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EV Tax Credit Guidance

On December 29, 2022, the Treasury Department and the IRS released new guidance regarding the EV tax credit that was modified by the Inflation Reduction Act. The guidance issued includes the following documents:

• FAQs for consumers on the clean vehicle tax credits that will help them better understand how to access the various tax incentives for the purchase of new and used electric vehicles available beginning January 1.  These FAQs include a link containing a list of clean vehicles that manufacturers have indicated to the IRS meet the requirements to claim the new clean vehicle tax credit beginning January 1, 2023. This list will be updated over the coming days and weeks so consumers looking to purchase a new clean vehicle in the new year should be sure to check it regularly.  
• A notice on the “incremental cost” of vehicles eligible for the commercial clean vehicle tax credit. For vehicles under 14,000 pounds, this tax credit is the lesser of $7,500, 15% of a qualifying vehicle’s cost (30% if the vehicle is not gas- or diesel-powered), or the “incremental cost” of the vehicle relative to a solely gas- or diesel-powered vehicle of comparable size and use. Today’s notice clarifies the incremental cost in 2023 for commercial clean vehicles. 
• A notice of intent to propose regulations on the tax credit for new clean vehicles. This includes definitions that will provide clarity to manufacturers and buyers around the changes that take effect automatically on January 1, such as Manufacturer’s Suggested Retail Price limits. Importantly, the notice specifies that a vehicle is considered to be “placed in service” for the purposes of the tax credit on the date the taxpayer takes possession of the vehicle, which may or may not be the same date as the purchase date. 

In addition to the above pieces of guidance, which taxpayers may rely on beginning January 1, Treasury also released a white paper on the anticipated direction of Treasury and the IRS’s upcoming proposed guidance on the critical minerals and battery components requirements and the process for determining whether vehicles qualify under these requirements. While this preliminary information is not proposed guidance, it will help manufacturers prepare to be able to identify vehicles eligible for the tax credit when the new requirements go into effect after Treasury and the IRS issue a Notice of Proposed Rulemaking in March.

For a copy of the press release, click here.

Clean Vehicle Tax Credit Guidance

Clean Vehicle Tax Credit Guidance (IR-2022-218) – On December 12, 2022, the Treasury Department and Internal Revenue Service issued a Revenue Procedure setting out key processes for manufacturers and sellers of clean vehicles.  Specifically, the guidance applies to manufacturers of vehicles eligible for the clean vehicle credit under § 30D of the Code (§ 30D credit), vehicles eligible for the credit for qualified commercial clean vehicles under § 45W of the Code (§ 45W credit), and vehicles eligible for the credit for previously-owned clean vehicles under § 25E of the Code (§ 25E credit). The processes discussed in the guidance are required for vehicles to be eligible for one or more clean vehicle tax incentives, including tax credits for new and previously owned clean vehicles, as well as for commercial clean vehicles.

For vehicle manufacturers, Revenue Procedure 2022-42 provides guidance on new rules in the tax law added by the Inflation Reduction Act on how to enter into a written agreement with the IRS and how to provide periodic written reports containing specified information related to each clean vehicle manufactured. Per the guidance, qualified manufacturers must file reports with the IRS on a monthly basis, by the fifteenth of the month. Qualified manufacturers must send an email  to [email protected] indicating their intent to submit monthly reports and the IRS will respond with instructions on how to submit their reporting information.

This revenue procedure also provides the procedures for persons selling vehicles to report specified information to the IRS for a vehicle to be eligible for the credit for new or previously owned clean vehicles.  For vehicle sales occurring in calendar year 2023 and later, Sellers must file reports with the IRS within fifteen days after the end of the calendar year (i.e., the first report will be due Jan. 15, 2024).

NOTE: This revenue procedure is not the issuance of proposed guidance with respect to the critical minerals and battery components requirements under § 30D(e). The Treasury Department and the IRS will explicitly identify when they are issuing proposed guidance with respect to the critical minerals and battery components requirements under § 30D(e).