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House Ways And Means Markup Of Build Back Better

Let's Avoid Unnecessary Costs And Complexities

Let’s Avoid Unnecessary Costs And Complexities

The House Ways and Means markup of the Build Back Better Act (H.R. 5376) has over 120 tax changes included. This includes a lot of energy credits. Subtitle G on Green Energy is laid out in 257 or the 2466 pages of legislative text. The cost estimate over ten years from the Joint Committee on Taxation is $235 billion. In comparison, the social safety net provisions in Subtitle H cost almost four times as much, but will likely provide benefits to those more than in need than for the energy credits.

For example, there is a new refundable credit proposed at new IRC §36E for the purchase of an electric bicycle costing up to $5,000 (for a $750 credit) but the bike can’t cost more than $8,000. My Google search indicates that these bikes cost under $2,000. While there likely are ones costing more, if the buyer needs the $750 credit to buy it, why not skip the credit and the complexity it will add to our tax law and the buyer can instead buy one that costs $750 less.

Here is a summary of this one credit, which easily illustrates the complexity. It is also inequitable in that the people who will claim this likely have the funds to buy the bike even without the credit. That makes it a poor use of funds – giving money to reward behavior likely to occur anyway.  And, isn’t it better to have a non-electric bike and get some good exercise and use the existing bike lanes?  I assume electric bikes can’t use bike lanes for safety reasons and it likely isn’t that safe to have them in the vehicle lanes.

The many complex rules to make this new credit possible include:

  • Equipped with: “(A) fully operable pedals, (B) a saddle or seat for the rider, and (C) an electric motor of less than 750 watts which is designed to provided assistance in propelling the bicycle and—(i) does not provide such assistance if the bicycle is moving in excess of 20 miler per hour, or (ii) if such motor only provides such assistance when the rider is pedaling, does not provide such assistance if the bicycle is moving in excess of 28 miles per hour.”
  • Original use must start with taxpayer; must be used in US.
  • Acquired for use rather than resale.
  • Made by qualified manufacturer (includes requirement that they have agreement with IRS) with appropriate label.
  • VIN must be reported on return.
  • Limited to 2 per MFJ; otherwise 1, but reduced by any taken into account for 2 preceding tax years.
  • Modified AGI (MAGI) phaseout starts when MAGI exceeds $150K (MFJ), $112,500 (HH), $75K (S).
  • Recapture if bike no longer eligible (per regs to be provided by IRS).
  • Reduce basis by credit amount.
  • Terminates for bikes placed in service after 12/31/31.

Let’s look at all of the new credits and be sure they meet principles of good tax policy including equity, neutrality and simplicity. Also, let’s be sure each has three good reasons why it is needed and that there is no alternative other than providing a tax rule. I think this exercise will reduce the size of H.R. 5376.


What do you think? Annette Nellen, San Jose State University.

Annette Nellen, CPA, Esq., is a professor in and director of San Jose State University’s graduate tax program (MST), teaching courses in tax research, accounting methods, property transactions, state taxation, employment tax, ethics, tax policy, tax reform, and high technology tax issues.

Annette is the immediate past chair of the AICPA Individual Taxation Technical Resource Panel and a current member of the Executive Committee of the Tax Section of the California Bar. Annette is a regular contributor to the AICPA Tax Insider and Corporate Taxation Insider e-newsletters. She is the author of BNA Portfolio #533, Amortization of Intangibles.

Annette has testified before the House Ways & Means Committee, Senate Finance Committee, California Assembly Revenue & Taxation Committee, and tax reform commissions and committees on various aspects of federal and state tax reform.

Prior to joining SJSU, Annette was with Ernst & Young and the IRS.

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