The IRS has issued proposed regs and a revenue procedure that would provide guidance for taxpayers who purchase qualifying previously-owned clean vehicles or purchase qualifying new clean vehicles and intend to transfer the amount of any previously-owned clean vehicle credit or new clean vehicle credit to dealers who are entities eligible to receive advance payments of either credit. The proposed regs also would provide guidance for dealers to become eligible entities to receive advance payments of previously-owned clean vehicle credits or new clean vehicle credits, and rules regarding recapture of the credits. (Preamble to Prop Reg REG-113064-23, IR 2023-186, Fact Sheet 2023-22, Rev Proc 2023-33, IRB 2023-43)
Observation:
Effectively, the proposed regs would allow a new or used car buyer to receive the amount of the Code Sec. 30D or Code Sec. 25E credit at the time the buyer purchases a car from a dealer, rather than having to wait till the buyer files a tax return.
The proposed regs provide that the car buyer (“electing taxpayer”) can transfer the credit amount to the dealer (“eligible entity”) in what the IRS calls a “vehicle transfer election.” The eligible entity would receive an advance payment from the IRS in the amount of the clean vehicle credit. That payment would not be includible in the dealer’s gross income for the tax year in which the payment is received or accrued.
Applicability date.
The proposed regs would generally apply to tax years beginning after December 31, 2023.
For more information regarding the Sec. 30D transfer rules, see Checkpoint’s Federal Tax Coordinator ¶L-18017. For more information regarding the Sec. 25E transfer rules, see Checkpoint’s Federal Tax Coordinator ¶A-4794.
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