The Treasury Department and the IRS on Jan. 10 proposed new rules on the tax credit for Qualified Commercial Clean Vehicles that was established by the Inflation Reduction Act.
Under Section 45W of the tax code, the credit may be claimed by purchasing and placing in service qualified commercial clean vehicles, including certain battery electric vehicles, plug-in hybrid EVs, fuel cell EVs, and plug-in hybrid fuel cell EVs.
The credit is the lesser amount of either 30% of the vehicle’s basis (15% for plug-in hybrid EVs) or the vehicle’s incremental cost in excess of a vehicle comparable in size or use powered solely by gasoline or diesel. A credit up to $7,500 may be claimed for a single qualified commercial clean vehicle for cars and light-duty trucks (gross vehicle weight rating of less than 14,000 pounds), or otherwise $40,000 for vehicles like electric buses and semitrucks (gross vehicle weight rating equal to or greater than 14,000 pounds).
“The release of Treasury’s proposed rules for the commercial clean vehicle credit marks an important step forward in the Biden-Harris administration’s work to lower transportation costs and strengthen U.S. energy security,” U.S. Deputy Secretary of the Treasury Wally Adeyemo said in a statement on Jan. 10. “Today’s guidance will provide the clarity and certainty needed to grow investment in clean vehicle manufacturing.”
The notice of proposed rulemaking (NPRM) issued last Friday proposes rules to implement the Section 45W credit, including:
Determining credit amount: The NPRM proposes various pathways for taxpayers to determine the incremental cost of a qualifying commercial clean vehicle for purposes of calculating the amount of Section 45W credit. For example, the NPRM proposes that taxpayers can continue to use the incremental cost safe harbors, such as those set out in Notice 2023-9 and Notice 2024-5; may rely on a manufacturer’s written cost determination to determine the incremental cost of a qualifying commercial clean vehicle; or may calculate the incremental cost of a qualifying clean vehicle versus an internal combustion engine vehicle based on the differing costs of the vehicle powertrains, Treasury said.
Clarifying requirements for qualifying vehicles and eligibility: The NPRM proposes rules regarding the types of vehicles that qualify for the credit and aligns certain definitional concepts with those applicable to the Section 30D and Section 25E credits.
In addition, the NPRM proposes that vehicles are only eligible if they’re used 100% for trade or business, excepting de minimis personal use, and that the Section 45W credit is disallowed for qualified commercial clean vehicles that were previously allowed a clean vehicle credit under sections 30D or 45W, Treasury said.
The NPRM requests comment on issues related to off-road mobile machinery, including approaches that might be adopted in applying the definition of mobile machinery to off-road vehicles and whether to create a product identification number system for such machinery in order to comply with statutory requirements.
Comments can be submitted for 60 days after the release of the NPRM. A public hearing is scheduled for April 28, 2025.
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Tags: IRS, Legislation, Taxes
