We thought cash for clunkers was the ultimate waste of taxpayer money, but as usual we were too optimistic. Thanks to the federal tax credit to buy high-mileage cars that was part of President Obama's stimulus plan, Uncle Sam is now paying Americans to buy that great necessity of modern life, the golf cart. The federal credit provides from $4,200 to $5,500 for the purchase of an electric vehicle, and when it is combined with similar incentive plans in many states the tax credits can pay for nearly the entire cost of a golf cart. ...
This golf-cart fiasco perfectly illustrates tax policy in the age of Obama, when politicians dole out credits and loopholes for everything from plug-in cars to fuel efficient appliances, home insulation and vitamins. Democrats then insist that to pay for these absurdities they have no choice but to raise tax rates on other things—like work and investment—that aren't politically in vogue. If this keeps up, it'll soon make more sense to retire and play golf than work for living.
When someone told me that the federal government pays a tax credit for the purchase of a golf cart, covering one half to two-thirds of the cost, I was suspicious. The source is a Wall Street Journal Article: Cash for Clubbers, Wall Street Journal, Oct. 17, 2009. The article mentions a "Golf Cart Man", offering to lease and eventually purchase golf carts from individuals who buy a golf cart and apply for a tax credit. The golf cart purchaser ends up $2,000 richer in the Golf Cart Man's scheme. While the Wall Street Journal is a reliable source, I decided to try and check the information against the actual statutes, regulations, rulings and notices.
The article may be referring to IRS Private Letter Rulings holding that golf carts qualify for the electric car credit under 26 USC 30, if they are street-legal. See IRS Private Letter Ruling, 200005004, 2/07/2000 and Private Letter Ruling 200005003, 2/07/2000.
The article also appears to be referring to 26 USC Section 30D, which creates the tax credit. IRC section 30D was enacted by the Energy Improvement and Extension Act of 2008, Pub. L. 110-343, 122 Stat. 3765. However, 26 USC 30D(c)(5) requires that the vehicle be acquired for use or lease by the taxpayer and not for resale. 26 USC 30(D)(e)(1) refers to a definition of "motor vehicle" as manufactured primarily for use on public streets. Notice 2009-54, I.R.B. 2009-26 states that a low speed vehicle must not be "manufactured primarily for off-road use, such as primarily for use on a golf course."
While the language of the statute appears to exclude golf carts, numerous golf cart dealers' web sites claim that the IRS has authorized certain models to receive the credit. This could be true. The prospective cart purchaser should ask to see an IRS acknowledgment letter before they buy. See Notice 2009-54, I.R.B. 2009-26.
The 2009 American Recovery and Reinvestment Act, 111 P.L. 5; 123 Stat. 115; 2009 enacted H.R. 1, section 1141 made amendments effective for vehicles acquired after December 31, 2009. It appears to extend the termination date, reduces the maximum credit to $7,500 regardless of weight, changes the phase out rules and makes other changes. See RIA Checkpoint's Analysis of the American Recovery and Reinvestment Act of 2009, Section 1002.
While the Wall Street Journal article appears to be mostly true, I question their statement that the golf cart credit is an example of "tax policy in the age of Obama". It appears this tax credit was originally created before Obama took office.