EV. A new EV is eligible for a rebate if the car has a base retail price (MSRP) suggested by the manufacturer of $55,000 or less. That price does not include taxes and fees. A used EV is eligible if the car costs $25,000 or less.
The most common EVs on the road in Minnesota, by far, are the Tesla Model Y and Tesla Model 3. The newest version of the Tesla cars have a base price below $55,000, according to Kelley Blue Book, though vehicle prices can shift often.
Plug-in hybrid vehicles also count as electric vehicles that are eligible for the rebate.
While people are allowed to pair a federal tax credit with a Minnesota rebate, far more EVs appear eligible for the state rebate. That’s because the feds require vehicles to be assembled in North America and there are other rules for where certain parts and minerals for batteries can be sourced from. The Minnesota law does not include any similar restrictions.
If I already purchased my car, is it eligible?
It depends on when you bought it. If you bought an EV on May 25, 2023 or later, it can qualify for the rebate, according to the Department of Commerce.
Who is eligible for a rebate?
Minnesota residents are eligible for the rebate, but so are businesses operating in Minnesota with a state address, nonprofit corporations, as well as cities and counties. There is no cap on income for the Minnesota rebate, unlike the federal tax credit.
However, those people and entities aren’t eligible if they have already received a state tax credit or rebate for the purchase or lease of an EV before. The vehicle must also be registered in Minnesota.
About $10.7 million of the rebate money is paid for with fees levied on Xcel Energy for the storage of nuclear waste. And it’s reserved for people within the utility’s customer service area. The remaining $5 million is only for people outside of Xcel territory. That means there’s a smaller pool of money in the many parts of Greater Minnesota not served by Xcel, but perhaps less competition.
How many rebates can we get?
The rebates are limited to, as the law states, one “per resident per household,” which appears to mean just one for every state resident. The rebates are also limited to one per business per year.
Do I have to apply for the rebate?
Maybe.
On the one hand, a fact sheet released by the Department of Commerce says the agency will review applications for rebates on a first-come, first served basis once its program is launched. And since people who purchased or leased a vehicle after May 25 are eligible, it’s safe to assume those buyers would have to apply retroactively in some fashion for a rebate.
On the other hand, the law also says Commerce must develop a way for people buying and leasing EVs to get a rebate at the point of sale, so the rebate would simply be subtracted from the selling price. That’s what the auto dealers expect, though the question is not settled.
“It is supposed to be ‘point of sale,’” Lambert said. “It’s a question of does the person apply or does the dealership apply for the person? That’s a big detail that we’re trying to sort out with the state.”
Are there other rules on eligibility?
Possibly. There is one potentially huge loophole in the rebate law. It allows state officials to reduce the rebate amounts or put new restrictions on eligibility based on the availability of money “or other factors.” That means Commerce could theoretically end up with a much different rebate program than what was passed by lawmakers.
How many rebates can this pay for?
Maybe not as many as people who would like to buy EVs. Commerce hasn’t released an estimate of the number of rebates it may be able to hand out. And it’s difficult to speculate given the rebate amounts will vary based on whether vehicles are used or new, or if state officials alter the program in any way.
However, $15.7 million is enough for nearly 6,300 rebates of $2,500. That’s presuming the state awards zero rebates for used vehicles, which won’t happen. Either way, the number of rebates will be relatively small in the scope of total cars sold in the state. Lambert said dealers sell or lease about 17,000 new vehicles every month, though only a small fraction are EVs.
And the state estimated in late June that there were about 39,722 total EVs on the road in Minnesota. The cash could be used up within 30 days, he said.
Am I even guaranteed a rebate if I buy an EV?
Nope. The amount of money in the program is limited.
Lambert said there’s even a possibility that all the rebate money will be accounted for by the time the program is operating, since cars have been eligible for rebates since May 25.
“Based on what’s happening we can’t guarantee that there will be money available once the program is launched,” Lambert said.