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Section 30D New Clean Vehicle Credit Publication: Federal Register Agency: Internal Revenue Service Byline: Douglas W. O'Donnell Date: 17 April 2023 Subject: American Government 
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[Federal Register Volume 88, Number 73 (Monday, April 17, 2023)]
[Proposed Rules]
[Pages 23370-23386]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-06822]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG-120080-22]
RIN 1545-BQ52
Section 30D New Clean Vehicle Credit
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: This document contains proposed regulations regarding the
Federal income tax credit under the Inflation Reduction Act of 2022 for
the purchase of qualifying new clean vehicles, including new plug-in
electric vehicles powered by an electric battery meeting certain
requirements and new qualified fuel cell vehicles. These proposed
regulations would affect eligible taxpayers who purchase new vehicles
that qualify for the credit.
DATES:
Comments and Requests for a Public Hearing: Written or electronic
comments and requests for a public hearing must be received by June 16,
2023. Requests for a public hearing must be submitted as prescribed in
the ``Comments and Requests for a Public Hearing'' section.
Applicability Date of New Critical Mineral and Battery Component
Requirements: See section III.D of the ``Background'' section for a
discussion of the applicability date of the new critical mineral and
battery component requirements.
ADDRESSES: Commenters are strongly encouraged to submit public comments
electronically. Submit electronic submissions via the Federal
eRulemaking Portal at https://www.regulations.gov (indicate IRS and
REG-120080-22) by following the online instructions for submitting
comments. Once submitted to the Federal eRulemaking Portal, comments
cannot be edited or withdrawn. The Department of the Treasury (Treasury
Department) and the IRS will publish for public availability any
comments submitted, whether electronically or on paper, to the IRS's
public docket. Send paper submissions to: CC:PA:LPD:PR (REG-120080-22),
Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin
Station, Washington, DC 20044.
FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations,
the Office of Associate Chief Counsel (Passthroughs & Special
Industries) at (202) 317-6853 (not a toll-free number); concerning
submissions of comments and requests for a public hearing, Vivian Hayes
at (202) 317-5306 (not a toll-free number) or by email to
publichearings@irs.gov (preferred).
SUPPLEMENTARY INFORMATION:
Background
I. Overview
Section 30D(a) of the Internal Revenue Code (Code) provides a
credit (section 30D credit) against the tax imposed by chapter 1 of the
Code (chapter 1) with respect to each new clean vehicle that a taxpayer
purchases and places in service. The credit is determined and allowable
with respect to the taxable year in which the taxpayer places the new
clean vehicle in service. This document contains proposed amendments to
the Income Tax Regulations (26 CFR part 1) under section 30D of the
Code (proposed regulations). To date, no regulations have been proposed
pursuant to section 30D.
Section 30D was originally enacted by section 205(a) of the Energy
Improvement and Extension Act of 2008, Division B of Public Law 110-
343, 122 Stat. 3765, 3835 (October 3, 2008), to provide a credit for
the purchase and placing in service of new qualified plug-in electric
drive motor vehicles. Section 30D has been amended several times since
its enactment, most recently by section 13401 of Public Law 117-169,
136 Stat. 1818 (August 16, 2022), commonly known as the Inflation
Reduction Act of 2022 (IRA).
The amount of the section 30D credit is treated as a personal
credit or a general business credit depending on the character of the
vehicle. In general, the section 30D credit is treated as a personal
credit allowable under subpart A of the Code. Section 30D(c)(2).
However, the amount of the section 30D credit that is attributable to
property that is of a character subject to an allowance for
depreciation is treated as a current year business credit under section
38(b) instead of being allowed under section 30D(a). Section 30D(c)(1).
Section 38(b)(30) lists as a current year business credit the portion
of the section 30D credit to which section 30D(c)(1) applies. The IRA
did not amend section 30D(c)(1) or (2).
II. IRA Amendments to Section 30D
The IRA made a number of amendments to section 30D. In general, the
purpose of these amendments is to promote the purchase and use of new
clean vehicles by lower and middle-income Americans, to promote
resilient supply chains and domestic manufacturing, to strengthen
supply chains with trusted trading partners, to protect against
improper credit claims, and to achieve significant carbon emissions
reductions. These amendments are specifically described in the
following subsections.
A. Credit Amount and Critical Mineral and Battery Component
Requirements
The IRA amends the rules for determining the amount of the section
30D credit. Prior to the amendments to section 30D made by section
13401(a) and (e) of the IRA becoming applicable, the amount of the
section 30D credit is calculated based on the vehicle's battery
capacity. The base amount is $2,500, plus $417 for a battery with a
capacity of at least 5 kilowatt hours, and an additional $417 for each
kilowatt hour of capacity in excess of 5 kilowatt hours, up to a
maximum credit of $7,500 per vehicle. Section 13401(a) of the IRA
amends section 30D(b) of the Code to provide a maximum credit of $7,500
per vehicle, consisting of $3,750 in the case of a vehicle that meets
certain requirements relating to critical minerals and $3,750 in the
case of a vehicle that meets certain requirements relating to battery
components. The amendments made by section 13401(a) of the IRA apply to
vehicles placed in service after the date on which the Secretary of the
Treasury or her delegate (Secretary) issues proposed guidance described
in new section 30D(e)(3)(B) of the Code relating to the new critical
minerals requirements described in new section 30D(e)(1)(A) (Critical
Minerals Requirement) and the new battery components requirements
described in
[[Page 23371]]
new section 30D(e)(2)(A) (Battery Components Requirement). See section
13401(k)(3) of the IRA.
New section 30D(e)(1)(A) provides that the Critical Minerals
Requirement with respect to the battery from which the electric motor
of a vehicle draws electricity is satisfied if the percentage of the
value of the applicable critical minerals (as defined in section
45X(c)(6)) contained in such battery that were (i) extracted or
processed in the United States, or in any country with which the United
States has a free trade agreement in effect, or (ii) recycled in North
America, is equal to or greater than the applicable percentage (as
certified by the qualified manufacturer, in such form or manner as
prescribed by the Secretary). The applicable percentage for the
Critical Minerals Requirement is set forth in section 30D(e)(1)(B)(i)
through (v) of the Code and varies based on when the vehicle is placed
in service. In the case of a vehicle placed in service after the date
of issuance of the proposed guidance described in new section
30D(e)(3)(B) of the Code and before January 1, 2024, the applicable
percentage is 40 percent. In the case of a vehicle placed in service
during calendar year 2024, 2025, and 2026, the applicable percentage is
50 percent, 60 percent, and 70 percent, respectively. In the case of a
vehicle placed in service after December 31, 2026, the applicable
percentage is 80 percent.
New section 30D(e)(2)(A) provides that the Battery Components
Requirement with respect to the battery from which the electric motor
of a vehicle draws electricity is satisfied if the percentage of the
value of the components contained in such battery that were
manufactured or assembled in North America is equal to or greater than
the applicable percentage (as certified by the qualified manufacturer,
in such form or manner as prescribed by the Secretary). The applicable
percentage for the Battery Components Requirement is set forth in
section 30D(e)(2)(B)(i) through (vi) of the Code and varies based on
when the vehicle is placed in service. In the case of a vehicle placed
in service after the date of issuance of the proposed guidance
described in new section 30D(e)(3)(B) of the Code and before January 1,
2024, the applicable percentage is 50 percent. In the case of a vehicle
placed in service during calendar year 2024 or 2025, the applicable
percentage is 60 percent. In the case of a vehicle placed in service
during calendar year 2026, 2027, and 2028, the applicable percentage is
70 percent, 80 percent, and 90 percent, respectively. In the case of a
vehicle placed in service after December 31, 2028, the applicable
percentage is 100 percent.
B. New Clean Vehicle Definition
The IRA amends the definition of the vehicles that may qualify for
the section 30D credit. Section 13401(c) of the IRA amends section
30D(d) of the Code by making the credit applicable to ``new clean
vehicles,'' instead of ``new qualified plug-in electric drive motor
vehicles,'' applicable to vehicles placed in service after December 31,
2022. As amended by section 13401(c) and (g)(2) of the IRA, section
30D(d)(1) of the Code defines a ``new clean vehicle'' as a motor
vehicle that satisfies the eight requirements set forth in section
30D(d)(1)(A) through (H) of the Code: the original use of the motor
vehicle must commence with the taxpayer; the motor vehicle must be
acquired for use or lease by the taxpayer and not for resale; the motor
vehicle must be made by a qualified manufacturer; the motor vehicle
must be treated as a motor vehicle for purposes of title II of the
Clean Air Act; the motor vehicle must have a gross vehicle weight
rating of less than 14,000 pounds; the motor vehicle must be propelled
to a significant extent by an electric motor which draws electricity
from a battery that has a capacity of not less than 7 kilowatt hours,
and is capable of being recharged from an external source of
electricity; the final assembly of the motor vehicle must occur within
North America; and the person who sells any vehicle to the taxpayer
must furnish a report to the taxpayer and to the Secretary, at such
time and in such manner as the Secretary provides, containing
specifically enumerated items.
With respect to the requirement that the motor vehicle must be made
by a qualified manufacturer, the IRA creates new requirements for
manufacturers of vehicles eligible for the section 30D credit
applicable to vehicles placed in service after December 31, 2022. As
amended by section 13401(c) the IRA, section 30D(d)(3) of the Code
defines a ``qualified manufacturer'' as any manufacturer (within the
meaning of the regulations prescribed by the Administrator of the
Environmental Protection Agency for purposes of the administration of
title II of the Clean Air Act (42 U.S.C. 7521 et seq.)) that enters
into a written agreement with the Secretary under which such
manufacturer agrees to make periodic written reports to the Secretary
(at such times and in such manner as the Secretary may provide)
providing vehicle identification numbers and such other information
related to each vehicle manufactured by such manufacturer as the
Secretary may require.
The IRA provides that certain fuel cell vehicles may qualify for
the section 30D credit. Section 13401(c) of the IRA adds new section
30D(d)(6) to the Code, which includes in the definition of the term
``new clean vehicle'' applicable to vehicles placed in service after
December 31, 2022, any ``new qualified fuel cell motor vehicle'' (as
defined in section 30B(b)(3)) that meets the requirements under section
30D(d)(1)(G) and (H) (North American final assembly and seller
reporting requirements).
The IRA disqualifies certain vehicles from the section 30D credit
if the battery of the vehicle contains critical minerals or battery
components from a foreign entity of concern. As amended by section
13401(e) of the IRA, section 30D(d)(7) of the Code excludes, after
certain specified dates, vehicles placed in service with batteries
containing certain critical minerals or battery components from a
foreign entity of concern from the definition of the term ``new clean
vehicle.'' In particular, amended section 30D(d)(7) provides that the
term ``new clean vehicle'' does not include (A) any vehicle placed in
service after December 31, 2024, with respect to which any of the
applicable critical minerals contained in the battery of such vehicle
(as described in section 30D(e)(1)(A)) were extracted, processed, or
recycled by a foreign entity of concern (as defined in section
40207(a)(5) of the Infrastructure Investment and Jobs Act (42 U.S.C.
18741(a)(5))), or (B) any vehicle placed in service after December 31,
2023, with respect to which any of the components contained in the
battery of such vehicle (as described in section 30D(e)(2)(A)) were
manufactured or assembled by a foreign entity of concern (as so
defined). These rules will be addressed in future guidance.
C. Final Assembly Requirement
As described in section II.B of the Background section of this
preamble, the IRA requires new clean vehicles to undergo final assembly
in North America to be eligible for the section 30D credit. This
requirement is applicable to vehicles sold after August 16, 2022. See
section 13401(k)(2) of the IRA. New section 30D(d)(5) defines ``final
assembly'' as the process by which a manufacturer produces a new clean
vehicle at, or through the use of, a plant, factory, or other place
from which the vehicle is delivered to a dealer or importer with all
component parts necessary for the mechanical operation of the vehicle
included with
[[Page 23372]]
the vehicle, whether or not the component parts are permanently
installed in or on the vehicle.
D. Elimination of Phaseout
The IRA eliminates the phaseout of the section 30D credit for
vehicles made by manufacturers that have sold at least 200,000 vehicles
eligible for the credit for use in the United States after December 31,
2009. Pursuant to section 13401(d) of the IRA this limitation does not
apply to vehicles sold after December 31, 2022. See section 13401(k)(5)
of the IRA.
E. Special Rules
The IRA adds four new special rules under section 30D(f) applicable
to vehicles placed in service after December 31, 2022. First, section
30D(f)(8) permits only one section 30D credit to be claimed for each
vehicle identification number (VIN). Second, section 30D(f)(9) requires
taxpayers to include on the taxpayer's return for the taxable year the
VIN of the vehicle for which the section 30D credit is claimed. Third,
section 30D(f)(10) denies the section 30D credit to certain high-income
taxpayers. More specifically, section 30D(f)(10)(A) provides that no
credit is allowed for any taxable year if (i) the lesser of (I) the
modified adjusted gross income of the taxpayer for such taxable year,
or (II) the modified adjusted gross income of the taxpayer for the
preceding taxable year, exceeds (ii) the threshold amount (Modified AGI
Limitation). New section 30D(f)(10)(B) provides that the threshold
amount is (i) in the case of a joint return or a surviving spouse (as
defined in section 2(a) of the Code), $300,000, (ii) in the case of a
head of household (as defined in section 2(b) of the Code), $225,000,
and (iii) in the case of any other taxpayer, $150,000. New section
30D(f)(10)(C) defines ``modified adjusted gross income'' as adjusted
gross income (AGI) increased by any amount excluded from gross income
under sections 911, 931, or 933.
Fourth, section 30D(f)(11) excludes from the section 30D credit
vehicles that exceed certain manufacturer's suggested retail price
thresholds. New section 30D(f)(11)(A) provides that no credit is
allowed for a vehicle with a manufacturer's suggested retail price in
excess of the applicable limitation. New section 30D(f)(11)(B) provides
that the applicable limitation for each vehicle classification is as
follows: in the case of a van, $80,000; in the case of a sport utility
vehicle, $80,000; in the case of a pickup truck, $80,000; and in the
case of any other vehicle, $55,000. New section 30D(f)(11)(C)
authorizes the Secretary to prescribe such regulations or other
guidance as the Secretary determines necessary to determine vehicle
classifications using criteria similar to that employed by the
Environmental Protection Agency and the Department of the Energy to
determine size and class of vehicles.
Section 13401(i)(4) of the IRA amended section 6213(g)(2) to
provide the IRS with math error authority for the omission of a correct
VIN included on the return as required under section 30D(f)(9).
Amended section 30D(g) provides rules for transfer of the credit
from the taxpayer to certain registered dealers applicable to vehicles
placed in service after December 31, 2023. Those rules will be
addressed in future guidance.
Amended section 30D(h) provides that no credit is allowed with
respect to any vehicle placed in service after December 31, 2032.
F. IRA Applicability Dates
Section 13401(k) of the IRA specifies various applicability dates
for its amendments to section 30D. As noted previously, except as
provided in section 13401(k)(2) through (5) of the IRA, the amendments
made by section 13401 of the IRA apply to vehicles placed in service
after December 31, 2022. Section 13401(k)(2) of the IRA provides that
the amendments made by section 13401(b) of the IRA relating to final
assembly apply to vehicles sold after the date of enactment of the IRA
(August 16, 2022). Section 13401(k)(3) of the IRA provides that the
amendments made by section 13401(a) and (e) of the IRA relating to the
per vehicle credit amount dollar limitation and Critical Minerals and
Battery Components Requirements apply to vehicles placed in service
after the date on which the proposed guidance described in new section
30D(e)(3)(B) is issued by the Secretary. Section 13401(k)(4) of the IRA
provides that the amendments made by section 13401(g) of the IRA
relating to transfers of the section 30D credit apply to vehicles
placed in service after December 31, 2023. Section 13401(k)(5) of the
IRA provides that the amendment made by section 13401(d) of the IRA
eliminating the manufacturer limitation applies to vehicles sold after
December 31, 2022.
Section 13401(l) of the IRA provides a transition rule for a
taxpayer who purchased or entered into a written binding contract to
purchase a new qualified plug-in electric drive motor vehicle (as
defined in section 30D(d)(1) of the Code, as in effect on the day
before the date of enactment of the IRA (August 15, 2022)) after
December 31, 2021, and before the date of enactment of the IRA (August
16, 2022), and placed such vehicle in service on or after the date of
enactment of the IRA. The transition rule provides that such a taxpayer
may elect (at such time, and in such form and manner as the Secretary
may prescribe) to treat such vehicle as having been placed in service
on the day before the date of enactment of the IRA.
III. Prior Guidance, Request for Comments, and Other Documents Relating
to the New Clean Vehicle Credit
A. Notice 2022-46
On October 5, 2022, the Treasury Department and the IRS published
Notice 2022-46, 2022-43 I.R.B. 302. The notice requested general
comments on issues arising under section 30D, as well as specific
comments concerning: (1) definitions; (2) critical minerals; (3)
battery components; (4) applicable values; (5) foreign entities of
concern; (6) recordkeeping and reporting; (7) tax-exempt entities; (8)
registered dealers and eligible entities; (9) the final assembly
requirement; (10) vehicle classifications; (11) elections to transfer
and advance payments; and (12) recapture. The Treasury Department and
the IRS received 884 comments from industry participants, environmental
groups, individual consumers, and other stakeholders. The Treasury
Department and the IRS appreciate the commenters' interest and
engagement on these issues. These comments have been carefully
considered in the preparation of the proposed regulations.
B. Revenue Procedure 2022-42
On December 12, 2022, the Treasury Department and the IRS published
Revenue Procedure 2022-42, 2022-52 I.R.B. 565, providing guidance for
qualified manufacturers to enter into written agreements with the IRS,
as required in sections 30D, 25E, and 45W of the Code, and to report
certain information regarding vehicles produced by such manufacturers
that may be eligible for these credits. Information required to be
reported includes certifications regarding the Critical Minerals and
Battery Components Requirements, as required in sections 30D(e)(1)(A)
and (e)(2)(A), once those requirements are applicable. In addition,
Revenue Procedure 2022-42 provides the procedures for sellers of new
clean vehicles or previously-owned clean vehicles to report certain
information to the IRS and the purchasers of such clean vehicles.
[[Page 23373]]
C. Notices 2023-1 and 2023-16 and 30D White Paper
On December 29, 2022, the Treasury Department and the IRS published
Notice 2023-1, 2023-3 I.R.B. 373, which describes definitions for
certain terms in section 30D that the Treasury Department and the IRS
intended to include in proposed regulations. The Treasury Department
also released a white paper on the anticipated direction, as of
December 29, 2022, of the proposed guidance on the Critical Minerals
and Battery Components Requirements and the process for determining
whether vehicles qualify under these requirements (30D White Paper).
See ``Anticipated Direction of Forthcoming Proposed Guidance on
Critical Mineral and Battery Component Value Calculations for the New
Clean Vehicle Credit,'' Dec. 29, 2022, https://home.treasury.gov/system/files/136/30DWhite-Paper.pdf (last accessed March 28, 2023).
On February 3, 2023, the Treasury Department and the IRS published
Notice 2023-16, 2023-8 I.R.B. 479, which modifies Notice 2023-1 by
revising the vehicle classification standard that the Treasury
Department and the IRS intend to provide in proposed regulations.
D. Proposed Guidance Described in Section 30D(e)(3)(B)
The publication of these proposed regulations in the Federal
Register is the issuance of the proposed guidance described in section
30D(e)(3)(B) (as added by section 13401(e) of the IRA). Pursuant to
section 13401(a), (e), and (k)(3) of the IRA, the critical minerals and
battery components requirements of section 13401(a) and (e) of the IRA
amend section 30D with respect to vehicles placed in service after the
date on which these proposed regulations are published in the Federal
Register. Accordingly, the Critical Minerals and Battery Components
Requirements apply to vehicles placed in service after April 17, 2023,
the date of publication in the Federal Register.
Explanation of Provisions
I. General Rules
Section 30D(a) and proposed Sec. 1.30D-1(a) provide that there is
allowed as a credit against the tax imposed by chapter 1 for the
taxable year an amount equal to the sum of the credit amounts
determined under section 30D(b) with respect to each new clean vehicle
placed in service by the taxpayer during the taxable year.
Section 30D(c) and proposed Sec. 1.30D-1(b) provide that the
section 30D credit may be allowed as a general business credit or a
personal credit depending on whether the property is of a character
subject to an allowance for depreciation (depreciable vehicle).
Section 30D(c)(1) and proposed Sec. 1.30D-1(b)(1) provide that so
much of the credit that would be allowed to a taxpayer under section
30D(a) for any taxable year with respect to all new clean vehicles
placed in service by the taxpayer during the taxable year (determined
without regard to section 30D(c) and proposed Sec. 1.30D-1(b)(1)) that
is attributable to one or more depreciable vehicles will be treated as
a current year general business credit under section 38 of the Code
that is listed in section 38(b)(30) for such taxable year (and not
allowed under section 30D(a)). Depreciable vehicles may also be
eligible for the credit for qualified commercial clean vehicles under
section 45W. However, under section 45W(d)(3), no credit is allowed
under section 45W for a vehicle for which a section 30D credit was
allowed to any taxpayer for any taxable year. In addition, proposed
Sec. 1.30D-1(b)(2) would require the apportionment of any section 30D
credit with respect to a depreciable vehicle the business use of which
is less than 50 percent of a taxpayer's total use of the vehicle for
the taxable year in which the vehicle is placed in service. The portion
of the section 30D credit corresponding to the percentage of the
taxpayer's business use of the depreciable vehicle would be treated as
a general business credit under section 30D(c)(1) and proposed Sec.
1.30D-1(b)(1), and the portion of the section 30D credit corresponding
to the percentage of the taxpayer's personal use of such vehicle would
be treated as a section 30D credit allowed under section 30D(a)
pursuant to section 30D(c)(2) and proposed Sec. 1.30D-1(b)(3).
Section 30D(c)(2) and proposed Sec. 1.30D-1(b)(3) provide that the
section 30D credit allowed for any taxable year (determined after
application of section 30D(c)(1) and proposed Sec. 1.30D-1(b)(1)) is
treated as a nonrefundable personal credit allowable under subpart A of
part IV of subchapter A of chapter 1 (subpart A) for such taxable year.
Section 26 of the Code limits the aggregate amount of credits allowed
to a taxpayer by subpart A based on the taxpayer's tax liability. Under
section 26(a), the aggregate amount of credits allowed to a taxpayer by
subpart A cannot exceed the sum of (i) the taxpayer's regular tax
liability (as defined in section 26(b)) for the taxable year reduced by
the foreign tax credit allowable under section 27 of the Code, and (ii)
the alternative minimum tax imposed by section 55(a) for the taxable
year.
II. Definitions
Proposed Sec. 1.30D-2 clarifies the definitions of certain terms
related to the statutory requirements of the section 30D credit. The
definitions contained in proposed Sec. 1.30D-2 were substantially
described in Notice 2023-1, as modified by Notice 2023-16.
A. Final Assembly
Under section 30D(d)(1)(G) and section 13401(k)(2) of the IRA, any
vehicle sold after August 16, 2022, must undergo its final assembly in
North America to be eligible for the section 30D credit. Section
30D(d)(5) defines ``final assembly'' as the process by which a
manufacturer produces a new clean vehicle at, or through the use of, a
plant, factory, or other place from which the vehicle is delivered to a
dealer or importer with all component parts necessary for the
mechanical operation of the vehicle included with the vehicle, whether
or not the component parts are permanently installed in or on the
vehicle.
Proposed Sec. 1.30D-2(b) would provide that, for purposes of
section 30D(d)(5) of the Code, ``final assembly'' means the process by
which a manufacturer produces a new clean vehicle at, or through the
use of, a plant, factory, or other place from which the vehicle is
delivered to a dealer or importer with all component parts necessary
for the mechanical operation of the vehicle included with the vehicle,
whether or not the component parts are permanently installed in or on
the vehicle. To establish where final assembly of a new clean vehicle
occurred, the taxpayer could rely on the following information: (1) the
vehicle's plant of manufacture as reported in the vehicle
identification number (VIN) pursuant to 49 CFR 565; or (2) the final
assembly point reported on the label affixed to the vehicle as
described in 49 CFR 583.5(a)(3).
The vehicle's plant of manufacture as reported in the VIN means the
plant where the manufacturer affixes the VIN. See 49 CFR 565.12. The
plant of manufacture is reported in the VIN pursuant to 49 CFR
565.15(d)(2). The Department of Energy, Alternative Fuels Data Center
(AFDC), and the Department of Transportation, National Highway Traffic
Safety Administration (NHSTA), each provide a VIN decoder to the
public, which can be used to identify a vehicle's plant of manufacture.
AFDC, VIN Decoder, https://afdc.energy.gov/laws/electric-vehicles-for-tax-credit (last accessed
[[Page 23374]]
March 28, 2023); NHTSA, VIN Decoder, https://www.nhtsa.gov/vin-decoder
(last accessed March 28, 2023).
Labeling requirements in 49 CFR 583.5 require the final assembly
point to be reported on the label affixed to a passenger motor vehicle.
Final assembly point means the plant, factory, or other place, which is
a building or series of buildings in close proximity, where a new
passenger motor vehicle is produced or assembled from passenger motor
vehicle equipment and from which such vehicle is delivered to a dealer
or importer in such a condition that all component parts necessary to
the mechanical operation of such automobile are included with such
vehicle whether or not such component parts are permanently installed
in or on such vehicle. For multi-stage vehicles, the final assembly
point is the location where the first stage vehicle is assembled. 49
CFR 583.4(b)(5).
B. North America
Proposed Sec. 1.30D-2(d) would provide that for purposes of
section 30D(d)(1)(G), ``North America'' means the territory of the
United States, Canada, and Mexico as defined in 19 CFR part 182,
Appendix A, Sec. 1(1). The territory described in 19 CFR part 182,
Appendix A, Sec. 1(1), which provides rules of origin regulations for
the United States-Mexico-Canada Agreement, is defined as (a) for
Canada, the following zones or waters as determined by its domestic law
and consistent with international law: (i) The land territory, air
space, internal waters, and territorial sea of Canada, (ii) the
exclusive economic zone of Canada, and (iii) the continental shelf of
Canada; (b) for Mexico, (i) the land territory, including the states of
the Federation and Mexico City, (ii) the air space, and (iii) the
internal waters, territorial sea, and any areas beyond the territorial
seas of Mexico within which Mexico may exercise sovereign rights and
jurisdiction, as determined by its domestic law, consistent with the
United Nations Convention on the Law of the Sea, done at Montego Bay on
December 10, 1982; and (c) for the United States, (i) the customs
territory of the United States, which includes the 50 states, the
District of Columbia, and Puerto Rico, (ii) the foreign trade zones
located in the United States and Puerto Rico, and (iii) the territorial
sea and air space of the United States and any area beyond the
territorial sea within which, in accordance with customary
international law as reflected in the United Nations Convention on the
Law of the Sea, the United States may exercise sovereign rights or
jurisdiction.
C. Manufacturer's Suggested Retail Price (MSRP)
Section 30D(f)(11)(A) provides that no section 30D credit is
allowed for a vehicle with an MSRP in excess of the applicable
limitation. Section 30D(f)(11)(B) provides that the ``applicable
limitation'' for each vehicle classification is as follows: in the case
of a van, $80,000; in the case of a sport utility vehicle, $80,000; in
the case of a pickup truck, $80,000; and in the case of any other
vehicle, $55,000.
Proposed Sec. 1.30D-2(c) would provide that for purposes of
section 30D(f)(11)(A), ``manufacturer's suggested retail price'' means
the sum of: (A) the retail price of the automobile suggested by the
manufacturer as described in 15 U.S.C. 1232(f)(1); and (B) the retail
delivered price suggested by the manufacturer for each accessory or
item of optional equipment, physically attached to such automobile at
the time of its delivery to the dealer, which is not included within
the price of such automobile as stated pursuant to 15 U.S.C.
1232(f)(1), as described in 15 U.S.C. 1232(f)(2). This price
information is reported on the label that is affixed to the windshield
or side window of the vehicle, as described in 15 U.S.C. 1232.
D. Vehicle Classifications
For purposes of applying the MSRP limitation under section
30D(f)(11)(A), section 30D(f)(11)(C) authorizes the Secretary to
prescribe such regulations or other guidance as the Secretary
determines necessary to determine vehicle classifications using
criteria similar to that employed by the Environmental Protection
Agency (EPA) and the Department of Energy to determine size and class
of vehicles.
The Treasury Department and the IRS originally announced an intent
to propose use of the vehicle classification standards in 40 CFR
600.002 in Notice 2023-1; however, in Notice 2023-16, the Treasury
Department and the IRS modified the expected vehicle classification
standard set forth in Notice 2023-1 to instead provide that a vehicle's
vehicle classification is expected to be determined consistent with the
fuel economy labeling regime described in 40 CFR 600.315-08. Although
the EPA vehicle classification standards in both regimes are similar,
the fuel economy labeling regime provides for EPA discretion to assign
so-called ``crossover'' vehicles to a class on a case-by-case basis,
taking into account consumer perspective and the marketing segment
targeted by the manufacturer. EPA, ``Fuel Economy Labeling of Motor
Vehicles: Revisions to Improve Calculation of Fuel Economy Estimates,''
71 FR 77872, 77913 (Dec. 27, 2006). In addition, the proposed adoption
of the fuel economy labeling regime would align the vehicle
classification standards for purposes of the section 30D credit with
the classification displayed on the vehicle label and on the consumer-
facing website FuelEconomy.gov, making it easier for consumers to know
which vehicles qualify under the applicable MSRP limitation.
Proposed Sec. 1.30D-2(g) would provide that for purposes of
section 30D(f)(11)(B), a vehicle's vehicle classification is to be
determined consistent with the rules and definitions provided in 40 CFR
600.315-08 for vans, sport utility vehicles, pickup trucks, and other
vehicles. Specifically, ``van'' means a vehicle classified as a van or
minivan under 40 CFR 600.315-08(a)(2)(iii) and (iv), or otherwise so
classified by the Administrator of the EPA pursuant to 40 CFR 600.315-
08(a)(3)(ii); ``sport utility vehicle'' means a vehicle classified as a
small sport utility vehicle or standard sport utility vehicle under 40
CFR 600.315-08(a)(2)(v) and (vi), or otherwise so classified by the
Administrator of the EPA pursuant to 40 CFR 600.315-08(a)(3)(ii);
``pickup truck'' means a vehicle classified as a small pickup truck or
standard pickup truck under 40 CFR 600.315-08(a)(2)(i) and (ii), or
otherwise so classified by the Administrator of the EPA pursuant to 40
CFR 600.315-08(a)(3)(ii); and ``other vehicle'' means any vehicle
classified in one of the classes of passenger automobiles listed in 40
CFR 600.315-08(a)(1), or otherwise so classified by the Administrator
of the EPA pursuant to 40 CFR 600.315-08(a)(3)(ii).
E. Placed in Service
Proposed Sec. 1.30D-2(e) would provide that for purposes of the
section 30D credit, a new clean vehicle is considered to be placed in
service on the date the taxpayer takes possession of the vehicle. This
proposed definition is consistent with the meaning of ``placed in
service'' for purposes of other provisions of the Code under which
property is considered to be ``placed in service'' when the property is
``placed in a condition or state of readiness and availability for a
specifically assigned function'' and as ``the date on which the owner
of the vehicle took actual possession of the vehicle.'' See Sec. Sec.
1.46-3(d)(1)(ii) and (4)(i), 1.179-4(e) and 145.4051-1(c)(2); see also
Sec. 1.1250-4(b)(2); Consumers Power Co. v. Commissioner, 89 T.C. 710
(1987); Noell
[[Page 23375]]
v. Commissioner, 66 T.C. 718, 728-729 (1976).
III. The Critical Minerals and Battery Components Requirements
Section 30D(e) of the Code provides requirements for critical
minerals and battery components with respect to the battery from which
the electric motor of a new clean vehicle draws electricity. The
Critical Mineral and Battery Component Requirements apply to applicable
critical minerals and battery components, respectively, contained in a
battery as defined in proposed Sec. 1.30D-3(c)(3).
A. Critical Minerals Requirement
Proposed Sec. 1.30D-3(a) would provide the rules for determining
compliance with the Critical Minerals Requirement. In general, proposed
Sec. 1.30D-3(a) is consistent with the framework for the Critical
Minerals Requirement that was described in the 30D White Paper.
Proposed Sec. 1.30D-3(a) would provide a three-step process for
determining the percentage of the value of the applicable critical
minerals in a battery that contribute toward meeting the Critical
Minerals Requirement.
i. Step 1: Determine Procurement Chains
In the first step for determining compliance with the Critical
Minerals Requirement, the manufacturer would need to determine the
procurement chain or chains for each applicable critical mineral.
Proposed Sec. 1.30D-3(c)(14) would define a ``procurement chain'' as a
common sequence of extraction, processing, or recycling activities that
occur in a common set of locations, concluding in the production of
constituent materials. Proposed Sec. 1.30D-3(c)(14) would further
clarify that sources of a single applicable critical mineral may have
multiple procurement chains if, for example, one source of the
applicable critical mineral undergoes the same extraction, processing,
or recycling process in different locations. Each applicable critical
mineral procurement chain would need to be evaluated separately
pursuant to proposed Sec. 1.30D-3(a)(3)(ii).
ii. Step 2: Identify Qualifying Critical Minerals
In the second step for determining compliance with the Critical
Minerals Requirement, each applicable critical mineral procurement
chain in the battery would need to be evaluated to determine whether
critical minerals procured from the chain have been (1) extracted or
processed in the United States, or in any country with which the United
States has a free trade agreement in effect, or (2) recycled in North
America. Applicable critical minerals that satisfy this requirement are
considered qualifying critical minerals. Proposed Sec. 1.30D-3(c)(17)
would define ``qualifying critical mineral'' as an applicable critical
mineral that is extracted or processed in the United States, or in any
country with which the United States has a free trade agreement in
effect, or recycled in North America. Proposed Sec. 1.30D-3(c)(17)
would use a ``50% of value added test'' to determine whether this
definition is satisfied. Thus, an applicable critical mineral would be
treated as extracted or processed in the United States, or in any
country with which the United States has a free trade agreement in
effect, if: (1) 50 percent or more of the value added to the applicable
critical mineral by extraction is derived from extraction that occurred
in the United States or in any country with which the United States has
a free trade agreement in effect; or (2) 50 percent or more of the
value added to the applicable critical mineral by processing is derived
from processing that occurred in the United States or in any country
with which the United States has a free trade agreement in effect. An
applicable critical mineral would be treated as recycled in North
America if 50 percent or more of the value added to the applicable
critical mineral by recycling is derived from recycling that occurred
in North America.
The 30D White Paper explained the likely need for transition rules
that would provide manufacturers time to develop the necessary
capability to certify compliance with the Critical Minerals Requirement
throughout their supply chains--especially given the complexity of
battery supply chains and the detailed tracking that would be
required--while moving towards more secure and resilient critical
mineral supply chains. The proposed 50% of value added test would serve
that purpose for vehicles placed in service in 2023 and 2024. For later
years, however, the Treasury Department and the IRS anticipate moving
to a more stringent test for determining if an applicable critical
mineral was extracted or processed in the United States or in any
country with which the United States has a free trade agreement in
effect, or whether an applicable critical mineral was recycled in North
America. This more stringent test would reflect the potential for more
detailed tracking throughout manufacturers' supply chains, which may be
necessary to certify compliance with the foreign entity of concern
requirements described in section 30D(d)(7)(A) (applicable for vehicles
placed in service after December 31, 2024).
The Treasury Department and the IRS specifically request comment on
the 50% of value added test, and the best approach for adopting a more
stringent test for vehicles placed in service in 2025 and later years.
For example, under one approach, the standard of 50 percent or more of
the value added to the applicable critical mineral for extraction,
processing, or recycling in the definition of qualifying critical
mineral, could increase incrementally over time (similar to the
incremental increase in the applicable critical minerals percentages in
section 30D(e)(1)(B) and proposed Sec. 1.30D-3(a)(2)).
Notably, the 50% of value added test would need to be applied
separately for each procurement chain of an applicable critical mineral
pursuant to proposed Sec. 1.30D-3(a)(3)(ii). For example, lithium that
undergoes initial processing activities in a plant in Country A and
then is transferred to a plant in Country B to undergo final processing
activities, culminating in the lithium being incorporated into a
constituent material, would be analyzed under this step together with
other lithium moving through the same procurement chain. However, if
some of the lithium in the prior example instead undergoes final
processing activities in a plant in Country C instead of Country B,
then there would be two procurement chains for lithium: (1) Country A
to Country B and (2) Country A to Country C.
Proposed Sec. 1.30D-3(c)(8) would define ``extraction'' as the
activities performed to extract or harvest minerals or natural
resources from the ground or a body of water, including, but not
limited to, by operating equipment to extract minerals or natural
resources from mines and wells, or to extract or harvest minerals or
natural resources from the waste or residue of prior extraction.
Extraction would conclude when activities are performed to convert raw
mined or harvested products or raw well effluent to substances that can
be readily transported or stored for direct use in applicable critical
mineral processing. Extraction would include the beneficiation or other
physical processes that allow the extracted materials, including ores,
clays, and brines, to become transportable. Extraction would include
the physical processes involved in refining. Extraction would not
include the chemical and thermal processes involved in refining.
[[Page 23376]]
Proposed Sec. 1.30D-3(c)(13) would define ``processing'' as the
non-physical processes involved in refining of non-recycled substances
or materials, including the treating, baking, and coating processes
used to convert such substances and materials into constituent
materials. Processing would begin when chemical or thermal processes,
or the combination of them, are used on extracted minerals or natural
resources or manmade minerals or resources to create a new product
that, through subsequent steps in the applicable critical minerals
supply chain, will be processed into a final constituent material.
Processing would include the chemical or thermal processes involved in
refining. Processing would not include the physical processes involved
in refining.
Proposed Sec. 1.30D-3(c)(6) would define ``constituent materials''
as materials that contain applicable critical minerals and are employed
directly in the manufacturing of battery components. Constituent
materials could include, but would not be limited to, powders of
cathode active materials, powders of anode active materials, foils,
metals for solid electrodes, binders, electrolyte salts, and
electrolyte additives, as required for a battery cell. The definition
of constituent materials describes the materials that distinguish the
steps of extraction, processing, and recycling of critical minerals
from the subsequent steps of manufacturing and assembly of battery
components. Constituent materials would be the final products relevant
for calculating the value of the applicable critical minerals in the
battery.
Constituent materials would mark the end of processing as the point
at which no further chemical, physical, or thermal processes are needed
to create the final product that is then used in battery component
manufacturing. Constituent materials would similarly mark the end of
recycling as the point at which no further transformations are needed
to create the final product that is then used in battery component
manufacturing. All constituent materials contain applicable critical
minerals. Once the final constituent material is created, it then is
used as an input to a battery component. Some battery components could
be made entirely of inputs that do not contain constituent materials.
Inputs used to manufacture battery components that do not contain any
applicable critical minerals (for example, solvents, conductive
additives, etc.) would not be considered to be constituent materials.
Proposed Sec. 1.30D-3(c)(19) would define ``recycling'' as the
series of activities during which recyclable materials containing
applicable critical minerals are transformed into specification-grade
commodities and consumed in lieu of virgin materials to create new
constituent materials; such activities result in new constituent
materials contained in the battery from which the electric motor of a
new clean vehicle draws electricity. All physical, chemical, and
thermal treatments or modifications that convert recycled feedstocks to
specification grade constituent materials would be included in
recycling. This definition would align with the current methods of
direct, hydrometallurgical, or pyrometallurgical recycling that are
utilized commercially for reuse of materials for battery applications.
Proposed Sec. 1.30D-3(c)(24) would define ``value,'' with respect
to property, as the arm's-length price that was paid or would be paid
for the property by an unrelated purchaser determined in accordance
with the principles of section 482 of the Code and regulations
thereunder.
Proposed Sec. 1.30D-3(c)(25) would define ``value added,'' with
respect to recycling, extraction, or processing of an applicable
critical mineral as the increase in the value of the applicable
critical mineral attributable to the relevant activity.
Proposed Sec. 1.30D-3(c)(11) would define ``North America'' as the
territory of the United States, Canada, and Mexico as defined in 19
CFR. part 182, Appendix A, Sec. 1(1).
Proposed Sec. 1.30D-3(c)(7) would define the term ``country with
which the United States has a free trade agreement in effect'' and list
the countries with which the United States has a ``free trade agreement
in effect.'' The term free trade agreement is not defined in the IRA or
in the Code. The proposed definition takes into account the term's
meaning, use and context in the statute. The IRA's amendments to
section 30D expand the incentives for taxpayers to purchase new clean
vehicles and for vehicle manufacturers to increase their reliance on
supply chains in the United States and in countries with which the
United States has reliable and trusted economic relationships. The
Treasury Department and the IRS recognize that more secure and
resilient supply chains are essential for our national security, our
economic security, and our technological leadership. The Treasury
Department and the IRS propose to identify the countries with which the
United States has free trade agreements in effect for purposes of
section 30D consistent with the statute's purposes of promoting
reliance on such supply chains and of providing eligible consumers with
access to tax credits for the purchase of new clean vehicles.
Based on these considerations, the Treasury Department and the IRS
propose criteria the Secretary would consider in identifying these
countries. As set forth in proposed Sec. 1.30D-3(c)(7)(i), those
criteria would include whether an agreement between the United States
and another country, as to the critical minerals contained in electric
vehicle batteries or more generally, and in the context of the overall
commercial and economic relationship between that country and the
United States: (A) reduces or eliminates trade barriers on a
preferential basis, (B) commits the parties to refrain from imposing
new trade barriers, (C) establishes high-standard disciplines in key
areas affecting trade (such as core labor and environmental
protections), and/or (D) reduces or eliminates restrictions on exports
or commits the parties to refrain from imposing such restrictions on
exports.
Applying those factors, the proposed regulations include countries
with which the United States has comprehensive free trade agreements
(that is, agreements covering substantially all trade in goods and
services between the parties, including trade in critical minerals).
These are Australia, Bahrain, Canada, Chile, Colombia, Costa Rica,
Dominican Republic, El Salvador, Guatemala, Honduras, Israel, Jordan,
Korea, Mexico, Morocco, Nicaragua, Oman, Panama, Peru, and Singapore.
In addition, the Treasury Department and the IRS also propose to
include additional countries that the Secretary identifies after
considering the factors listed in proposed Sec. 1.30D-3(c)(7)(i). One
example of such a country is Japan, with which the United States
recently concluded a Critical Minerals Agreement (CMA) \1\ containing
robust obligations to help ensure free trade in critical minerals,
including a commitment to refrain from imposing duties on exports of
critical minerals that are currently essential to the electric vehicle
battery supply chain, a commitment for the United States and Japan to
confer on investments in this sector that may affect national security,
and detailed undertakings related to the
[[Page 23377]]
enforcement of labor and environmental laws related to trade in those
critical minerals. The CMA was concluded in the context of an earlier
trade agreement the United States concluded with Japan in 2019,\2\ a
related 2019 agreement on digital trade,\3\ and the U.S.-Japan
Partnership on Trade announced in November 2021.\4\ The Treasury
Department and the IRS have consulted with the U.S. Trade
Representative in applying the proposed factors here.
---------------------------------------------------------------------------
\1\ Agreement Between the Government of the United States of
America and the Government of Japan on Strengthening Critical
Minerals Supply Chains, concluded March 28, 2023, https://ustr.gov/sites/default/files/2023-03/US%20Japan%20Critical%20Minerals%20Agreement%202023%2003%2028.pdf.
\2\ Trade Agreement Between the United States of America and
Japan, concluded October 7, 2019, https://ustr.gov/sites/default/files/files/agreements/japan/Trade_Agreement_between_the_United_States_and_Japan.pdf.
\3\ Agreement Between the United States of America and Japan
Concerning Digital Trade, concluded October 7, 2019, https://ustr.gov/sites/default/files/files/agreements/japan/Agreement_between_the_United_States_and_Japan_concerning_Digital_Trade.pdf.
\4\ Office of United States Trade Representative, United States
and Japan Announce the Formation of the U.S.-Japan Partnership on
Trade, Nov. 17, 2021, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2021/november/united-states-and-japan-announce-formation-us-japan-partnership-trade-0.
---------------------------------------------------------------------------
Based on an evaluation of the criteria in proposed Sec. 1.30D-
3(c)(7)(i), the Treasury Department and the IRS would make any
necessary amendments to the list in proposed Sec. 1.30D-3(c)(7)(ii),
including adding any additional countries as any new qualifying
international agreements enter into force and the Secretary determines
that the factors have been met. The Treasury Department and the IRS
would similarly make any necessary amendments based on the
modification, termination, or expiration of any previously identified
free trade agreements. Proposed Sec. 1.30D-3(c)(7)(iii) would provide
that the list of countries in proposed Sec. 1.30D-3(c)(7)(ii) may be
revised and updated through appropriate publication in the Federal
Register or in the Internal Revenue Bulletin. The treatment of any
given country under this overall approach is independent from the
inclusion or exclusion of any other.\5\
---------------------------------------------------------------------------
\5\ This independent treatment is consistent with proposed Sec.
1.30D-3(c)(e).
---------------------------------------------------------------------------
The Treasury Department and the IRS seek comment on the proposed
criteria for identifying countries with which the United States has
free trade agreements in effect, other potential approaches for
identifying those countries, and the list of countries set forth in
proposed Sec. 1.30D-3(c)(7)(ii).
iii. Step 3: Calculate Qualifying Critical Mineral Content
The third step for determining compliance with the Critical
Minerals Requirement would involve the calculation of the percentage of
the value of qualifying critical minerals contained in a battery. The
proposed regulations refer to this percentage as the ``qualifying
critical mineral content'' and define that term under proposed Sec.
1.30D-3(c)(18) as the percentage of the value of the applicable
critical minerals contained in the battery from which the electric
motor of a new clean vehicle draws electricity that were extracted or
processed in the United States, or in any country with which the United
States has a free trade agreement in effect, or were recycled in North
America. Under proposed Sec. 1.30D-3(a)(3)(i), qualifying critical
mineral content would be calculated as the percentage that results from
dividing the total value of qualifying critical minerals by the total
value of critical minerals. Proposed Sec. 1.30D-3(c)(23) would define
``total value of qualifying critical minerals'' as the sum of the
values of all the qualifying critical minerals contained in a battery
described in proposed Sec. 1.30D-3(a)(1). Proposed Sec. 1.30D-
3(c)(22) would define ``total value of critical minerals'' as the sum
of the values of all applicable critical minerals contained in a
battery described in proposed Sec. 1.30D-3(a)(1).
Proposed Sec. 1.30D-3(a)(3)(iii) would require qualified
manufacturers to select a date for determining the values associated
with the total value of qualifying critical minerals (determined
separately for each procurement chain) and the total value of critical
minerals. Such date would need to be after the final processing or
recycling step for the applicable critical minerals relevant to the
certification described in section 30D(e)(1)(A) of the Code. This date
would need to be uniformly applied for all applicable critical minerals
contained in the battery. Proposed Sec. 1.30D-3(a)(15) would define a
qualified manufacturer as a manufacturer described in section 30D(d)(3)
of the Code.
Proposed Sec. 1.30D-3(a)(3)(iv) would provide that a qualified
manufacturer may determine qualifying critical mineral content based on
the value of the applicable critical minerals actually contained in the
battery of a specific vehicle. Alternatively, for purposes of
calculating the qualifying critical mineral content for batteries in a
group of vehicles, a qualified manufacturer could average the
qualifying critical mineral content calculation over a limited period
of time (for example, a year, quarter, or month) with respect to
vehicles from the same model line, plant, class, or some combination of
thereof, with final assembly (as defined in section 30D(d)(5) of the
Code and proposed Sec. 1.30D-2(b)) within North America. The Treasury
Department and the IRS seek comment on whether to include any more
specific conditions or limitations on this ability to average these
calculations
The percentage of qualifying critical minerals content that is
calculated in Step 3 would ultimately be compared with the relevant
applicable critical minerals percentage provided in proposed Sec.
1.30D-3(a)(2) to determine whether a vehicle satisfies the Critical
Minerals Requirement described in section 30D(e)(1)(A) of the Code.
B. Battery Components Requirement
Proposed Sec. 1.30D-3(b) would provide the rules for determining
compliance with the Battery Components Requirement. In general,
proposed Sec. 1.30D-3(b) is consistent with the framework for the
Battery Components Requirement that was described in the 30D White
Paper. Proposed Sec. 1.30D-3(b) would provide a four-step process for
determining the percentage of the value of the battery components in a
battery that contribute toward meeting the Battery Components
Requirement.
i. Step 1: Identify Components That Are Manufactured or Assembled in
North America
In the first step for determining compliance with the Battery
Components Requirement, qualified manufacturers would need to determine
whether each battery component in a battery was manufactured or
assembled in North America. Such components are referred to in the
proposed regulations as ``North American battery components'' and are
defined in proposed Sec. 1.30D-3(c)(12) as a battery component
substantially all of the manufacturing or assembly of which occurs in
North America, without regard to the location of the manufacturing or
assembly activities of the components that make up the particular
battery component.
Proposed Sec. 1.30D-3(c)(3) would define ``battery,'' for purposes
of a new clean vehicle, as a collection of one or more battery modules,
each of which has two or more electrically configured battery cells in
series or parallel, to create voltage or current. The term ``battery''
would not include items such as thermal management systems or other
parts of a battery cell or module that do not directly contribute to
the electrochemical storage of energy within the battery, such as
battery cell cases, cans, or pouches. This definition of battery is
consistent with the statute because battery modules and cells are the
sources ``from which the electric
[[Page 23378]]
motor of such vehicle draws electricity.'' Sections 30D(e)(1)(A) and
(2)(A). The battery module is the end point for the purpose of
calculating the value of battery components.
Proposed Sec. 1.30D-3(c)(4) would define ``battery cell'' as a
combination of battery components (other than battery cells) capable of
electrochemically storing energy from which the electric motor of a new
clean vehicle draws electricity. This definition of battery cell would
encompass the smallest combination of battery components necessary for
the function of energy storage.
Proposed Sec. 1.30D-3(c)(5) would define ``battery component'' as
a component that forms part of a battery and which is manufactured or
assembled from one or more components or constituent materials that are
combined through industrial, chemical, and physical assembly steps.
Battery components would include, but not be limited to, a cathode
electrode, anode electrode, solid metal electrode, separator, liquid
electrolyte, solid state electrolyte, battery cell, and battery module.
Constituent materials would not be considered a type of battery
component, although constituent materials could be manufactured or
assembled into battery components. Some battery components could be
made entirely of inputs that do not contain constituent materials.
Battery components would include any piece of the assembled battery
cell that contribute to electrochemical energy storage.
Proposed Sec. 1.30D-3(c)(10) would define ``manufacturing,'' with
respect to a battery component, as the industrial and chemical steps
taken to produce a battery component. Manufacturing would use
industrial and chemical steps starting with constituent materials and
other battery components that do not contain constituent materials to
create a new battery component.
Proposed Sec. 1.30D-3(c)(2) would define ``assembly,'' with
respect to battery components, as the process of combining battery
components into battery cells and battery modules.
ii. Step 2: Determine the Incremental Value of Each Battery Component
and North American Battery Components
In the second step for determining compliance with the Battery
Components Requirement, qualified manufacturers would need to determine
the incremental value for each battery component. The resulting
incremental value for a battery component would be attributable to
North America if the battery component is a ``North American battery
component'' as defined in proposed Sec. 1.30D-3(c)(12).
Proposed Sec. 1.30D-3(c)(9) would define ``incremental value,''
with respect to a battery component, as the value (as defined in
proposed Sec. 1.30D-3(c)(24)) determined by subtracting from the value
of that battery component the value of the manufactured or assembled
battery components, if any, that are contained in that battery
component.
Proposed Sec. 1.30D-3(c)(20) would define ``total incremental
value of North American battery components'' as the sum of the
incremental values of each North American battery component contained
in a battery described in proposed Sec. 1.30D-3(b)(1).
iii. Step 3: Determine the Total Incremental Value of Battery
Components
In the third step for determining compliance with the Battery
Components Requirement, qualified manufacturers would need to total the
incremental value of battery components. Proposed Sec. 1.30D-3(c)(21)
would define ``total incremental value of battery components'' as the
sum of the incremental values of each battery component contained in a
battery described in proposed Sec. 1.30D-3(b)(1). The total
incremental value of battery components could also be calculated by
totaling the value of each battery module in the battery.
iv. Step 4: Calculate the Qualifying Battery Component Content
In the fourth step for determining compliance with the Battery
Components Requirement, qualified manufacturers would need to determine
the qualifying battery component content. Proposed Sec. 1.30D-3(c)(16)
would define ``qualifying battery component content'' as the percentage
of the value of the battery components contained in the battery from
which the electric motor of a new clean vehicle draws electricity that
were manufactured or assembled in North America. Proposed Sec. 1.30D-
3(b)(3)(i) would provide that the qualifying battery component content
is the percentage that results from dividing the total incremental
value of North American battery components (determined in step 2) by
the total incremental value of battery components (determined in step
3).
Proposed Sec. 1.30D-3(b)(3)(ii) would require qualified
manufacturers to select a date for determining the values associated
with the total incremental value of North American battery components
and the total incremental value of battery components. Such date would
need to be after the last manufacturing or assembly step for the
battery components relevant to the certification described in section
30D(e)(2)(A) of the Code. This date must be uniformly applied for all
battery components contained in the battery.
Proposed Sec. 1.30D-3(b)(3)(iii) would provide that a qualified
manufacturer may determine qualifying battery component content based
on the incremental values of the battery components actually contained
in the battery of a specific vehicle. Alternatively, for purposes of
calculating the qualifying battery component content for batteries in a
group of vehicles, a qualified manufacturer could average the
qualifying battery component content calculation over a limited period
of time (for example, a year, quarter, or month) with respect to
vehicles from the same model line, plant, class, or some combination of
thereof, with final assembly (as defined in section 30D(d)(5) of the
Code and proposed Sec. 1.30D-2(a)) within North America. The Treasury
Department and the IRS seek comment on whether to include any more
specific conditions or limitations on this ability to average these
calculations.
The percentage of qualifying battery component content that would
be calculated in Step 4 would ultimately be compared with the relevant
applicable battery components percentage provided in proposed Sec.
1.30D-3(b)(2) to determine whether a vehicle satisfies the Battery
Components Requirement described in section 30D(e)(2)(A) of the Code.
The Treasury Department and the IRS request comments on the
Critical Mineral and Battery Component Requirements as they would be
implemented in proposed Sec. 1.30D-3, including the distinction
between processing of applicable critical minerals and manufacturing
and assembly of battery components, and related definitions.
C. Excluded Entities
Section 30D(d)(7) of the Code excludes from the definition of ``new
clean vehicle'' any vehicle placed in service after December 31, 2024,
with respect to which any of the applicable critical minerals contained
in the battery of such vehicle (as described in section 30D(e)(1)(A))
were extracted, processed, or recycled by a foreign entity of concern
(as defined in section 40207(a)(5) of the Infrastructure Investment and
Jobs Act (42 U.S.C. 18741(a)(5))), or any vehicle placed in service
after December 31, 2023, with
[[Page 23379]]
respect to which any of the components contained in the battery of such
vehicle (as described in section 30D(e)(2)(A)) were manufactured or
assembled by a foreign entity of concern (as so defined). The Treasury
Department and the IRS intend to issue guidance with respect to section
30D(d)(7) at a later date.
IV. Special Rules
Proposed Sec. 1.30D-4 would provide special rules with respect to
the section 30D credit.
A. No Double Benefit
Section 30D(f)(2) and proposed Sec. 1.30D-4(a)(1) would provide
that the amount of any deduction or other credit allowable under
chapter 1 for a vehicle for which a section 30D credit is allowable
must be reduced by the amount of the section 30D credit allowed under
section 30D(a) for such vehicle determined without regard to section
30D(c), which may treat all or a portion of the aggregate credit
allowed under section 30D(a) as a current year general business credit
under section 38(b).
Proposed Sec. 1.30D-4(a)(2) would provide that a section 30D
credit that has been allowed with respect to a vehicle in a taxable
year before the taxable year in which a credit under section 25E is
allowable for that vehicle does not reduce the amount of the allowable
section 25E credit. Accordingly, a taxpayer who otherwise satisfies the
requirements of section 25E would be eligible to claim the section 25E
credit for a vehicle for which another taxpayer previously claimed the
section 30D credit.
Proposed Sec. 1.30D-4(a)(3) would provide that no credit is
allowed under section 45W with respect to any vehicle for which a
credit was allowed under section 30D. This rule, which is based on
section 45W(d)(3), precludes both the section 30D credit and the
section 45W credit from being allowed for the same vehicle, whether in
the same or different taxable years.
B. Limitation Based on Modified Adjusted Gross Income
Section 30D(f)(10) and proposed Sec. 1.30D-4(b) would provide that
no section 30D(a) credit is allowed for any taxable year if (i) the
lesser of (I) the modified AGI of the taxpayer for such taxable year or
(II) the modified AGI of the taxpayer for the preceding taxable year
exceeds (ii) the threshold amount (Modified AGI Limitation). The
threshold amount is $300,000 in the case of a joint return or a
surviving spouse (as defined in section 2(a) of the Code), $225,000 in
the case of a head of household (as defined in section 2(b) of the
Code), and $150,000 for all other taxpayers. ``Modified adjusted gross
income'' is defined in section 30D(f)(10)(C) as the taxpayer's AGI
increased by any amount excluded from gross income under sections 911,
931, or 933 of the Code. Proposed Sec. 1.30D-4(b)(4) provides that if
the taxpayer's filing status changes (for example, from single to head
of household) in this two-year period, the taxpayer satisfies the
Modified AGI Limitation if the taxpayer's modified AGI does not exceed
the threshold amount in either taxable year based on the applicable
filing status for that taxable year.
Proposed Sec. 1.30D-4(b)(5)(i) would provide that, except as
provided in proposed Sec. 1.30D-4(b)(5)(ii), in the case of a new
clean vehicle that is placed in service by a corporation or other
taxpayer that is not an individual for whom AGI is computed under
section 62, the Modified AGI Limitation does not apply. Corporations
and such other taxpayers do not have AGI computed under section 62, so
the special rule in section 30D(f)(10) establishing a Modified AGI
Limitation does not apply to these taxpayers.
Proposed Sec. 1.30D-4(b)(5)(ii) would provide that in the event
that the new clean vehicle is placed in service by a partnership or an
S corporation, and the section 30D credit is claimed by individuals who
are direct or indirect partners of that partnership or shareholders of
that S corporation, the Modified AGI Limitation will apply to those
partners or shareholders. The Treasury Department and the IRS request
comments on whether a similar rule should be provided for trusts or
other types of entities that place in service a new clean vehicle.
C. Multiple Owners and Passthrough Entity Ownership of a Single Vehicle
In certain instances, multiple taxpayers may purchase, place in
service, and be titled as owners of a single vehicle. For example, a
married couple that files separate tax returns may jointly purchase and
take possession of a new clean vehicle that qualifies for the section
30D credit and both spouses may be titled as owners of the vehicle.
However, the structure of section 30D provides for one taxpayer to
claim the section 30D credit per vehicle placed in service. See
generally section 30D(a), (b), (f)(8), (f)(9) and section 6213(g)(2)(T)
of the Code. Section 30D does not contain rules for allocation or
proration of the section 30D credit with respect to a single vehicle to
multiple taxpayers placing that vehicle in service, and such an
allocation or proration would present challenges from a tax
administration perspective.
Proposed Sec. 1.30D-4(c)(1) would provide that, except as provided
in proposed Sec. 1.30D-4(c)(2), the amount of the section 30D credit
attributable to a new clean vehicle may be claimed on only one tax
return. In the event multiple owners place in service a new clean
vehicle, no allocation or proration of the credit would be available.
Proposed Sec. 1.30D-4(c)(3)(i) would provide that the name and
taxpayer identification number of the owner claiming the credit under
section 30D(a) should be listed on the seller's report pursuant to
section 30D(d)(1)(H). Accordingly, multiple owners of a new clean
vehicle would inform the seller which owner will claim the section 30D
credit so that the seller can identify that taxpayer on the seller's
report. The credit would be allowed only on the tax return of the owner
listed in the seller's report.
Proposed Sec. 1.30D-4(c)(2) would provide that in the case of a
new clean vehicle placed in service by a partnership or S corporation,
while the partnership or S corporation is the vehicle owner, the
section 30D credit is allocated among the partners of the partnership
under Sec. 1.704-1(b)(4)(ii) or among the shareholders of the S
corporation under sections 1366(a) and 1377(a) of the Code and claimed
on the tax returns of the partners or shareholder(s). Proposed Sec.
1.30D-4(c)(3)(i) would provide that in the case of a new clean vehicle
placed in service by a partnership or S corporation, the name and tax
identification number of the partnership or S corporation that placed
the new clean vehicle in service should be listed on the seller's
report pursuant to section 30D(d)(1)(H).
V. Severability
If any provision in this proposed rulemaking is held to be invalid
or unenforceable facially, or as applied to any person or circumstance,
it shall be severable from the remainder of this rulemaking, and shall
not affect the remainder thereof, or the application of the provision
to other persons not similarly situated or to other dissimilar
circumstances.
Effect on Other Documents
This proposed rulemaking hereby makes IRS Notices 2023-1, 2023-3
I.R.B. 373 and 2023-16, 2023-8 I.R.B. 479 obsolete.
Proposed Applicability Dates
Proposed Sec. 1.30D-1 is proposed to apply to new clean vehicles
placed in service after the date of publication of
[[Page 23380]]
the Treasury Decision adopting these rules as final rules in the
Federal Register.
Proposed Sec. 1.30D-2 is proposed to apply to new clean vehicles
placed in service on or after January 1, 2023, for taxable years ending
after April 17, 2023. The amendments made to section 30D by the IRA
generally apply to vehicles placed in service after December 31, 2022,
with certain exceptions. The definitions in proposed Sec. 1.30D-2 were
substantially described in Notice 2023-1, which was released on
December 29, 2022.\6\ The definitions in proposed Sec. 1.30D-2
generally relate to statutory rules applicable to vehicles placed in
service on or after January 1, 2023. These proposed regulations are
proposed to apply to vehicles placed in service on or after January 1,
2023, for taxable years ending after the date these proposed
regulations are published in the Federal Register to improve certainty
for taxpayers and to provide clear rules for tax administration.
---------------------------------------------------------------------------
\6\ Notice 2023-16, released February 3, 2023, modified Notice
2023-1, regarding the vehicle classification standard set forth in
Notice 2023-1 in a manner that allowed additional new clean vehicles
to be eligible for the section 30D credit. Notice 2023-16 provided
that taxpayers could rely on these modified expected definitions for
new clean vehicles placed in service on or after January 1, 2023.
---------------------------------------------------------------------------
Proposed Sec. 1.30D-3 is proposed to apply to new clean vehicles
placed in service after April 17, 2023 for taxable years ending after
April 17, 2023. Pursuant to section 13401(a), (e), and (k)(3) of the
IRA, the critical minerals and battery components requirements of
section 13401(a) and (e) of the IRA amend section 30D with respect to
vehicles placed in service after the date on which these proposed
regulations are published in the Federal Register. Accordingly, the
Critical Minerals and Battery Components Requirements in proposed Sec.
1.30D-3 are proposed to apply to vehicles placed in service after the
date of publication of these proposed regulations for taxable years
ending after the date of publication of these proposed regulations.
Proposed Sec. 1.30D-4 is proposed to apply to new clean vehicles
placed in service after the date of publication of the Treasury
Decision adopting these rules as final rules in the Federal Register.
Taxpayers may rely on these proposed regulations for vehicles
placed in service prior to the date final regulations are published in
the Federal Register, provided the taxpayer follows the proposed
regulations in their entirety, and in a consistent manner.
Statement of Availability for IRS Documents
For copies of recently issued Revenue Procedures, Revenue Rulings,
Notices, and other guidance published in the Internal Revenue Bulletin,
please visit the IRS website at https://www.irs.gov.
Special Analyses
I. Regulatory Planning and Review--Economic Analysis
Executive Orders 13563 and 12866 direct agencies to assess costs
and benefits of available regulatory alternatives and, if regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects, distributive impacts, and equity). Executive Order 13563
emphasizes the importance of quantifying both costs and benefits, of
reducing costs, of harmonizing rules, and of promoting flexibility.
These proposed regulations have been designated by the Office of
Management and Budget's Office of Information and Regulatory Affairs
(OIRA) as subject to review under Executive Order 12866 pursuant to the
Memorandum of Agreement (April 11, 2018) between the Treasury
Department and the Office of Management and Budget (OMB) regarding
review of tax regulations. OIRA has determined that the proposed
rulemaking is significant and subject to review under Executive Order
12866 and section 1(b) of the Memorandum of Agreement. Accordingly, the
proposed regulations have been reviewed by OMB.
II. Paperwork Reduction Act
Any collection burden associated with rules described in these
proposed regulations is previously accounted for in OMB Control Number
1545-2137. These proposed regulations do not alter previously accounted
for information collection requirements and do not create new
collection requirements. OMB Control Number 1545-2137 covers Form 8936
and Form 8936-A regarding electric vehicle credits, including the new
requirement in section 30D(f)(9) to include on the taxpayer's return
for the taxable year the VIN of the vehicle for which the section 30D
credit is claimed. Revenue Procedure 2022-42 describes the procedural
requirements for qualified manufacturers to make periodic written
reports to the Secretary to provide information related to each vehicle
manufactured by such manufacturer that is eligible for the section 30D
credit as required in section 30D(d)(3), including the critical mineral
and battery component certification requirements in sections
30D(e)(1)(A) and (e)(2)(A). In addition, Revenue Procedure 2022-42 also
provides the procedures for sellers of new clean vehicles to report
information required by section 30D(d)(1)(H) for vehicles to be
eligible for the section 30D credit. The collections of information
contained in Revenue Procedure 2022-42 are described in that document
and were submitted to the Office of Management and Budget in accordance
with the Paperwork Reduction Act under control number 1545-2137.
The requirement to determine the final assembly location in
proposed Sec. 1.30D-2(b) by relying on (1) the vehicle's plant of
manufacture as reported in the vehicle identification number (VIN)
pursuant to 49 CFR 565 or (2) the final assembly point reported on the
label affixed to the vehicle as described in 49 CFR 583.5(a)(3) is
accounted for by the Department of Transportation in OMB Control
Numbers 2127-0510 and 2127-0573.
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a valid
control number assigned by the Office of Management and Budget.
III. Regulatory Flexibility Act
Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6),
the Secretary hereby certifies that these proposed regulations will not
have a significant economic impact on a substantial number of small
entities within the meaning of section 601(6) of the Regulatory
Flexibility Act. Pursuant to section 7805(f), this notice of proposed
rulemaking has been submitted to the Chief Counsel for the Office of
Advocacy of the Small Business Administration for comment on their
impact on small business.
The proposed regulations affect two types of business entities: (1)
qualified manufacturers that must trace and report on their critical
minerals and battery components in order to certify that their new
clean vehicles qualify for the section 30D credit, and (2) businesses
that may earn the section 30D credit when purchasing and placing in
service a new clean vehicle.
While the tracking and reporting of critical minerals and battery
components is likely to involve significant administrative costs,
according to public filings, all qualified manufacturers had total
revenues above $1B in 2022. There are a total of 21 qualified
manufacturers that have indicated that they manufacture vehicles
currently eligible for the
[[Page 23381]]
section 30D credit.\7\ Pursuant to Revenue Procedure 2022-42 and
following the publication of these proposed regulations, qualified
manufacturers will also have to certify that their vehicles qualify
under the Critical Minerals and Battery Components Requirements. The
proposed regulations provide definitions and general rules for the
section 30D credit, including rules for qualified manufacturers to
comply with the Critical Mineral and Battery Component Requirements.
Accordingly, the Treasury Department and the IRS intend that the
proposed rules provide clarity for qualified manufacturers for
consistent application of critical minerals and battery components
calculations and for taxpayers purchasing new clean vehicles that
qualify for the section 30D credit. The Treasury Department and the IRS
have determined that qualified manufacturers do not meet the applicable
definition of small entity.
---------------------------------------------------------------------------
\7\ The list of manufacturers is available at the following IRS
website: https://www.irs.gov/credits-deductions/manufacturers-and-
models-for-new-qualified-clean-vehicles-purchased-in-2023-or-
after#:~:text=If%20you%20bought%20and%20placed,Internal%20Revenue%20C
ode%20Section%2030D.
---------------------------------------------------------------------------
Business purchasers of clean vehicles who take the section 30D
credit must satisfy reporting requirements that are largely the same as
those faced by individuals accessing the section 30D credit to purchase
clean vehicles. Taxpayers will continue to file Form 8936, Qualified
Plug-In Electric Drive Motor Vehicle Credit, to claim the section 30D
credit. As was the case for the section 30D credit prior to amendments
made by the IRA, taxpayers can rely on qualified manufacturers to
determine if the vehicle being purchased qualifies for the section 30D
credit and the credit amount. The estimated burden for individual and
business taxpayers filing this form is approved under OMB control
number 1545-0074 and 1545-0123. To make it easier for a taxpayer to
determine the potential section 30D credit available for a specific
vehicle, the proposed regulations provide business entities with tools
and definitions to ascertain whether any vehicles purchased would be
eligible for the credit. The VIN reporting required by section
30D(f)(9) and described in the proposed regulations was included in
prior section 30D reporting.
Accordingly, the Secretary certifies that these proposed
regulations will not have a significant economic impact on a
substantial number of small entities. The Treasury Department and the
IRS request comments that provide data, other evidence, or models that
provide insight on this issue.
IV. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates Reform Act of 1995 requires
that agencies assess anticipated costs and benefits and take certain
other actions before issuing a final rule that includes any Federal
mandate that may result in expenditures in any one year by a State,
local, or Tribal government, in the aggregate, or by the private
sector, of $100 million in 1995 dollars, updated annually for
inflation. In 2023, that threshold is approximately $198 million. This
rule does not include any Federal mandate that may result in
expenditures by State, local, or Tribal governments, or by the private
sector in excess of that threshold.
V. Executive Order 13132: Federalism
Executive Order 13132 (Federalism) prohibits an agency (to the
extent practicable and permitted by law) from promulgating any
regulation that has federalism implications, unless the agency meets
the consultation and funding requirements of section 6 of the Executive
order, if the rule either imposes substantial, direct compliance costs
on State and local governments, and is not required by statute, or
preempts State law. This proposed rule does not have federalism
implications and does not impose substantial direct compliance costs on
State and local governments or preempt State law within the meaning of
the Executive order.
Comments and Requests for a Public Hearing
Before these proposed regulations are adopted as final regulations,
consideration will be given to any comments that are submitted timely
to the IRS as prescribed in this preamble under the ADDRESSES heading.
The Treasury Department and the IRS request comments on all aspects of
the proposed regulations, including their economic impact and any
alternative approaches that should be considered during the rulemaking
process. In addition, the Treasury Department and the IRS request
comments on the specific issues noted in the previous sections of this
preamble.
Any comments submitted, whether electronically or on paper, will be
made available at https://www.regulations.gov or upon request. A public
hearing will be scheduled if requested in writing by any person who
timely submits electronic or written comments as prescribed in this
preamble under the DATES heading. Requests for a public hearing are
also encouraged to be made electronically. If a public hearing is
scheduled, notice of the date and time for the public hearing will be
published in the Federal Register. Announcement 2020-4, 2020-17 IRB 1,
provides that until further notice, public hearings conducted by the
IRS will be held telephonically. Any telephonic hearing will be made
accessible to people with disabilities.
Drafting Information
The principal author of the proposed regulations is the Office of
Associate Chief Counsel (Passthroughs & Special Industries). However,
other personnel from the Treasury Department and the IRS participated
in the development of the proposed regulations.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Proposed Amendments to the Regulations
Accordingly, 26 CFR part 1 is proposed to be amended as follows:
PART 1 INCOME TAXES
0
Paragraph 1.The authority citation for part 1 is amended by adding
entries in numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.30D-1 also issued under 26 U.S.C. 30D.
Section 1.30D-2 also issued under 26 U.S.C. 30D.
Section 1.30D-3 also issued under 26 U.S.C. 30D.
Section 1.30D-4 also issued under 26 U.S.C. 30D and 26 U.S.C.
45W(d)(3).
0
Par 2. Sections 1.30D-0, 1.30D-1, 1.30D-2, 1.30D-3, and 1.30D-4 are
added to read as follows:
Sec.
* * * * *
1.30D-0 Table of contents.
1.30D-1 Credit for new clean vehicles.
1.30D-2 Definitions for purposes of section 30D.
1.30D-3 Critical mineral and battery component requirements.
1.30D-4 Special rules.
* * * * *
Sec. 1.30D-0 Table of contents.
This section lists the captions contained in Sec. Sec. 1.30D-1
through 1.30D-4.
Sec. 1.30D-1 Credit for new clean vehicles.
(a) In general.
(b) Treatment of credit.
(1) Business credit treated as part of general business credit.
(2) Apportionment of section 30D credit.
[[Page 23382]]
(3) Personal credit limited based on tax liability.
(c) Severability.
(d) Applicability date.
Sec. 1.30D-2 Definitions for purposes of section 30D.
(a) In general.
(b) Final assembly.
(c) Manufacturer's suggested retail price.
(d) North America.
(e) Placed in service.
(f) Section 30D regulations.
(g) Vehicle classifications.
(i) Van.
(ii) Sport utility vehicle.
(iii) Pickup truck.
(iv) Other vehicle.
(h) Severability.
(i) Applicability date.
Sec. 1.30D-3 Critical mineral and battery component requirements.
(a) Critical minerals requirement.
(1) In general.
(2) Applicable critical minerals percentage.
(3) Determining qualifying critical mineral content.
(i) In general.
(ii) Separate determinations required for each procurement
chain.
(iii) Time for determining value.
(iv) Application of qualifying critical mineral content to
vehicles.
(b) Battery components requirement.
(1) In general.
(2) Applicable battery components percentage.
(3) Determining qualifying battery component content.
(i) In general.
(ii) Time for determining value.
(iii) Application of qualifying battery component content to
vehicles.
(c) Definitions.
(1) Applicable critical mineral.
(2) Assembly.
(3) Battery.
(4) Battery cell.
(5) Battery component.
(6) Constituent materials.
(7) Country with which the United States has a free trade
agreement in effect.
(8) Extraction.
(9) Incremental value.
(10) Manufacturing.
(11) North America.
(12) North American battery component.
(13) Processing
(14) Procurement chain.
(15) Qualified manufacturer.
(16) Qualifying battery component content.
(17) Qualifying critical mineral.
(18) Qualifying critical mineral content.
(19) Recycling.
(20) Total incremental value of North American battery
components.
(21) Total incremental value of battery components.
(22) Total value of critical minerals.
(23) Total value of qualifying critical minerals.
(24) Value.
(25) Value added.
(d) Excluded entities.
(e) Severability.
(f) Applicability date.
Sec. 1.30D-4 Special rules
(a) No double benefit.
(1) In general.
(2) Application to credit for previously-owned clean vehicles
under section 25E.
(3) Application to credit for qualified clean vehicles under
section 45W.
(b) Limitation based on modified adjusted gross income.
(1) In general.
(2) Threshold amount.
(3) Modified adjusted gross income.
(4) Special rule for change in filing status.
(5) Application to taxpayers other than individuals.
(i) In general.
(ii) Application to passthrough entities.
(c) Multiple owners and passthrough entity ownership of a single
vehicle.
(1) In general.
(2) Passthrough entities.
(3) Seller Reporting.
(i) In general.
(ii) Passthrough entities.
(4) Example.
(d) Severability.
(e) Applicability date.
Sec. 1.30D-1 Credit for new clean vehicles.
(a) In general. Section 30D(a) of the Internal Revenue Code (Code)
allows as a credit against the tax imposed by chapter 1 of the Code
(chapter 1) for the taxable year of a taxpayer an amount equal to the
sum of the credit amounts determined under section 30D(b) with respect
to each new clean vehicle purchased by the taxpayer that the taxpayer
places in service during the taxable year. For purposes of the section
30D regulations (as defined in Sec. 1.30D-2(f)), the term section 30D
credit means the credit allowable to a taxpayer for a taxable year
under section 30D(a) and the section 30D regulations with respect to
all vehicles placed in service by the taxpayer during the taxable year.
Section 1.30D-2 provides definitions that apply for purposes of section
30D and the section 30D regulations. Section 1.30D-3 provides rules
regarding the critical mineral and battery component requirements of
section 30D(e). Section 1.30D-4 provides guidance regarding the
limitations and special rules in section 30D(f).
(b) Application with other credits--(1) Business credit treated as
part of general business credit--(i) In general. Section 30D(c)(1)
requires that so much of the section 30D credit that would be allowed
under section 30D(a) for any taxable year (determined without regard to
section 30D(c) and this paragraph (b)) that is attributable to a
depreciable vehicle must be treated as a general business credit under
section 38 of the Code that is listed in section 38(b)(30) for such
taxable year (and not allowed under section 30D(a)). In the case of a
depreciable vehicle the use of which is 50 percent or more business use
in the taxable year such vehicle is placed in service, the section 30D
credit that would be allowed under section 30D(a) for that taxable year
(determined without regard to section 30D(c) and this paragraph (b))
that is attributable to such depreciable vehicle must be treated as a
general business credit under section 38 of the Code that is listed in
section 38(b)(30) for such taxable year (and not allowed under section
30D(a)). See paragraph (b)(2) of this section for rules applicable in
the case of a depreciable vehicle the use of which is less than 50
percent business use in the taxable year such vehicle is placed in
service. See paragraph (b)(3) of this section for rules applicable to a
section 30D credit allowed under section 30D(a) pursuant to section
30D(c)(2) or paragraphs (b)(2)(ii) or (b)(3) of this section.
(ii) Depreciable vehicle. For purposes of this paragraph (b), a
depreciable vehicle is a vehicle of a character subject to an allowance
for depreciation.
(2) Apportionment of section 30D credit. In the case of a
depreciable vehicle the business use of which is less than 50 percent
of a taxpayer's total use of the vehicle for the taxable year in which
the vehicle is placed in service, the taxpayer's section 30D credit for
that taxable year with respect to that vehicle must be apportioned as
follows:
(i) The portion of the section 30D credit corresponding to the
percentage of the taxpayer's business use of the vehicle is treated as
a general business credit under section 30D(c)(1) and paragraph (b)(1)
of this section (and not allowed under section 30D(a) or paragraph
(b)(3) of this section).
(ii) The portion of the section 30D credit corresponding to the
percentage of the taxpayer's personal use of the vehicle is treated as
a section 30D credit allowed under section 30D(a) pursuant to section
30D(c)(2) and paragraph (b)(3) of this section.
(3) Personal credit limited based on tax liability. Section 26 of
the Code limits the aggregate amount of credits allowed to a taxpayer
by subpart A of part IV of subchapter A of chapter 1 (subpart A) based
on the taxpayer's tax liability. Under section 26(a), the aggregate
amount of credits allowed to a taxpayer by subpart A cannot exceed the
sum of the taxpayer's regular tax liability (as defined in section
26(b)) for the taxable year reduced by the foreign tax credit allowable
under section 27 of the Code, and the alternative minimum tax imposed
by section 55(a) for the taxable year. Section 30D(c)(2) provides that
the section 30D credit allowed under section 30D(a) for any taxable
year (determined after application of
[[Page 23383]]
section 30D(c)(1) and paragraphs (b)(1) and (2) of this section) is
treated as a credit allowable under subpart A for such taxable year,
and the section 30D credit allowed under section 30D(a) is therefore
subject to the limitation imposed by section 26.
(c) Severability. The provisions of this section are separate and
severable from one another. If any provision of this section is stayed
or determined to be invalid, it is the agencies' intention that the
remaining provisions shall continue in effect.
(d) Applicability date. This section applies to new clean vehicles
placed in service after [DATE OF PUBLICATION OF FINAL RULE].
Sec. 1.30D-2 Definitions for purposes of section 30D.
(a) In general. The definitions in paragraphs (b) through (g) of
this section apply for purposes of section 30D of the Internal Revenue
Code (Code) and the section 30D regulations.
(b) Final assembly means the process by which a manufacturer
produces a new clean vehicle at, or through the use of, a plant,
factory, or other place from which the vehicle is delivered to a dealer
or importer with all component parts necessary for the mechanical
operation of the vehicle included with the vehicle, whether or not the
component parts are permanently installed in or on the vehicle. To
establish where final assembly of a new clean vehicle occurred for
purposes of the requirement in section 30D(d)(1)(G) that final assembly
of a new clean vehicle occur within North America, the taxpayer may
rely on the following information:
(1) The vehicle's plant of manufacture as reported in the vehicle
identification number pursuant to 49 CFR 565; or
(2) The final assembly point reported on the label affixed to the
vehicle as described in 49 CFR 583.5(a)(3).
(c) Manufacturer's suggested retail price means the sum of the
prices described in paragraphs (c)(1) and (2) of this section as
reported on the label that is affixed to the windshield or side window
of the vehicle, as described in 15 U.S.C. 1232.
(1) The retail price of the automobile suggested by the
manufacturer as described in 15 U.S.C. 1232(f)(1).
(2) The retail delivered price suggested by the manufacturer for
each accessory or item of optional equipment, physically attached to
such automobile at the time of its delivery to the dealer, which is not
included within the price of such automobile as stated pursuant to 15
U.S.C. 1232(f)(1), as described in 15 U.S.C. 1232(f)(2).
(d) North America means the territory of the United States, Canada,
and Mexico as defined in 19 CFR part 182, appendix A, section 1(1).
(e) Placed in service. A new clean vehicle is considered to be
placed in service on the date the taxpayer takes possession of the
vehicle.
(f) Section 30D regulations means Sec. 1.30D-1, this section, and
Sec. Sec. 1.30D-3 and 1.30D-4.
(g) Vehicle classifications--(1) In general. The vehicle
classification of a new clean vehicle is to be determined consistent
with the rules and definitions provided in 40 CFR 600.315-08 and this
paragraph (g) for vans, sport utility vehicles, and pickup trucks, and
other vehicles.
(2) Van means a vehicle classified as a van or minivan under 40 CFR
600.315-08(a)(2)(iii) and (iv), or otherwise so classified by the
Administrator of the EPA pursuant to 40 CFR 600.315-08(a)(3)(ii).
(3) Sport utility vehicle means a vehicle classified as a small
sport utility vehicle or standard sport utility vehicle under 40 CFR
600.315-08(a)(2)(v) and (vi), or otherwise so classified by the
Administrator of the EPA pursuant to 40 CFR 600.315-08(a)(3)(ii).
(4) Pickup truck means a vehicle classified as a small pickup truck
or standard pickup truck under 40 CFR 600.315-08(a)(2)(i) and (ii), or
otherwise so classified by the Administrator of the EPA pursuant to 40
CFR 600.315-08(a)(3)(ii).
(5) Other vehicle means any vehicle classified in one of the
classes of passenger automobiles listed in 40 CFR 600.315-08(a)(1), or
otherwise so classified by the Administrator of the EPA pursuant to 40
CFR 600.315-08(a)(3)(ii).
(h) Severability. The provisions of this section are separate and
severable from one another. If any provision of this section is stayed
or determined to be invalid, it is the agencies' intention that the
remaining provisions shall continue in effect.
(i) Applicability date. This section applies to new clean vehicles
placed in service on or after January 1, 2023, for taxable years ending
after April 17, 2023.
Sec. 1.30D-3 Critical mineral and battery component requirements.
(a) Critical minerals requirement--(1) In general. The critical
minerals requirement described in section 30D(e)(1)(A) of the Internal
Revenue Code (Code), with respect to the battery from which the
electric motor of a new clean vehicle draws electricity, is met if the
qualifying critical mineral content of such battery is equal to or
greater than the applicable critical minerals percentage (as defined in
paragraph (a)(2) of this section), as certified by the qualified
manufacturer, in such form or manner as prescribed by the Secretary of
the Treasury or her delegate (Secretary).
(2) Applicable critical minerals percentage. For purposes of
paragraph (a)(1) of this section, section 30D(e)(1)(B) provides the
applicable critical minerals percentage, which is based on the year in
which a vehicle is placed in service by the taxpayer and set forth in
paragraphs (a)(2)(i) through (v) of this section.
(i) In the case of a vehicle placed in service after April 17,
2023, and before January 1, 2024, the applicable critical minerals
percentage is 40 percent.
(ii) In the case of a vehicle placed in service during calendar
year 2024, the applicable critical minerals percentage is 50 percent.
(iii) In the case of a vehicle placed in service during calendar
year 2025, the applicable critical minerals percentage is 60 percent.
(iv) In the case of a vehicle placed in service during calendar
year 2026, the applicable critical minerals percentage is 70 percent.
(v) In the case of a vehicle placed in service after December 31,
2026, the applicable critical minerals percentage is 80 percent.
(3) Determining qualifying critical mineral content--(i) In
general. Qualifying critical mineral content with respect to a battery
described in paragraph (a)(1) of this section is calculated as the
percentage that results from dividing:
(A) The total value of qualifying critical minerals, by
(B) The total value of critical minerals.
(ii) Separate determinations required for each procurement chain.
The portion of an applicable critical mineral that is a qualifying
critical mineral must be determined separately for each procurement
chain.
(iii) Time for determining value. A qualified manufacturer must
select a date for determining the values described in paragraphs
(a)(3)(i)(A) and (B) of this section. Such date must be after the final
processing or recycling step for the applicable critical minerals
relevant to the certification described in section 30D(e)(1)(A).
(iv) Application of qualifying critical mineral content to
vehicles. A qualified manufacturer may determine qualifying critical
mineral content based on the value of the applicable critical minerals
actually contained in the battery of a specific vehicle. Alternatively,
for
[[Page 23384]]
purposes of calculating the qualifying critical mineral content for
batteries in a group of vehicles, a qualified manufacturer may average
the qualifying critical mineral content calculation over a period of
time (for example, a year, quarter, or month) with respect to vehicles
from the same model line, plant, class, or some combination of thereof,
with final assembly (as defined in section 30D(d)(5) of the Code and
Sec. 1.30D-2(b)) within North America.
(b) Battery components requirement--(1) In general. The battery
components requirement described in section 30D(e)(2)(A) of the Code,
with respect to the battery from which the electric motor of a new
clean vehicle draws electricity, is met if the qualifying battery
component content of such battery is equal to or greater than the
applicable battery components percentage (as defined in paragraph
(b)(2) of this section), as certified by the qualified manufacturer, in
such form or manner as prescribed by the Secretary.
(2) Applicable battery components percentage. For purposes of
paragraph (b)(1) of this section, section 30D(e)(2)(B) provides the
applicable battery components percentage, which is based on the year in
which a vehicle is placed in service by the taxpayer as set forth in
paragraphs (b)(2)(i) through (vi) of this section.
(i) In the case of a vehicle placed in service after April 17,
2023, and before January 1, 2024, the applicable battery components
percentage is 50 percent.
(ii) In the case of a vehicle placed in service during calendar
year 2024 or 2025, the applicable battery components percentage is 60
percent.
(iii) In the case of a vehicle placed in service during calendar
year 2026, the applicable battery components percentage is 70 percent.
(iv) In the case of a vehicle placed in service during calendar
year 2027, the applicable battery components percentage is 80 percent.
(v) In the case of a vehicle placed in service during calendar year
2028, the applicable battery components percentage is 90 percent.
(vi) In the case of a vehicle placed in service after December 31,
2028, the applicable battery components percentage is 100 percent.
(3) Determining qualifying battery component content--(i) In
general. Qualifying battery component content with respect to a battery
described in paragraph (b)(1) of this section is calculated as the
percentage that results from dividing--
(A) The total incremental value of North American battery
components, by
(B) The total incremental value of battery components.
(ii) Time for determining value. A qualified manufacturer must
select a date for determining the incremental values described in
paragraphs (b)(3)(i)(A) and (B) of this section. Such date must be
after the last manufacturing or assembly step for the battery
components relevant to the certification described in section
30D(e)(2)(A) of the Code.
(iii) Application of qualifying battery component content to
vehicles. A qualified manufacturer may determine qualifying battery
component content based on the incremental values of the battery
components actually contained in the battery of a specific vehicle.
Alternatively, for purposes of calculating the qualifying battery
component content for batteries in a group of vehicles, a qualified
manufacturer may average the qualifying battery component content
calculation over a period of time (for example, a year, quarter, or
month) with respect to vehicles from the same model line, plant, class,
or some combination of thereof, with final assembly (as defined in
section 30D(d)(5) of the Code and Sec. 1.30D-2(b)) within North
America.
(c) Definitions. The following definitions apply for purposes of
this section:
(1) Applicable critical mineral means an applicable critical
mineral as defined in section 45X(c)(6) of the Code.
(2) Assembly, with respect to battery components, means the process
of combining battery components into battery cells and battery modules.
(3) Battery, for purposes of a new clean vehicle, means a
collection of one or more battery modules, each of which has two or
more electrically configured battery cells in series or parallel, to
create voltage or current. The term battery does not include items such
as thermal management systems or other parts of a battery cell or
module that do not directly contribute to the electrochemical storage
of energy within the battery, such as battery cell cases, cans, or
pouches.
(4) Battery cell means a combination of battery components (other
than battery cells) capable of electrochemically storing energy from
which the electric motor of a new clean vehicle draws electricity.
(5) Battery component means a component that forms part of a
battery and which is manufactured or assembled from one or more
components or constituent materials that are combined through
industrial, chemical, and physical assembly steps. Battery components
may include, but are not limited to, a cathode electrode, anode
electrode, solid metal electrode, separator, liquid electrolyte, solid
state electrolyte, battery cell, and battery module. Constituent
materials are not considered a type of battery component, although
constituent materials may be manufactured or assembled into battery
components. Some battery components may be made entirely of inputs that
do not contain constituent materials.
(6) Constituent materials means materials that contain applicable
critical minerals and are employed directly in the manufacturing of
battery components. Constituent materials may include, but are not
limited to, powders of cathode active materials, powders of anode
active materials, foils, metals for solid electrodes, binders,
electrolyte salts, and electrolyte additives, as required for a battery
cell.
(7) Country with which the United States has a free trade agreement
in effect--(i) In general. The term ``country with which the United
States has a free trade agreement in effect'' means any of those
countries identified in paragraph (c)(7)(ii) of this section or that
the Secretary may identify in the future. The criteria the Secretary
will consider in determining whether to identify a country under this
paragraph (c)(7) include whether an agreement between the United States
and that country, as to the critical minerals contained in electric
vehicle batteries or more generally, and in the context of the overall
commercial and economic relationship between that country and the
United States:
(A) Reduces or eliminates trade barriers on a preferential basis;
(B) Commits the parties to refrain from imposing new trade
barriers;
(C) Establishes high-standard disciplines in key areas affecting
trade (such as core labor and environmental protections); and/or
(D) Reduces or eliminates restrictions on exports or commits the
parties to refrain from imposing such restrictions.
(ii) Free trade agreements in effect. The countries with which the
United States currently has a free trade agreement in effect are:
Australia, Bahrain, Canada, Chile, Colombia, Costa Rica, Dominican
Republic, El Salvador, Guatemala, Honduras, Israel, Japan, Jordan,
South Korea, Mexico, Morocco, Nicaragua, Oman, Panama, Peru, and
Singapore.
(iii) Updates. The list of countries in paragraph (c)(7)(ii) may be
revised and updated through appropriate guidance published in the
Federal Register or in the Internal Revenue Bulletin (see Sec.
601.601(d) of this chapter).
[[Page 23385]]
(8) Extraction means the activities performed to extract or harvest
minerals or natural resources from the ground or a body of water,
including, but not limited to, by operating equipment to extract or
harvest minerals or natural resources from mines and wells, or to
extract minerals or natural resources from the waste or residue of
prior extraction. Extraction concludes when activities are performed to
convert raw mined or harvested products or raw well effluent to
substances that can be readily transported or stored for direct use in
critical mineral processing. Extraction includes the physical processes
involved in refining. Extraction does not include the chemical and
thermal processes involved in refining.
(9) Incremental value, with respect to a battery component, means
the value determined by subtracting from the value of that battery
component the value of the manufactured or assembled battery
components, if any, that are contained in that battery component.
(10) Manufacturing, with respect to a battery component, means the
industrial and chemical steps taken to produce a battery component.
(11) North America means the territory of the United States,
Canada, and Mexico as defined in 19 CFR part 182, appendix A, section
1(1).
(12) North American battery component means a battery component
substantially all of the manufacturing or assembly of which occurs in
North America, without regard to the location of the manufacturing or
assembly activities of any components that make up the particular
battery component.
(13) Processing means the non-physical processes involved in the
refining of non-recycled substances or materials, including the
treating, baking, and coating processes used to convert such substances
and materials into constituent materials. Processing includes the
chemical or thermal processes involved in refining. Processing does not
include the physical processes involved in refining.
(14) Procurement chain means a common sequence of extraction,
processing, or recycling activities that occur in a common set of
locations with respect to an applicable critical mineral, concluding in
the production of constituent materials. Sources of a single applicable
critical mineral may have multiple procurement chains if, for example,
one source of the applicable critical mineral undergoes the same
extraction, processing, or recycling process in different locations.
(15) Qualified manufacturer means a manufacturer described in
section 30D(d)(3) of the Code.
(16) Qualifying battery component content means the percentage of
the value of the battery components contained in the battery from which
the electric motor of a new clean vehicle draws electricity that were
manufactured or assembled in North America.
(17) Qualifying critical mineral means an applicable critical
mineral that is extracted or processed in the United States, or in any
country with which the United States has a free trade agreement in
effect, or recycled in North America.
(i) An applicable critical mineral is extracted or processed in the
United States, or in any country with which the United States has a
free trade agreement in effect, if:
(A) Fifty (50) percent or more of the value added to the applicable
critical mineral by extraction is derived from extraction that occurred
in the United States or in any country with which the United States has
a free trade agreement in effect; or
(B) Fifty (50) percent or more of the value added to the applicable
critical mineral by processing is derived from processing that occurred
in the United States or in any country with which the United States has
a free trade agreement in effect.
(ii) An applicable critical mineral is recycled in North America if
50 percent or more of the value added to the applicable critical
mineral by recycling is derived from recycling that occurred in North
America.
(18) Qualifying critical mineral content means the percentage of
the value of the applicable critical minerals contained in the battery
from which the electric motor of a new clean vehicle draws electricity
that were extracted or processed in the United States, or in any
country with which the United States has a free trade agreement in
effect, or recycled in North America.
(19) Recycling means the series of activities during which
recyclable materials containing critical minerals are transformed into
specification-grade commodities and consumed in lieu of virgin
materials to create new constituent materials; such activities result
in new constituent materials contained in the battery from which the
electric motor of a new clean vehicle draws electricity.
(20) Total incremental value of North American battery components
means the sum of the incremental values of each North American battery
component contained in a battery described in paragraph (b)(1) of this
section.
(21) Total incremental value of battery components means the sum of
the incremental values of each battery component contained in a battery
described in paragraph (b)(1) of this section.
(22) Total value of critical minerals means the sum of the values
of all applicable critical minerals contained in a battery described in
paragraph (a)(1) of this section.
(23) Total value of qualifying critical minerals means the sum of
the values of all the qualifying critical minerals contained in a
battery described in paragraph (a)(1) of this section.
(24) Value, with respect to property, means the arm's-length price
that was paid or would be paid for the property by an unrelated
purchaser determined in accordance with the principles of section 482
of the Code and regulations thereunder.
(25) Value added, with respect to recycling, extraction, or
processing of an applicable critical mineral, means the increase in the
value of the applicable critical mineral attributable to the relevant
activity.
(d) Excluded entities. [IRS will address excluded entities in the
final rule.]
(e) Severability. The provisions of this section are separate and
severable from one another. If any provision of this section is stayed
or determined to be invalid, it is the agencies' intention that the
remaining provisions shall continue in effect.
(f) Applicability date. This section applies to new clean vehicles
placed in service after April 17, 2023, for taxable years ending after
April 17, 2023.
Sec. 1.30D-4 Special rules.
(a) No double benefit--(1) In general. Under section 30D(f)(2) of
the Internal Revenue Code (Code), the amount of any deduction or other
credit allowable under chapter 1 of the Code for a vehicle for which a
credit is allowable under section 30D(a) must be reduced by the amount
of the section 30D credit allowed for such vehicle (determined without
regard to section 30D(c)).
(2) Application to credit for previously-owned clean vehicles under
section 25E. A section 30D credit that has been allowed with respect to
a vehicle in a taxable year before the year in which a credit under
section 25E of the Code is allowable for that vehicle does not reduce
the amount allowable under section 25E.
(3) Application to credit for qualified clean vehicles under
section 45W. Pursuant to section 45W(d)(3) of the
[[Page 23386]]
Code, no credit is allowed under section 45W with respect to any
vehicle for which a credit was allowed under section 30D.
(b) Limitation based on modified adjusted gross income--(1) In
general. No credit is allowed under section 30D(a) for any taxable year
if--
(i) The lesser of--
(A) The modified adjusted gross income of the taxpayer for such
taxable year, or
(B) The modified adjusted gross income of the taxpayer for the
preceding taxable year, exceeds
(ii) The threshold amount.
(2) Threshold amount. For purposes of paragraph (b)(1) of this
section, the threshold amount applies to individual taxpayers based on
the return filing status for the taxable year, as set forth in
paragraphs (b)(2)(i) through (iii) of this section.
(i) In the case of a joint return or a surviving spouse (as defined
in section 2(a) of the Code), the threshold amount is $300,000,
(ii) In the case of a head of household (as defined in section 2(b)
of the Code), the threshold amount is $225,000.
(iii) In the case of a taxpayer not described in paragraph
(b)(2)(i) or (ii) of this section, the threshold amount is $150,000.
(3) Modified adjusted gross income. For purposes of section
30D(f)(10) and this paragraph (b), the term modified adjusted gross
income means adjusted gross income (as defined in section 62 of the
Code) increased by any amount excluded from gross income under section
911, 931, or 933 of the Code.
(4) Special rule for change in filing status. If the taxpayer's
filing status for the taxable year differs from the taxpayer's filing
status in the preceding taxable year, the taxpayer satisfies the
limitation described in paragraph (b)(1) of this section if the
taxpayer's modified AGI does not exceed the threshold amount in either
year based on the applicable filing status for that taxable year.
(5) Application to taxpayers other than individuals--(i) In
general. Except as provided in paragraph (b)(4)(ii) of this section,
the modified adjusted gross income limitation of this paragraph (b)
does not apply in the case of a new clean vehicle placed in service by
a corporation or other taxpayer that is not an individual for whom
adjusted gross income is computed under section 62.
(ii) Application to passthrough entities. In the case of a new
clean vehicle placed in service by a partnership or S corporation,
where the section 30D credit is claimed by individuals who are direct
or indirect partners of that partnership or shareholders of that S
corporation, the modified adjusted gross income limitation of this
paragraph (b) will apply to those partners or shareholders.
(c) Multiple owners and passthrough entity ownership of a single
vehicle--(1) In general. Except as provided in paragraph (c)(2) of this
section, the amount of the section 30D credit attributable to a new
clean vehicle may be claimed on only one tax return. In the event a new
clean vehicle is placed in service by multiple owners, no allocation or
proration of the section 30D credit is available.
(2) Passthrough entities. In the case of a new clean vehicle placed
in service by a partnership or S corporation, while the partnership or
S corporation is the vehicle owner, the section 30D credit is allocated
among the partners of the partnership under Sec. 1.704-1(b)(4)(ii) or
among the shareholders of the S corporation under sections 1366(a) and
1377(a) of the Code and claimed on the tax returns of the ultimate
partners' or of the S corporation shareholder(s).
(3) Seller reporting--(i) In general. The name and taxpayer
identification number of the vehicle owner claiming the section 30D
credit must be listed on the seller's report pursuant to section
30D(d)(1)(H). The credit will be allowed only on the tax return of the
owner listed in the seller's report.
(ii) Passthrough entities. In the case of a new clean vehicle
placed in service by a partnership or S corporation, the name and tax
identification number of the partnership or S corporation that placed
the new clean vehicle in service must be listed on the seller's report
pursuant to section 30D(d)(1)(H).
(4) Example. A married couple jointly purchases and places in
service a new clean vehicle that qualifies for the section 30D credit
and puts both of their names on the title. When the couple prepares to
file their Federal income tax return, they choose to file using the
married filing separately filing status. The section 30D credit may
only be claimed by one of the spouses on that spouse's tax return, and
the other spouse may not claim any amount of the section 30D credit
with respect to that new clean vehicle. The spouse that claims the
section 30D credit must be the same spouse listed on the seller report
received pursuant to section 30D(d)(1)(H).
(d) Severability. The provisions of this section are separate and
severable from one another. If any provision of this section is stayed
or determined to be invalid, it is the agencies' intention that the
remaining provisions shall continue in effect.
(e) Applicability date. This section applies to new clean vehicles
placed in service after [DATE OF PUBLICATION OF FINAL RULE].
Douglas W. O'Donnell,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2023-06822 Filed 3-31-23; 8:45 am]
BILLING CODE 4830-01-P