IRS and Treasury Issue Initial Guidance on Clean Vehicle Tax Credit
The IRS and the U.S. Treasury Department recently released initial guidance concerning a new requirement to qualify for the Sec. 30D clean vehicle tax credit.
The Inflation Reduction Act (IRA), H.R. 5376, signed by President Joe Biden on Aug. 16, 2022, made the clean vehicle credit generally available only if the qualifying vehicle's final assembly happened in North America. The change went into effect for new clean vehicles purchased after Aug. 16, 2022, immediately after enactment of the legislation.
The new guidance explains a two-step process to verify whether a vehicle meets the final assembly requirement. Consumers and dealers can first check to see if the vehicle appears on the Department of Energy's list of model year 2022 and 2023 electric vehicles that may qualify. However, the IRS says there may be vehicles on the Department of Energy list that do not meet the final assembly requirement in all circumstances. The second step, entering the vehicle identification number (VIN) into the National Highway Traffic Safety Administration's VIN Decoder tool and viewing the "Plant Information" field, will identify where the vehicle was built.
Regarding previously ordered vehicles, under a transition rule, if a buyer entered into a written, binding contract to buy a qualifying clean vehicle before Aug. 16, 2022, but does not take possession of the vehicle until on or after that date, the preexisting rules apply.
For more information, see the IRS’ webpage about the clean vehicle tax credit or the Treasury’s frequently asked questions (FAQs) on the IRA changes to the credit.