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The Inflation Reduction Act of 2022 (IRA) updated the Clean Vehicle Credit to make US-manufactured electric and fuel cell vehicles more attractive to American car buyers. Since provisions in the legislation changed several qualifying requirements that take effect in 2023, the Internal Revenue Service has been steadily issuing guidance since January.   

Last week, the IRS again announced new guidance, this time addressing the critical mineral and battery component requirements. This clarification includes regulations that will be published in the Federal Register on April 17 and updates to frequently asked questions (FAQs) on the IRS website.

Critical mineral and battery component requirements take effect April 18

The IRS says that “new clean vehicles placed in service on or after April 18, 2023, are subject to the critical mineral and battery component requirements even if the vehicle was ordered or purchased before April 18, 2023.” After this date, the maximum available credit of $7,500, will be split into two components:

  • $3,750 for meeting critical mineral requirements
  • $3,750 for meeting battery component requirements

For the purposes of determining eligibility for the credit, the IRS notes that “placed in service” means “the date the taxpayer takes delivery of the vehicle.”

A PDF of the official notice can be downloaded from the Federal Register.

FAQ changes documented in the new fact sheet

The IRS notes that Fact Sheet 2023-08 “updates FAQs related to new, previously owned, and qualified commercial clean vehicles,” including changes to the following topics:

  • Topic A: Eligibility Rules for the New Clean Vehicle Credit
    • Added question 11
    • Updated questions 2, 3, 4, 5, 6, and 7
  • Topic B: Income and Price Limitations for the New Clean Vehicle Credit
    • Added question 2 (renumbered prior questions 2 through 10 to 3 through 11)
    • Updated questions 1, 3, 7, 8, and 9
  • Topic C: When the New Requirements Apply to the New Clean Vehicle Credit
    • Added question 8 (renumbered prior question 8 to question 9)
    • Updated questions 2, 4, 5, and 6
  • Topic F: Claiming the Previously Owned Clean Vehicles Credit
    • Updated question 2
  • Topic G: Qualified Commercial Clean Vehicles Credit
    • Added question 10

While the agency considers FAQ updates the fastest method for providing taxpayers and tax professionals information, they should not be relied upon for determining precedent.

Want more information about the Clean Vehicle Credit?

For more information about the Clean Vehicle Credit, check out the following Taxing Subjects blogs:

To earn continuing professional education credits while learning about the Clean Vehicle Credit and other provisions included in the IRA, take the Inflation Reduction Act: Tax Implications self-study course on DrakeCPE.com.

Source: IR-2023-64

Article provided by Taxing Subjects.