SECTION 2. BACKGROUND — Internal Revenue Bulletin 2023-51

.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. 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(d)(1) defines a “new clean vehicle” as a motor vehicle that satisfies the following eight requirements set forth in § 30D(d)(1)(A) through (H):

(a) The original use of the motor vehicle must commence with the taxpayer.

(b) The motor vehicle must be acquired for use or lease by the taxpayer and not for resale.

(d) The motor vehicle must be treated as a motor vehicle for purposes of title II of the Clean Air Act.

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

2 Section 30D(d)(6) defines a new clean vehicle to include any new qualified fuel cell motor vehicle (as defined in § 30B(b)(3)) that meets the requirements of § 30D(1)(G) and (H). Section 25E(c) defines a previously-owned clean vehicle to include, in part, a motor vehicle that either (1) meets the requirements of § 30D(d)(1)(C) (regarding qualified manufacturer), or (2) satisfies the requirements of § 30B(b)(3)(A) and (B) (regarding fuel cell motor vehicles) and has a gross vehicle weight rating of less than 14,000 pounds. Therefore, if a new clean vehicle is a new qualified fuel cell motor vehicle described in § 30D(d)(6), it does not need to be made by a qualified manufacturer, as otherwise required under § 30D(d)(1)(C). Similarly, if a previously-owned clean vehicle is a fuel cell motor vehicle described in § 25E(c)(1)(D)(ii), it does not need to be made by a qualified manufacturer, as otherwise required under § 25E(c)(1)(D)(i). However, any qualified manufacturer that makes fuel cell vehicles must report on such vehicles as described in sections 4.05 and 6 of this revenue procedure. In addition, any manufacturer of fuel cell vehicles that is not subject to the requirement to be a qualified manufacturer is encouraged to become a qualified manufacturer for purposes of providing the IRS with information to facilitate tax administration.

3 Amendments to § 30D to allow an election to transfer the credit to an eligible entity are effective for vehicles placed in service after December 31, 2023. The transfer election provisions are incorporated by reference in § 25E(f) and apply to previously-owned clean vehicles.

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under which such manufacturer agrees to make periodic written reports to the Secretary (at such times and in such manner as the Secretary may provide) providing vehicle identification numbers and such other information related to each vehicle manufactured by such manufacturer as the Secretary may require.

(5) Section 30D(d)(5) defines “final assembly” as the process by which a manufacturer produces a new clean vehicle at, or through the use of, a plant, factory, or other place from which the vehicle is delivered to a dealer or importer with all component parts necessary for the mechanical operation of the vehicle included with the vehicle, whether or not the component parts are permanently installed in or on the vehicle.

(6) Section 30D(d)(6) provides that “new clean vehicle” includes any new qualified fuel cell motor vehicle (as defined in § 30B(b)(3)) that meets the requirements under § 30D(d)(1)(G) and (H).

(7) Section 30D(d)(7) provides that “new clean vehicle” does not include: any vehicle placed in service after December 31, 2024, with respect to which any of the applicable critical minerals contained in the battery of such vehicle (as described in § 30D(e)(1)(A)) were extracted, processed, or recycled by a foreign entity of concern (as defined in 42 U.S.C. 18741(a)(5)), or any vehicle placed in service after December 31, 2023, with respect to which any of the components contained in the battery of such vehicle (as described in § 30D(e)(2) (A)) were manufactured or assembled by a foreign entity of concern.

(8) Section 13401(k)(3) of the IRA provides that the critical minerals and the battery components requirements described in § 30D(e)(1) and (2) apply to vehicles placed in service after the date on which proposed guidance with respect to the critical minerals and the battery components requirements is issued by the Secretary. On April 17, 2023, the Department of the Treasury (Treasury Department) and the IRS issued a Notice of Proposed Rulemaking, 88 F.R. 23370, which constitutes that proposed guidance. Thus, the critical minerals and battery components requirements apply to vehicles placed in service on or after April 18, 2023.

(9) Section 30D(e)(1)(A) provides that the critical minerals requirement with respect to the battery from which the electric motor of a vehicle draws electricity is satisfied if the percentage of the value of the applicable critical minerals (as defined in § 45X(c)(6)) contained in such battery that were (i) extracted or processed in the United States, or in any country with which the United States has a free trade agreement in effect, or (ii) recycled in North America, is equal to or greater than the applicable percentage (as certified by the qualified manufacturer, in such form or manner as prescribed by the Secretary) (critical minerals requirement). The applicable percentage for the critical minerals requirement is set forth in § 30D(e)(1)(B)(i) through (v) and varies based on when the vehicle is placed in service. In the case of a vehicle placed in service after April 18, 2023, and before January 1, 2024, the applicable percentage is 40 percent. In the case of a vehicle placed in service during calendar year 2024, 2025, and 2026, the applicable percentage is 50 percent, 60 percent, and 70 percent, respectively. In the case of a vehicle placed in service after December 31, 2026, the applicable percentage is 80 percent.

(10) Section 30D(e)(2)(A) provides that the battery components requirement with respect to the battery from which the electric motor of a vehicle draws electricity is satisfied if the percentage of the value of the components contained in such battery that were manufactured or assembled in North America is equal to or greater than the applicable percentage (as certified by the qualified manufacturer, in such form or manner as prescribed by the Secretary) (battery components requirement). The applicable percentage for the battery components requirement is set forth in § 30D(e)(2)(B)(i) through (vi) and varies based on when the vehicle is placed in service. In the case of a vehicle placed in service after April 18, 2023, and before January 1, 2024, the applicable percentage is 50 percent. In the case of a vehicle placed in service during calendar year 2024 or 2025, the applicable percentage is 60 percent. In the case of a vehicle placed in service during calendar year 2026, 2027, and 2028, the applicable percentage is 70 percent, 80 percent, and

90 percent, respectively. In the case of a vehicle placed in service after December 31, 2028, the applicable percentage is 100 percent.

(11) Section 30D(f)(11)(A) provides that no credit is allowed for a vehicle with a manufacturer’s suggested retail price in excess of the applicable limitation. Section 30D(f)(11)(B) provides that the applicable limitation for each vehicle classification is as follows: in the case of a van, a sport utility vehicle, or a pickup truck, $80,000; and in the case of any other vehicle, $55,000.

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

(1) Section 13402 of the IRA added § 25E to the Code, which is generally effective for vehicles acquired after December 31, 2022, and before January 1, 2033. 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 (that is, the § 25E 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.

(2) Section 25E(c) defines certain terms for purposes of the § 25E credit. Section 25E(c)(1) defines “previously-owned clean vehicle” as, with respect to a taxpayer, a motor vehicle that satisfies the following four requirements set forth in § 25E(c)(1)(A) through (D):

(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.

(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: (A) satisfies the requirements under § 30B(b)(3)(A) and (B), and

(B) 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 (A) by a dealer (as defined in § 30D(g)

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(8)), (B) for a sale price that does not exceed $25,000, and (C) that is the first transfer since August 16, 2022, to a qualified buyer other than the person with whom the original use of such vehicle commenced.

(4) Section 25E(c)(3) defines “qualified buyer” as, with respect to a sale of a motor vehicle, 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 during the 3-year period ending on the date of the sale of such 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 § 25E(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.

Section 45W, Credit for Qualified Commercial Clean Vehicles

(1) Section 13403(a) of the IRA added new § 45W to the Code, which is effective for vehicles acquired after December 31, 2022, and before January 1, 2033. A taxpayer can claim a § 45W credit for purchasing and placing in service a qualified commercial clean vehicle, as defined in § 45W(c), during the taxable year. The amount of the § 45W credit is the lesser of (1) 15 percent of the taxpayer’s basis in the vehicle (30 percent in the case of a vehicle not powered by a gasoline or diesel internal combustion engine), or (2) the incremental cost of the vehicle. Under § 45W(b)(4), the credit is limited to $7,500 in the case of a vehicle that has a gross vehicle weight rating of less than 14,000 pounds, and $40,000 for all other vehicles.

(2) Under § 45W(c), a “qualified commercial clean vehicle” is defined as any vehicle that is of a character subject to the allowance for depreciation that:

(a) meets the requirement under § 30D(d)(1)(C) of being made by a qualified manufacturer and is acquired for use or lease by the taxpayer and not for resale,

(b) either:

(i) meets the requirement under § 30D(d)(1)(D) of being treated as a motor vehicle for purposes of title II of the Clean Air Act and is manufactured primarily for use on public streets, roads, and highways (not including a vehicle operated exclusively on a rail or rails), or

(ii) is mobile machinery, as defined in § 4053(8) (including vehicles that are not designed to perform a function of transporting a load over the public highways), and

(c) either: (i) is propelled to a significant extent by an electric motor that draws electricity from a battery that has a capacity of not less than 15 kilowatt hours (or, in the case of a vehicle that has a gross vehicle weight rating of less than 14,000 pounds, 7 kilowatt hours) and is capable of being recharged from an external source of electricity, or

(ii) is a motor vehicle that satisfies the requirements under § 30B(b)(3)(A) and (B) of being a new qualified fuel cell motor vehicle.

.04 Revenue Procedure 2022-42 (1) Rev. Proc. 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).

(2) Sections 4.01 and 4.02 of Rev. Proc. 2022-42 provided, respectively, information regarding the contents of the written agreement that a manufacturer must enter into with the IRS to become a qualified manufacturer and the contents of the written reports submitted by the qualified manufacturer to the IRS.

(3) Section 6.01 of Rev. Proc. 202242 provided that manufacturers must send their signed written agreements to IRS.Clean.Vehicle.Manufacturers@irs. gov . Section 6.02 of Rev. Proc. 2022-42 provided, in relevant part, that qualified manufacturers must file written monthly reports with the IRS by the fifteenth of the month and may file more frequently. It further provided that 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.

.05 Revenue Procedure 2023-33

(1) Rev. Proc. 2023-33, in relevant part, superseded sections 6.01 and 6.02 of Rev. Proc. 2022-42, and provided updated information on written agreements to be submitted by manufacturers to the IRS to be considered qualified manufacturers, as well as the method for qualified manufacturers to submit monthly reports, beginning January 1, 2024.

(2) Section 7.01 of Rev. Proc. 202333 updated the information for entering into a written agreement and provided that beginning January 1, 2024, to be a qualified manufacturer, manufacturers must have entered into a written agreement pursuant to section 4.01 of Rev. Proc. 2022-42 through the IRS Energy Credits Online Portal. It also clarified that manufacturers who previously registered and filed written agreements under the procedures in section 6.01 of Rev. Proc. 2022-42 must enter into new written agreements through the IRS Energy Credits Online Portal, and that the procedures for manufacturers to enter into written agreements prior to January 1, 2024, will remain as described in section 6.01 of Rev. Proc. 2022-42. (3) Section 7.02 of Rev. Proc. 2023-33 updated the information for filing written reports by qualified manufacturers and provided that beginning January 1, 2024, qualified manufacturers must file the monthly written reports described in section 4.02 of Rev. Proc. 2022-42 through the IRS Energy Credits Online Portal by the fifteenth of the month following the month to which each monthly written report relates. It further stated that qualified manufacturers may file reports more frequently than once a month. Beginning January 1, 2024, manufacturers who previously registered as qualified manufacturers under the procedures in section 6.01 of Rev. Proc. 202242 must file their written reports through the IRS Energy Credits Online Portal. It further clarified that the procedures for manufacturers to file written reports prior to January 1, 2024, will remain as described in section 6.02 of Rev. Proc. 2022-42. .06 IRS Proposed Regulations (1) On April 17, 2023, the Treasury Department and the IRS published a notice of proposed rulemaking (REG120080-22) in the Federal Register (88

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F.R. 23370) (April 2023 proposed regulations). The April 2023 proposed regulations provided proposed definitions for certain terms related to § 30D, proposed rules regarding personal and business use and other special rules, and additional proposed rules related to the critical mineral and battery component requirements.

(2) On October 10, 2023, the Treasury Department and the IRS published a notice of proposed rulemaking (REG113064-23) in the Federal Register (88 F.R. 70310) (October 2023 proposed regulations), that contains initial and additional proposed regulations under §§ 25E, 30D, and 6213. (3) Concurrently with this revenue procedure, the Treasury Department and the IRS are releasing a notice of proposed rulemaking (REG-118492-23) in the Federal Register, regarding the excluded entity provisions under § 30D(d) (7) with respect to the § 30D credit (December 2023 proposed regulations). The December 2023 proposed regulations would provide additional clarity on definitions with respect to new clean vehicles eligible for the clean vehicle credit.

(4) References in this revenue procedure to “clean vehicle regulations” are to the provisions of the April 2023 proposed regulations, October 2023 proposed regulations, and December 2023 proposed regulations described in this section 2.06 of this revenue procedure, once they are issued in final form.

.07 Department of Energy Guidance Concurrently with this revenue procedure, the DOE is releasing proposed guidance in the Federal Register (DOE guidance), which proposes interpretations of certain terms used in the definition of “foreign entity of concern” (FEOC) provided in section 40207(a)(5) of the Infrastructure Investment and Jobs Act (42 U.S.C. 18741(a)(5)) and as cross-referenced in § 30D(d)(7).