Announcement 2023-16 — Internal Revenue Bulletin 2023-43

I.R.B. 854 (May 15, 2023), provides that public hearings will be conducted in person, although the IRS will continue to provide a telephonic option for individuals who wish to attend or testify at a hearing by telephone. Any telephonic hearing will be made accessible to people with disabilities.

Statement of Availability of IRS Documents

Guidance cited in this preamble is published in the Internal Revenue Bulletin and is available from the Superintendent of

Bulletin No. 2023–43 1161 October 23, 2023

Documents, U.S. Government Publishing Office, Washington, DC, 20402, or by visiting the IRS website at https://www.irs. gov.

Drafting Information

The principal author of these proposed regulations is the Office of the Associate Chief Counsel (Passthroughs and Special Industries). However, other personnel from the Treasury Department and the IRS participated in their development.

List of Subjects

26 CFR Part 1

Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 301

Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income taxes, Penalties, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

Accordingly, the Treasury Department and the IRS propose to amend 26 CFR parts 1 and 301 as follows:

PART 1—INCOME TAXES

25E-3 Transfer of credit.

§1.25E-0 Table of contents.

This section lists the captions contained in §§1.25E-1 through 1.25E-3.

§1.25E-1 Credit for previously-owned clean vehicles .

(iv) Other returns and resales. (2) Recapture rules in the case of a vehicle transfer election.

(3) Example. (d) Branded title. (e) Seller registration. (f) Requirement to file a complete income tax return.

(g) Severability. (h) Applicability date.

§1.25E-3 Transfer of credit .

(a) In general. (b) Definitions. (1) Advance payment program. (2) Dealer. (3) Dealer tax non-compliance. (4) Electing taxpayer. (5) Eligible entity. (6) Registered dealer. (7) Time of sale. (8) Vehicle transfer election. (c) Dealer registration. (1) In general. (2) Effect of dealer tax non-compliance. (d) Vehicle transfer election by electing taxpayer to transfer credit.

(e) Federal income tax consequences of the vehicle transfer election.

(1) Treatment of electing taxpayer. (2) Treatment of eligible entity. (3) Form of payment from eligible entity to electing taxpayer.

(4) Application of certain other requirements.

(5) Examples. (f) Advance payments received by eligible entities.

(1) In general. (2) Requirements for a registered dealer to become an eligible entity.

(3) Suspension of registered dealer eligibility.

(4) Revocation of registered dealer eligibility.

(g) Increase in tax. (1) Recapture where taxpayer exceeds modified adjusted gross income limitation.

(2) Excessive payments. (i) In general. (ii) Reasonable cause. (iii) Excessive payment defined. (iv) Special rule for cases in which the purchaser’s modified adjusted gross income exceeds the limitation.

(3) Example.

Paragraph 1. The authority citation for part 1 is amended by adding entries in numerical order for §§1.25E-1 through 1.25E-3 and 1.30D-5 to read in part as follows:

Authority: 26 U.S.C. 7805 * * * Sections 1.25E-1 through 1.25E-3 also issued under 26 U.S.C. 25E.

Section 1.30D-5 also issued under 26 U.S.C. 30D.

Par 2. Sections 1.25E-0 through 1.25E-3 are added to read as follows: Sec.

1.25E-0 Table of contents .

25E-1 Credit for previously-owned clean vehicles.
25E-2 Special rules.

(a) In general. (b) Definitions. (1) Dealer. (2) Incentive. (3) Modified adjusted gross income. (4) Placed in service. (5) Previously-owned clean vehicle. (6) Qualified buyer. (7) Qualified manufacturer. (8) Qualified sale. (i) In general. (ii) First transfer rule. (9) Sale price. (10) Section 25E regulations. (11) Seller report. (c) Limitation based on modified adjusted gross income.

(1) In general. (2) Threshold amount. (3) Special rule for change in filing status.

(d) Limitation on multiple owners. (1) In general. (2) Seller reporting. (e) Examples. (1) Example 1. (2) Example 2. (3) Example 3. (4) Example 4. (5) Example 5. (6) Example 6. (f) Severability. (g) Applicability date.

§1.25E-2 Special rules .

(a) In general. (b) No double benefit. (1) In general. (2) Interaction of section 30D and section 25E no double benefit rules.

October 23, 2023 1162 Bulletin No. 2023–43

and dealer in a written contract at the time of sale, including any delivery charges and after the application of any incentives, but excluding separately-stated taxes and fees required by State or local law. The sale price of a previously-owned clean vehicle is determined before the application of any trade-in value.

(10) Section 25E regulations . Section 25E regulations means this section and §§1.25E-2 and 1.25E-3.

(11) Seller report . Seller report means the report described in section 25E(c)(1) (D)(i) by reference to section 30D(d)(1) (H) and provided by the seller of a vehicle to the taxpayer and to the IRS electronically in the manner provided in, and containing the information described in, guidance published in the Internal Revenue Bulletin (see §601.601(d)(2)(ii) (a) of this chapter). The seller report must be provided to the IRS electronically. The term seller report does not include a report rejected by the IRS due to the information contained therein not matching IRS records.

(c) Limitation based on modified adjusted gross income —(1) In general . No section 25E credit is allowed for any taxable year if—

(i) The lesser of— (A) The modified adjusted gross income of the taxpayer for such taxable year; or

(B) The modified adjusted gross income of the taxpayer for the preceding taxable year; exceeds

(ii) The threshold amount. (2) Threshold amount . For purposes of paragraph (c)(1) of this section, the threshold amount is determined based on the taxpayer’s return filing status for the taxable year, as set forth in paragraphs (c) (2)(i) through (iii) of this section—

(i) In the case of a joint return or a surviving spouse (as defined in section 2(a) of the Code), the threshold amount is $150,000.

(ii) In the case of a head of household (as defined in section 2(b) of the Code), the threshold amount is $112,500.

(iii) In the case of a taxpayer not described in paragraph (c)(2)(i) or (ii) of this section, the threshold amount is $75,000.

(3) Special rule for change in filing status . If the taxpayer’s filing status for

(h) Requirement of return. (1) In general. (2) Income tax return. (i) Two vehicle transfer elections per year.

(j) Severability. (k) Applicability date.

§1.25E-1 Credit for previously-owned clean vehicles.

(a) In general . Section 25E(a) of the Internal Revenue Code (Code) allows as a credit against the tax imposed by chapter 1 of the Code (chapter 1) for the taxable year of a taxpayer an amount equal to the lesser of $4,000, or the amount equal to 30 percent of the sale price of a previously-owned clean vehicle, when that previously-owned clean vehicle is placed in service during the taxable year by a taxpayer that acquired the previously-owned clean vehicle in a qualified sale in which that taxpayer is a qualified buyer. This section provides definitions and generally applicable rules that apply for purposes of determining the credit under section 25E and the section 25E regulations (as defined in paragraph (b)(10) of this section) (section 25E credit). Section 1.25E-2 provides special rules under section 25E(e). Section 1.25E-3 provides rules under section 25E(f).

(b) Definitions . The following definitions apply for purposes of the section 25E regulations.

(1) Dealer . Dealer has the meaning provided in section 25E(c)(2)(A) by reference to section 30D(g)(8), except that the term does not include persons licensed solely by a territory of the United States, and includes a dealer licensed in any jurisdiction described in section 30D(g)(8) (other than one licensed solely by a territory of the United States) that makes sales at sites outside of the jurisdiction in which its licensed.

(2) Incentive . For purposes of the definition of sale price in paragraph (b)(9) of this section, incentive means any reduction in total sale price offered to and accepted by a taxpayer from the dealer or manufacturer, other than a reduction in the form of a partial payment or down payment for the purchase of a previously-owned clean vehicle pursuant to section 25E(f) and §1.25E-3.

(3) Modified adjusted gross income . Modified adjusted gross income has the meaning provided in section 25E(b)(3).

(4) Placed in service . A previously-owned clean vehicle is considered to be placed in service on the date the taxpayer takes possession of the vehicle.

(5) Previously-owned clean vehicle . Previously-owned clean vehicle has the meaning provided in section 25E(c)(1).

(6) Qualified buyer . Q ualified buyer means, with respect to a sale of a motor vehicle, a taxpayer—

(i) Who is an individual; (ii) Who purchases such vehicle for use and not for resale;

(iii) With respect to whom no deduction is allowable to another taxpayer under section 151 of the Code; and

(iv) Who has not been allowed a credit under section 25E and this section for any sale occurring during the period beginning three calendar years before the date of the sale of the vehicle and ending on the date of the sale.

(7) Qualified manufacturer . Qualified manufacturer has the meaning provided in section 30D(d)(3).

(8) Qualified sale —(i) In general . Q ualified sale means a sale of a motor vehicle—

(A) By a dealer (as defined in paragraph (b)(1) of this section);

(B) For a sale price that does not exceed $25,000; and

(C) That is the first transfer of the motor vehicle after August 16, 2022 (the date of enactment of section 25E), to a qualified buyer other than the person with whom the original use of such vehicle commenced.

(ii) First transfer rule . To be a qualified sale, a transfer must be the first transfer since August 16, 2022, as shown by vehicle history, of a previously-owned clean vehicle after the sale to the person with whom the original use of such vehicle commenced. For purposes of this paragraph (b)(8)(ii), a transfer to or between dealers is ignored. The taxpayer may rely on the dealer’s provision of the vehicle history in determining whether the first transfer rule in this paragraph (b)(8)(ii) is satisfied.

(9) Sale price . The sale price of a previously-owned clean vehicle means the total sale price agreed upon by the buyer

Bulletin No. 2023–43 1163 October 23, 2023

the taxable year differs from the taxpayer’s filing status in the preceding taxable year, then the taxpayer satisfies the limitation described in paragraph (c)(1) of this section if the taxpayer’s modified adjusted gross income does not exceed the threshold amount in either year based on the applicable filing status for that taxable year.

(d) Limitation on multiple owners —(1) In general . The amount of the section 25E credit attributable to a previously-owned clean vehicle may be claimed on only one tax return. In the event a previously-owned clean vehicle is placed in service by multiple owners (for example, in the case of married individuals filing separate returns), no allocation or proration of the section 25E credit is available.

(2) Seller reporting. The name and taxpayer identification number of the vehicle owner claiming the section 25E credit must be listed on the seller report pursuant to sections 25E(c)(1)(D)(i) and 30D(d)(1) (H). The credit will be allowed only on the tax return of the owner listed in the seller report.

(e) Examples . The following examples illustrate the application of the rules in this section.

(1) Example 1: First transfer since enactment of section 25E . A two-year-old qualifying vehicle has been sold as used prior to August 16, 2022 (the date of enactment of section 25E). The next sale of the vehicle occurs on September 1, 2023, for a sale price below $25,000 from a dealer to a qualified buyer whose modified adjusted gross income does not exceed the limitation described in paragraph (c) of this section. This sale is a qualified sale pursuant to paragraph (b)(8) of this section and, therefore, the buyer will qualify for the section 25E credit.

(2) Example 2: Multiple transfers since enact- ment of section 25E . The facts are the same as in paragraph (e)(1) of this section ( Example 1 ), except that the first sale of the used vehicle occurs after August 16, 2022, for a sale price above $25,000. The first sale of the used vehicle would not qualify for a credit under section 25E because the sale price exceeded $25,000. The second sale is not a qualified sale because it was not the first transfer after enactment of section 25E.

(3) Example 3: First buyer is a commercial buyer . The facts are the same as in paragraph (e)(1) of this section ( Example 1 ), except that the first sale of the used vehicle occurs after August 16, 2022, to a partnership, for a sale price below $25,000. The first sale would not qualify for a credit under section 25E because the buyer is a partnership, not an individual. The second sale is not a qualified sale because it is not the first transfer after enactment of section 25E.

(4) Example 4: First buyer exceeds the modified adjusted gross income limits . The facts are the same

as in paragraph (e)(1) of this section ( Example 1 ), except that the first sale of the used vehicle occurs after August 16, 2022, and was sold to a buyer whose modified adjusted gross income exceeds the limitation described in paragraph (c) of this section. Subsequently, the vehicle is sold again for less than $25,000 to a qualified buyer whose modified adjusted gross income is below the limitation. The first sale would not qualify for a credit under section 25E because the buyer’s modified adjusted gross income exceeds the limitation, and the second sale is not a qualified sale because it is not the first transfer after the enactment of section 25E.

(5) Example 5: First buyer elects to not take the section 25E credit. The facts are the same as in paragraph (e)(1) of this section ( Example 1 ), except that the first sale of the used vehicle occurred after August 16, 2022, and was sold to a qualified buyer for a sale price below $25,000, but that first buyer elects to not claim the section 25E credit. The second sale is not a qualified sale because it is not the first transfer after the enactment of section 25E.

(f) Severability . The provisions of this section are separate and severable from one another. If any provision of this section is stayed or determined to be invalid, it is the agencies’ intention that the remaining provisions shall continue in effect.

(g) Applicability date . This section applies to previously-owned clean vehicles placed in service in taxable years beginning after October 10, 2023.

§1.25E-2 Special rules.

(a) In general . This section provides additional guidance under section 25E(e) of the Internal Revenue Code (Code), which incorporates rules similar to the rules of section 30D(f) other than section 30D(f)(10) or 30D(f)(11). Unless otherwise provided in this section, the rules of section 30D(f) apply to section 25E and the section 25E regulations (as defined in §1.25E-1(b)(10)) in the same manner by replacing, if applicable, any reference to section 30D or the section 30D credit with a reference to section 25E or the section 25E credit. (b) No double benefit —(1) In gen- eral . Under sections 25E(e) and 30D(f) (2), the amount of any deduction or other credit allowable under chapter 1 of the Code (chapter 1) for a vehicle for which a section 25E credit is allowable must be reduced by the amount of the section 25E credit allowed for such vehicle.

(2) Interaction of section 30D and section 25E no double benefit rules . A section 30D credit that has been allowed with respect to a vehicle in a taxable year

before the year in which a section 25E credit under section 25E is allowable for that vehicle does not reduce the amount allowable under section 25E.

(i) Cancelled sale . If the sale of a vehicle between the taxpayer and dealer is cancelled before the taxpayer places the vehicle in service, then—

(A) The taxpayer may not claim the section 25E credit with respect to the vehicle;

(B) The sale will be treated as not having occurred (and no transfer is considered to have occurred by reason of the cancelled sale), and the vehicle will, therefore, still qualify for the section 25E credit upon a subsequent sale meeting the requirements of section 25E and the section 25E regulations;

(C) The seller report (as defined in §1.25E-1(b)(11)) must be rescinded by the seller in the manner set forth in guidance published in the Internal Revenue Bulletin (see §601.601(d)(2)(ii)(a) of this chapter); and

(D) The taxpayer cannot make an election to transfer the credit under section 25E(f) and §1.25E-3. (ii) Vehicle return . If a taxpayer returns a vehicle to the dealer within 30 days of placing such vehicle in service, then—

(A) The taxpayer cannot claim the section 25E credit with respect to the vehicle;

(B) The sale will be treated as having occurred (and a transfer is therefore considered as having occurred by reason of the sale), and the vehicle will not qualify for the section 25E credit upon a subsequent sale, unless the vehicle history does not reflect the prior sale and return; if the vehicle history does not reflect the prior sale and return, the vehicle remains eligible for the section 25E credit under the first transfer rule described in §1.25E-1(b) (8)(ii);

(D) Any vehicle transfer election made pursuant to section 25E(f) and §1.25E-3, if applicable, will be treated as nullified and any advance payment made pursuant to section 25E(f) and §1.25E-3, if applicable, will be collected from the eligible

October 23, 2023 1164 Bulletin No. 2023–43

entity as an excessive payment pursuant to §1.25E-3.

(iii) Resale . If a taxpayer resells the vehicle within 30 days of placing the vehicle in service, then the taxpayer is treated as having purchased the previously-owned clean vehicle with the intent to resell, and—

(A) The taxpayer may not claim the section 25E credit with respect to the vehicle;

(B) The sale to the taxpayer will be treated as occurring (and a transfer is therefore considered as occurring by reason of the sale), and the vehicle will not qualify for the section 25E credit upon a subsequent sale;

(D) Any vehicle transfer election made pursuant to section 25E(f) and §1.25E-3, if applicable, will remain in effect and any advance payment made pursuant to section 25E(f) and §1.25E-3 will not be collected from the eligible entity; and

(E) The value of the transferred credit will be collected from the taxpayer.

(iv) Other returns and resales . In the case of a vehicle return not described in paragraph (c)(1)(ii) or a resale not described in paragraph (c)(1)(iii), the vehicle will no longer be eligible for the section 25E credit upon a subsequent sale.

(2) Recapture rules in the case of a vehicle transfer election . For additional recapture rules that apply in the case of a vehicle transfer election, see §1.25E3(g)(1). For excessive payment rules that apply in the case where an advance payment is made to an eligible entity, see §1.25E-3(g)(2).

(3) Example: First buyer returns vehi- cle . A two-year-old qualifying vehicle is sold to a qualified buyer after August 16, 2022, for less than $25,000, but the buyer returns the vehicle to the dealer within 30 days and does not claim the credit under section 25E. The vehicle history reflects the first used sale and return. A second sale of the used vehicle is not a qualified sale because the first sale occurred after the enactment of section 25E, regardless of whether the first buyer claimed the credit under section 25E.

(d) Branded title . A title to a previously-owned clean vehicle indicating that such vehicle has been damaged, or is

otherwise a branded title, does not impact the vehicle’s eligibility for a section 25E credit.

(e) Seller registration . A seller must register with the IRS in the manner set forth in guidance published in the Internal Revenue Bulletin (see §601.601(d)(2)(ii) (a) of this chapter) for purposes of filing seller reports.

(f) Requirement to file a complete income tax return. No section 25E credit is allowed unless the taxpayer claiming such credit files an income tax return for the taxable year in which the previously-owned clean vehicle is placed in service. For purpose of this paragraph (f), the term income tax return means a Form 1040, U.S. Individual Income Tax Return, with an attached Form 8936, Clean Vehicle Credits, or successor forms, and any additional forms, schedules, or statements prescribed by the Commissioner for the purpose of making a return to report the tax under chapter 1 that includes all of the information required on the forms and in instructions.

(g) Severability . The provisions of this section are separate and severable from one another. If any provision of this section is stayed or determined to be invalid, it is the agencies’ intention that the remaining provisions shall continue in effect.

(h) Applicability date . This section applies to previously-owned clean vehicles placed in service in taxable years beginning after [DATE OF PUBLICATION OF FINAL RULE].

§1.25E-3 Transfer of credit.

(a) In general . This section provides a credit transfer program under section 25E(f). (b) Definitions . This paragraph (b) provides definitions that apply for purposes of section 25E(f) and this section.

(1) Advance payment program . Advance payment program means the program described in paragraph (f)(1) of this section.

(2) Dealer . Dealer has the meaning provided in §1.25-1(b)(1).

(3) Dealer tax compliance . Dealer tax compliance means that all required Federal information and tax returns of the dealer have been filed, including for Federal income and employment tax

purposes, and all Federal tax, penalties, and interest due of the dealer as of the time of sale have been paid. A dealer that has entered into an installment agreement with the IRS for which a dealer is current on its obligations is treated as being in dealer tax compliance.

(4) Electing taxpayer . Electing tax- payer means the individual who purchases the previously-owned clean vehicle and elects to transfer the section 25E credit that would otherwise be allowable to such individual to an eligible entity pursuant to section 25E(f) and the rules of this section. A taxpayer is an electing taxpayer only if the taxpayer makes certain attestations to the registered dealer, pursuant to procedures provided in guidance published in the Internal Revenue Bulletin, including that the taxpayer does not anticipate exceeding the modified adjusted gross income limitations.

(5) Eligible entity . Eligible entity has the meaning provided in section 30D(g) (2) and paragraph (f)(2) of this section.

(6) Registered dealer . Registered dealer is a dealer that has completed registering with the IRS as provided in paragraph (c) of this section.

(7) Time of sale . Time of sale means the date the previously-owned clean vehicle is placed in service, as defined in §1.25E1(b)(4). (8) Vehicle transfer election . Vehicle transfer election has the meaning provided in sections 25E(f) and 30D(g) and paragraph (d) of this section.

(c) Dealer registration —(1) In gen- eral . A dealer must first register with the IRS in the manner set forth in guidance published in the Internal Revenue Bulletin (see §601.601(d)(2)(ii)(a) of this chapter) for the dealer to receive credits transferred by an electing taxpayer pursuant to section 25E(f) and paragraph (d) of this section. (2) Effect of dealer tax non-compli- ance . If the dealer is not in dealer tax compliance for any of the taxable periods during the last five taxable years, then the dealer may complete its initial registration with the IRS, but the dealer will not be eligible for the advance payment program (and, therefore, the dealer will not be eligible to receive transferred section 25E credits) until the compliance issue is resolved. The IRS will notify the dealer in writing that the dealer is not in dealer tax

Bulletin No. 2023–43 1165 October 23, 2023

compliance, and the dealer will have the opportunity to address any failure through regular procedures. If the failure is corrected, the IRS will complete the dealer’s registration for the advance payment program, and, provided all other requirements of this section are met, the dealer will then be allowed to participate in the advance payment program. Additional procedural guidance regarding this paragraph (c)(2) will be set forth in guidance published in the Internal Revenue Bulletin.

(d) Vehicle transfer election by electing taxpayer to transfer credit . For a previously-owned clean vehicle placed in service after December 31, 2023, an electing taxpayer may elect to apply the rules of section 25E(f) and this section to make a vehicle transfer election with respect to the vehicle, so that the 25E credit with respect to the vehicle is allowed to the eligible entity specified in the vehicle transfer election (and not to the taxpayer) pursuant to the advance payment program described in paragraph (f) of this section. The electing taxpayer, as part of the vehicle transfer election, must transfer the entire amount of the section 25E credit that would otherwise be allowable to the electing taxpayer with respect to the vehicle, and the eligible entity specified in the vehicle transfer election must pay the electing taxpayer an amount equal to the amount of the credit included in the vehicle transfer election. A vehicle transfer election is made no later than at the time of sale in the manner set forth in guidance published in the Internal Revenue Bulletin (see §601.601(d)(2)(ii)(a) of this chapter), and, once made the vehicle transfer election is irrevocable.

(e) Federal income tax consequences of the vehicle transfer election —(1) Treatment of electing taxpayer . In the case of a vehicle transfer election, the Federal income tax consequences for the electing taxpayer are as follows—

(i) The amount of the section 25E credit that the electing taxpayer elects to transfer to the eligible entity under section 30D(g) (by reason of section 25E(f)) and paragraph (d) of this section may exceed the electing taxpayer’s regular tax liability (as defined in section 26(b)(1) of the Code) for the taxable year in which the sale occurs, and the excess, if any, is not subject to recapture;

(ii) The payment made by an eligible entity to an electing taxpayer under section 30D(g)(2)(C) (by reason of 25E(f)) and paragraph (d) of this section to an electing taxpayer pursuant to a vehicle transfer election is not includible in the gross income of the electing taxpayer; and

(iii) The payment made by an eligible entity under section 30D(g)(2)(C) (by reason of section 25E(f)) and paragraph (d) of this section is treated as repaid by the electing taxpayer to the eligible entity as part of the purchase price of the previously-owned clean vehicle. Thus, the repayment by the electing taxpayer is part of the electing taxpayer’s basis in the previously-owned clean vehicle prior to the application of the basis reduction rule of section 30D(f)(1) that applies by reason of section 25E(e) and §1.25E-2(a).

(2) Treatment of eligible entity . In the case of a vehicle transfer election, the Federal income tax consequences for the eligible entity are as follows—

(i) The eligible entity is allowed the section 25E credit with respect to the previously-owned clean vehicle and may receive an advance payment pursuant to section 30D(g)(7) (by reason of section 25(f)) and paragraph (f) of this section; (ii) Advance payments received by the eligible entity are not treated as a tax credit in the hands of the eligible entity and may exceed the eligible entity’s regular tax liability (as defined in section 26(b)(1)) for the taxable year in which the sale occurs;

(iii) An advance payment received by the eligible entity is not included in the gross income of the eligible entity;

(iv) The payment made by an eligible entity under section 30D(g)(2)(C) (by reason of section 25(f)) and paragraph (d) of this section to an electing taxpayer is not deductible by the eligible entity; and

(v) The payment made by an eligible entity to the electing taxpayer under section 30D(g)(2)(C) (by reason of section 25(f)) and paragraph (d) of this section is treated as paid by the electing taxpayer to the eligible entity as part of the purchase price of the previously-owned clean vehicle. Thus, the repayment by the electing taxpayer is treated as an amount realized of the eligible entity under section 1001 of the Code and the regulations in this part under section 1001.

(vi) If the eligible entity is a partnership or an S corporation, then—

(A) The IRS will make the advance payment to such partnership or S corporation equal to the amount of the section 25E credit allowed that is transferred to the eligible entity;

(B) Such section 25E credit is reduced to zero and is, for any other purpose of the Code, deemed to have been allowed solely to such entity (and not allocated or otherwise allowed to its partners or shareholders) for such taxable year; and

(C) The amount of the advance payment is not treated as tax exempt income to the partnership or S corporation for purposes of the Code.

(3) Form of payment from eligible entity to electing taxpayer . The tax treatment of the payment made by the eligible entity to the electing taxpayer described in paragraphs (e)(1) and (2) of this section is the same regardless of whether the payment is made in cash or in the form of a partial payment or down payment for purchase of the previously-owned clean vehicle.

(4) Application of certain other requirements . In the case of a vehicle transfer election, the following additional rules apply –

(i) The requirements of section 30D(f) (1) (regarding basis reduction) and 30D(f) (2) (regarding no double benefit), by reason of section 25E(e), apply to the electing taxpayer as if the vehicle transfer election were not made (so, for example, the electing taxpayer must reduce the taxpayer’s basis in the vehicle by the amount of the section 25E credit, regardless of the vehicle transfer election).

(ii) Section 30D(f)(6) (regarding the election not to take the credit), by reason of section 25E(e), will not apply (in other words, by electing to transfer the credit, the electing taxpayer is electing to take the credit).

(iii) Section 30D(f)(9) (regarding the vehicle identification number (VIN) requirement), by reason of section 25E(e), and section 25E(d) (regarding the VIN requirement) will be treated as satisfied if the eligible entity provides the VIN of such vehicle to the IRS in the form and manner set forth in guidance published in the Internal Revenue Bulletin.

October 23, 2023 1166 Bulletin No. 2023–43

(5) Examples . The following examples illustrate the rules under paragraph (e) of this section.

(i) Example 1: Electing taxpayer’s regular tax liability less than value of the credit —(A) Facts . A taxpayer, who is an individual, purchases a previously-owned clean vehicle from a dealer, which is a C corporation. The taxpayer satisfies the requirements to be an electing taxpayer and elects to transfer the section 25E credit to the dealer. The dealer is a registered dealer and satisfies the requirements to be an eligible entity. The sales price the vehicle is $24,000. The section 25E credit otherwise allowable to the electing taxpayer is $4,000. The eligible entity makes the payment required to be made to the electing taxpayer in the form of a cash payment of $4,000. The electing taxpayer pays back the $4,000 to the eligible entity and pays an additional $20,000 as the purchase price of the vehicle. The electing taxpayer’s regular tax liability for the year is less than $4,000.

(B) Analysis . Under paragraph (e)(1) of this section, the electing taxpayer may transfer the credit even though the electing taxpayer’s regular tax liability is less than $4,000, and no amount of the credit will be recaptured from the taxpayer on the basis that the allowable credit exceeded their regular tax liability. The eligible entity’s $4,000 payment to the electing taxpayer is not included in the electing taxpayer’s gross income, and the electing taxpayer’s purchase price for the vehicle is $24,000 (including both the $4,000 payment and the additional $20,000 purchase price paid), prior to the application of the basis reduction rule of section 30D(f)(1) (by reason of section 25E(e)). After application of the basis reduction, the electing taxpayer’s basis in the vehicle is $20,000. The eligible entity is eligible to receive an advance payment of $4,000 for the transferred section 25E credit as provided in section 30D(g)(7) (by reason of section 25E(f)) and paragraph (f) of this section. Under paragraph (d)(2) of this section, the eligible entity may receive the advance payment regardless of whether the eligible entity’s regular tax liability is less than $4,000. The advance payment is not treated as a credit toward the eligible entity’s tax liability (if any), nor is it included in the eligible entity’s gross income, the eligible entity’s $4,000 payment to the electing taxpayer is not deductible, and the eligible entity’s amount realized is $24,000 upon the sale of the vehicle (including both the $4,000 payment and the additional $20,000 purchase price of the vehicle).

(ii) Example 2: Non-cash payment by eligible entity to electing taxpayer —(A) Facts . The facts are the same as in paragraph (e)(5)(i)(A) of this section (facts of Example 1 ), except that the eligible entity makes the payment to the electing taxpayer in the form of a reduction in the purchase price (rather than as a cash payment).

(B) Analysis . Paragraph (e)(3) of this section provides that the application of paragraphs (e)(1) and (2) of this section is not dependent on the form of payment from an eligible entity to an electing taxpayer (for example, a payment in cash or a payment in the form of a reduction in purchase price). Thus, the analysis is the same as in paragraph (e)(5)(i)(B) of this section (analysis of Example 1 ).

(iii) Example 3: Eligible entity is a partnership (A) Facts . The facts are the same as in paragraph (e)

(5)(i)(A) of this section (facts of Example 1 ), except that the dealer is a partnership.

(B) Analysis . The analysis as to the electing taxpayer is the same as in paragraph (e)(5)(i)(B) of this section (analysis of Example 1 ). Because the eligible entity is a partnership, paragraph (e)(2)(vi) of this section applies. Thus, the advance payment is made to the partnership, the credit is reduced to zero and is, for any other purpose of the Code, deemed to have been allowed solely to the partnership (and not allocated or otherwise allowed to its partners) for such taxable year. The amount of the advance payment is not treated as tax exempt income to the partnership for purposes of the Code.

(f) Advance payments received by eli- gible entities —(1) In general . An eligible entity may receive advance payments from the IRS corresponding to the amount of the section 25E credit for which an election was made by an electing taxpayer to transfer the credit to the eligible entity pursuant to section 30D(g) (by reason of section 25E(f)) and paragraph (d) of this section before the eligible entity files its Federal income tax return for the taxable year that includes the taxable year with respect to which the vehicle transfer election corresponds. This advance payment program is the exclusive mechanism for an eligible entity to receive the section 25E credit transferred under section 25E(f) pursuant to paragraph (d) of this section. An eligible entity receiving an advance payment may not claim the section 25E credit on a Federal income tax return.

(2) Requirements for a registered dealer to become an eligible entity . A registered dealer qualifies as an eligible entity, and may therefore receive an advance payment, by meeting the following requirements—

(i) The registered dealer submits all required registration information and is in dealer tax compliance.

(ii) The registered dealer retains information regarding the vehicle transfer election for three calendar years beginning with the year immediately after the year in which the vehicle is placed in service, as described in guidance published in the Internal Revenue Bulletin (see §601.601 of this chapter).

(iii) The eligible entity meets any other requirements of section 25E(f) by reference to section 30D(g) and this section included in guidance published in the Internal Revenue Bulletin (see §601.601 of this chapter) or in forms and instructions.

(3) Suspension of registered dealer eligibility . A registered dealer may be suspended from the advance payment program pursuant to the procedures described in guidance published in the Internal Revenue Bulletin (see §601.601 of this chapter). Any decision made by the IRS relating to the suspension of a dealer’s registration is not subject to administrative appeal to the IRS Independent Office of Appeals unless the IRS and the IRS Independent Office of Appeals agree that such review is available and the IRS provides the time and manner for such review.

(4) Revocation of registered dealer eli- gibility . A registered dealer’s registration may be revoked pursuant to the procedures described in guidance published in the Internal Revenue Bulletin (see §601.601 of this chapter). Any decision made by the IRS relating to the revocation of a dealer’s registration is not subject to administrative appeal to the IRS Independent Office of Appeals unless the IRS and the IRS Independent Office of Appeals agree that such review is available and the IRS provides the time and manner for such review.

(g) Increase in tax —(1) Recapture where taxpayer exceeds modified adjusted gross income limitation . If a taxpayer who elected to transfer the credit under section 25E(f) and this section has modified adjusted gross income that exceeds the limitation in section 25E(b), the income tax imposed on such taxpayer under chapter 1 of the Code (chapter 1) for the taxable year in which the vehicle was placed in service is increased by the amount of the payment received by the taxpayer. The taxpayer must reconcile such amounts on the tax return described in paragraph (h) of this section.

(2) Excessive payments —(i) In gen- eral . This paragraph (g)(2) provides rules under section 25E(f) by reference to section 30D(g)(7)(B), under which rules similar to the rules of section 6417(d)(6) of the Code apply to the advance payment program. In the case of any advance payment that the IRS determines constitutes an excessive payment, the tax imposed on the eligible entity under chapter 1, regardless of whether such entity would otherwise be subject to tax under chapter 1, for the taxable year in which such determination is made will be increased by the sum of:

Bulletin No. 2023–43 1167 October 23, 2023

(A) The amount of the excessive payment; plus

(B) An amount equal to 20 percent of such excessive payment.

(ii) Reasonable cause . The amount described in paragraph (g)(2)(i)(B) of this section will not apply to an eligible entity if the eligible entity demonstrates to the satisfaction of the IRS that the excessive payment resulted from reasonable cause. In the case of a vehicle returned to the eligible entity within 30 days of placing the vehicle in service for which a vehicle transfer election was made by the electing taxpayer, as described in §1.25E-2(c)(1) (ii), the eligible entity will be treated as demonstrating reasonable cause.

(iii) Excessive payment defined . Excessive payment means an advance payment made—

(A) To a registered dealer that fails to meet the requirements to be an eligible entity provided in paragraph (f)(2) of this section; or

(B) Except as provided in paragraph (g) (2)(iv) of this section, to an eligible entity with respect to a vehicle to the extent the payment exceeds the amount of the credit that, without application of section 25E(f) and this section, would be otherwise allowable to the electing taxpayer with respect to the vehicle for such tax year.

(iv) Special rule for cases in which the purchaser’s modified adjusted gross income exceeds the limitation . Any excess described in paragraph (g)(2)(iii)(B) of this section due to the purchaser exceeding the limitation based on modified adjusted gross income provided in section 25E(b) is not an excessive payment. Instead, the value of the amount of the advance payment is recaptured from the purchaser under section 25E(e) and paragraph (g)(1) of this section.

(3) Example . This paragraph (g)(3) provides an example to illustrate the excessive payment rules provided in paragraph (g)(2) of this section.

(i) Facts . In 2024, D, a registered dealer, receives an advance payment of $4,000 with respect to a credit transferred under section 25E(f)(1) and paragraph (d) of this section with respect to a previously-owned clean vehicle. In 2025, the IRS determines that the registered dealer was not an eligible entity with respect to the vehicle at the time of the receipt of the advance payment in 2024 because the registered dealer failed to satisfy a requirement in section 30D(g)(2) (applicable by reason of section 25E(f)) and paragraph (f)(2) of this section to be an eligible

entity with respect to the vehicle. D is unable to show reasonable cause for the failure.

(ii) Analysis . Under paragraph (g)(2)(i) of this section, the tax imposed on D is increased by the amount of the excessive payment if the advance payment received by D constitutes an excessive payment. Under paragraph (g)(2)(iii) of this section, the entire amount of the $4,000 advance payment received by D is an excessive payment because D did not meet the requirements to be an eligible entity under section 30D(g)(2) (applicable by reason of section 25E(f)) and paragraph (g)(2) of this section. Additionally, because D cannot show reasonable cause for its failure to meet these requirements, the tax imposed under chapter 1 on D is increased by $4,800 in 2025 (the taxable year of the IRS determination). This is comprised of the $4,000 value of the credit plus the $800 penalty, calculated as 20% penalty on such $4,000 (20% * $4,000 = $800). This treatment applies regardless of whether D is otherwise subject to tax under chapter 1 (for example, if D is a partnership).

(h) Requirement of return —(1) In general . An electing taxpayer that makes a vehicle transfer election must file an income tax return for the taxable year in which the vehicle transfer election is made and indicate such election on the return per instructions. The electing taxpayer must include the VIN of the new clean vehicle on such return, as provided for in forms and instructions.

(2) Income tax return . For purposes of this section, the term income tax return means a Form 1040, U.S. Individual Income Tax Return, with an attached Form 8936, Clean Vehicle Credits, or successor forms, or any other forms, schedules, or statements prescribed by the Commissioner for the purpose of making a return to report the tax under chapter 1 that includes all of the information required on the forms and in instructions.

(i) Two vehicle transfer elections per year. A taxpayer may make no more than two transfer elections per taxable year, consisting of either two section 30D credits or one section 30D credit and one section 25E credit. In the case of a joint return, each individual taxpayer may make no more than two transfer elections per taxable year.

(j) Severability . The provisions of this section are separate and severable from one another. If any provision of this section is stayed or determined to be invalid, it is the agency’s intention that the remaining provisions will continue in effect.

(k) Applicability date . This section applies to taxable years ending after December 31, 2023.

Par 3. Section 1.30D-0, as proposed to be added at 88 FR 23370 (April 17, 2023), is amended by:

Adding entry (j) to §1.30D-2;
In §1.30D-4: i. Revising the heading; and ii. Adding entries (f), (f)(1), (f)(1)(i) through (iv), (f)(2), (g), and (h); and
Adding an entry in numerical order for §1.30D-5.

The revisions and additions read as follows:

§1.30D-0 Table of contents.

§1.30D-2 Definitions for purposes of section 30D.

(j) Seller report.

§1.30D-4 Special rules.

(f) Recapture rules. (1) In general. (i) Cancelled sale. (ii) Vehicle return. (iii) Resale. (iv) Other vehicle returns and resales. (2) Recapture rules in the case of a vehicle transfer election.

(g) Seller registration. (h) Requirement to file a complete income tax return.

§1.30D-5 Transfer of credit and recapture.

(a) Definitions. (1) Advance payment program. (2) Dealer. (3) Dealer tax compliance. (4) Electing taxpayer. (5) Eligible entity. (6) Registered dealer. (7) Time of sale. (8) Vehicle registration election. (b) Dealer registration. (1) In general. (2) Effect of dealer tax non-compliance. (c) Election by electing taxpayer to transfer credit.

October 23, 2023 1168 Bulletin No. 2023–43

as having purchased the new clean vehicle with the intent to resell, and—

(A) The taxpayer cannot claim the section 30D credit with respect to the vehicle;

(B) The vehicle will no longer be considered available for original use by another taxpayer, and, therefore, the vehicle will no longer be eligible for the section 30D credit;

(D) A vehicle transfer election under 30D(g) and §1. 30D-5(c), if applicable, will remain in effect and any advance payment made pursuant to section 30D(g) and §1. 30D-5(e) will not be collected from the eligible entity; and

(E) The value of any transferred credit will be collected from the taxpayer.

(iv) Other vehicle returns and resales . In the case of a vehicle return not described in paragraph (f)(1)(ii) of this section or a resale not described in paragraph (f)(1) (iii) of this section, the vehicle will no longer be considered available for original use by another taxpayer, and, therefore, the vehicle will no longer be eligible for the section 30D credit.

(2) Recapture rules in the case of a vehi- cle transfer election . For additional recapture rules that apply in the case of a vehicle transfer election, see §1. 30D-5(f)(1) . For excessive payment rules that apply in the case where an advance payment is made to an eligible entity, see §1. 30D-5(f)(2) .

(g) Seller registration . A seller must first register with the IRS in the manner set forth in guidance published in the Internal Revenue Bulletin (see §601.601(d)(2)(ii) (a) of this chapter) for purposes of filing seller reports.

(h) Requirement to file a complete income tax return. No section 30D credit is allowed unless the taxpayer claiming such credit files an income tax return for the taxable year in which the new clean vehicle is placed in service. For purpose of this paragraph (h), the term income tax return means a Form 1040, U.S. Individual Income Tax Return, with an attached Form 8936, Clean Vehicle Credits, or successor forms, and any additional forms, schedules, or statements prescribed by the Commissioner for the purpose of making a return to report the tax under chapter 1 that includes all of the information required on the forms and in instructions.

(d) Federal income tax consequences of the vehicle transfer election.

(1) Treatment of electing taxpayer. (2) Treatment of eligible entity. (3) Form of payment from eligible entity to electing taxpayer.

(4) Application of certain other requirements.

(5) Examples. (e) Advance payments received by eligible entities.

(1) In general. (2) Requirements for a registered dealer to become an eligible entity.

(3) Suspension of registered dealer eligibility.

(4) Revocation of registered dealer eligibility.

(f) Increase in tax. (1) Recapture where taxpayer exceeds modified adjusted gross income limitation.

(3) Example. (g)Requirement of return. (1) In general. (2) Income tax return. (h) Two vehicle transfer elections per year. (i) Severability. (j) Applicability date. Par 4. Section 1.30D-2, as proposed to be added at 88 FR 23370 (April 17, 2023), is amended by adding paragraph (j) to read as follows:

§1.30D-2 Definitions for purposes of section 30D .

(j) Seller report . Seller report means the report described in section 30D(d)(1) (H) and provided by the seller of a vehicle to the taxpayer and the IRS in the manner provided in, and containing the information described in, guidance published in the Internal Revenue Bulletin (see §601.601(d)(2)(ii)(a) of this chapter). The seller report must be provided to the IRS electronically. The term seller report does not include a report rejected by the IRS due to the information contained therein not matching IRS records.

Par 5. Section 1.30D-4, as proposed to be added at 88 FR 23370 (April 17, 2023), is amended by adding paragraphs (f) through (h) to read as follows:

§1.30D-4 Special rules .

(f) Recapture rules —(1) In general . This paragraph (f) provides rules under section 30D(f)(5) regarding the recapture of the section 30D credit.

(i) Cancelled sale . If the sale of a vehicle between the taxpayer and seller is cancelled before the taxpayer places the vehicle in service, then—

(A) The taxpayer may not claim the section 30D credit with respect to the vehicle;

(B) The sale will be treated as not having occurred and the vehicle will be considered available for original use by another taxpayer (regardless of the cancelled sale), and the vehicle will, therefore, still be eligible for the section 30D credit;

(C) The seller report must be rescinded by the seller in the manner set forth in guidance published in the Internal Revenue Bulletin (see §601.601(d)(2)(ii) (a) of this chapter); and

(D) The taxpayer cannot make a vehicle transfer election under section 30D(g) and §1. 30D-5(c) with respect to the cancelled sale.

(ii) Vehicle return . If a taxpayer returns to the seller a vehicle within 30 days of placing such vehicle in service, then—

(A) The taxpayer cannot claim the section 30D credit with respect to the vehicle;

(B) The vehicle will no longer be considered available for original use by another taxpayer, and, therefore, the vehicle will no longer be eligible for the section 30D credit;

(D) A vehicle transfer election under 30D(g) and §1. 30D-5(c), if applicable, will be treated as nullified and any advance payment made pursuant to section 30D(g) and §1. 30D-5(e) will be collected from the eligible entity as an excessive payment pursuant to §1.30D-5(f).

(iii) Resale . If a taxpayer resells the vehicle within 30 days of placing the vehicle in service, then the taxpayer is treated

Bulletin No. 2023–43 1169 October 23, 2023

Par 6. Section 1.30D-5 is added to read as follows:

§1.30D-5 Transfer of credit and recapture.

(a) Definitions . This paragraph (a) provides definitions that apply for purposes of section 30D(g) and this section.

(1) Advance payment program . Advance payment program means the program described in paragraph (e)(1) of this section.

(2) Dealer . Dealer has the meaning provided in section 30D(g)(8), except that, for purposes of this section, the term does not include persons licensed solely by a territory of the United States, and includes a dealer licensed in any jurisdiction (other than one licensed solely by a territory of the United States) that makes sales at sites outside of the jurisdiction in which its licensed.

(3) Dealer tax compliance . Dealer tax compliance means that all required Federal information and tax returns of the dealer have been filed, including for Federal income and employment tax purposes, and all Federal tax, penalties, and interest due of the dealer as of the time of sale have been paid. A dealer who has entered into an installment agreement with the Internal Revenue Service (IRS) for which a dealer is current on its obligations is treated as in Dealer tax compliance.

(4) Electing taxpayer . Electing tax- payer means the individual who purchases and places in service a new clean vehicle and elects to transfer the credit under section 30D that would otherwise be allowable to such individual to an eligible entity pursuant to section 30D(g) and paragraph (c) of this section. A taxpayer is an electing taxpayer only if the taxpayer make certain attestations to the registered dealer, pursuant to procedures provided in guidance published in the Internal Revenue Bulletin, including that the taxpayer does not anticipate exceeding the modified adjusted gross income limitations and that the taxpayer will use the vehicle predominantly for personal use.

(5) Eligible entity . Eligible entity has the meaning provided in section 30D(g) (2) and paragraph (e)(2) of this section.

(6) Registered dealer . A registered dealer is a dealer that has completed

registration with the IRS as provided in paragraph (b) of this section.

(7) Time of sale . Time of sale means the date the new clean vehicle is placed in service. A new clean vehicle is placed in service on the date the electing taxpayer takes possession of the vehicle.

(8) Vehicle transfer election . Vehicle transfer election has the meaning provided in section 30D(g) and paragraph (c) of this section.

(b) Dealer registration —(1) In gen- eral . A dealer must first register with the IRS in the manner set forth in guidance published in the Internal Revenue Bulletin (see §601.601(d)(2)(ii)(a) of this chapter) for the dealer to receive credits transferred by an electing taxpayer pursuant to section 30D(g) and paragraph (c) of this section. (2) Effect of dealer tax non-compli- ance . If the dealer is not in dealer tax compliance for any of the taxable periods during the last five taxable years, the dealer may complete its initial registration with the IRS, but the dealer will not be eligible for the advance payment program (and, therefore, the dealer will not be eligible to receive transferred section 30D credits) until the compliance issue is resolved. If the failure is corrected, the IRS will complete the dealer’s registration for the advance payment program, and, provided all other requirements of section 30D(g) and this section are met, the dealer will then be allowed to participate in the advance payment program. Additional procedural guidance regarding this paragraph (b)(2) will be set forth in guidance published in the Internal Revenue Bulletin.

(c) Vehicle transfer election by electing taxpayer to transfer credit . For a new clean vehicle placed in service after December 31, 2023, an electing taxpayer may elect to apply the rules of section 30D(g) and this section to make a vehicle transfer election with respect to the vehicle so that the section 30D credit with respect to the vehicle is allowed to the eligible entity specified in the vehicle transfer election (and not to the electing taxpayer) pursuant to the advance payment program described in paragraph (e) of this section. The electing taxpayer, as part of the vehicle transfer election, must transfer the entire amount of the credit that would otherwise be allowable to the electing taxpayer under section 30D

with respect to the vehicle, and the eligible entity specified in the vehicle transfer election must pay the electing taxpayer an amount equal to the amount of the credit included in the vehicle transfer election. A vehicle transfer election is made not later than at the time of sale in the manner set forth in guidance published in the Internal Revenue Bulletin, and, once made, the vehicle transfer election is irrevocable. No vehicle transfer election may be made to transfer an amount of credit that would otherwise be allowed to the electing taxpayer under section 38.

(d) Federal income tax consequences of the vehicle transfer election —(1) Treatment of electing taxpayer . In the case of a vehicle transfer election, the Federal income tax consequences for the electing taxpayer are as follows—

(i) The credit amount under section 30D that the electing taxpayer elects to transfer to the eligible entity under section 30D(g) and paragraph (c) of this section may exceed the electing taxpayer’s regular tax liability (as defined in section 26(b) (1) of the Code) for the taxable year in which the sale occurs, and the excess, if any, is not subject to recapture.

(ii) The payment made by an eligible entity to an electing taxpayer under section 30D(g)(2)(C) and paragraph (c) of this section to an electing taxpayer pursuant to the vehicle transfer election is not includible in the gross income of the electing taxpayer.

(iii) The payment made by an eligible entity to an electing taxpayer under section 30D(g)(2)(C) and paragraph (c) of this section is treated as repaid by the electing taxpayer to the eligible entity as part of the purchase price of the new clean vehicle. Thus, the repayment by the electing taxpayer is included in the electing taxpayer’s basis in the new clean vehicle prior to the application of the basis reduction rule in section 30D(f)(1).

(2) Treatment of eligible entity . In the case of a vehicle transfer election, the Federal income tax consequences for the eligible entity are as follows—

(i) The eligible entity is allowed the credit under section 30D with respect to the new clean vehicle and may receive an advance payment pursuant to section 30D(g)(7) and paragraph (e) of this section;

October 23, 2023 1170 Bulletin No. 2023–43

(ii) Advance payments received by the eligible entity are not treated as a tax credit in the hands of the eligible entity and may exceed the eligible entity’s regular tax liability (as defined in section 26(b)(1)) for the taxable year in which the sale occurs;

(iii) An advance payment received by the eligible entity is not included in the gross income of the eligible entity;

(iv) The payment made by an eligible entity under section 30D(g)(2)(C) and paragraph (c) of this section to an electing taxpayer is not deductible by the eligible entity;

(v) The payment made by an eligible entity to an electing taxpayer under section 30D(g)(2)(C) and paragraph (c) of this section is treated as repaid by the electing taxpayer to the eligible entity as part of the purchase price of the new clean vehicle. Thus, the repayment by the electing taxpayer is treated as an amount realized of the eligible entity under section 1001 of the Code and the regulations in this part under section 1001; and

(vi) If the eligible entity is a partnership or an S corporation, then—

(A) The IRS will make the advance payment to such partnership or S corporation equal to the amount of the section 30D credit allowed that is transferred to the eligible entity;

(B) Such section 30D credit is reduced to zero and is, for any other purpose of the Code, deemed to have been allowed solely to such entity (and not allocated or otherwise allowed to its partners or shareholders) for such taxable year; and

(C) The amount of the advance payment is not treated as tax exempt income to the partnership or S corporation for purposes of the Code.

(3) Form of payment from eligible entity to electing taxpayer . The tax treatment of the payment made by the eligible entity to the electing taxpayer described in paragraphs (d)(1) and (2) of this section is the same regardless of whether the payment is made in cash or in the form of a partial payment or down payment for purchase of the new clean vehicle.

(4) Application of certain other requirements . In the case of a vehicle transfer election, the following additional rules apply—

(i) The requirements of section 30D(f) (1) (regarding basis reduction) and 30D(f)

(2) (regarding no double benefit) apply to the electing taxpayer as if the vehicle transfer election were not made (so, for example, the electing taxpayer must reduce its basis in the vehicle by the amount of the section 30D credit, regardless of the vehicle transfer election);

(ii) Section 30D(f)(6) (regarding the election not to take the credit) will not apply (in other words, by electing to transfer the credit, the electing taxpayer is electing to take the credit); and

(iii) Section 30D(f)(9) (regarding the VIN requirement) will be treated as satisfied if the eligible entity provides the vehicle identification number of such vehicle to the IRS in the form and manner set forth in guidance published in the Internal Revenue Bulletin.

(5) Examples . The following examples illustrate the rules under paragraph (d) of this section.

(i) Example 1: Electing taxpayer’s regular tax liability less than value of the credit —(A) Facts . A taxpayer, who is an individual, purchases a new clean sports utility vehicle from a dealer that is a C corporation. The taxpayer satisfies the requirements to be an electing taxpayer and elects to transfer the section 30D credit to the dealer. The dealer is a registered dealer and satisfies the requirements to be an eligible entity. The purchase price for the vehicle is $57,500. The credit otherwise allowable to the electing taxpayer by section 30D with respect to the vehicle is $7,500. The eligible entity makes the payment required to be made to the electing taxpayer in the form of a cash payment of $7,500. The electing taxpayer pays back the $7,500 to the eligible entity and pays an additional $50,000 as the purchase price of the vehicle. The electing taxpayer’s regular tax liability for the year is less than $7,500.

(B) Analysis . Under paragraph (d)(1) of this section, the electing taxpayer may transfer the credit even though the electing taxpayer’s regular tax liability is less than $7,500, and no amount of the credit will be recaptured from the taxpayer on the basis that the allowable credit exceeded their regular tax liability. The eligible entity’s $7,500 payment to the electing taxpayer is not included in the electing taxpayer’s gross income, and the electing taxpayer’s purchase price for the vehicle is $57,500 (including both the $7,500 payment and the additional $50,000 purchase price paid), prior to the application of the basis reduction rule of section 30D(f)(1). After application of the basis reduction, the electing taxpayer’s basis in the vehicle is $50,000. The eligible entity is eligible to receive an advance payment of $7,500 for the transferred section 30D credit as provided in section 30D(g)(7) and paragraph (e) of this section. Under paragraph (d)(2) of this section, the eligible entity may receive the advance payment regardless of whether the eligible entity’s regular tax liability is less than $7,500. The advance payment is not treated as a credit toward the eligible entity’s tax liability (if any), nor is it included in

the eligible entity’s gross income, the eligible entity’s $7,500 payment to the electing taxpayer is not deductible, and the eligible entity’s amount realized is $57,500 upon the sale of the vehicle (including both the $7,500 payment and the additional $50,000 purchase price of the vehicle).

(ii) Example 2: Non-cash payment by eligible entity to electing taxpayer —(A) Facts . The facts are the same as in paragraph (d)(5)(i)(A) of this section (facts of Example 1 ), except that the eligible entity makes the payment to the electing taxpayer in the form of a reduction in the purchase price (rather than as a cash payment).

(B) Analysis . Paragraph (d)(3) of this section provides that the application of paragraphs (d)(1) and (2) of this section is not dependent on the form of payment from an eligible entity to an electing taxpayer (for example, a payment in cash or a payment in the form of a reduction in purchase price). Thus, the analysis is the same as in paragraph (d)(5)(i)(B) of this section (analysis of Example 1 ).

(iii) Example 3: Eligible entity is a partnership (A) Facts . The facts are the same as in paragraph (d) (5)(i)(A) of this section (facts of Example 1 ), except that the dealer is a partnership.

(B) Analysis . The analysis as to the electing taxpayer is the same as in paragraph (d)(5)(i)(B) of this section (analysis of Example 1 ). Because the eligible entity is a partnership, paragraph (d)(2)(vi) of this section applies. Thus, the advance payment is made to the partnership, the credit is reduced to zero and is, for any other purpose of the Code, deemed to have been allowed solely to the partnership (and not allocated or otherwise allowed to its partners) for such taxable year. The amount of the advance payment is not treated as tax exempt income to the partnership for purposes of the Code.

(e) Advance payments received by eli- gible entities —(1) In general . An eligible entity may receive advance payments from the IRS corresponding to the amount of the section 30D credit for which a vehicle transfer election was made by an electing taxpayer to the eligible entity pursuant to section 30D(g) and paragraph (c) of this section before the eligible entity files its Federal income tax return for the taxable year that includes the taxable year with respect to which the vehicle transfer election corresponds. This advance payment program is the exclusive mechanism for an eligible entity to receive any payment related to a section 30D credit pursuant to section 30D(g) and paragraph (c) of this section. The eligible entity may not claim a section 30D credit on a Federal income tax return.

Bulletin No. 2023–43 1171 October 23, 2023

(i) The registered dealer submits required registration information and is in dealer tax compliance;

(iii) The registered dealer meets any other requirements of section 30D(g) and this section included in guidance published in the Internal Revenue Bulletin (see §601.601 of this chapter).

(3) Suspension of registered dealer eligibility . A registered dealer may be suspended from the advance payment program pursuant to the procedures as described in guidance published in the Internal Revenue Bulletin (see §601.601 of this chapter). Any decision made by the IRS relating to the suspension of a dealer’s registration is not subject to administrative appeal to the IRS Independent Office of Appeals unless the IRS and the IRS Independent Office of Appeals agree that such review is available and the IRS provides the time and manner for such review.

(4) Revocation of registered dealer eli- gibility. A registered dealer’s registration may be revoked pursuant to the procedures as described in guidance published in the Internal Revenue Bulletin (see §601.601 of this chapter). Any decision made by the IRS relating to the revocation of a dealer’s registration is not subject to administrative appeal to the IRS Independent Office of Appeals unless the IRS and the IRS Independent Office of Appeals agree that such review is available and the IRS provides the time and manner for such review.

(f) Increase in tax —(1) Recapture where taxpayer exceeds modified adjusted gross income limitation . If the section 30D credit would otherwise (but for section 30D(g) and the rules of this section) not be allowable to a taxpayer that elected to transfer the credit under section 30D(g) and this section because the taxpayer exceeds the limitation based on modified adjusted gross income in section 30D(f)(10), then the income tax imposed on such taxpayer under chapter 1 of the

Code (chapter 1) for the taxable year in which such vehicle was placed in service is increased by the amount of the payment received by the taxpayer. The taxpayer must reconcile such amounts on the tax return described in paragraph (g)(2) of this section.

(2) Excessive payments —(i) In general . This paragraph (f)(2) provides rules under section 30D(g)(7)(B), under which rules similar to the rules of section 6417(d)(6) of the Code apply to the advance payment program. In the case of any advance payment that the IRS determines constitutes an excessive payment, the tax imposed on the eligible entity under chapter 1, regardless of whether such entity would otherwise be subject to tax under chapter 1, for the taxable year in which such determination is made will be increased by the sum of the following amounts—

(A) The amount of the excessive payment; plus

(B) An amount equal to 20 percent of such excessive payment.

(ii) Reasonable cause . The amount described in paragraph (f)(2)(i)(B) of this section will not apply to an eligible entity if the eligible entity demonstrates to the satisfaction of the IRS that the excessive payment resulted from reasonable cause. In the case of a vehicle returned to the eligible entity within 30 days of being placed in service for which a vehicle transfer election was made by the electing taxpayer, as described in §1.30D-4(d)(1) (ii), the eligible entity will be treated as demonstrating reasonable cause.

(iii) Excessive payment defined . Excessive payment means an advance payment made–

(A) To a registered dealer that fails to meet the requirements to be an eligible entity provided in section 30D(g)(2) and paragraph (e)(2) of this section; or

(B) Except as provided in paragraph (f) (2)(iv) of this section, to an eligible entity with respect to a vehicle to the extent the payment exceeds the amount of the credit that, without application of section 30D(g) and this section, would be otherwise allowable to the electing taxpayer with respect to the vehicle for such tax year.

(iv) Special rule for cases in which the purchaser’s modified adjusted gross income exceeds the limitation . Any excess described in paragraph (f)(2)(iii)(B) of

this section due to the purchaser exceeding the limitation based on modified adjusted gross income provided in section 30D(f) (10) is not an excessive payment. Instead, the value of the amount of the advance payment is recaptured from the purchaser under section 30D(f)(10) and paragraph (f)(1) of this section.

(3) Example . This paragraph (f)(3) provides an example to illustrate the excessive payment rules provided in paragraph (f)(2) of this section.

(i) Facts . In 2024, D, a registered dealer, receives an advance payment of $7,500 with respect to a credit transferred under section 30D(g)(1) and paragraph (c) of this section with respect to a new clean vehicle. In 2025, the IRS determines that the registered dealer was not an eligible entity with respect to the vehicle at the time of the receipt of the advance payment in 2024 because the registered dealer failed to satisfy a requirement in section 30D(g)(2) and paragraph (e) (2) of this section to be an eligible entity with respect to the vehicle. D is unable to show reasonable cause for the failure.

(ii) Analysis . Under paragraph (f)(2)(i) of this section, the tax imposed on D is increased by the amount of the excessive payment if the advance payment received by D constitutes an excessive payment. Under paragraph (f)(2)(iii) of this section, the entire amount of the $7,500 advance payment received by D is an excessive payment because D did not meet the requirements to be an eligible entity under section 30D(g)(2) and paragraph (e)(2) of this section. Additionally, because D cannot show reasonable cause for its failure to meet these requirements, the tax imposed under chapter 1 on D is increased by $9,000 in 2025 (the taxable year of the IRS determination). This is comprised of the $7,500 value of the credit plus the $1,500 penalty, calculated as 20% penalty on such $7,500 (20% * $7,500 = $1,500). This treatment applies regardless of whether D is otherwise subject to tax under chapter 1 (for example, if D is a partnership).

(g) Requirement of return —(1) In general . An electing taxpayer that makes a vehicle transfer election must file an income tax return for the taxable year in which the vehicle transfer election is made and indicate such election on the return per instructions. The electing taxpayer must include the VIN of the new clean vehicle on such return, as provided for in forms and instructions.

October 23, 2023 1172 Bulletin No. 2023–43

(Filed by the Office of the Federal Register October 6, 2023, 8:45 a.m., and published in the issue of the Federal Register for October 10, 2023, 88 FR 70310.)

purpose of making a return to report the tax under chapter 1 that includes all of the information required on the forms and in instructions.

(h) Two vehicle transfer elections per year. A taxpayer may make no more than two transfer elections per taxable year, consisting of either two section 30D credits or one section 30D credit and one section 25E credit. In the case of a joint return, each individual taxpayer may make no more than two transfer elections per taxable year.

(i) Severability . The provisions of this section are separate and severable from one another. If any provision of this section is stayed or determined to be invalid, it is the agency’s intention that the remaining provisions will continue in effect.

(j) Applicability date . This section applies to taxable years beginning after December 31, 2023.

PART 301—PROCEDURE AND ADMINISTRATION

Par 7. The authority citation for part 301 is amended by adding an entry in numerical order for §301.6213-2 to read, in part, as follows:

Authority: 26 U.S.C. 7805.

Section 301.6213-2 also issued under 26 U.S.C. 6213.

Par 8. Section 301.6213-2 is added to read as follows:

§301.6213-2 Omission of correct vehicle identification number.

(a) In general . The definition of the term mathematical or clerical error in section 6213(g)(2) of the Internal Revenue Code (Code) includes:

(1) Under section 6213(g)(2)(T), an omission of a correct vehicle identification number required under section 30D(f) (9) of the Code (relating to credit for new clean vehicles) to be included on a return;

(2) Under section 6213(g)(2)(U), an omission of a correct vehicle identification number required under section 25E(d) of the Code (relating to credit for previously-owned clean vehicles) to be included on a return; and

(3) Under section 6213(g)(2)(V), an omission of a correct vehicle identification number required under section 45W(e) of the Code (relating to commercial clean vehicle credit) to be included on a return.

(b) Omission of a correct vehicle iden- tification number . For purposes of paragraph (a) of this section, a taxpayer is treated as having omitted a correct vehicle identification number if:

(1) The vehicle identification number required to be reported under section 30D(f)(9), 25E(d), or 45W(e) is not included on the return of tax;

(2) The vehicle identification number included on the return of tax is not that of a vehicle eligible for a credit under section 30D, 25E, or 45W; (3) The vehicle identification number included on the return of tax is not that of a vehicle eligible for a credit under section 30D, 25E, or 45W for the year in which it is claimed;

(4) The vehicle identification number included on the return of tax differs from the vehicle identification number reported to the IRS and the taxpayer under section 30D(d)(1)(H) for each new clean vehicle placed in service during the taxable year by the taxpayer who was issued the report; or

(5) The vehicle identification number included on the return of tax differs from the vehicle identification number reported to the IRS and the taxpayer under section 25E(c)(1)(D)(i) for each previously-owned clean vehicle placed in service during the taxable year by the taxpayer who was issued the report.

Douglas W. O’Donnell, Deputy Commissioner for Services and

Enforcement.

Bulletin No. 2023–43 1173 October 23, 2023