House Passes Bill to Prolong 'Cash for Clunkers'

The U.S. House of Representatives passed a bill Friday afternoon to give the popular, week-old Car Allowance Rebate System (CARS) program, or “Cash for Clunkers”, an additional $2 billion.  The program, which provides credits for the owners of old gas guzzlers to purchase newer, more fuel-efficient cars, had almost run through its initial $1 billion allotment.

Today’s congressional action would give the CARS program a chance to continue through its November 1 expiration date.

The money will come from funds in the already-passed economic stimulus package that were intended for energy loan guarantees. Congress will seek to replenish the energy program at a later date.

“If you were planning on going to buy a car this weekend, using this program, this program continues to run,” White House press secretary Robert Gibbs said Friday. “If you meet the requirements of the program, the certificates will be honored.”

Senate leaders hope to bring the bill up next week. Conservatives who opposed both the original cash for clunkers program and the stimulus package as a whole may seek to slow the process, as might liberals who want the program’s mileage standards to be revised upwards.

Two members of the Michigan congressional delegation said the administration had told them it would continue to honor exchanges made under the program “until further notice.”

Lawmakers also want problems fixed in the way the program has been administered and and to ensure auto dealers are being reimbursed in a timely fashion. Technical glitches have made it difficult for the administration to know exactly how many exchanges have taken place and how much money has been paid out to date.

Previous Tax Topics entries about the CARS program:

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'Cash for Clunkers' possibly suspended

The federal government might discontinue its popular Car Allowance Rebate System (CARS) program, known also as Cash for Clunkers.  The program provides a credit for owners of older gas guzzlers to purchase newer, more fuel-efficient vehicles.

But the program has proved so popular,  that it may be at risk of depleting its $1 billion allotment more quickly than anticipated.

Transportation Department officials called lawmakers earlier Thursday to alert them of plans to suspend the program as early as Friday. But a White House official said later the program had not been suspended and they were reviewing their options to keep the program funded.

White House press secretary Robert Gibbs said they were working to “assess the situation facing what is obviously an incredibly popular program. Auto dealers and consumers should have confidence that all valid CARS transactions that have taken place to date will be honored.”

Dubbed the Car Allowance Rebate System, or CARS, the program offers owners of old cars and trucks $3,500 or $4,500 toward a new, more fuel-efficient vehicle, in exchange for scrapping their old vehicle. Congress last month approved the plan to boost auto sales and remove some inefficient cars and trucks from the roads.

The program was scheduled to last through Nov. 1 or until the money ran out, but few predicted it would be depleted in days. Through late Wednesday, 22,782 vehicles had been purchased through CARS and nearly $96 million had been spent.

But dealers raised concerns about large backlogs in the processing of the deals in the government system. A survey of 2,000 dealers by the National Automobile Dealers Association found about 25,000 deals had not yet been approved by the government, or nearly 13 trades per store.

It suggested that with about 23,000 dealers taking part in the program, car dealers may already have surpassed the 250,000 vehicle sales funded by the $1 billion program.

Previously, LDR distributed guidance on how Louisiana sales tax law applies to the CARS program.

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