The U.S. Treasury Department and the Internal Revenue Service (IRS) issued guidance last week on certain clean vehicle provisions of the Inflation Reduction Act.
The information is designed to provide greater clarity to consumers and businesses so that they can access tax benefits from the law’s clean vehicle provisions when they became available on Jan. 1, 2023.
One of the documents is frequently asked questions (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 on Jan. 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 starting Jan. 1.
Another piece of guidance is 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 percent of a qualifying vehicle’s cost (30 percent 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. This notice clarifies the incremental cost in 2023 for commercial clean vehicles.
Finally, Treasury and the IRS released 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 on Jan. 1. In addition, 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.
Further, Treasury released a white paper on the anticipated direction of the 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. This 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.