In detail

Notice 2023-9 provided a safe harbor for computing the incremental cost of certain commercial clean vehicles placed in service in calendar year 2023. The safe harbor was based on a December 2022 Department of Energy (DOE) analysis of classes of street vehicles that modeled the costs of representative electric vehicles, including street electric vehicles, and comparable street internal combustion engine vehicles. “Street electric vehicles” include battery electric, plug-in hybrid electric (PHEV), and fuel cell electric cars; SUVs; minivans; and pickup trucks.

Notice 2024-5 advises that DOE amended its analysis in December 2023 and reached the same results as in December 2022. DOE concluded that the modeled incremental cost of all street electric vehicles, other than compact car PHEVs, under 14,000 pounds GVW will be greater than $7,500. The incremental cost for compact car PHEVs is $7,000.

Based on the DOE analysis, Notice 2024-5 provides a safe harbor permitting taxpayers to rely on the DOE modeled incremental costs for vehicles placed in service in 2024. Thus, $7,000 may be treated as the incremental cost for compact (including mini-compact and subcompact) PHEVs. The credit for other vehicles under 14,000 pounds GVW will not be limited by the modeled incremental cost because it is more than the credit maximum.

See the PwC insight Interim guidance addresses clean vehicle battery requirements, incremental cost for additional information on the Section 45W credit.