Article
New guidance released for previously-owned and new clean vehicle credits
Treasury and IRS summarize the information reporting process for IRC Sections 25E and 30D
On June 7, 2024, the Department of Treasury (Treasury) and the Internal Revenue Service (IRS) issued Rev. Proc. 2024-26 [1]. This guidance outlines the procedures for manufacturers of new clean vehicles and dealers or sellers of previously owned clean vehicles to submit information to ensure compliance with the requirements for clean vehicle credits under Sections 25E and 30D of the Internal Revenue Code (IRC). The previously-owned and new clean vehicle credits incentivize the purchase and use of clean vehicles and is part of the Inflation Reduction Act (IRA) of 2022.
What’s changed?
The issued guidance did three things:
- Updated existing procedures and provides additional guidelines for qualified manufacturers to ensure their vehicles meet the necessary criteria for eligibility. The guidance introduced updated procedures to streamline and clarify the steps that manufacturers must follow to certify their vehicles as eligible for the clean vehicle credits under Sections 25E and 30D. These updates ensure that the manufacturers understand the compliance requirements, including adherence to the vehicle component sourcing regulations.
- Addressed updates and rescissions related to seller reports and modifies certain sections of previous revenue procedures.
- Provided the detailed requirements for qualified manufacturers on how to submit information about the vehicles, including compliance with critical mineral and battery component requirements. This information is crucial for determining the eligibility of vehicles for the clean vehicle credit.
Manufacturers are required to attest to the accuracy of this information and report any material changes to the Department of Energy and the IRS. The information must be collected and retained to ensure vehicles meet the clean vehicle credit requirements, and this process involves substantial due diligence on the part of manufacturers.
Compliant battery ledgers are now required
Starting Jan. 1, 2025, manufacturers must submit compliant-battery ledgers that track the anticipated supply of foreign entity of concern (FEOC) compliant batteries for each calendar year. The collection of this information ensures that the clean vehicle credit is applied correctly and that the vehicles benefiting from this credit adhere to the stipulated environmental and manufacturing standards.
A compliant battery ledger will detail the sourcing and composition of batteries used in clean vehicles, focusing on compliance with regulations that prevent reliance on critical minerals from FEOC. This is also a part of a broader effort to ensure the sustainability and security of the supply chain for clean vehicle components.
Additionally, manufacturers can now utilize a transition rule allowing them to exclude certain impracticable-to-trace battery materials from due diligence requirements until Jan. 1, 2027. This transitional period provides manufacturers with additional time to develop and implement the necessary tracking and reporting systems for these materials.
Finally, the Revenue Procedure described the process regarding updating and rescinding seller reports.
In summary, Rev. Proc. 2024-26 introduces some changes to the procedures for claiming IRC sections 25E and 30D clean vehicle credits, emphasizing transparency, accuracy, and compliance with FEOC rules. Manufacturers must adapt to these requirements to allow their buyers to continue to benefit from the tax credit incentives.
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Connect with a Baker Tilly team member to learn more or visit the IRA resource center for additional insights, events and resources.
Incentive opportunities and compliance solutions for manufacturers
Explore key programs like Section 48C and 45X, offering substantial tax credits for clean energy and industrial decarbonization projects, and learn about Section 30D’s federal tax credits for energy-efficient transportation. Ensure compliance with domestic content requirements to maximize your benefits and stay ahead in the competitive manufacturing landscape.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.
