Cash for Clunkers
Volume 2009 / Issue 14
June 23, 2009
On June 18, the Senate passed H.R. 2346, the Supplemental Appropriations Act of 2009 and it is now on the way to the White House for the President's expected signature. The bill includes a provision known as “cash for clunkers”, which gives a cash incentive for individuals and businesses to trade in older gas-hogging vehicles for new, more fuel-efficient ones. The incentive takes the form of a voucher of $3,500 or $4,500 depending on the type of vehicle traded in and the fuel efficiency of the vehicle purchased. The new vehicle would have to be purchased between July 1 and November 1 of 2009. The $3,500 or $4,500 vouchers are not to be treated as gross income for purposes of the Code, or for federal or state assistance programs.
Trade-in vehicles eligible for the voucher program are those that at trade-in time: are in drivable condition; have been continuously insured and registered to the same owner for at least one year; were manufactured less than 25 years before the trade-in date; and in the case of an auto, achieve a CFE of 18 mpg or less. A single person may get only one trade-in voucher and only one voucher is available for joint registered owners of a single eligible trade-in vehicle.
The voucher, which will be sent by the Treasury to the dealer, will offset the new vehicle's purchase price or lease price for a qualifying lease. A qualifying lease is a lease of an auto for at least five years. The selling dealer must use the voucher in addition to any other rebate or discount that it advertises or the manufacturer offers, and the voucher can't be used to offset a rebate or discount. There are other restrictions on the dealer, such as having to scrap the traded-in vehicle, except for certain salvaged parts.
A total of $1 billion is allocated to the trade-in initiative (less $50 million for administration of the program).
Within 30 days of the enactment date, Treasury is to provide details and requirements relating to the program, including a comprehensive list, by make and model, of new fuel efficient autos meeting the requirements of the voucher program.
