The IRS has issued proposed regs regarding the Code Sec. 30D new clean vehicle credit. (Preamble to Prop Reg REG-120080-22, IR 2023-64, Fact Sheet 2023-8)
The Inflation Reduction Act (PL 117-169, the Act) allows a maximum credit of $7,500 per vehicle, consisting of $3,750 in the case of a vehicle that meets certain requirements relating to critical minerals and $3,750 in the case of a vehicle that meets certain requirements relating to battery components.
The proposed regs say that the critical mineral and battery component requirements will apply to vehicles placed in service on or after April 18, 2023.
New clean vehicles placed in service on or after April 18, 2023, are subject to the critical mineral and battery component requirements even if the vehicle was ordered or purchased before April 18, 2023. A vehicle’s eligibility for the new clean vehicle credit is generally based on the rules that apply as of the date a vehicle is placed in service, meaning the date the taxpayer takes delivery of the vehicle.
This means that the vehicle may or may not be eligible depending on whether it meets the critical mineral and battery component requirements.
The proposed regs outline the rules for determining compliance with the critical minerals requirement. Prop Reg §1.30D-3(a) would provide a three-step process for determining the percentage of the value of the applicable critical minerals in a battery that contribute toward meeting the Critical Minerals Requirement:
- Step 1: Determine procurement chains
- Step 2: Identify qualifying critical minerals
- Step 3: Calculate qualifying critical mineral content.
Prop Reg §1.30D-3(b) would provide the rules for determining compliance with the battery components requirement. It would provide a four-step process for determining what percentage the value of a battery’s components contribute to meeting the battery components requirement:
- Step 1: Identify components that are manufactured or assembled in North America
- Step 2: Determine the incremental value of each battery component and North American battery components
- Step 3: Determine the total incremental value of battery components
- Step 4: Calculate the qualifying battery component content
The proposed regs also contain guidance as to the determination of modified adjusted gross income for purposes of the credit’s limitation. They also contain guidance for who is entitled to the credit when a new clean vehicle is owned by multiple owners (for example, a married couple that file separate returns)
As a result of the proposes regs, the IRS updated the FAQs for the clean vehicle credits.
For more information post-2022 new clean vehicle credit, see Checkpoint’s Federal Tax Coordinator ¶L-18001.
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