Washington Lawmaker Pushes For Sales Tax Exemption For BMW i3 REx Buyers as New Jersey Exempts i3 REx From Sales Tax

JAN 28 2014 BY ERIC LOVEDAY 60

Build Your Own i3 REx Gets Loaded to the Tune of $56,025 - Washington Lawmaker Tries to Make i3 REx More Enticing to Buyers in the State

Build Your Own i3 REx Gets Loaded to the Tune of $56,025 – Washington Lawmaker Tries to Make i3 REx More Enticing to Buyers in the State

“We’re smarter than California,” says Washington state representative Chad Magendanz.

BMW i3 With REx Not White Sticker Approved in California

BMW i3 With REx Not White Sticker Approved in California

Magendanz says that Washington will look to take advantage of the guidelines in California that prevent the BMW i3 REx from getting the white HOV sticker (it’s still believed that the i3 REx will qualify for California’s green sticker, but those green stickers will likely run out by this summer).

Per the press release sent to us by Magendanz’ staff:

“The innovative BMW i3 is partly homegrown, with carbon fiber parts for its passenger compartment made in Moses Lake by SGL, a joint venture with BMW Group. Earlier this month the state of California said it wouldn’t offer its coveted “white stickers,” which allow unrestricted HOV-lane use, to people who buy the i3 when equipped with the gas-powered “range extender” (REx) option, despite an earlier agreement to do so. Sales of the i3 in California are expected to be negatively affected as a result, since the range extender is a critical piece to address the “range anxiety” – nervousness drivers feel when electric power gets low – that has substantially slowed adoption of electric vehicles.”

The press release continues as follows:

BMW-SGL Facility in Moses Lake, Washington

BMW-SGL Facility in Moses Lake, Washington

Magendanz, R-Issaquah, wanted to make sure Washington state policy would encourage sales of cutting-edge green cars like the i3, especially since the vehicle helped create jobs in-state. He at first assumed Washington’s sales tax exemption for electric vehicles would apply to the i3, but when he checked with the state Department of Revenue it said its interpretation of current law makes the i3 range extender ineligible for the exemption.

Now Magendanz has introduced legislation, House Bill 2671, clarifying the language of the sales tax exemption law. It would replace the current requirement that vehicles be “exclusively powered” by electricity to “directly powered,” to make allowances for the fact that the i3’s optional range extender doesn’t connect to its electric drivetrain. The bill defines “directly powered” as “the direct source of power to a vehicle’s drivetrain.”

A green car enthusiast with two electric motorcycles who’s anxious to purchase an i3 when it hits the market in April, Magendanz said Washington state has every reason in the world to promote the i3: “Washington workers helped build it. It’s good for the environment. And with our state’s growing expertise in carbon fiber production, we can become a hub for this technology of the future.”

The bill has been referred to the House Finance Committee.

*Editor’s Note: Magendanz has pledged that if he receives a sales tax exemption for purchasing the BMW i3, then he’ll donate his sales tax saving entirely to charity.

But…But…Why Not the Chevy Volt Too Then

Okay, so Washington is pushing to add the i3 REx (and only the i3 REx) to its list of sales tax exempt vehicles.  At this point we’ll immediately say that passage of such a bill will rightfully infuriate Chevy Volt owners.

Both the Chevy Volt and i3 REx Could be Driven on Gas Only If One Chose To.  So, Why Put an Added Benefit Only on the i3 REx?

Both the Chevy Volt and i3 REx Could be Driven on Gas Only If One Chose To. So, Why Put an Added Benefit Only on the i3 REx?

California’s BEVx designation was set up to allow one vehicle, the BMW i3 REx, to get special consideration.  The rules were re-written to include the i3 REx and no other vehicle that’s in production now or set to enter production at any point in the near future.

The guidelines were not adjusted to include the Chevy Volt (which has a range extender that can connect to the electric drivetrain).

We see a problem here.

Both the Chevy Volt and BMW i3 REx could be driven cross country without ever plugging in.  In theory, both vehicles could be driven indefinitely without ever being recharged.

We’re not saying that owners of either vehicle will ever drive them in such a way, but the possibility does exist (as it does for PHEVs, too).

New Jersey Takes the Lead

Meanwhile, over in New Jersey, the decision has been finalized.  The BMW i3 REx is exempt from sales tax.  The i3 REx joins all of the pure electric vehicles as being sales tax exempt in New Jersey, location of BMW’s North American headquarters.

Hmm... Wonder Wat Will Happen If I Never Charge This Again

Hmm… Wonder Wat Will Happen If I Never Charge This Again

For i3 REx buyers in New Jersey, the sales tax exemption is certainly welcome, but again there’s bound to be complaints from non i3 REx buyers.

My Take

As I’m sure you’re already aware from the tone of this article, I’m not thrilled by this tax exemption being awarded to a single vehicle.  Yes, the operation of the i3 REx is slightly different than the Chevy Volt, but theoretically both could be driven for hundreds of thousands of miles without being charged (so too could all the PHEVs out there).

Sales tax exemptions should be awarded to zero-emissions vehicles, those that can never emit CO2 pollution.  Or, to put it more precisely, BEVs.

 

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60 Comments on "Washington Lawmaker Pushes For Sales Tax Exemption For BMW i3 REx Buyers as New Jersey Exempts i3 REx From Sales Tax"

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I’m fine with sales tax exemptions for PHEVs.. Especially EREV vehicles like the BMW i3 and the Volt.

While yes, it is certainly possible to drive them on gasoline indefinitely, I doubt even 1% of drivers will wind up using them in that manner. I personally believe vehicles like these are the future of transportation for the next decade or two and we need to make sure to give any incentives to these.

In fact, I’ll go as far as to say I’d be perfectly happy if CARB dropped the requirement of zero emissions vehicles and allowed manufacturers to satisfy their quota using PHEVs. The reason is, I believe the average American consumer is more likely to embrace a PHEV at this stage than they are a pure electric. And under normal, practical daily usage they are just as good as a BEV when it comes to reducing oil usage.

Agreed. My argument is more that it needs to be either all of them (EREVs and PHEVs) or none. You can’t include just one vehicle that was specifically designed to slot into a CARB loophole (BEVx). A loophole that we’re certain BMW helped create.

It probably is not likely for people to pay more for this technology and not have a significant amount of EV only driving with the Volt or i3. But the huge difference is that the i3 can literally go twice as far as the volt on battery power alone. And its not that comfortable of a proposition to run it on gas as the Volt is. The opposite of the extreme would be a plug in with only 10 miles of range (Prius), ICE intervention would be even more pronounced.

In reality, incentive should be tied to income. And lower income should get a larger incentive. Let’s face it, most of the people buying the Tesla, BMW, Volt, Energi, etc, are higher income and would have bought without the tax credits. Remember the mass consumer market is made up of people who make under $30,000 per year. Like it or not, 43-47% do not pay federal income tax and likewise pay low to no state tax. These are the people that should get a $15000 incentive to switch, not the EE, ME, Chem E’s, etc that make $70K or more a year.

I wouldn’t have gotten a Volt if it weren’t for the Federal incentive.

Me too

The problem with that is that most lower income people either live in apartments or lack the means to put in a charger

Yes, it doesn’t sit well with me that one EREV (i3) is exempt, but another (Volt) is not.

Sure, we can argue symantec that sometimes the Volt engages an indirect mechanical linkage of one of its electric motors to the engine and the wheels, but that only results in increased efficiency. If that’s the reasoning to not include the Volt,that’s pretty ridiculous.

Also interesting they note the i3 is part home-grown as a justification to make it sales tax exempt.

The Volt is 100% home-grown guys, come on!

Do you think this is because the i3 is a serial hybrid and the Volt is a parallel hybrid? I don’t think it should make any difference.

California’s reasoning, or justification for special treatment of the extended range i3 is that the range of the i3 under gas power does not exceed the range of the car under battery power. In contrast the Volt goes ~40 miles on gas and then about 300 miles on the 9+ gallons of gas. So it was not focused on technology but simply range of the gas powered car.

The Volt, when the battery is discharged, is sometimes a parallel hybrid (at higher speeds) and sometimes a serial hybrid (at lower speeds) for efficiency. So i3 range extended MPG will probably suffer at highway speeds.

To understand the CARB program is to understand that the CARB quota was enacted to further the establishment of BEVs and to eliminate emissions, not to help consumers “embrace a PHEV” which is supposedly practically “just as good as a BEV when it comes to reducing oil usage.”

To be “smarter than California” by exempting ONE vehicle from taxation sounds more like ONE Washington political representative really wants an i3 in his garage.

Should only exempt zero emission vehicles. Simple cut and dry, gets the correct incentive in place. Anything else becomes a gray area open to lots of interpretation. If the i3 REX, why not the Volt. If the Volt why not the Ford energi, Prius plugin. If the plugin Prius, why not the regular Prius hybrid. If that one, why not any hybrid. If a hybrid, why not the start/stop capable ICE vehicles? It all becomes gray and arbitrary.

Zero emission or bust.

Perhaps it should be handled sort of like the federal tax credit.. Base it on battery capacity. I think that is a much better way of pushing the technology. If you want people to drive a lot on EV power, make the incentives require a certain size of battery. Personally, I think 8kwh is a good minimum amount. That would ensure vehicles that get the exemption have a decent sized battery pack. Or you could always stagger and it and say that 8Kwh gets 50% tax exemption and 16Kwh gets a full tax exemption.. That works for me too.

Having a minimum threshold like that is great because it would encourage the manufacturers to include a battery of at least that size, otherwise the buyer gets nothing in incentives.

Whether the car has a gasoline engine too should be irrelevant.

Cars with a good RE range get pretty generous exemptions and credits in Europe.
The idea there is that the immediate aim is to try to clear up the gunky air in cities, so as long as they can make reasonable mileage for city commutes then they will trust them to mainly be using the RE for cross country, where the air quality is not quite so dire.
Hence so many PHEVs are being announced there with 50km EV range.

Of course city traffic is very different in Europe to in the US, with average speeds lower, less freeways and shorter average commutes.

The Volt qualifies here for most things though, as does the i3 with or without the RE.

I think any EV with a AER of 70 or miles should qualify as pure EV weather or not it has a range extender. Under normal operation, an AER of 70 miles means that the car is in pure EV mode 99% of the time. While I like the Volt, under normal operation it is only an EV 80% of the time.

It appears the lack of hold mode in the i3 is due to trying to finesse California rules. If CARB denying the white sticker gets us hold mode then I think that’s a win.

Agreed.. especially if it gets us a bigger gas tank. Even another gallon or two would be a huge win.

Great write up. I think this a great move in understanding range extenders. Yes, I agree with Eric’s logic, still I am thrilled that the conversation is on the table. As for other EREVs like the Volt, I am optimistic this will work itself out in time. Bravo to the i3 for providing a vehicle that makes lawmakers scratch their heads on how to classify….

The Feds got this one right, and IMO, the states should award sales tax exemptions on battery capacity, not BEV/PHEV class.

Agree 100%.

What about Fuel Cell electric vehicles then? They’re ‘zero emission’ but don’t have a battery, or at least not a sizeable one. Like the Tucson coming out in less than 60 days: http://www.mytucsonfuelcell.com/hyundaitucson-fuel-cell-availability/

Eric, I totally agree with you. Interesting to note there was an earlier WA sales tax exemption for regular hybrid cars. I bought my 2009 Prius (not a plug-in at all) and paid no sales tax. That exemption expired several years ago. The law exempts only true BEVs (and expires this year, I believe). To add a single car is bad policy and worse since it burns gas.

Also, all this talk about HOV stickers completely ignores the fact that in WA, EVs don’t get use of the HOV lanes unless there are two or more people in the car (and in some cases, 3). Frankly, I would gladly pay the sales tax if I got to use the HOV lanes all the time.

C’mon. Since when has government been fair or honest.

Wouldn’t the 13-mile AER Honda Accord Plug-in Hybrid also be exempt from Washington sales tax, since it’s drivetrain is “directly powered” by electricity?

Yes…you’re probably right. But Honda would have to convince Washington lawmakers that the Accord PHEV operates as you describe. I doubt Honda would put the time and effort in to do that.

The way I understand the Honda system is that it is similar to the Volt in that it operates electric only at city speeds, and at faster speeds there is a clutch that engages so the engine can drive it directly. However, unlike the Volt it has no gearing once the ICE is engaged, so if more acceleration is needed, the clutch must be disengaged to allow the ICE to rev up and generate more electricity.

I actually really like the way Honda’s system works. In many ways it is simpler than the Volt’s yet offers most of the same benefits.

David, you’re absolutely correct. For some reason I thought the Plug-in Accord had no mode for a direct connection between the ICE and wheels. I was wrong. But in my defense, I quickly lost interest in the Plug-in Accord when I found out about the absurd $10,000 premium Honda is charging over the Accord Hybrid. 🙂

“I’m not thrilled by this tax exemption being awarded to a single vehicle. Yes, the operation of the i3 REx is slightly different than the Chevy Volt, but theoretically both could be driven for hundreds of thousands of miles without being charged”

Theoretically, someone could buy a BEV and keep a range extender in the form of a second ICE vehicle, and use their range extender every day for daily commuting. This would be stupid just like it would be stupid to spend extra money for a plug in with a significantly sized battery pack and never charge it. Also, it would be stupid for me to turn pull the disconnect switch on my solar system, which I received a state tax credit for, and which also added value to my home. These are all edge cases. If the law is bases the credit size on batter pack range or the number of EV miles these edge cases would not matter.

Going for a record in typos in the last post, btw.

No way…I’ll always have you beat.

I think his pint was electristy is one thurd the prise of gas.

Heeh…One turd you say?

The fundamental flaw that I see is basing the definitions on drivetrain. This is clearly not a clean, public policy.

The tax incentives need to be based on a uniform metric…if only we had one…oh, wait! Efficiency!!! ICEs and non-plug hybrids are rated in mpg by the EPA, and all the plugs have mpge ratings, for direct efficiency comparisons.

Therefore, I propose the following (won’t happen, too reasonable and practical):
Combined mpg or mpge = % of available tax incentives:
0-20mpg = 0%
21-30mpg = 10%
31-40mpg = 20%
41-50mpg = 30%
51-70mpg = 50%
71-100mpg = 75%
101mpg+ = 100%

For all EVs sold in the US, all but the Model S would get 100% of the tax incentives. Being rated at 89mpge, the Model S would get 75%. Ford C-Max Energi (100mpge) would get 75% of available tax incentives, and so on…

…notice I used the combined ratings, not playing 8-gear highway mileage games…I want to see real engineering, real efficiency gains.

sorry – RAV4 EV only rated at 76mpge…75%…

A pretty complete list of hybrid mpg (based on combined rating):
http://www.hybridcars.com/top-hybrid-cars-list/?sort=ASC&order=MPG%20Combined

And an equally comprehensive list of EV combined mpge:
http://www.hybridcars.com/electric-car/?sort=ASC&order=MPG%20Combined

Neither list included plug-in hybrids for some reason…

Sorry to reference a competing website, but I have not found such convenient lists on this site – I’m sorry if I’m mistaken!

As efficiencies improve, the list can slide up so that only, say, under 25mpg or under 30mpg gets 0%, etc.

Tom, I think MPGe will remain esoteric. It get really far from reality when the Volt fleet, for instance, reports 60-90% all-electric miles. No way that’s fair to its “95 mpge”.

So, some measure of charge sustain, or simple gas mpg’s should be coupled with battery capacity, IMO. Driving patterns that go for the watts, that tend to be short, or sometimes even end up with destination charging, all make MPGe less accurate.

GE has some good graphics, showing how little REx engine efficiency matters. I wish the EPA observed:
http://visualization.geblogs.com/visualization/evs/

A solution to the heavy “pattern dependence”, instead of MPGe was put forward by Fueleconomy.gov. Its a nice model specific calculator on what your profile will save you in costs:

http://www.fueleconomy.gov/feg/Find.do?action=phev1Prompt

So? Some people get 60mpg in a Prius, while others get 40mpg with the same model and year.

You cannot control how people drive (how much electric vs. how much gas). You can only go by how efficient the car is on a standardized test.

Again, more EV range will mean higher efficiency for all those various hybrids, which also enables those owners to more easily avoid gas, so the end-result is better efficiency = better incentives.

Thanks for the links – very well-done websites, from what I’ve seen so far.

This would be flawed since it doesn’t take into account EV range, so cars that on average would have a much lower EV range (PIP) could easily get higher credits than cars that don’t.

How is that possible? More EV range will result in higher EPA efficiency range (unless you’re going for performance like the Model S).

And different models would be assessed on their own – incentives for the i3 would be high for the EV version and lower for the REx version since the REx version will invariably have lower efficiency.

Basically, my point is that the 21st century economy is energy, and efficiency is the future. There are about as many hybrid drivetrains as there are manufacturers, so the laws become unnecessarily complex when trying to keep up with it. Who cares what they do, as long as it is more efficient?

Volvo has a hybrid that has a gas engine feeding one axle and an electric motor with batteries feeding the other axle. It has different modes of operation so that the driver can control the amount of battery capacity for city driving within the zero emission limits of some EU cities.

How would you rate that under these ridiculous laws? Apply a standard efficiency test and rate it according to the results. Simple. Effective. No room for idiotic loopholes, no wiggle-room for wheeling and dealing…which is why such a law will never happen…

And remember that efficiency means less waste. The more efficient a vehicle is, the less emissions it will have.

I still recommend keeping and increasing emissions regulations, but generally speaking, emissions will follow efficiency.

A plug in can have a very short range and/or not be able to operate at highway speeds under without mixed range use, yet still have a high mpge rating for that VERY LIMITED ev usage. Under what you propose, such a vehicle could have a higher tax credit than a vehicle that is capable of operating in full EV mode for many more miles, and save much more gas.

I”m not following this – it’s a combined rating! It covers the gamut of NORMAL operation! Exceptional, rare operating modes are not going to be able to fake a combined mpge result.

The worst line from the article, describing the lawmaker in question: “A green car enthusiast with two electric motorcycles who’s anxious to purchase an i3 when it hits the market in April…” Sounds like he wants to save himself some money. I wish I had the power to not pay sales tax on big ticket items I purchase.
Everyone should buy him a Springsteen song on iTunes: Born in the USA!

Glad you caught that line. I was considering not putting it in because it sure makes him look bad, but hey we roll how we please here, so who cares if the Washington lawmaker looks bad. My guess? They won’t send us the press release next time. Oh well.

Actually, if the bill passes I’ve pledged to donate my sales tax savings to charity.

…but I probably am guilty of pandering to the state’s largest carbon fiber manufacturer.

Glad to see you join the conversation Chad. The charity donation is honorable. I’ll add that into the post.

Not sure why Volt should get sales tax exemption – given that they decided to make the engine directly drive the wheels after saying so many times that it won’t happen.

For those talking about how the feds got it right – it is obvious that the rules were written such that Volt got the max tax credit. I’d have said – at least 24 kWh battery to get the max credit 😉

The origins of the $7500 credit go back to Bush’s 2007 state of the union address, and later the Energy Improvement and Extension Act, prior to the known battery pack size for the Volt or Leaf.

That said, you can agree with the concept of tying the amount of a credit, rebate, or sales tax exemption based on the capability of the battery or the rated EV miles, and not have to agree with the exact points that the Federal Credit break down.

I bet GM knew what size battery they were going to put in. 16 kWh – and not a round figure like 15 or 20, gives it away.

Outlander PHEV is directly powered by electric motors only up to 120km/h, then the gasoline engine becomes directly connected to the drivetrain. So effectively, at all legal speeds its directly powered by electric motors only.

Great discussion. It’s probably worth mentioning that the original language in Washington state statute applied the tax exemption to any vehicle “exclusively powered” by electricity, and we expected the 100% electric drive train on the BMW i3 REx to qualify. Should it really matter if the source of the electrons is a two-cycle generator? How about if it’s a coal power plant in Centralia?

This bill just proposes changing “exclusively powered” to “directly powered” for clarity, since the Dept. of Revenue really was hard pressed to differentiate the i3 REx from a Chevy Volt, which has the gas engine mechanically connected to the drivetrain and a much more limited EV range (only 35 miles).

At a high level, the intent of the original bill was to promote clean alterative fuels, and I believe the change stays true to that intent. Range anxiety has substantially slowed adoption of BEVs, and the power output of the REx isn’t even enough to keep up with the power load at 60 mph. People aren’t going to be regularly driving around at reduced speeds refilling a 2 gal tank every 50 miles.

Chad, You might be interested in this surprising study: http://green.autoblog.com/2013/11/24/when-chevy-volts-go-more-electric-miles-than-nissan-leafs/ Personally I think Chevy did an excellent job with the Volt drive-train, balancing EV vs. usability. In the real world it turns out Volt drivers are driving 75% on pure Electric (per the above article). As a Volt owner I’m personally tracking 92% pure EV miles. The fuss being made about the fact that the Volt REx can sometimes connect to the drive-train is really miss-guided. First, it’s only 25% of the time on average in REx mode (again per the article above). Second, while in REx mode it’s actually very limited times when the REx will assist in propelling the car. Such cases are severe acceleration, going up a mountain and perhaps extremely high speeds (although I’ve never experienced this, I have experience the other two). Otherwise the Volt is being propelled by the Electric motor – even in REx mode. So let’s say for gins 5% of the time it’s helping to drive the car while in REx mode (which is probably too much really!). So that’s 5% of 25% which is only 1.25% of the total use! Does 1.25% of the time really matter THAT much?