Proposed regulations on Section 30D clean vehicle credit issued

In brief

The Inflation Reduction Act of 2022 extended and amended the Section 30D tax credit for new clean vehicles. One amendment replaced a requirement that a vehicle’s battery must have a certain minimum capacity with requirements relating to a battery’s critical mineral content and the location where battery components are manufactured or assembled. Amended Section 30D applies to vehicles placed in service after 2022 and before 2033.

The IRS and Treasury have issued proposed regulations on the Section 30D credit. Many of the rules are substantially unchanged from interim guidance previously provided in Notice 2023-1, modified by Notice 2013-16, and a Treasury white paper. Accordingly, while some provisions of the regulations are proposed to apply after publication of final regulations, rules incorporated from the interim guidance generally are proposed to apply to vehicles placed in service after publication of the proposed regulations in the Federal Register (scheduled for April 17, 2023) for tax years ending after that date.

The preamble states that taxpayers may rely on the proposed regulations before publication of final regulations if they follow the proposed regulations consistently and in their entirety. Notice 2023-1 and the Treasury white paper, along with interim guidance on clean vehicle credits under Sections 45W and 25E, are discussed in the PwC Insight Interim guidance addresses clean vehicle battery requirements, incremental cost.

For consideration:  Comments on the proposed regulations are due by June 16, 2023. The IRS and Treasury have requested specific comments on certain issues, including the standards associated with critical minerals and battery components and criteria to identify free trade countries. Although these proposed regulations are specific to the Section 30D credit for taxpayers who acquire vehicles for personal use, some requirements for the Section 45W credit for qualified commercial clean vehicles reference Section 30D. Taxpayers may want to consider submitting comments to request clarification of whether the rules in the Section 30D proposed regulations on provisions common to Section 45W are expected also to apply to Section 45W.