What Volkswagen’s Recent Scandal Teaches Us About Tax Credits

Written by Darren Labrie, CPA. Updated Oct 29, 2015.

What Volkswagen’s Recent Scandal Teaches Us About Capturing Tax CreditsVolkswagen’s (VW) recent emissions-rigging scandal has its proverbial foot firmly rooted in the automaker’s use of a federal tax credit (the advanced lean-burn technology motor vehicle credit) intended for fuel-efficient cars.

On the heel of certain allegations came an admission from VW that they installed “defeat devices” in nearly 500,000 diesel vehicles in the U.S. that emit far more exhaust pollution than is legal. The automaker had installed the devices on as many as 11 million vehicles worldwide between 2009 through 2015.

The Burden Of Responsibility


With the use of defeat devices, this raises the question of whether VW made false claims to the U.S. government, certifying that certain car models met emissions standards needed to claim the $1,300-per-vehicle tax credit. The automaker could face penalties of up to $18 billion from the Environmental Protection Agency (EPA).

Without the benefit of a federal tax credit or subsidy, Volkswagen was caught in a difficult situation of affording to meet regulatory standards on emissions while still promoting their diesel vehicles as having good fuel economy at a lower price. It’s been suggested that lack of government assistance to help reduce carbon emissions from their vehicles in the first place is what ultimately led VW to use advanced software to skirt EPA emissions tests.

Why You Must Have A Process In Place For Capturing Tax Credits

As your business considers pursuing corporate tax credits and incentives, the VW scandal sheds light on an important fact: You must ensure you’re able to back up every tax credit claim you make to the IRS.

Often, business owners don’t have time to endure the arduous documentation and reporting involved in capturing tax credits. However, skipping steps and avoiding issues is going to result in an audit, in which your business may be subject to devastating penalties and interest.

When claiming a federal corporate tax credit, any mistakes or misinformation you certify to the government could directly affect more than just your business. The benefit is reported on your business’s tax return and flows through to your investors and shareholders as well.

Partnering With An Outsourced Tax Consultant

A penalty to the tune of $18 billion is enough to scare any business away from capturing federal tax credits. However, if you don’t attempt to capture potential tax credits, you’re leaving a substantial amount of money on the table that your business may qualify for.

While you may not be an expert in how to capture corporate tax credits, you should consider partnering with an outsourced tax consultant who has years of experience in the industry.

With a tax expert by your side, no stone is left unturned as you identify and work toward capturing tax savings opportunities. As your tax consultant applies their process to pursuing corporate tax credits and incentives, they are also benchmarking, monitoring and managing progress along the way.

Having an outsourced tax consultant’s level of expertise at your disposal provides peace of mind that everything is being done precisely according to IRS rules and regulations. With their support and guidance, you’re able to successfully capture valuable credits while still focusing on other equally important business operations.

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Topics: R&D Tax Credit, Employment Incentives, Training Incentives, Property Incentives

Darren Labrie, CPA

Written by Darren Labrie, CPA

Darren brings more than 20 years of experience in tax credits and business incentives. In his current role, he focuses on the overall operations of the practice and ensuring the highest level of service to clients.