09 February 2023 IRS modifies definitions to include more vehicles eligible for clean vehicles credit
In Notice 2023-16, the IRS and Treasury modified earlier guidance on the definition of clean vehicles for purposes of the IRC Section 30D credit. With the modifications, the forthcoming proposed regulations previously announced in Notice 2023-1 will provide that the fuel economy labeling regime under 40 CFR 600.315-08 is the basis for determining whether a vehicle is a van, sport utility vehicle (SUV), pickup truck or other vehicle eligible for the credit. In Notice 2023-1, the Treasury and the IRS announced that they intend to propose regulations on the following definitions under IRC Section 30D for new clean vehicles placed in service after December 31, 2022: (1) final assembly; (2) North America; (3) manufacturer's suggested retail price; (4) vehicle classifications for vans, SUVs, pickup trucks, and other vehicles; and (5) placed in service (see Tax Alert 2023-0076). Classifying the vehicle is the first step in determining which price cap applies (e.g., $80,000 for vans, SUVs and pickup trucks, $55,000 for sedans and others). Notice 2023-1 stated that a vehicle's classification must be determined under the rules and definitions in 40 CFR 600.002 (the Corporate Average Fuel Economy (CAFE) standard) for vans, SUVs and pickup trucks. Notice 2023-16 changes the vehicle classification standard from the CAFE standard to the fuel economy labeling regime in 40 CFR 600.315-08 as classified by the Environmental Protection Agency. Using this standard will allow more vehicles to qualify as SUVs and meet the $80,000 price cap. Until the proposed regulations under IRC Section 30D are issued, taxpayers may rely on this guidance for new clean vehicles placed into service on or after January 1, 2023. Notice 2023-16 provides greater clarity on which vehicles will qualify for the credit and may reduce hesitancy in those consumers who, due to ambiguity, were reluctant to take advantage of this program. The Notice applies retroactively, implying that vehicles purchased at the start of 2023 may be credit-eligible, even if they were not at the time of purchase.
Document ID: 2023-0251 | ||||||||||||||||||||
