Section 45W Credit for Qualified Commercial Clean Vehicles

DEPARTMENT OF THE TREASURY <SUBAGY>Internal Revenue Service</SUBAGY> <CFR>26 CFR Part 1</CFR> <DEPDOC>[REG-123525-23]</DEPDOC> <RIN>RIN 1545-BR06</RIN> <SUBJECT>Section 45W Credit for Qualified Commercial Clean Vehicles</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Internal Revenue Service (IRS), Treasury. <HD SOURCE="HED">ACTION:</HD> Notice of proposed rulemaking and notice of public hearing. <SUM> <HD SOURCE="HED">SUMMARY:</HD> This document contains proposed regulations that would provide guidance on the qualified commercial clean vehicle credit enacted by the Inflation Reduction Act of 2022. These proposed regulations would affect eligible taxpayers that place a qualified commercial clean vehicle in service during a taxable year. These proposed regulations would also affect manufacturers of qualified commercial clean vehicles. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> Written or electronic comments must be received by March 17, 2025. The public hearing on these proposed regulations is scheduled for April 28, 2025, at 10 a.m. eastern standard time (EST). Requests to speak and outlines of topics to be discussed at the public hearing must be received by March 17, 2025. If no outlines are received by March 17, 2025, the public hearing will be cancelled. </EFFDATE> <HD SOURCE="HED">ADDRESSES:</HD> Commenters are strongly encouraged to submit public comments electronically via the Federal eRulemaking Portal at <E T="03">https://www.regulations.gov</E> (indicate IRS and REG-123525-23) 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 Once submitted to the Federal eRulemaking Portal, comments cannot be edited or withdrawn.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 to the IRS's public docket. Send paper submissions to: CC:PA:01:PR (REG-123525-23), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Concerning the proposed regulations, David Villagrana or Rika Valdman at (202) 317-6853 (not a toll-free number); concerning submissions of comments or the public hearing, Publications and Regulations Section at (202) 317-6901 (not a toll-free number) or by email at <E T="03">publichearings@irs.gov</E> (preferred). </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">Authority</HD> This document contains proposed amendments to the Income Tax Regulations (26 CFR part 1) regarding sections 25E, 30D, 45W, and 6417 of the Internal Revenue Code (Code) as they relate to the credit for qualified commercial clean vehicles (proposed regulations). The proposed regulations are issued by the Secretary of the Treasury or her delegate (Secretary) under the authority granted by sections 25E(e), 30D(d)(3) and (f)(5), 45W(c)(1), (d)(1), and (f), 6417(h), and 7805(a) of the Code. Section 45W(f) provides an express delegation authorizing the Secretary to issue “such regulations or other guidance as the Secretary determines necessary to carry out the purposes of this section, including regulations or other guidance relating to determination of the incremental cost of any qualified commercial clean vehicle.” Section 45W(c)(1), in part, incorporates in the definition of the term “qualified commercial clean vehicle” that the vehicle “meets the requirements of section 30D(d)(1)(C).” Section 30D(d)(1)(C) requires that such vehicle be made by a “qualified manufacturer,” as defined in section 30D(d)(3). Section 30D(d)(3) provides that a qualified manufacturer must enter “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.” Section 45W(d)(1), which provides that rules similar to the rules under section 30D(f) (without regard to section 30D(f)(10) or (11)) apply for purposes of section 45W, incorporates section 30D(f)(5), which provides an express delegation of authority stating, “[t]he Secretary shall, by regulations, provide for recapturing the benefit of any credit allowable under subsection (a) with respect to any property which ceases to be property eligible for such credit.” Section 6417(h) authorizes the Secretary to issue such regulations or other guidance as may be necessary to carry out the purposes of section 6417. Finally, section 7805(a) authorizes the Secretary “to prescribe all needful rules and regulations for the enforcement of [the Code], including all rules and regulations as may be necessary by reason of any alteration of law in relation to internal revenue.” <HD SOURCE="HD1">Background</HD> <HD SOURCE="HD2">I. Overview</HD> Section 13403(a) of Public Law 117-169, 136 Stat. 1818 (August 16, 2022), commonly known as the Inflation Reduction Act of 2022 (IRA), added section 45W to the Code. Section 13403(b)(1) of the IRA added section 45W to the list of general business credits in section 38 of the Code. Section 45W provides a credit against the tax imposed by chapter 1 of the Code (chapter 1) with respect to each qualified commercial clean vehicle placed in service by the taxpayer during the taxable year (section 45W credit). The section 45W credit is effective for vehicles placed in service after December 31, 2022. The section 45W credit is one of three related clean vehicle credits enacted under or revised by the IRA. Section 25E provides a credit for previously-owned clean vehicles. Section 30D provides a credit for new clean vehicles. <HD SOURCE="HD2">II. Section 45W</HD> Section 45W(a) provides that, for purposes of section 38, the qualified commercial clean vehicle credit for any taxable year is an amount equal to the sum of the credit amounts determined under section 45W(b) with respect to each qualified commercial clean vehicle placed in service by the taxpayer during the taxable year. The amount of the section 45W credit is treated as a general business credit. Section 38(b)(37) lists as a current year business credit the qualified commercial clean vehicle credit determined under section 45W. Section 45W(b)(1) provides that, subject to the limitation in section 45W(b)(4), the amount of the section 45W credit is the lesser of: (A) 15 percent of the taxpayer's basis in the vehicle (30 percent in the case of a vehicle not powered by a gasoline or diesel internal combustion engine (ICE)), or (B) the incremental cost of the vehicle. Section 45W(b)(2) provides that the incremental cost of any qualified commercial clean vehicle is an amount equal to the excess of the purchase price for such vehicle over the purchase price of a comparable vehicle. Section 45W(b)(3) defines “comparable vehicle” to mean, with respect to any qualified commercial clean vehicle, any vehicle that is powered solely by a gasoline or diesel ICE and is comparable in size and use to such vehicle. Section 45W(b)(4) provides that the section 45W credit amount determined under section 45W(b) with respect to any qualified commercial clean vehicle cannot exceed: (A) in the case of a vehicle that has a gross vehicle weight rating of less than 14,000 pounds, $7,500; and (B) in the case of a vehicle not described in section 45W(b)(4)(A), $40,000. Section 45W(c) defines “qualified commercial clean vehicle” for purposes of the section 45W credit as any vehicle which: (1) meets the requirements of section 30D(d)(1)(C) of the Code, and is acquired for use or lease by the taxpayer and not for resale; (2) either meets the requirements of section 30D(d)(1)(D), and is manufactured primarily for use on public streets, roads, and highways (not including a vehicle operated exclusively on a rail or rails), or is mobile machinery, as defined in section 4053(8) of the Code (including vehicles that are not designed to perform a function of transporting a load over the public highways); (3) either is propelled to a significant extent by an electric motor which draws electricity from a battery that has a capacity of not less than 15 kilowatt hours (or, in the case of a vehicle that has a gross vehicle weight rating of less than 14,000 pounds, 7 kilowatt hours) and is capable of being recharged from an external source of electricity, or is a motor vehicle that satisfies the requirements under section 30B(b)(3)(A) and (B) of the Code; and (4) is of a character subject to the allowance for depreciation. Section 45W(d) establishes special rules for purposes of the section 45W credit. Section 45W(d)(1) provides that rules similar to the rules of section 30D(f)(1) through (9) apply to section 45W. Section 45W(d)(2) provides that section 45W(c)(4) does not apply to any vehicle that is not subject to a lease and which is placed in service by a tax-exempt entity described in section 168(h)(2)(A)(i), (ii), or (iv) of the Code. Section 45W(d)(3) provides that no section 45W credit is allowed with respect to any vehicle for which a credit was allowed under section 30D. Section 45W(e) provides that no section 45W credit is allowed with respect to any vehicle unless the taxpayer includes the vehicle identification number of such vehicle on the return of tax for the taxable year. Section 45W(f) grants the Secretary authority to issue regulations or other guidance to carry out the purposes of section 45W, including regulations or other guidance relating to the determination of the incremental cost of any qualified commercial clean vehicle. Section 45W(g) provides that no section 45W credit is allowed with respect to a vehicle acquired after December 31, 2032. <HD SOURCE="HD2">III. Section 25E</HD> Section 13402 of the IRA added section 25E to the Code. The credit under s ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 202k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━