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

TAX ALERT | April 19, 2023

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.
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