Lawmakers contemplate state tax credit to ease electric vehicle, appliance purchases

Thinking of going electric? There’s a tax credit for that.

Whether you’re considering buying an electric vehicle (and installing a charger in your garage) or trading in that old gas stove for an electric, the federal Inflation Reduction Act signed into law last year offers a variety of rebates to cover some of the price of your purchase.

And now Minnesota might give you a tax credit on top of it.

Sponsored by Rep. Jeff Brand (DFL-St. Peter), HF810, as amended, would create a refundable tax credit of up to $2,000 for certain energy-efficient home improvements, renewable energy systems and electric vehicles.

On Thursday, the House Taxes Committee laid the bill over for possible omnibus bill inclusion.

The bill contains three categories of qualifying expenditures: appliances, large improvements, and energy efficiency measures. Up to $1,000 from each category could be included in the $2,000 limit.

Rep. Jeff Brand

Qualifying appliance expenditures would include electric vehicle residential chargers, heat pump water heaters, induction ranges, and smart thermostats. Among the qualifying large improvement expenditures would be air-source heat pumps, ductless mini-split heat pumps, electrical service panel upgrades, electric vehicles, energy storage systems, ground-source heat pumps, photovoltaic devices, solar water heaters, and, thanks to an amendment adopted at the hearing, wood-burning appliances approved by the Environmental Protection Agency.

“This will give folks an incentive if they were kind of teetering,” Brand said. “But maybe it will offer more incentive to folks who weren’t quite able to reach that affordability range.”

The Department of Revenue estimates that the bill’s provisions — which would sunset at the end of 2027 — would reduce the state’s General Fund by $48.8 million in fiscal year 2024 and $50.2 million in fiscal year 2025.

Rep. Kristin Robbins (R-Maple Grove) compared the bill unfavorably to one laid over by the committee earlier in the meeting: HF915. Sponsored by Rep. Matt Norris (DFL-Blaine), it would expand Minnesota’s education tax credit, more than doubling its income-based phaseout from $33,500 to $70,000, and increasing the maximum credit from $1,000 to $1,500. Robbins noted that HF915 would reduce the General Fund by only $11.1 million and called the larger total from HF810 and its higher income-based phaseout a case of misplaced priorities.

“The return on investment is much larger for the education credit,” she said.

Rep. Bjorn Olson (R-Fairmont) questioned whether the Revenue Department’s estimates would be accurate. He said that some estimate the budget impacts of similar measures in the Inflation Reduction Act will cost the federal government four times more than what was originally projected.

But the discussion came around to climate change, which the bill is designed to help slow by reducing the state’s greenhouse gas emissions.

“This is an impending crisis,” said Rep. Andy Smith (DFL-Rochester). “If we don’t spend this money now in the form of tax credits to make ourselves more efficient, it’s going to cost us a lot more in the long run.”