February 2024
On January 19, the IRS and Treasury issued Notice 2024-20, which provides interim guidance under Section 30C, the tax credit for alternative fuel vehicle refueling property.
Notice 2024-20 describes definitions and rules under Section 30C that the IRS and Treasury expect to include in forthcoming proposed regulations for determining whether property is located in an eligible census tract.
Notice 2024-20 includes appendices that list eligible population census tracts and thus simplify the identification process. The notice provides that taxpayers may rely on the guidance pending the issuance of proposed regulations.
As amended for property placed in service after 2022 and before 2032, Section 30C provides a tax credit of 30% of the cost of qualified alternative fuel vehicle refueling property a taxpayer places in service during the tax year. The credit is 6% for depreciable property, increased to 30% if the taxpayer meets prevailing wage and apprenticeship requirements. The credit is limited to $100,000 (depreciable property) or $1,000 (other property) for a single item of property.
“Qualified alternative fuel vehicle refueling property” (qualified property) is property, excluding buildings and structural components:
(1) That is either depreciable or installed on the taxpayer’s principal residence,
(2) Of which the taxpayer has the original use, and
(3) For the purpose of:
(a) Storing or dispensing a clean-burning fuel into a motor vehicle fuel tank at the point of delivery or
(b) Recharging an electric motor vehicle at the point of recharging.
“Clean-burning fuels” include certain petrochemical fuels, electricity, and (after 2024) certain transportation fuels.
Qualified property must be placed in service in an “eligible census tract,” which is a population census tract that is a low-income community for purposes of the Section 45D new markets tax credit (NMTC) or not designated as an urban area by the Department of Commerce (nonurban census tract).
Under the NMTC, a low-income community generally is a population census tract where:
(1) The poverty rate is at least 20%, or
(2) The median family income is 80% or less of statewide median family income (in a metropolitan area, 80% or less of the greater of statewide or metropolitan area median family income).
The 80% figure is 85% for property located in a high migration rural county.
Low-income communities also may include certain “targeted populations” as determined by the Community Development Financial Institutions (CDFI) Fund, areas not within census tracts, and areas with a population under 2,000 within an empowerment zone or contiguous to a low-income community.
Notice 2024-20 advises that the Census Bureau determines the boundaries of census tracts. The Census Bureau identifies “census blocks,” which are combined to form “population census tracts” that are located within a county or equivalent entity. The Census Bureau assigns an 11-digit “GEOID” number to each population census tract.
Beginning in 2020, the Census Bureau defines urban areas only on the basis of census blocks and not by population census tract. Notice 2024-20 advises that, to identify areas that are eligible census tracts as nonurban areas, the IRS and Treasury intend to propose regulations defining a nonurban census tract as a population census tract in which at least 10% of the census blocks are not designated as urban areas in the 2020 census, based on the 2020 census tract boundaries.
Notice 2024-20 advises that the CDFI Fund, which administers the NMTC jointly with the IRS, identifies low-income community population census tracts based in part on surveys published by the Census Bureau that provide five-year estimates. The CDFI Fund identified NMTC low-income community tracts based on 2011-2015 estimates and 2015 census tract boundaries, updated in 2023 using 2016-2020 estimates and 2020 census tract boundaries. Notice 2024-20 provides that the IRS and Treasury intend to provide guidance allowing a taxpayer to determine whether qualified property placed in service after 2022 and before 2025 is located in a low-income community population census tract based on either the 2011-2015 NMTC tracts or the 2016-2020 NMTC tracts.
Notice 2024-20 advises that the IRS and Treasury, in consultation with the CDFI Fund, have been unable to identify population census tracts that qualify as NMTC low-income communities as a targeted population or because the population is less than 2,000, and intend to request comments on this issue in future guidance.
Note: Notice 2024-20 does not request comments at this time on this issue or other expected rules.
The notice provides that an area that is not within a population census tract does not qualify as an eligible census tract for purposes of Section 30C, which requires qualified property to be located within a population census tract, although the area may qualify for the NMTC.
Appendix A to Notice 2024-20 lists Section 30C eligible low-income community population census tracts using the 2011-2015 NMTC tracts. Appendix B lists the Section 30C eligible low-income community population census tracts using the 2016-2020 NMTC tracts plus the 2020 nonurban census tracts.
Notice 2024-24 provides that qualified property placed in service after 2022 and before 2025 will be considered placed in service in an eligible census tract if located in a population census tract with a GEOID listed in Appendix A or B, depending on whether it is using the 2011-2015 or 2016-2020 NMTC census tracts. Qualified property placed in service after 2024 and before 2030, which must be based on the 2016-2020 tracts, will be considered placed in service in an eligible census tract if its population census tract GEOID is listed in Appendix B.
Notice 2024-20 also defines “placed in service” for purposes of Section 30C. Depreciable qualified property is placed in service in the earlier of the tax year that the property’s depreciation period begins or the property is placed in a condition or state of readiness and availability for a specifically assigned function. Nondepreciable property is placed in service when it is installed at the taxpayer’s principal residence and is operational.
Observation: These definitions are consistent with how the IRS and Treasury have defined “placed in service” for purposes of other energy tax credits.
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