SECTION 2. BACKGROUND

.01 Section 30D, Clean Vehicle Credit (1) Section 30D was enacted by § 205(a) of the Energy Improvement and Extension Act of 2008, Division B of Public Law 110-343, 122 Stat. 3765, 3835 (October 3, 2008), to provide a credit for purchasing and placing in service new qualified plug-in electric drive motor vehicles. Section 30D has been amended several times since its enactment, most recently by § 13401 of Public

Law 117-169, 136 Stat. 1818 (August 16, 2022), commonly known as the Inflation Reduction Act of 2022 (IRA). In general, the amendments made by § 13401 of the IRA to § 30D apply to vehicles placed in service after December 31, 2022, except as provided in § 13401(k)(2) through (5) of the IRA.

(2) Section 30D(a) allows a credit for the taxable year with respect to each new clean vehicle placed in service by a taxpayer during the taxable year (§ 30D credit). Section 30D(b) provides a maximum credit of $7,500 per vehicle, consisting of $3,750 if certain critical minerals requirements are met and $3,750 if certain battery components requirements are met. These requirements are described in § 30D(e)(1) and (2), respectively.

(3) Section 30D(g) allows the taxpayer to elect to transfer the § 30D credit in certain situations. Specifically, § 30D(g)(1) provides that, subject to such regulations or other guidance as the Secretary of the Treasury or her delegate (Secretary) determines necessary, a taxpayer may elect to transfer a § 30D credit with respect to a new clean vehicle to an eligible entity (transfer election). If the taxpayer who acquires a new clean vehicle makes a transfer election with respect to such vehicle, the § 30D(a) credit that would otherwise be allowed to such taxpayer with respect to such vehicle is allowed to the eligible entity specified in such election (and not the taxpayer). Section 30D(g)(2) defines an “eligible entity” with respect to the vehicle for which the § 30D credit is allowed as the dealer that sold such vehicle to the taxpayer and that satisfies the following four requirements of § 30D(g) (2)(A) through (D) set forth in section 2.01(3)(a) through (d) of this revenue procedure:

(a) The dealer, subject to § 30D(g)(4), must be registered with the IRS for purposes of § 30D(g)(2), at such time, and in such form and manner, as the Secretary prescribes.

(b) The dealer, prior to the transfer election and not later than at the time of sale, must have disclosed to the taxpayer purchasing such vehicle:

(i) The manufacturer’s suggested retail price,

1 Unless otherwise specified, all “Section” or “§” references are to sections of the Code.

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number (VIN) requirement of § 30D(f)(9) is treated as satisfied if the eligible entity provides the VIN of such vehicle to the IRS in such manner as the Secretary may provide.

(8) Section 30D(g)(7)(A) authorizes the Secretary to establish a program to make advance payments to registered dealers in an amount equal to the cumulative amount of the § 30D credits allowed under § 30D(a) with respect to any vehicles sold by such entity for which a transfer election has been made. Section 30D(g)(7) (B) details that rules similar to the rules of § 6417(d)(6) apply for purposes of any excessive payments, and § 30D(g)(7)(C) provides that, for purposes of 31 U.S.C. 1324, the payments under § 30D(g)(7)(A) are treated in the same manner as a refund due from a credit provision referred to in 31 U.S.C. 1324(b)(2). (9) Section 30D(g)(8) defines the term “dealer” as a person licensed by a State, the District of Columbia, the Commonwealth of Puerto Rico, any other territory or possession of the United States, an Indian tribal government, or any Alaska Native Corporation (as defined in § 3 of the Alaska Native Claims Settlement Act (43 U.S.C. 1602(m)) to engage in the sale of vehicles. Section 30D(g)(9) defines the term “Indian tribal government” as the recognized governing body of any Indian or Alaska Native tribe, band, nation, pueblo, village, community, component band, or component reservation, individually identified (including parenthetically) in the list published most recently as of the date of enactment of § 30D(g) (that is, August 16, 2022) pursuant to § 104 of the Federally Recognized Indian Tribe List Act of 1994 (25 U.S.C. 5131).

(10) Section 30D(g)(10) provides that, in the case of any taxpayer who has made a transfer election with respect to a new clean vehicle and received a payment from an eligible entity, if the § 30D credit would otherwise (but for § 30D(g)) not be allowable to such taxpayer pursuant to the application of the limitation based on modified adjusted gross income in § 30D(f)(10), the income tax imposed on such taxpayer under chapter 1 of the Code for the taxable year in which such vehicle was placed in service must be increased by the amount of the payment received by such taxpayer.

(11) Section 13401(k)(4) of the IRA provides that the ability for a taxpayer to elect to transfer a § 30D credit under § 30D(g) applies to vehicles placed in service after December 31, 2023.

.02 Section 25E, Previously-Owned Clean Vehicles Credit

(1) Section 13402 of the IRA added § 25E to the Code. Section 25E(a) provides that, in the case of a qualified buyer who during a taxable year places in service a previously-owned clean vehicle, an income tax credit is allowed for the taxable year equal to the lesser of: (1) $4,000, or (2) the amount equal to 30 percent of the sale price with respect to such vehicle (§ 25E credit).

(2) Section 25E(c)(1) defines “previously-owned clean vehicle”, with respect to a taxpayer, as a motor vehicle that satisfies the following requirements:

(a) The model year of the motor vehicle is at least 2 years earlier than the calendar year in which the taxpayer acquires such vehicle.

(b) The original use of the motor vehicle commences with a person other than the taxpayer.

(c) The motor vehicle is acquired by the taxpayer in a qualified sale.

(d) The motor vehicle: (i) Meets the requirements of § 30D(d) (1)(C), (D), (E), (F), and (H) (except for § 30D(d)(1)(H)(iv)), or

(ii) Is a motor vehicle that (I) satisfies the requirements under § 30B(b)(3) (A) and (B), and (II) has a gross vehicle weight rating of less than 14,000 pounds.

(3) Section 25E(c)(2) defines a “qualified sale” as a sale of a motor vehicle:

(i) By a dealer (as defined in § 30D(g) (8)),

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

(iii) That is the first transfer since the date of enactment to a qualified buyer other than the person with whom the original use of such vehicle commenced.

(4) Section 25E(c)(3) defines the term “qualified buyer” for purposes of § 25E as a taxpayer:

(a) Who is an individual, (b) Who purchases such vehicle for use and not for resale,

(c) With respect to whom no deduction is allowable with respect to another taxpayer under § 151, and

(d) Who has not been allowed a § 25E credit for any sale of a motor vehicle during the 3-year period ending on the date of the sale of the previously-owned clean vehicle.

(5) Section 25E(c)(4) defines “motor vehicle” and “capacity” to have the meaning given such terms in § 30D(d)(2) and (4), respectively.

(6) Section 25E(d) provides that no credit is allowed under § 25(a) with respect to any vehicle unless the taxpayer includes the vehicle identification number of such vehicle on the return of tax for the taxable year.

(7) Section 25E(f) provides that rules similar to § 30D(g) apply to the transfer of a § 25E credit for previously-owned vehicles (thus, a taxpayer also may elect to transfer a § 25E credit). For purposes of this revenue procedure, the program established under §§ 30D(g)(7)(A) and 25E(f) to make advance payments of amounts of § 30D credits and § 25E credits to registered dealers with respect to eligible clean vehicles sold by such dealers for which a taxpayer makes a transfer election is referred to as the “advance payment program.”

(8) Section 13402(e)(2) of the IRA provides that the ability of a taxpayer to elect to transfer a § 25E credit under § 25E(f) applies to vehicles acquired after December 31, 2023.

.03 Revenue Procedure 2022-42. (1) Revenue Procedure 2022-42, in relevant part, established procedures for qualified manufacturers to enter into written agreements with the IRS in accordance with §§ 30D(d)(1)(C) and 30D(d)(3), and procedures for persons selling vehicles to submit seller reports to the IRS.

(2) Sections 4.01 and 4.03 of Rev. Proc. 2022-42 provide, respectively, that a manufacturer must enter into a written agreement with the IRS to become a qualified manufacturer and must submit written reports to the IRS containing required information.

(3) Section 5.01 of Rev. Proc. 2022-42 provides, in relevant part, that the seller of a clean vehicle must submit to the Secretary a seller report containing certain information within fifteen (15) days of the end of the calendar year in which the sale occurs. Section 6.03 of Rev. Proc. 2022-42 provides that, beginning January

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15, 2024, seller reports must be filed with the IRS within fifteen days after the end of the calendar year in which the sale occurs in a format and method that the Secretary provides.

(4) Section 6.01 of Rev. Proc. 2022-42 provides that manufacturers must send their signed written agreements pursuant to section 4.01 of Rev. Proc. 2022-42 to IRS.Clean.Vehicle.Manufacturers@irs. gov . Section 6.02 of Rev. Proc. 2022-42 provides, in relevant part, that qualified manufacturers must file written monthly reports with the IRS by the fifteenth of the month. Qualified manufacturers must send an email to IRS.Clean.Vehicles. QM.Reporting@irs.gov indicating their intent to submit monthly reports and the IRS will respond with instructions on how to submit their reporting information.

.04 Transfer Election and Advance Payment Program Procedural Requirements. The procedural rules described in this Revenue Procedure are designed in part to ensure program integrity. In particular, advance payment of the § 30D and § 25E credits poses unique compliance challenges, since such advance payments are not subject to the same tax administration procedures that apply to claiming a credit via return filing. Furthermore, participation in the credit transfer and advance payment program is optional. The transfer of § 30D and § 25E credits is elective on the part of the taxpayer, and the eligible entity can decide whether to offer to the taxpayer the ability to transfer the § 30D and § 25E credits (thereby participating in the advance payment program). Taxpayers instead may choose to wait and claim a § 30D or § 25E credit on the taxpayer’s return. Section 30D(g)(1) provides that a taxpayer election to transfer the § 30D credit is subject to the regulations or other guidance that the Secretary determines necessary. Section 30D(g)(7) instructs the Secretary to establish a program for making advance payments to eligible entities – that is, a program to make payments to the eligible entity before the eligible entity files its Federal income tax return for the relevant taxable year. Section 25E(f) provides that, for purposes of § 25E, rules similar to the rules of § 30D(g) apply. Taken together, these provisions provide authority for the Secretary to establish the parameters and

conditions of the transfer election and the accompanying advance payment program for those taxpayers and eligible entities that choose to participate, in furtherance of sound tax administration.