The Department of the Treasury and the Internal Revenue Service have issued two items of guidance on the excluded entity restriction of the section 30D clean vehicle credit, as amended by the Inflation Reduction Act. Under the excluded entity restriction, vehicles are not eligible for the clean vehicle credit if the battery contains battery components manufactured or assembled or applicable critical minerals extracted, processed or recycled by a foreign entity of concern (FEOC).

The proposed regulations provide definitions and proposed rules for qualified manufacturers of vehicles to determine eligibility for the clean vehicle credit regarding the excluded entity restrictions. In particular, the proposed regulations provide rules for determining whether applicable critical minerals (and their associated constituent materials) and battery components are FEOC compliant, meaning such materials do not violate the excluded entity provision.

Revenue Procedure 2023-38PDF provides procedural rules for qualified manufacturers of new clean vehicles to comply with the reporting, certification, and attestation requirements regarding the excluded entity restriction, under which the IRS, with analytical assistance from the Department of Energy, will review compliance with the excluded entity restrictions. In addition, this revenue procedure updates and consolidates the procedural rules for qualified manufacturers with respect to the clean vehicle credit, the previously-owned clean vehicle credit, and the qualified commercial clean vehicle credit.