Fewer vehicles to qualify for clean vehicle credit in the short term

Authored by RSM US LLP

Executive summary: Fewer models to qualify for clean vehicle credit in short term

Treasury and the IRS issued proposed regulations that impact the credit calculation for vehicles eligible for the clean vehicle credit. These regulations affect certain vehicles placed in service after Apr. 17, 2023. In addition to other requirements imposed by changes to the clean vehicle credit through the Inflation Reduction Act (IRA), new critical mineral and battery component requirements determine the value of the credit for an eligible vehicle. For now, there are fewer vehicle models that yield a full or partial clean vehicle if they are placed in service after Apr. 17, 2023. The number of qualifying vehicles is likely to increase as manufacturers strive to satisfy the requirements, maximizing credits for their customers.

Fewer vehicles to qualify for clean vehicle credit in the short term

Critical mineral and battery component requirements

The clean vehicle credit is available for the purchase of certain plug-in hybrid and electric vehicles. Prior to the IRA, the credit was determined as a function of a qualifying vehicle’s battery capacity in kilowatt hours. The IRA’s modifications to the credit included new requirements on the origin of critical minerals and battery components used in a qualifying vehicle. Each requirement, if met, represents a $3,750 component of the maximum credit of $7,500 per vehicle. The new critical mineral and battery component requirements apply to vehicles placed in service after Apr. 17, 2023. Additional requirements are imposed on both vehicles and buyers.

Current list of credit-eligible vehicles

A qualified manufacturer that asserts its vehicles are eligible for the clean vehicle credit must certify their eligibility to the IRS through periodic written reports. Satisfaction of the critical mineral and battery component requirements is included in the manufacturer’s certification. 

The IRS publishes a list of credit-eligible vehicles. Currently, the list is available on a U.S. Department of Energy website. As of this writing, vehicles placed in service after Apr. 17, 2023 are eligible for credits as follows:

Washington National Tax takeaways

The list of credit-eligible vehicle models is expected to expand as manufacturers comply with the critical mineral and battery component requirements for models produced in the future. Further, it is expected that the IRS and Department of Energy will maintain an updated list for consumers to identify eligible vehicles. Fortunately for vehicle buyers, use of the Department of Energy list and reliance on seller’s reports accompanying credit-eligible vehicles should reduce confusion regarding credit eligibility.

This article was written by Christian Wood, Deborah Gordon, Brent Sabot and originally appeared on 2023-04-19.
2022 RSM US LLP. All rights reserved.
https://rsmus.com/insights/tax-alerts/2023/Fewer-vehicles-qualify-clean-vehicle-credit-short-term.html

The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.

RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/aboutus for more information regarding RSM US LLP and RSM International. The RSM(tm) brandmark is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.

Lauterbach, Borschow & Co. is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.

Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.

For more information on how the Lauterbach, Borschow & Co. can assist you, please call us at (915) 544-6950.