Bulletin No. 2024–22

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HIGHLIGHTS

OF THIS ISSUE

Bulletin No. 2024–22

May 28, 2024

These synopses are intended only as aids to the reader in

identifying the subject matter covered. They may not be

relied upon as authoritative interpretations.

ADMINISTRATIVE

Rev. Proc. 2024-25, page 1333.

This revenue procedure provides the 2025 inflation adjusted

amounts for Health Savings Accounts (HSAs) as determined

under § 223 of the Internal Revenue Code and the maximum

amount that may be made newly available for excepted benefit health reimbursement arrangements (HRAs) provided

under § 54.9831-1(c)(3)(viii) of the Pension Excise Tax Regulations.

ADMINISTRATIVE, INCOME TAX

T.D. 9995, page 1241.

These final regulations provide guidance regarding general

provisions and special rules for §§ 25E and 30D, as well as

rules related to the Critical Minerals and Battery Components

Requirements of section 30D(e). Furthermore, these final

regulations provide guidance for elections to transfer clean

vehicle credits under §§ 25E(f) and 30D(g). These final regulations provide guidance to qualified manufacturers of new

clean vehicles to comply with rules regarding foreign entities

of concern (FEOC) and excluded entities. These final regulations provide guidance for qualified manufacturers of new

clean vehicles to comply with rules to determine if the battery components and applicable critical minerals contained in

a vehicle battery satisfy the requirements of § 30D(d)(7) and

are FEOC-compliant. Finally, the final regulations also define

the omission of a correct vehicle identification number for

purposes of § 6213.

ESTATE TAX, GIFT TAX

T.D. 9996, page 1317.

These final regulations provide guidance under section

2642(g) describing the circumstances and procedures under

Finding Lists begin on page ii.

which an extension of time will be granted by the Internal

Revenue Service (IRS) to make certain allocations and elections related to the generation-skipping transfer (GST) tax.

Since the enactment of section 2642(g) in 2001, the IRS

has granted relief for such allocations and elections under

the regulatory authority of section 301.9100-1 through the

private letter ruling program. In order to reduce taxpayers’

compliance burden attendant to requesting relief under section 301.9100-1, the final regulations set forth nonexclusive

factors that the IRS will consider in determining whether a

transferor, or the executor of a transferor’s estate, has met

the standards of reasonableness, good faith, and lack of prejudice to the interests of the Government so that the IRS may

grant relief. Henceforward, taxpayers requesting relief for

certain allocations and elections related to the GST tax must

seek relief under section 2642(g) and cannot obtain relief

under section 301.9100-1.

EXEMPT ORGANIZATIONS

Rev. Proc. 2024-22, page 1332.

This revenue procedure obsoletes Rev. Proc. 82-2, 1982-1

C.B. 367, which identified the circumstances in which an

organization could satisfy § 1.501(c)(3)-1(b)(4) (requiring that

the assets of a section 501(c)(3) organization be dedicated

to an exempt purpose) by operation of the law of certain

States or the District of Columbia. Due to material changes

in the law of many jurisdictions since 1982, the jurisdictional

list set forth in Rev. Proc. 82-2 is no longer accurate.

Rev. Rul. 2024-10, page 1240.

This revenue ruling obsoletes Rev. Rul. 75-38, 1975-1 C.B.

161, which identified the District of Columbia and each State

with statutory provisions that, in 1975, satisfied the private

foundation governing instrument requirements of section

508(e). Due to material changes in the laws of a number

of jurisdictions since 1975, the jurisdictional list set forth in

Rev. Rul. 75-38 is no longer accurate.

The IRS Mission

Provide America’s taxpayers top-quality service by helping

them understand and meet their tax responsibilities and

enforce the law with integrity and fairness to all.

Introduction

The Internal Revenue Bulletin is the authoritative instrument

of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service

and for publishing Treasury Decisions, Executive Orders, Tax

Conventions, legislation, court decisions, and other items of

general interest. It is published weekly.

It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application

of the tax laws, including all rulings that supersede, revoke,

modify, or amend any of those previously published in the

Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of

internal practices and procedures that affect the rights and

duties of taxpayers are published.

Revenue rulings represent the conclusions of the Service

on the application of the law to the pivotal facts stated in

the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices,

identifying details and information of a confidential nature are

deleted to prevent unwarranted invasions of privacy and to

comply with statutory requirements.

Rulings and procedures reported in the Bulletin do not have the

force and effect of Treasury Department Regulations, but they

may be used as precedents. Unpublished rulings will not be

relied on, used, or cited as precedents by Service personnel in

the disposition of other cases. In applying published rulings and

procedures, the effect of subsequent legislation, regulations,

court decisions, rulings, and procedures must be considered,

and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unless

the facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.

This part includes rulings and decisions based on provisions

of the Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation.

This part is divided into two subparts as follows: Subpart A,

Tax Conventions and Other Related Items, and Subpart B,

Legislation and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.

To the extent practicable, pertinent cross references to these

subjects are contained in the other Parts and Subparts. Also

included in this part are Bank Secrecy Act Administrative

Rulings. Bank Secrecy Act Administrative Rulings are issued

by the Department of the Treasury’s Office of the Assistant

Secretary (Enforcement).

Part IV.—Items of General Interest.

This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative index

for the matters published during the preceding months. These

monthly indexes are cumulated on a semiannual basis, and are

published in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

May 28, 2024

Bulletin No. 2024–22

Part I

Section 508.—Special

Rules with Respect

to Section 501(c)(3)

Organizations

26 CFR 1.508-3: Governing instruments.

Rev. Rul. 2024-10

This revenue ruling obsoletes Rev. Rul.

75-38, 1975-1 C.B. 161, which identified

the State laws and circumstances that the

Internal Revenue Service (IRS) previously

concluded would permit an organization

to satisfy the private foundation governing instrument requirements of § 508(e)

of the Internal Revenue Code (Code).1 A

number of the State laws identified in Rev.

Rul. 75-38 have materially changed, and

a revenue ruling cannot be relied upon to

the extent it is predicated on State law and

that State law has materially changed. See

Rev. Proc. 89-14, 1989-1 C.B. 814.

LAW AND ANALYSIS

Section 508(e) provides that a private

foundation will not be exempt from Federal income taxation under § 501(a) unless

its governing instrument includes provisions the effects of which are to require

its income for each taxable year to be distributed at such time and in such manner

as not to subject the private foundation to

tax under § 4942 and to prohibit the private foundation from engaging in any act

of self-dealing (as defined in § 4941(d)),

from retaining any excess business holdings (as defined in § 4943(c)), from making any investments in such manner as to

subject the private foundation to tax under

§ 4944, and from making any taxable

expenditures (as defined in § 4945(d)).

Section 1.508-3(a) provides a general rule

that is consistent with § 508(e).

Section 1.508-3(d)(1) provides, however, that a private foundation’s governing

instrument will be deemed to satisfy the

requirements of § 1.508-3(a) if valid provisions of State law have been enacted that:

(1) Require it to act or refrain from acting so as not to subject the private foundation to the taxes imposed by §§ 4941,

4942, 4943, 4944, and 4945; or

(2) Treat the required provisions as

contained in the private foundation’s governing instrument.

Rev. Rul. 75-38 identified 48 States

and the District of Columbia as jurisdictions with statutory provisions in effect

at the time of its publication that satisfied

the requirements of § 508(e). Rev. Rul.

75-38 also noted exceptions included in

those statutory provisions, such as cases

in which a court determines that the provisions do not apply to a particular private

foundation or in which a private foundation expressly opts out of the statutory

provisions through a provision in its governing instrument.

Section 7.01(5) of Rev. Proc. 89-14

cautions taxpayers, IRS personnel, and

others concerned to determine whether a

revenue ruling on which they seek to rely

has been revoked, modified, declared

obsolete, distinguished, clarified, or

otherwise affected by subsequent legislation, treaties, regulations, revenue

rulings, revenue procedures, or court

decisions. Section 7.01(6) of Rev. Proc.

89-14 provides that if the conclusion

of a revenue ruling is predicated upon

a certain provision or interpretation of

law other than Federal tax law, taxpayers, IRS personnel, and others generally

must determine whether such relevant

non-Federal tax law has changed materially from that used in the revenue ruling

on which they seek to rely. Therefore,

under section 7.01(5) and (6) of Rev.

Proc. 89-14, a revenue ruling cannot

be relied upon to the extent it is predicated on State law and that State law has

materially changed.

A number of the statutory provisions

considered in Rev. Rul. 75-38 have since

been amended, repealed, or replaced. Rev.

Rul. 75-38 therefore no longer provides an

accurate list of the jurisdictions with statutory provisions that satisfy the requirements of § 508(e) or of the exceptions to

those statutory provisions.

In addition, Rev. Rul. 75-38 does not

address potential differences in the State

statutory provisions that apply depending

on whether an organization is formed as

a charitable trust or as a not-for-profit (or

nonstock) corporation. While most States

have enacted statutory provisions having

the effects described in § 508(e) for both

charitable trusts and not-for-profit corporations, there are a small number of States

with statutory provisions that satisfy the

requirements of § 508(e) for charitable

trusts or not-for-profit corporations but

not both.

For the foregoing reasons, this revenue

ruling is being published to obsolete Rev.

Rul. 75-38.

A private foundation is responsible

for verifying whether the requirements

of § 508(e) are satisfied by applicable

State law if its governing instrument

does not include the provisions described

in § 508(e). A private foundation can

ensure that it satisfies the requirements

of § 508(e) by including the provisions

described in § 508(e) in its governing

instrument. Publication 557, Tax-Exempt

Status for Your Organization (currently

available at: https://www.irs.gov/pub/irspdf/p557.pdf), provides samples of governing instrument provisions that a private

foundation may include in its governing

instrument to satisfy the requirements of

§ 508(e).

EFFECT ON OTHER REVENUE

RULINGS

Rev. Rul. 75-38, 1975-1 C.B. 161, is

obsoleted as of May 24, 2024.

DRAFTING INFORMATION

The principal author of this revenue

ruling is Christopher Hyde of the Office

of Associate Chief Counsel (Employee

Benefits, Exempt Organizations, and

Employment Taxes). For further information regarding this revenue ruling, contact

Mr. Hyde at (202) 317-5800 (not a tollfree number).

Unless otherwise specified, all “section” or “§” references are to sections of the Code or the Income Tax Regulations (26 CFR part 1).

May 28, 2024

1240

Bulletin No. 2024–22

26 CFR 1.25E-1, 1.25E-2, 1.25E-3, 1.30D-1, 1.30D2, 1.30D-3, 1.30D-4, 1.30D-5, 1.30D-6, 301.6213-2

T.D. 9995

DEPARTMENT OF THE

TREASURY

Internal Revenue Service

26 CFR Parts 1 and 301

Clean Vehicle Credits under

Sections 25E and 30D;

Transfer of Credits; Critical

Minerals and Battery

Components; Foreign

Entities of Concern

AGENCY: Internal Revenue Service

(IRS), Treasury.

ACTION: Final regulations.

SUMMARY: This document contains

final regulations regarding Federal income

tax credits under the Inflation Reduction

Act of 2022 (IRA) for the purchase of

qualifying new and previously-owned

clean vehicles, including new and previously-owned plug-in electric vehicles

certain requirements and new qualified

fuel cell motor vehicles. In addition, the

final regulations provide guidance for taxpayers who purchase qualifying vehicles

and intend to transfer the amount of any

previously-owned clean vehicle credit or

new clean vehicle credit to dealers that

are entities eligible to receive advance

payments of either credit. The final regulations also provide guidance for dealers to become eligible entities to receive

advance payments of previously-owned

clean vehicle credits or new clean vehicle

credits, and rules regarding recapture of

the credits. Finally, the final regulations

provide guidance on the meaning of three

new definitions added to the exclusive list

of mathematical or clerical errors relating

to certain assessments of tax without a

notice of deficiency.

DATES: Effective date: These regulations

are effective on July 5, 2024.

Bulletin No. 2024–22

Applicability dates: For dates of applicability, see §§1.25E-1(h), 1.25E-2(i), 1.25E3(k), 1.30D-1(d), 1.30D-2(d), 1.30D3(h), 1.30D-4(j), 1.30D-5(k), 1.30D-6(j),

and 301.6213-2(c).

FOR FURTHER INFORMATION

CONTACT: Rika Valdman or Maggie

Stehn of the Office of Associate Chief

Counsel (Passthroughs & Special Industries) at (202) 317-6853 (not a toll-free

number).

SUPPLEMENTARY INFORMATION:

Background

This document contains amendments

to the Income Tax Regulations (26 CFR

part 1) under sections 25E and 30D of

the Internal Revenue Code (Code), and

to the Procedure and Administration Regulations (26 CFR part 301) under section

6213 of the Code.

I. Section 25E

Section 13402 of Public Law 117-169,

136 Stat. 1818 (August 16, 2022), commonly known as the IRA, added section

25E to the Code. The credit under section

25E (section 25E credit) is a personal

credit allowable under subpart A of the

Code.

Section 25E(a) provides that, in the

case of a qualified buyer who during a

taxable year places in service a previously-owned clean vehicle, an income

tax credit is allowed for the taxable year

equal to the lesser of: (1) $4,000, or (2)

the amount equal to 30 percent of the sale

price with respect to such vehicle.

Section 25E(b)(1) sets a limitation based on modified adjusted gross

income (Modified AGI) and provides

that no credit is allowed for any taxable

year if (A) 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 (B) the threshold amount.

The threshold amount is set forth in

section 25E(b)(2) and varies based on a

taxpayer’s filing status. In the case of a

taxpayer filing a joint return or who is a

surviving spouse (as defined in section

2(a) of the Code), the threshold amount

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is $150,000. In the case of a taxpayer

who is a head of household (as defined

in section 2(b)), the threshold amount is

$112,500. In the case of any other taxpayer, the threshold amount is $75,000.

Section 25E(b)(3) defines Modified

AGI as adjusted gross income (AGI)

increased by any amount excluded from

gross income under section 911, 931, or

933 of the Code.

Section 25E(c) defines certain terms for

purposes of the section 25E credit. Section 25E(c)(1) defines “previously-owned

clean vehicle” as a motor vehicle:

(A) the model year of which is at least

2 years earlier than the calendar year in

which the taxpayer acquires such vehicle;

(B) the original use of which commences with a person other than the taxpayer;

qualified sale; and

(D) that (i) meets the requirements of

section 30D(d)(1)(C), (D), (E), (F), and

(H) (except for section 30D(d)(1)(H)(iv)),

or (ii) is a motor vehicle that (I) satisfies

the requirements under section 30B(b)(3)

(A) and (B), and (II) has a gross vehicle

weight rating (GVWR) of less than 14,000

pounds.

Section 25E(c)(2) defines a “qualified

sale” as a sale of a motor vehicle (A) by

a dealer (as defined in section 30D(g)(8));

(B) for a sale price that does not exceed

$25,000; and (C) that is the first transfer

since the date of enactment of the IRA to a

qualified buyer other than the person with

whom the original use of such vehicle

commenced.

Under section 25E(c)(3), “qualified

buyer” means, with respect to a sale of a

motor vehicle, a taxpayer (A) who is an

individual; (B) who purchases such vehicle for use and not for resale; (C) with

respect to whom no deduction is allowable

with respect to another taxpayer under

section 151 of the Code; and (D) who has

not been allowed a section 25E credit for

any sale during the 3-year period ending

on the date of the sale of such vehicle.

Section 25E(c)(4) defines “motor vehicle” and “capacity” to have the meaning

given such terms in section 30D(d)(2) and

(4), respectively.

Section 25E(d) provides that no credit

is allowed under section 25E(a) with

respect to any vehicle unless the taxpayer

May 28, 2024

includes the vehicle identification number

(VIN) of such vehicle on the return of tax

for the taxable year.

Section 25E(e) and (f) provide, respectively, that rules similar to the rules of

section 30D(f) (without regard to paragraph (10) or (11) thereof) and the rules of

section 30D(g) apply for purposes of section 25E. Section 13402(e)(2) of the IRA

provides that the ability of a taxpayer to

elect to transfer a section 25E credit under

section 25E(f) applies to vehicles placed

in service by the taxpayer after December

31, 2023.

Section 25E(g) provides that no section

25E credit is allowed with respect to a

vehicle acquired after December 31, 2032.

II. Section 30D

A. In general

Section 30D(a) provides a credit (section 30D credit) 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.

Section 30D was originally enacted by

section 205(a) of the Energy Improvement

and Extension Act of 2008, Division B of

Pub. L. No. 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 the 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).

May 28, 2024

B. IRA amendments to Section 30D

1. Credit Amount and Critical Minerals

and Battery Components 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, the amount of the section 30D

credit was calculated based on the vehicle’s battery capacity. The base amount

was $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) 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 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) of the

Code) 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), and varies based

1242

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) 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) 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.

2. New Clean Vehicle Definition

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.” This amendment

is 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

Bulletin No. 2024–22

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 that

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 that

are applicable to vehicles placed in service

after December 31, 2022. As amended

by section 13401(c) of 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 (EPA)

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 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

Bulletin No. 2024–22

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.

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 (FEOC). 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 FEOC

from the definition of the term “new clean

vehicle.” In particular, amended section

30D(d)(7) (FEOC Restriction) 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 FEOC (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 FEOC (as so defined).

3. Elimination of Phaseout

The IRA eliminates the phaseout of

the section 30D credit for vehicles made

by manufacturers that have sold at least

1243

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.

4. 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 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 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. 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 AGI

as 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 (MSRP) thresholds. New section 30D(f)(11)(A) provides that no credit

is allowed for a vehicle if the MSRP of the

vehicle exceeds 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)

such regulations or other guidance as the

Secretary determines necessary to deter-

May 28, 2024

mine vehicle classifications using criteria

similar to that employed by the EPA and

the Department of the Energy (DOE) to

determine size and class of vehicles.

5. Transfer of Credit

The IRA added new section 30D(g)

to the Code, which allows the taxpayer

to elect to transfer the section 30D credit

in certain situations for vehicles placed in

service after December 31, 2023.

Section 30D(g)(1) provides that subject to such regulations or other guidance

as the Secretary determines necessary, a

taxpayer may elect to transfer a section

30D credit with respect to a new clean

vehicle to an eligible entity (credit transfer

election).1 If the taxpayer who acquires a

new clean vehicle makes a credit transfer

election under section 30D(g) with respect

to such vehicle, the section 30D credit

that would otherwise be allowed to such

taxpayer with respect to such vehicle is

allowed to the eligible entity specified in

such election (and not the taxpayer).

Section 30D(g)(2) defines an “eligible entity” with respect to the vehicle for

which the section 30D credit is allowed as

the dealer that sold such vehicle to the taxpayer and that satisfies the following four

requirements set forth in section 30D(g)

(2)(A) through (D): (i) the dealer, subject

to section 30D(g)(4), must be registered

with the Secretary for purposes of section

30D(g)(2), at such time, and in such form

and manner, as the Secretary prescribes;

(ii) the dealer, prior to the credit transfer

election and not later than at the time of

sale, must have disclosed to the taxpayer

purchasing such vehicle the manufacturer’s suggested retail price, the value of

the section 30D credit allowed and any

other incentive available for the purchase

of such vehicle, and the amount provided

by the dealer to such taxpayer as a condition of the credit transfer election; (iii) the

dealer, not later than at the time of sale,

must have paid the taxpayer (whether in

cash or in the form of a partial payment

or down payment for the purchase of such

vehicle) an amount equal to the credit oth-

erwise allowable to such taxpayer; and

(iv) the dealer with respect to any incentive otherwise available for the purchase

of a vehicle for which a section 30D credit

is allowed, including any incentive in the

form of a rebate or discount provided by

the dealer or manufacturer, must have

ensured that the availability or use of such

incentive does not limit the ability of a

taxpayer to make a credit transfer election,

and such election does not limit the value

or use of such incentive.

Section 30D(g)(3) addresses the timing

of the transfer and provides that any credit

transfer election cannot be made by the

taxpayer any later than the date on which

the vehicle for which the section 30D

credit is allowed is purchased.

Section 30D(g)(4) provides that upon

determination by the Secretary that a

dealer has failed to comply with the

requirements described in section 30D(g)

(2), the Secretary may revoke the dealer’s

registration.

Section 30D(g)(5) provides that with

respect to any payment described in section 30D(g)(2)(C), such payment is not

includible in the gross income of the taxpayer and is not deductible with respect to

the dealer.

Section 30D(g)(6) addresses the application of certain other requirements to the

transfer of credit and provides that in the

case of any credit transfer election with

respect to any vehicle: (i) the basis reduction and no double benefit requirements of

section 30D(f)(1) and (2) apply to the taxpayer who acquired the vehicle in the same

manner as if the section 30D credit determined with respect to such vehicle were

allowed to such taxpayer; (ii) the election

in section 30D(f)(6) to not take the section

30D credit does not apply; and (iii) the VIN

requirement of section 30D(f)(9) is treated

as satisfied if the eligible entity provides

the VIN of such vehicle to the Secretary in

such manner as the Secretary may provide.

Section 30D(g)(7)(A) provides for

the establishment of a program to make

advance payments to eligible entities in an

amount equal to the cumulative amount

of the credits allowed with respect to any

vehicles sold by such entity for which a

credit transfer election described in section 30D(g)(1) has been made. Section

30D(g)(7)(B) provides that rules similar

to the rules of section 6417(d)(6) of the

Code apply for purposes of the advance

payment rules, and section 30D(g)(7)(C)

provides that for purposes of 31 U.S.C.

1324, the payments under section 30D(g)

(7)(A) are treated in the same manner as a

refund due from a credit provision referred

to in 31 U.S.C. 1324(b)(2).

Section 30D(g)(8) defines the term

“dealer” as a person licensed by a State,

the District of Columbia, the Commonwealth of Puerto Rico, any other territory

or possession of the United States, an

Indian tribal government, or any Alaska

Native Corporation (as defined in section

3 of the Alaska Native Claims Settlement

Act (43 U.S.C. 1602(m)) to engage in the

sale of vehicles. Section 30D(g)(9) defines

an “Indian tribal government” as the recognized governing body of any Indian or

Alaska Native tribe, band, nation, pueblo,

village, community, component band, or

component reservation, individually identified (including parenthetically) in the

list published most recently as of the date

of enactment of section 30D(g) (that is,

August 16, 2022) pursuant to section 104

of the Federally Recognized Indian Tribe

List Act of 1994 (25 U.S.C. 5131).

Section 30D(g)(10) provides that in

the case of any taxpayer who has made a

credit transfer election with respect to a

new clean vehicle and received a payment

from an eligible entity, if the section 30D

credit would otherwise (but for section

30D(g)) not be allowable to such taxpayer

pursuant to the application of the Modified AGI limitation of section 30D(f)(10),

the income tax imposed on such taxpayer

under chapter 1 of the Code for the taxable

year in which such vehicle was placed in

service must be increased by the amount

of the payment received by such taxpayer.

Section 13401(k)(4) of the IRA provides that the ability for a taxpayer to elect

to transfer a section 30D credit under section 30D(g) applies to vehicles placed in

service after December 31, 2023.

As discussed in section VIII of this Background section, on October 10, 2023, the Treasury Department and the IRS published a notice of proposed rulemaking (REG-113064-23) in the

Federal Register (88 FR 70310), that referred to this election as the “vehicle transfer election.” However, “credit transfer election” is a more descriptive and appropriate term, so these final

regulations adopt the defined term “credit transfer election” to refer to the election by a taxpayer to transfer a section 25E or section 30D credit to an eligible entity.

May 28, 2024

1244

Bulletin No. 2024–22

6. Termination

The IRA added new section 30D(h) to

the Code, which provides that no credit is

allowed with respect to any vehicle placed

in service after December 31, 2032.

III. Section 45W

Section 13403(a) of the IRA added section 45W to the Code, which is effective

for vehicles acquired after December 31,

2022, and before January 1, 2033. A taxpayer can claim a section 45W credit for

purchasing and placing in service a qualified commercial clean vehicle, as defined

in section 45W(c), during the taxable year.

Section 45W(e) provides that no section

45W credit is allowed with respect to any

vehicle unless the taxpayer includes the

VIN of such vehicle on the tax return for

the taxable year.

IV. Section 6213(g)(2)

Section 6213(b)(1) authorizes the IRS

to make certain assessments of mathematical or clerical errors without first issuing a notice of deficiency under section

6213(a). 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 required under

sections 25E(d), 30D(f)(9), and 45W(e)

to be included on a return. See section

6213(g)(2)(T)-(V).

V. Notice 2022-46

On October 24, 2022, the Treasury

Department and the IRS published

Notice 2022-46, 2022-43 I.R.B. 306.

The notice requested general comments

on issues arising under sections 25E and

30D. Regarding section 30D, the notice

requested specific comments concerning:

(1) definitions; (2) critical minerals; (3)

battery components; (4) applicable values; (5) FEOCs; (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. Regarding section 25E,

the notice requested specific comments

concerning: (1) qualification as a “previ-

Bulletin No. 2024–22

ously-owned clean vehicle”; (2) the rules

of section 30D(f) that should be applied

under section 25E(e); (3) the rules of section 30D(g) that should be applied under

section 25E; and (4) terms that may

require definitions or further guidance.

Stakeholders submitted more than 800

comments in response to Notice 2022-46.

Those comments informed the development of the notices of proposed rulemaking relating to sections 25E and 30D discussed in section VII of this Background

section.

VI. Revenue Procedures

On December 27, 2022, the Treasury Department and the IRS published

Revenue Procedure 2022-42, 2022-52

I.R.B. 565, which sets forth the procedures under section 30D(d)(3) for qualified manufacturers to enter into a written agreement with the Secretary under

which such manufacturer agrees to make

periodic written reports to the Secretary

providing VINs and such other information related to each vehicle manufactured

by such manufacturer as the Secretary

may require. The revenue procedure

also provides the procedures for persons

selling vehicles to report the information required to be reported to the IRS in

order for such vehicles to be eligible for

the section 25E credit or the section 30D

credit.

On October 23, 2023, the Treasury

Department and the IRS published Revenue Procedure 2023-33, 2023-43 I.R.B.

1135. The revenue procedure sets forth

the procedures under sections 25E(f) and

30D(g) for the transfer of the section 25E

credit and the 30D credit from the taxpayer to an eligible entity. In addition, the

revenue procedure supersedes certain provisions of Rev. Proc. 2022-42.

On December 18, 2023, the Treasury

Department and the IRS published Revenue Procedure 2023-38, 2023-51 I.R.B.

1544. The revenue procedure provides

procedural rules for qualified manufacturers of new clean vehicles to comply with

the reporting, certification, and attestation requirements regarding the excluded

entity restriction, under which the IRS,

with analytical assistance from the DOE,

will review compliance with the excluded

entity restrictions. In addition, Rev. Proc.

1245

2023-38 updates and consolidates the procedural rules for qualified manufacturers

with respect to the section 25E credit, the

section 30D credit, and the qualified commercial clean vehicle credit under section

45W. The revenue procedure supersedes

certain provisions of Rev. Proc. 2022-42

and Rev. Proc. 2023-33.

On February 26, 2024, the Treasury

Department and the IRS published Revenue Procedure 2024-12, 2024-9 I.R.B.

677. The revenue procedure provides a

temporary extension of time to submit

seller reports to the IRS under the procedures set out in Rev. Proc. 2022-42 and

Rev. Proc. 2023-33 for the transfer of section 25E credits and 30D credits.

VII. Notice 2023-1, Notice 2023-16, and

30D White Paper

On January 17, 2023, 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 of the proposed guidance on the

Critical Minerals Requirement and Battery Components Requirement and the

process for determining whether vehicles qualify under these requirements,

as of December 29, 2022. 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 16, 2024).

On February 21, 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 intended to provide in proposed regulations.

VIII. Notices of Proposed Rulemaking

On April 17, 2023, the Treasury Department and the IRS published a notice of

proposed rulemaking (REG-120080-22)

in the Federal Register (88 FR 23370),

May 28, 2024

containing proposed regulations under

section 30D (April Proposed Regulations). The April Proposed Regulations

provided proposed definitions for certain

terms related to section 30D; proposed

rules regarding personal and business

use of new clean vehicles and other special rules; and additional proposed rules

related to the Critical Minerals and Battery Components Requirements of section

30D(e) in proposed §1.30D-3.

On October 10, 2023, the Treasury

Department and the IRS published a notice

of proposed rulemaking (REG-11306423) in the Federal Register (88 FR 70310),

which provided proposed guidance for

elections to transfer clean vehicle credits

under sections 25E(f) and 30D(g) (October Proposed Regulations). The October

Proposed Regulations provided proposed

guidance for taxpayers intending to transfer the section 25E credit and the section

30D credit to dealers that are entities

eligible to receive advance payments of

such credits. The October Proposed Regulations also provided proposed guidance

for how dealers become eligible entities to

receive advance payments of the section

25E credit and the section 30D credit. In

addition, the October Proposed Regulations provided proposed guidance regarding basic and definitional provisions in for

section 25E, recapture of the section 25E

and section 30D credits, and math error

authority under section 6213.

On December 4, 2023, the Treasury

Department and the IRS published a

notice of proposed rulemaking (REG118492-23) in the Federal Register (88

FR 84098), which provided guidance

regarding the excluded entities limitation

of section 30D(d)(7) (December Proposed

Regulations). The December Proposed

Regulations provided proposed definitions and proposed rules for qualified

manufacturers of vehicles to determine

eligibility for the section 30D clean vehicle credit regarding the excluded entity

restrictions, under which vehicles placed

in service beginning in 2024 are not eligible if the battery contains battery components manufactured or assembled by

a FEOC, and vehicles placed in service

beginning in 2025 are not eligible if the

battery contains applicable critical minerals extracted, processed, or recycled by a

FEOC.

May 28, 2024

IX. Department of Energy Guidance

Concurrently with the release of the

December Proposed Regulations, the

DOE released proposed guidance in the

Federal Register, which provides proposed interpretations of certain terms

used in the definition of FEOC set forth

in section 40207(a)(5) of the Infrastructure Investment and Jobs Act (IIJA), and

as cross-referenced in section 30D(d)(7).

Concurrently with the release of these

final regulations, the DOE is releasing

final regulations under section 40207(a)

(5) of the IIJA.

Section 40207(a)(5) of the IIJA defines

FEOC to include foreign entities covered by specific designations, inclusions,

and allegations by Federal agencies as

described in section 40207(a)(5)(A), (B),

and (D), as well as foreign entities ‘‘owned

by, controlled by, or subject to the jurisdiction or direction of a government’’ of

a covered nation under section 40207(a)

(5)(C). Covered nations are defined in 10

U.S.C. 4872(d)(2) as the People’s Republic of China, the Russian Federation, the

Democratic People’s Republic of Korea,

and the Islamic Republic of Iran, as of

the date of publication of the these final

regulations and the DOE final guidance.

Finally, section 40207(a)(5)(E) of the IIJA

provides that a FEOC includes a foreign

entity that the Secretary of Energy, in consultation with the Secretary of Defense

and the Director of National Intelligence,

determines is engaged in unauthorized

conduct that is detrimental to the national

security or foreign policy of the United

States. The DOE final guidance provides

an interpretation of section 40207(a)(5)

final guidance provides definitions for the

terms ‘‘government of a foreign country,’’

‘‘foreign entity,’’ ‘‘subject to the jurisdiction,’’ and ‘‘owned by, controlled by, or

subject to the direction of.’’ In general,

an entity incorporated in, headquartered

in, or performing the relevant activities

in a covered nation would be classified

as a FEOC. For purposes of these rules,

an entity would be ‘‘owned by, controlled

by, or subject to the direction’’ of another

entity if 25 percent or more of the entity’s

board seats, voting rights, or equity interest are cumulatively held by such other

entity. In addition, licensing agreements

1246

or other contractual agreements may also

create control. Finally, ‘‘government of a

foreign country’’ is defined to include subnational governments and certain current

or former senior foreign political figures.

Summary of Comments and

Explanation of Revisions

The Treasury Department and the IRS

received over 180 written and electronic

comments in response to the April Proposed Regulations, the October Proposed

Regulations, and the December Proposed

Regulations (collectively, the proposed

regulations). A public hearing on the proposed regulations was held on January 31,

2024. Copies of written comments and the

list of speakers at the public hearing are

available at https://www.regulations.gov

or upon request.

After full consideration of the comments received on the proposed regulations and the testimony presented at the

public hearing, this Treasury Decision

adopts the proposed regulations with

clarifying changes and additional modifications in response to the comments and

testimony as described in this Summary of

Comments and Explanation of Revisions.

Unless otherwise indicated in this

Summary of Comments and Explanation

of Revisions, provisions of the proposed

regulations for which no comments were

received are adopted without substantive

change. Comments that merely summarize the proposed regulations, recommend statutory revisions to section 25E,

section 30D, or other statutes, address

issues that are outside the scope of this

rulemaking (such as proposed changes to

other guidance), or recommend changes

to IRS forms, are beyond the scope of

these regulations and are not adopted. In

addition, comments that relate to the revenue procedures or notices described in

section VI and VII of this Background

section are beyond the scope of these regulations and are not adopted. The final

regulations include non-substantive modifications, including modifications that

promote consistency across definitions,

rules, and examples, rearrange provisions, and improve the overall clarity of

the guidance. Such modifications are not

addressed in the Summary of Comments

and Explanation of Revisions.

Bulletin No. 2024–22

Section I of this Summary of Comments

and Explanation of Revisions addresses

the comments and revisions applicable

only to section 25E. Section II of this

Summary of Comments and Explanation

of Revisions addresses the comments

and revisions applicable to both section

25E and section 30D. Section III of this

Summary of Comments and Explanation

of Revisions addresses the comments and

revisions applicable only to section 30D.

Section IV of this Summary of Comments

and Explanation of Revisions addresses

the comments and revisions applicable to

section 6213. Section V of this Summary

of Comments and Explanation of Revisions addresses the applicability dates of

these final regulations.

I. Section 25E Credit

A. Definitions

1. Previously-Owned Clean Vehicle

Proposed §1.25E-1(b)(5) defined the

term “previously-owned clean vehicle” by

reference to the statutory definition provided in section 25E(c)(1). A commenter

noted that the proposed definition of “previously-owned clean vehicle” does not

address whether a previously-owned vehicle purchased from a dealership would be

eligible for the section 25E credit. Another

commenter requested that the Treasury

Department and the IRS provide a definition of “vehicle.”

Section 25E(c)(1) provides a definition of “previously-owned clean vehicle”

and criteria to be considered a “motor

vehicle.” Section 25E(c)(4) defines

“motor vehicle” by reference to section

30D(d)(2), which defines that term as

any vehicle that is manufactured primarily for use on public streets, roads, and

highways (not including a vehicle operated exclusively on a rail or rails) and

that has at least four wheels. Further,

section 25E(c)(2) defines “qualified sale”

in part, as a sale of a motor vehicle by

the dealer. Under the plain language of

section 25E, a sale of a previously-owned

clean vehicle by a dealer is eligible for

the section 25E credit, provided the other

requirements of section 25E are satisfied.

Accordingly, the final regulations do not

adopt these comments.

Bulletin No. 2024–22

The final regulations clarify that vehicles that may qualify as previously-owned

clean vehicles include battery electric

vehicles, plug-in hybrid electric vehicles, fuel cell motor vehicles, and plug-in

hybrid fuel cell motor vehicles.

2. Qualified Sale

i. Motor vehicle reference and price cap

Section 25E(c)(2) defines “qualified

sale” as a sale of a motor vehicle by a

dealer (as defined in section 30D(g)(8)), for

a sale price that does not exceed $25,000,

and that is the first transfer since August

16, 2022 (the date of enactment of section

25E), to a qualified buyer other than the

person with whom the original use of such

vehicle commenced. Proposed §1.25E-1(b)

(8)(i) tracked the statutory definition.

A commenter recommended that the

final regulations substitute “previously-owned clean vehicle” for “motor vehicle” in the definition of “qualified sale” in

proposed §1.25E-1(b)(8)(i). In addition,

multiple commenters requested changes to

the $25,000 maximum sale price amount

in the definition of “qualified sale.”

Section 25E(c)(2) uses the term “motor

vehicle” in the definition of “qualified

sale.” In order to maintain consistency

with the statutory definition of “qualified

sale,” the final regulations do not adopt

this comment. With regard to the comments suggesting a change to the sale

price limitation, section 25E(c)(2)(B) provides that the sale price may not exceed

$25,000. Because the $25,000 sale price

limitation is statutory, the final regulations

do not adopt this comment.

ii. First transfer rule

Proposed §1.25E-1(b)(8)(ii) provided

that to be a qualified sale, a transfer must

be the first transfer since August 16, 2022,

as shown by vehicle history, of a previously-owned clean vehicle after the sale to the

person with whom the original use of such

vehicle commenced. The proposed regulation further provided that the taxpayer

may rely on the dealer’s provision of the

vehicle history in determining whether the

first transfer rule is satisfied.

A commenter recommended that the

final regulations change the term “vehicle

1247

history” to “vehicle history report” in proposed §1.25E-1(b)(8)(ii) and define “vehicle history report” as a report “issued by

an approved provider at www.vehiclehistory.bja/ojp.gov/nmvtis_vehiclehistory.”

The website recommended by the commenter provides a list of National Motor

Vehicle Title Information System (NMVTIS) approved data providers. This website is maintained by the Department of

Justice. The commenter further suggested

removing the dealer limitation from the

last sentence of proposed §1.25E-1(b)(8)

(ii) and tying the vehicle history report to

the time of sale.

Proposed §1.25E-1(b)(8)(ii) identified

“vehicle history” as the mechanism for

verifying whether a transfer is the first

transfer of the vehicle for purposes of the

qualified sale definition. The Treasury

Department and the IRS agree that substituting the term “vehicle history report”

for “vehicle history” adds clarity to the

rule. The Treasury Department and the

IRS further agree that requiring the taxpayer to obtain the vehicle history report

from the dealer is overly restrictive, and

that the vehicle history report should be

obtained at the time of sale or as part of

the sale transaction in order to satisfy the

first transfer rule. Accordingly, the final

regulations adopt these comments. Further, the Treasury Department and the

IRS have determined that vehicle history

reports issued by NMVTIS-approved data

providers may be used to verify whether

a transfer is the first transfer of the vehicle. However, the Treasury Department

and the IRS lack sufficient information

to determine whether limiting vehicle

history reports to those issued by NMVTIS-approved data providers would place

an undue burden on taxpayers. As a result,

the final regulations adopt the comment,

in part, by adding a definition of “vehicle

history report” and clarifying that the term

includes reports from NMVTIS-approved

data providers.

Another commenter expressed concern

that the proposed first transfer rule is more

restrictive than the statutory language and

could severely limit the applicability of

the section 25E credit. The commenter

suggested that the most straightforward

way to determine if a car had previously

been sold to a qualified buyer would be to

exclude vehicles for which a credit under

May 28, 2024

25E had previously been claimed. The

commenter recommended that the final

regulations allow one section 25E credit

per VIN (regardless of whether the credit

is claimed with respect to the first transfer

since August 16, 2022, or the first transfer

to a qualified buyer) in place of the proposed first transfer rule.

One of the statutory requirements to

be a qualified sale is that the sale be the

first transfer to a qualified buyer since the

enactment of section 25E, other than to

the person with whom the original use of

the vehicle commenced. The commenter’s suggestion that the final regulations

adopt a one section 25E credit per VIN

rule is inconsistent with the statutory language and Congressional intent, because

it would allow a transfer to a second qualified buyer to be eligible for the credit in

situations where the first qualified buyer

did not claim the section 25E credit or

was not eligible to claim the credit (for

example, if the first qualified buyer’s

MAGI exceeds the limitation). Further,

the commenter’s suggestion, if adopted,

would be unadministrable because taxpayers have no way of verifying whether

a section 25E credit has previously been

claimed with respect to a prior sale of a

particular vehicle. Such information is

not part of a vehicle history report and

is otherwise inaccessible to taxpayers.

While the IRS has that information, it

cannot share that information without

violating the taxpayer confidentiality

restrictions in section 6103. As a result,

taxpayers making purchasing decisions

would not know which previously sold

vehicles were eligible for the section

25E credit in advance of their vehicle

purchase, which would disincentivize

the purchase of previously-owned clean

vehicles. Accordingly, the final regulations do not adopt this comment.

As for the commenter’s concern that

the proposed first transfer rule is more

restrictive than the statutory language, the

first transfer rule is consistent with how

Congress expected the statute to operate2

and is necessary to protect confidential

taxpayer information consistent with section 6103. Once there has been a sale of

a previously-owned clean vehicle, there

is no information source from which a

subsequent buyer could ascertain or verify whether the prior sale was to a qualified buyer. For example, vehicle history

reports do not include information as to

whether a previous buyer was an individual, whether the previous buyer was a

dependent, or whether the previous buyer

had claimed the section 25E credit in the

prior three years. As noted above, in cases

where the previous buyer has claimed the

section 25E credit, the IRS would have

the information necessary to determine

whether the prior transfer was to a qualified buyer, but such taxpayer information

is protected from disclosure by statute,

under section 6103. The first transfer rule,

by allowing the section 25E credit to the

first transfer after the date of enactment

of 25E as determined by the vehicle’s

vehicle history report, provides certainty

to buyers and dealers in a manner that is

consistent with the taxpayer confidentiality mandates of section 6103. In addition,

the proposed first transfer rule is consistent with Congressional intent to incentivize the deployment of clean vehicles.

The final regulations thus adopt the

proposed first transfer rule without substantive change. As noted earlier, the first

transfer rule is an element of the definition

of “qualified sale.” The final regulations

merge proposed §1.25E-1(b)(8)(i) and (ii)

and finalize the definition of “qualified

sale” as §1.25E-1(b)(14). Further, the final

regulations move the language regarding

taxpayer reliance on the vehicle history

report from the definition of “qualified

sale” to a standalone rule in §1.25E-1(f),

and clarify that reliance on a vehicle history report applies in the case where there

has been a prior sale and return or resale

described in §1.25E-2(c). For additional

clarity, the final regulations add an example that illustrates how the first transfer

rule works in the context of dealer-todealer transfers.

3. Sale Price

Section 25E(a)(2) and (c)(2)(B) provide

that the sale price of a previously-owned

clean vehicle is taken into account for

purposes of determining the amount of the

section 25E credit and whether a particular sale is a qualified sale of the vehicle.

Proposed §1.25E-1(b)(9) defined the “sale

price” of a previously-owned clean vehicle as the total sale price agreed upon by

the buyer and dealer in a written contract

at the time of sale, including any delivery charges and after the application of

any incentives, but excluding separately-stated taxes and fees required by law.

Under the proposed definition, the sale

price of a previously-owned clean vehicle

was determined before the application of

any trade-in value. Proposed §1.25E-1(b)

(2) provided that for purposes of the definition of “sale price,” the term “incentive”

means any reduction in total sale price

offered to and accepted by a taxpayer

from the dealer or manufacturer, other

than a reduction, whether in the form of

a partial payment or down payment for

the purchase of a previously-owned clean

vehicle or otherwise, pursuant to section

25E(f) and §1.25E-3.

One commenter requested clarification

regarding the term “incentives,” noting

that manufacturer and distributor rebates

and incentives are typically not available

for previously-owned vehicles. The commenter did not reference the proposed

definition of “incentive” in its comment

letter. The proposed definition addresses

the commenter’s concern by broadly

defining “incentive” to include reductions

in price by manufacturers and dealers. In

other words, the proposed definition does

not limit incentives to price reductions

provided by manufacturers and distributors. Therefore, no clarification is needed.

However, because the term “incentive” is

relevant to both sale price determinations

for purposes the $25,000 sale price cap

in section 25E(c)(2)(B) and the eligible

entity definition in section 30D(g)(2)(B)

(ii) and (D), the final regulations include

separate definitions of “incentive” that

apply to those provisions. In addition,

with regard to the definition of “incentive”

for purposes of sale price determinations,

the final regulations clarify that an “incentive” means any reduction in price offered

See Joint Committee on Taxation, General Explanation of Tax Legislation Enacted in the 117th Congress (JCS-1-23), December 2023 at page 254.

May 28, 2024

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to and accepted by a taxpayer from the

dealer or manufacturer. This clarification

is necessary because the proposed definition only looked to incentives available to

taxpayers from the dealer or manufacturer,

which could disadvantage consumers by

artificially lowering the $25,000 sale price

cap in cases where the incentive was not

accepted by the taxpayer.

Several commenters requested modifications to the proposed definition of

“sale price.” Two commenters requested

a narrower definition. Specifically, one

commenter suggested that the proposed

definition of sale price be amended so

that fees and charges allowed by a state

or locality, such as titling and registration charges for out-of-state buyers and

charges associated with perfecting a lienholder’s security interest, be excluded

from the sale price because the amount

of such fees is not easily knowable at

the time of sale. Another commenter

recommended modifying the proposed

definition of “sale price” to exclude documentation fees because of long-standing practice in the automotive industry

to charge such fees to cover a dealer’s

processing and administrative costs associated with a sale. The inclusion of dealer

document fees and charges allowed by a

state or locality in the sale price would

allow dealers to allocate a portion of the

sale price of the vehicle to such fees in

order to avoid the $25,000 sale price cap

in section 25E(c)(2)(B). Accordingly, the

final regulations do not adopt these comments.

A commenter suggested the proposed

definition of “sale price” be amended

to include the total transaction amount,

less any government-imposed taxes or

fees, and including all add-ons and any

non-government fees to prevent dealers

from capturing a large portion of the credit

as profit. The proposed definition already

effectively does what the commenter suggests by excluding only separately-stated

taxes and fees as required by law. Accordingly, the final regulations do not adopt

this comment.

4. Other Definitions Applicable to

Section 25E

The Treasury Department and the IRS

received comments related to other defi-

Bulletin No. 2024–22

nitions applicable to section 25E that are

also applicable to section 30D. Section II

of this Summary of Comments and Explanation of Revisions discusses comments

received and modifications made to definitions applicable to both section 25E and

section 30D.

B. Limitations based on Modified AGI

The proposed regulations restated the

Modified AGI limitation of section 25E(b)

at proposed §1.25E-1(b)(3) and (c)(1).

Several commenters suggested that

the qualifying income threshold for the

section 25E credit should be increased.

Because these limitations are statutory,

the final regulations do not adopt this

comment.

C. Branded title

Proposed §1.25E-2(d) provided that a

title to a previously-owned clean vehicle

indicating that such vehicle has been damaged or is otherwise a branded title does

not impact the vehicle’s eligibility for a

section 25E credit.

A commenter suggested that the section 25E credit program should not be

used to incentivize consumers to purchase unsafe or unreliable vehicles, such

as those that have been determined to be

a total loss, salvage, or junk, and encouraged the Treasury Department and the

IRS to consider making such vehicles

ineligible for the section 25E credit. The

commenter further suggested that title

status reflected in the NMVTIS should be

determinative because all states, insurance companies, and junk and salvage

yards are required by law to regularly

report information about vehicles that

have been determined to be a total loss,

salvage, or junk to NMVTIS.

Vehicle titles indicate whether the

title is clean (meaning the vehicle has

never been declared a total loss) or

branded (indicating the vehicle has

sustained serious damage, such as in

the case of salvage title, or that there is

some other significant problem with the

vehicle, as in the case of a lemon title

brand). State law generally governs the

titling of vehicles. Each State and the

District of Columbia has different standards for determining when a vehicle

1249

title must be branded. Further, although

there are broad categories of title brands

that are common across jurisdictions,

such as salvage title, the thresholds for

applying those title brands varies. These

variations can lead to the practice of title

washing, which is a method of removing

a title brand by retitling the vehicle in a

jurisdiction that does not recognize the

title brand. The Treasury Department

and the IRS do not want to incentivize

the purchase of unsafe or unreliable

vehicles. However, modifying proposed §1.25E-2(d) to exclude certain

title brands could lead to an increase

in title washing, which, in turn, could

lead to increased fraud regarding previously-owned vehicles. This would negatively impact consumers of previously-owned clean vehicles. Moreover, the

statute does not exclude branded titles,

and there is no indication that Congress intended to exclude such vehicles.

Accordingly, the final regulations do not

adopt these comments.

II. Crossover Provisions in Section 25E

and Section 30D

A. Definitions

This section of the Summary of Comments and Explanation of Revisions

addresses definitions that apply to both

section 25E and section 30D. Unless

otherwise specified, the final regulations

move the definitions relating to section

30D from §§1.30D-2, 1.30D-3(c), 1.30D5(a), and 1.30D-6(a) to §1.30D-2(b).

1. Dealer

Section 25E(c)(2)(A) cross references

section 30D(g)(8) with regard to the term

“dealer.” Under section 30D(g)(8), the

term “dealer” means a person licensed

by a State, the District of Columbia, the

Commonwealth of Puerto Rico, or any

other territory or possession of the United

States, an Indian tribal government, or any

Alaska Native Corporation to engage in

the sale of vehicles.

Proposed §§1.25E-1(b)(1) and 1.30D5(a)(2) defined “dealer” as provided

in section 30D(g)(8), except that the

proposed term did not include persons

licensed solely by a territory of the United

May 28, 2024

States.3 Under the proposed regulations,

the term included a dealer licensed in any

jurisdiction described in section 30D(g)(8)

(other than one licensed solely by a territory of the United States) that makes sales

at sites outside of the jurisdiction in which

its licensed. The definition of dealer in the

proposed regulations did not include persons licensed solely by a territory because

clean vehicle credits generally are not

allowed for vehicles used predominantly

outside of the 50 States and the District of

Columbia. See sections 30D(f)(4), 25E(e),

50(b)(1), and 7701(a)(9) of the Code.

A commenter suggested that the definition of “dealer” should include licensed

dealers in territories or possessions of the

United States, but only for purposes of

vehicles sold for use and not for resale in

the 50 states or the District of Columbia.

Such a rule would create verification

issues for the IRS and place administrative

burdens on certain dealers and purchasers

of clean vehicles. At a minimum, buyers

purchasing clean vehicles from dealers

licensed in territories of the United States

would be required to provide an attestation or certificate to the dealer indicating

that the buyer intended to use the vehicle

in the United States and not resell it. In

addition, predominant use of the vehicle

in a territory subsequent to such a statement of intent would make the vehicle

ineligible for a clean vehicle credit. Pursuant to section 30D(g)(1), the Secretary

has authority to prescribe necessary regulations with respect to that subsection.

Accordingly, the final regulations do not

adopt this comment.

A separate comment requested guidance on the circumstances in which an

original equipment manufacturer (OEM)

is considered a “dealer” for purposes of

section 30D(g)(8). In response to this

comment, the Treasury Department and

the IRS note that an OEM may be a dealer

if licensed in any jurisdiction described

in section 30D(g)(8) and §§1.25E-1(b) or

1.30D-2(b), as applicable.

2. Placed in Service

The year in which a vehicle is placed

in service is relevant for a number of

rules under section 25E and section 30D,

including the applicable percentages for

the Critical Minerals and Battery Components Requirements of section 30D(e)

and the FEOC Restriction, which impose

manufacturer sourcing requirements for

the clean vehicle battery.

Proposed §§1.25E-1(b)(4) and 1.30D2(e) provided that a vehicle is considered

to be placed in service on the date the

taxpayer takes possession of the vehicle.

The proposed definition is consistent with

the meaning of “placed in service” for

purposes of other Code provisions. See

§1.46-3(d)(1)(ii) and (4)(i) and §1.1794(e) (property is considered placed in service when “placed in a condition or state

of readiness and availability for a specifically assigned function”); §145.4051-1(c)

(2) (“a vehicle shall be considered placed

in service on the date on which the owner

of the vehicle took actual possession of

the vehicle”); see also §1.1250-4(b)(2)

(“property is placed in service on the date

on which it is first used”); Consumers

Power Co. v. Commissioner, 89 T.C. 710

(1987); Noell v. Commissioner, 66 T.C.

718, 728-729 (1976).

The proposed definition is also consistent with the IRS’s and the Tax Court’s

interpretation of “placed in service” as used

in section 30D(a), which was not amended

by the IRA, and while not precedential or

binding, reflects the prevailing view. See

e.g., Trout v. Comm’r of Internal Revenue, T.C. Summ. Op. 2015-66, 2015 WL

7423818, at *4 (T.C. Nov. 19, 2015) (“[t]

he Court will look at whether the vehicle

was ‘in a condition or state of readiness and

availability’ for the ‘specifically assigned

function’ for which petitioners purchased

it to determine when petitioners placed the

[vehicle] in service.”); Podraza v. Comm’r

of Internal Revenue, T.C. Summ. Op. 201567, 2015 WL 7423525 (T.C. Nov. 19, 2015)

(same); IRS PLR 201312034 (Mar. 22,

2013) (“the taxable year in which the taxpayer may claim the credit on their return

is defined as the year in which the vehicle

is ‘placed in service,’ which requires that

the taxpayer have actual possession of the

vehicle…”).

The Treasury Department and the IRS

received several comments regarding the

definition of “placed in service.” One

commenter suggested that for purposes

of the section 30D credit, the definition of

“placed in service” be modified to mean

the date of vehicle manufacture. The commenter further noted that the proposed

definition will cause significant confusion

for consumers if the clean vehicle they

want to buy is no longer credit-eligible

because the vehicle was not placed in service at the correct time.

Several other commenters requested

that “placed in service” be defined as the

date of manufacture for purposes of the

vehicle manufacturing requirements (specifically, the Critical Minerals and Battery

Components Requirements and the FEOC

Restriction) of section 30D. Another commenter raised concerns with the proposed

definition of “placed in service” based on

vehicle possession because some taxpayers: (1) may never take possession of the

vehicle, such as cases involving leases

and gifts, (2) may take possession before a

vehicle is sold, (3) may take possession at

the time a vehicle is sold, or (4) may take

possession after a vehicle is sold, such

as cases in which the taxpayer preorders

a vehicle. The commenter recommended

that the definition of “placed in service”

be the date on which a vehicle is registered by a United States jurisdiction that

administers on-road vehicle registration

laws.

The final regulations adopt the definition in proposed §§1.25E-1(b)(4)

and 1.30D-2(e), with minor clarifying

changes, because the definition is consistent with existing guidance, as well

as case law relating to when a vehicle is

placed in service. Further, the Treasury

Department and the IRS do not adopt a

definition of “placed in service” for purposes of the Critical Minerals and Battery

Components Requirements and the FEOC

Restriction that differs from the definition

for purposes of section 30D(a), because in

cases in which the same term is used in

a single section the term is presumed to

have the same meaning throughout. Mertens v. Hewitt Assocs., 508 U.S. 248, 260,

113 S.Ct. 2063, 124 L.Ed.2d 161 (1993).

Accordingly, the final regulations do not

adopt these comments.

Section 30D(g)(8) uses the term “territory or possession,” but the proposed regulations and these final regulations use the term “territory” since both terms have the same meaning.

May 28, 2024

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3. Sale

The term “sale” is not defined in section 25E, section 30D, or the proposed

regulations applicable to those sections.

A commenter suggested that a definition

of the term “sale” be added to the final

regulations for purposes of sections 25E

and 30D. The commenter recommended

that the term “sale” be defined as “an

enforceable contract to transfer ownership of a vehicle from a dealer to a taxpayer.”

The term “sale” is relevant to the determination of whether there is a qualified

sale for purposes of section 25E(c)(2) and

the applicable recapture provisions under

sections 25E and 30D. The commenter’s

proposed definition is overly broad and

would not require that the transfer of ownership be made for consideration provided

by the buyer. Further, section 25E(a) provides that the section 25E credit is only

allowed for a qualified sale of a previously-owned clean vehicle. Section 25E(c)(2)

(A) defines the term “qualified sale,” in

part, as a sale by a dealer. Similarly, the

credit transfer election framework incentivizes the purchase of previously-owned

clean vehicles and new clean vehicles

from dealers. Dealers have well-established practices with regard to vehicle

sales and what constitutes a sale transaction. Based on the foregoing, the Treasury

Department and the IRS have determined

that a definition of “sale” is unnecessary.

Accordingly, the final regulations do not

adopt this comment.

B. Special rules

1. Recapture

Section 25E(e) provides that, for purposes of section 25E, rules similar to the

rules of section 30D(f) apply. Section

30D(f)(5) instructs the Secretary to provide regulations for recapturing the benefit

of any section 30D credit with respect to

any property that ceases to be eligible for

the section 30D credit. Proposed §§1.25E2(c) and 1.30D-4(d) provided corresponding rules under section 30D(f)(5) for cancelled sales, returns, and resales of the

vehicle. The final regulations clarify that

for purposes of section 30D(f)(5), and by

extension, section 25E(e), the amount of

Bulletin No. 2024–22

the benefit recaptured due to such an event

is considered an increase to tax imposed

by chapter 1 of the Code.

i. Cancelled sale

Proposed

§§1.25E-2(c)(1)(i)

and

1.30D-4(d)(1)(i) provided the Federal

income tax consequences that apply if

the sale of a vehicle between the taxpayer

and seller is cancelled before the taxpayer places the vehicle in service (that

is, before the taxpayer takes possession of

the vehicle).

A commenter recommended that part

of the definition of “cancelled sale” be

changed from “taxpayer places the vehicle in service” to “the vehicle is placed

in service.” Section 25E(a) expressly

requires the previously-owned clean vehicle to be placed in service by a qualified

buyer. Similarly, section 30D(a) expressly

requires the new clean vehicle to be

placed in service by the taxpayer. Accordingly, the final regulations do not adopt

this comment because a clean vehicle

placed in service by someone other than

the qualified buyer or taxpayer, as applicable, would not qualify for the credit.

ii. Vehicle returns

Proposed §§1.25E-2(c)(1)(ii) and

1.30D-4(d)(1)(ii) addressed the Federal

income tax consequences that apply if the

taxpayer returns the vehicle to the seller

within 30 days of placing the vehicle in

service.

The Treasury Department and the IRS

received multiple comments regarding

the proposed vehicle return rules in proposed §§1.25E-2(c)(1)(ii) and 1.30D-4(d)

(1)(ii). A commenter requested that the

final regulations clarify that once a contract for the purchase of a clean vehicle is

signed by the buyer and seller, the 30-day

return period is for credit recapture purposes only and that state contract law

governs whether the buyer can void the

sale. One commenter agreed that 30 days

is an appropriate length of time for qualified vehicle returns. Another commenter

recommended deleting the 30-day limitation. That commenter also suggested

changing “of placing such vehicle in service” to “after it is placed in service” and

“the vehicle history” to “a vehicle history

1251

report as of the date of such sale.” In addition, a commenter recommended that, in

general, the Treasury Department and the

IRS regulate returns after the vehicle is

registered.

Dealers generally have return policies

that range from several days up to 30 days,

so the proposed rules regarding returns

within 30 days reflect industry practice.

The final regulations maintain the 30-day

return rule, with one modification. Specifically, the final regulations, for purposes

of 25E, modify the reference to “the vehicle history” by changing it to “a vehicle

history report obtained on the date of such

subsequent sale or as part of such subsequent sale transaction” to conform with

modifications to the definition of “qualified sale” described in section I.A.2 of this

Summary of Comments and Explanation

of Revisions. The final regulations also

add a definition of “vehicle history report”

and clarify that the term includes reports

from NMVTIS-approved data providers.

In addition, the Treasury Department and

the IRS confirm that the vehicle return

rules in the final regulations relate only

to the section 25E and 30D credits and

have no impact on the voidability of the

sales contract for the clean vehicle, which

is governed by state contract law. Otherwise, the final regulations do not adopt

these comments.

2. Resales

Proposed §§1.25E-2(c)(1)(iii) and

1.30D-4(d)(1)(iii) treat the taxpayer as

having purchased a clean vehicle with an

intent to resell such vehicle if the resale

occurs within 30 days of the taxpayer

placing the vehicle in service.

A commenter noted that it largely

agreed with the proposed resale rules,

but suggested that for purposes of section 25E, the final regulations include an

exception for subsequent sales by dealers

that are unaware of prior resales as of the

date of the subsequent sale. The commenter did not suggest an exception for

purposes of section 30D resales given that

a resale of a vehicle will render it used,

thereby making the vehicle ineligible for

the section 30D credit. The commenter

also suggested changing “placing the

vehicle” in service to “it being placed” in

service. Another commenter stated that 30

May 28, 2024

days is an appropriate length of time for

the resale rule.

The recapture rule in proposed

§1.25E-2(c)(1)(iii) did not address sales

by dealers. Proposed §1.25E-2(c)(1)

(iii) addressed sales by individual buyers

within 30 days and provided that recapture in the event of such resale is recaptured from the taxpayer, not the dealer.

Accordingly, the final regulations retain

the rules in proposed §§1.25E-2(c)(1)(iii)

and 1.30D-4(d)(1)(iii) and do not adopt

these comments.

3. Other returns or resales

Proposed §§1.25E-2(c)(1)(iv) and

1.30D-4(d)(iv) provided a rule for

returns or resales occurring more than

30 days after the date on which the taxpayer places the vehicle in service. Generally, taxpayers returning or reselling

a clean vehicle more than 30 days after

the date the taxpayer places it in service

will remain eligible for the section 25E

or section 30D credit for the purchase of

such vehicle. The proposed regulations

provided that, in the case of a new clean

vehicle that is returned or resold, the

vehicle, once returned or resold, is not

available for original use by another taxpayer and, therefore, is not eligible for a

section 30D credit. Similarly, in the case

of a previously-owned clean vehicle that

is returned or resold, the vehicle, once

returned or resold, is generally not eligible for the section 25E credit upon a subsequent sale pursuant to the first transfer

rule described in proposed §1.25E-1(b)

(8)(ii). In the case of a return occurring

more than 30 days after the date on which

the taxpayer places the vehicle in service, the seller report is not required to

be updated because the taxpayer generally will be eligible for the clean vehicle

credit in this circumstance. In addition,

in the case of a resale of such vehicle, the

seller report is not required to be updated

because the seller would not have knowledge of the subsequent resale. Finally, if

the taxpayer made an election to transfer the clean vehicle credit, that credit

transfer election remains in effect and the

value of any transferred credit pursuant

to the clean vehicle credit transfer rules

generally is not subject to recapture and

is not an excessive payment.

May 28, 2024

Although the proposed regulations did

not provide an automatic clean vehicle

credit recapture rule for returns or resales

more than 30 days after a return or resale,

the IRS may determine, based upon the

facts and circumstances of a particular

case, that a clean vehicle was purchased

with the intent to return or resell and may

disallow the clean vehicle credit in such

case.

One commenter noted that dealers regularly place new clean vehicles in use for

longer than 30 days as loaners, rentals, or

company vehicles, and that the period of

time the vehicle is in use varies but is normally longer than 30 days. The commenter

suggested that the section 30D credit

obtained by the dealer on its purchase of

the vehicle should not be recaptured if,

after a period of more than 30 days of use

as a loaner, the dealer reclassifies the vehicle as used and subsequently sells it to a

third party. The commenter requested the

addition of an example to the final regulations addressing this scenario.

The final regulations adopt the comment and add an example to §1.30D-4(e)

that illustrates the application of the vehicle return rules to a scenario in which the

dealer purchases a new clean vehicle, uses

it as a demonstrator, and later sells the

vehicle.

4. Recapture after transfer election

One commenter requested that an

example be added to the final regulations

that addresses who would be responsible for repaying a credit in the event the

taxpayer made an election to transfer the

credit and later learned that the sale of the

previously-owned clean vehicle to the taxpayer was not a qualified sale.

In general, whether the sale of a previously-owned clean vehicle is a qualified

sale will be determined at the time of sale.

For example, the taxpayer may rely on

the vehicle history report obtained at the

time of sale or as part of the sale transaction to determine whether the first transfer

rule is satisfied. In the case of recapture,

as described in §§1.25E-2(c) and 1.30D4(e), responsibility for recapture of a

clean vehicle credit depends upon the circumstances of recapture. In the case of a

vehicle return within 30 days of placing

a clean vehicle in service in which the

1252

taxpayer made a credit transfer election,

the eligible entity must repay the amount

of the credit as an excessive payment. In

contrast, if the taxpayer resells the vehicle

within 30 days of placing the clean vehicle

in service rather than returning it to the eligible entity, the amount of the transferred

credit is recaptured from the taxpayer.

Another commenter requested additional information about specific procedures regarding recapture, including clarification as to whether both parties would

be notified, how such notification might

occur, and when recapture would occur.

Generally, recapture is reported via

self-assessment by the eligible entity

or taxpayer. In the event of recapture

from the eligible entity, the eligible

entity must report the recapture via the

dealer registration system as described

in §§1.25E-3(c)(1) and 1.30D-5(c)(1), as

finalized. In the event of recapture from

the taxpayer, the taxpayer must report

the recapture amount as an increase in

tax imposed by chapter 1 of the Code on

the taxpayer’s Federal income tax return

for the taxable year in which the recapture occurred.

A commenter requested that the final

regulations clarify whether a taxpayer

would be liable for repayment of the

credit or a portion of the credit if a transfer election is made but the taxpayer’s

regular tax liability is less than the total

amount of the credit transferred. With

respect to the section 25E credit, this situation is addressed in proposed §1.25E3(e)(1)(i) and proposed §1.25E-3(e)(5)

Example 1. With respect to the section

30D credit, this situation is addressed in

proposed §1.30D-5(e)(1)(i) and §1.30D5(e)(5) Example 1. These provisions and

examples are adopted in the final regulations at §1.25E-3(e)(1)(i), §1.25E-3(e)

(5) Example 1, §1.30D-5(e)(1)(i), and

§1.30D-5(e)(5) Example 1. Accordingly,

no additional clarification is needed and

the final regulations do not adopt this

comment.

5. Requirement to File a Complete

Income Tax Return

Proposed §§1.25E-2(f) and 1.30D4(g) provided that taxpayers must file an

income tax return, together with Schedule A (Form 8936), Clean Vehicle Credit

Bulletin No. 2024–22

Amount, or successor form, and any additional forms, schedules, or statements

prescribed by the Commissioner for the

purpose of making a return to report

the tax under chapter 1 of the Code that

includes all of the information required

on the forms and in the instructions, for

the taxable year in which the clean vehicle

is placed in service to be entitled to the

credit under section 25E or section 30D.

The final regulations under section 30D

clarify that this requirement also applies

to information returns because a partnership or S corporation may claim a section

30D credit as a general business credit

under section 38.

A commenter noted that some taxpayers may transfer a credit to a dealer and

then fail to file a return or fail to attach

Form 8936 to their return, and that dealers

will have little incentive to inform taxpayers of their future filing obligations in

order to qualify for the credit. The commenter recommended that the final regulations clarify that failing to file a return or

failing to attach Form 8936 to a return will

not alone subject the taxpayer to the credit

recapture rules.

Proposed §§1.25E-3(h) and 1.30D-5(g)

provide a reporting requirement for taxpayers who transfer a section 25E credit

or section 30D credit to a dealer, but do

not provide for recapture of the credit as

a consequence of failing to fulfill these

requirements. Although a taxpayer may

not otherwise be required to file an income

tax return for a particular taxable year, the

taxpayer is required to file an income tax

return and attach a Form 8936 and Schedule A (Form 8936) to ensure timely processing of their tax return and to demonstrate their eligibility for the credit. This

reporting requirement assists the IRS in

the collection of accurate information

necessary to effectively administer the

section 25E and section 30D credits. The

statutory text provides the IRS with sufficient authority to impose this requirement

to ensure program integrity, including the

ability to recapture the credit where necessary. See sections 25E(f), 30D(g)(1)

and 30D(g)(10); see also section 6011.

Accordingly, a clarification has been made

in the final regulations. The final regulations regarding credit transfer elections

under section 30D also clarify that this

includes information returns.

Bulletin No. 2024–22

C. Transfer rules

1. Disclosure and assurance

Section 30D(g) generally establishes a

set of rules under which a taxpayer may

transfer a section 30D credit to certain

dealers, referred to as eligible entities, in

which case the eligible entity (and not

the taxpayer) is allowed the section 30D

credit. In exchange, the eligible entity

must pay the taxpayer an amount equal

to the transferred section 30D credit (with

such payment being made either in cash or

in the form of a partial payment or down

payment for the purchase of the vehicle).

Section 25E(f) provides that, for purposes

of section 25E, rules similar to the rules of

section 30D(g) apply.

Proposed §§1.25E-3 and 1.30D-5 provided transfer rules under section 30D(g)

(and section 25E(f) by cross reference to

section 30D(g)), including the establishment of an advance payment program for

such transfers. The proposed regulations

did not specifically address the requirements under section 30D(g)(2)(B)(ii) and

(D) relating to the disclosure by the dealer

of other incentives.

A commenter requested that the final

regulations define the term “incentive”

for purposes of the disclosure requirement

and suggested a definition similar to the

one in proposed §1.25E-1(b)(2). The commenter also requested that the final regulations provide an attestation for dealers

and taxpayers to use in conjunction with

creditable sales to satisfy the assurance

requirement.

The Treasury Department and the IRS

agree that the final regulations should

include a definition of “incentive” for purposes of section 30D(g)(2)(B)(ii) and (D).

Because the section 30(g) credit transfer

rules also apply to section 25E by reason

of the cross reference in section 25E(f),

the definition of “incentive” for the section

25E and 30D eligible entity requirements

should align. Accordingly, the final regulations add a definition of “incentive” to

§§1.25E-1(b) and 1.30D-5(b) that applies

for purposes of the eligible entity requirements. Under that definition, “incentive”

means any reduction in price available to

the taxpayer from the dealer or manufacturer, including as in combination with

other incentives, other than a reduction

1253

in the form of a partial payment or down

payment for the purchase of a clean vehicle pursuant to section 30D(g)(2)(C).

2. Definitions

Proposed §§1.25E-3(b) and 1.30D5(a) provided definitions that apply for

purposes of the transfer of a clean vehicle

credit.

i. Advance payment program

Proposed §§1.25E-3(b)(1) and 1.30D5(a)(1) defined “advance payment program” as the program described in section 30D(g)(7) (and section 25E(f) by

cross reference to section 30D(g)) and the

proposed regulations under which an eligible entity may receive an advance payment from the IRS in the case of a credit

transfer election made by an electing

taxpayer. The advance payment program

is the exclusive means by which an eligible entity may receive a transferred clean

vehicle credit.

Several commenters requested that the

section 25E and 30D credits be refundable

regardless of tax liability. Other commenters requested that the credits be available

for a taxpayer to use as a down payment

at the time of the sale. In contrast, another

commenter, requested that taxpayers without sufficient tax liability be required to

repay the excess credit amount because,

the commenter argued, Congress intended

for the credit to be a non-refundable

credit. One commenter requested clarification on how the credit will work in 2024

and beyond compared to previous years.

Another commenter suggested that the

proposed regulations allow 30D credits to

be carried forward.

The section 25E and 30D credits are

nonrefundable credits under the Code that

cannot be carried forward; however, pursuant to sections 25E(f) and 30D(g), such

credits may be transferred to an eligible

entity beginning in 2024, regardless of the

tax liability of the taxpayer or the eligible

entity for the applicable tax year. Sections

25E(f) and 30D(g) do not provide for

repayment in the event of insufficient tax

liability. In exchange for the transferred

credit, the eligible entity must pay the taxpayer an amount equal to the transferred

clean vehicle credit, with such payment

May 28, 2024

being made either in cash or in the form

of a partial payment or down payment for

the purchase of the vehicle. The proposed

regulations described the transfer of the

clean vehicle credits, including examples

of cases in which a taxpayer may not have

sufficient tax liability to claim the full

amount of the credit (for example, Example 1 of proposed §1.30D-5(d)(5)(i)).

Accordingly, the final regulations do not

adopt the comment to require repayment

of an excess credit amount. Proposed

§§1.25E-3 and 1.30D-5 already provided

the other rules requested by commenters,

and no additional clarification is needed.

Accordingly, no changes are needed in

the final regulations to address these comments.

a registered dealer that meets certain

requirements and, by reason of meeting

those requirements, is eligible to receive

advance payments from the IRS under the

advance payment program.

A commenter suggested clarifying that

an eligible entity is a registered dealer

that is eligible to receive payments under

the advance payment program by virtue

of meeting the statutory and regulatory

requirements. Proposed §§1.25E-3(b)(4)

and 1.30D-5(a)(5) already provided the

rule requested in this comment, and no

additional clarification is needed. Accordingly, the final regulations do not adopt

this comment.

ii. Electing taxpayer

Under proposed §§1.25E-3(b)(6) and

1.30D-5(a)(7), “time of sale” means the

date the clean vehicle is placed in service.

Under the proposed regulations, the date

the clean vehicle is placed in service is the

date the taxpayer takes possession of the

vehicle.

A commenter suggested that “time of

sale” be defined as the date of sale on

the seller report, and noted that physical

possession may occur before, after, or at

the time of sale (or at no time) and is not

relevant to when a sale has occurred. The

date a taxpayer takes possession of the

vehicle is a date certain that completes

the transaction of purchasing a vehicle,

whereas a date on the seller report does

not guarantee the taxpayer will take possession of the vehicle and place it in service. As discussed in section II.A.2 of this

Summary of Comments and Explanation

of Revisions, defining “placed in service”

as the date a taxpayer takes possession of

the vehicle is consistent with other provisions of the Code and prior interpretations

of section 30D(a). Accordingly, the final

regulations do not adopt this comment.

Under proposed §§1.25E‑3(b)(3) and

1.30D-5(a)(4), “electing taxpayer” means

the individual that purchases and places in

service a clean vehicle and that elects to

transfer a clean vehicle credit associated

with that vehicle that would otherwise be

allowable to that individual.

A commenter requested that businesses that purchase new clean vehicles be allowed to use the credit transfer

option under section 30D(g). Because the

election to transfer a credit under section

30D(g) is limited to the credit allowable

under section 30D, the Treasury Department and the IRS have determined that a

taxpayer may not elect to transfer a general business credit for a new clean vehicle allowable under section 38 pursuant to

section 30D(c)(1). Proposed §1.30D-1(b)

(1) provided that in the event a depreciable vehicle’s use is 50 percent or more

business use in the taxable year the vehicle is placed in service, it will be creditable entirely under section 38 as a general

business credit rather than under section

30D. Thus, the use of a new clean vehicle must be predominantly personal for a

taxpayer to be able to make the election

to transfer the credit under section 30D(g).

Accordingly, the final regulations do not

adopt this comment.

iii. Eligible entity

Under proposed §§1.25E‑3(b)(4) and

1.30D-5(a)(5), “eligible entity” means

May 28, 2024

iv. Time of sale

3. Dealer Registration

Proposed §§1.25E-3(c)(2) and 1.30D5(b)(2) provided rules regarding dealer

tax compliance. Specifically, the proposed

regulations provided that if the dealer is

not in dealer tax compliance for any of

the taxable periods during the most recent

five taxable years, the dealer may register

nonetheless to become a registered dealer.

1254

However, the proposed regulations provided that in such cases the dealer cannot receive advance payments under the

advance payment program until the dealer’s tax compliance issue is resolved. This

is because the dealer, while registered, is

not an eligible entity until it comes into

dealer tax compliance.

One commenter suggested creating an

exemption from the dealer tax compliance

requirement to address the unique nature

of its sales model in which all advance

payments of transferred credits ultimately

reside with the corporate parent and not

with one of the subsidiaries in the organization structure that may be deemed out of

tax compliance.

A commenter asserted that dealers

play a purely ministerial role in the credit

transfer process, and their tax compliance status does not impact the dealer’s

ability to facilitate a credit transfer. The

commenter requested that to the extent

the final regulations do not remove the

dealer tax compliance provision, the

compliance lookback period should be

for a maximum of three years rather

than the five provided in the proposed

regulations. In addition, the commenter

requested that the final regulations clarify

that the dealer tax compliance requirement applies for advance payment purposes only and has no impact on a registered dealer’s sales or seller reporting.

Pursuant to section 30D(g)(1) and

(g)(7), participation in the advance payment program is elective and is subject

to the requirements and conditions that

the Secretary determines necessary.

An advance payment system for dealers presents unique tax administration

challenges because it involves the IRS

making payments to dealers regardless

of their tax liability and doing so outside

of the normal tax filing system, with its

built-in compliance and enforcement

mechanisms. The dealer tax compliance

requirement ensures that the entities

receiving advance payments have satisfied their own Federal tax obligations,

which aids in fraud prevention and tax

administration. For these reasons, the

final regulations retain the dealer tax

compliance requirement. Further, the

final regulations retain the five-year lookback period because the longer period

better facilitates the IRS’s ability to deter-

Bulletin No. 2024–22

mine whether there are enforcement concerns with regard to a particular dealer.

The final regulations also add an express

statement that dealer tax compliance is

required before describing the consequences of noncompliance. No clarification is needed regarding the scope of

the dealer tax compliance requirement

because it is clear from the placement of

the requirement in the provisions relating

to the transfer of the section 25E and 30D

credits that such requirement applies only

for purposes of the advance payment program and not for other dealer activities,

such as the issuance of seller reports.

4. Form of Payment from Eligible Entity

to Electing Taxpayer

Proposed §§1.25E-3(e)(3) and 1.30D5(d)(3) provided that the Federal income

tax treatment of the payments associated

with a credit transfer election are the same

regardless of whether the payment is made

in cash or in the form of a partial payment

or down payment for the purchase of the

clean vehicle.

A commenter noted that in some states,

dealers are prohibited under state law to

promise to pay or otherwise tender cash

if a vehicle is financed. The commenter

recommended that the credit transfer election be available only for a reduction in

sale price without the payment of cash in

states where cash payments from dealers

for financed vehicles are prohibited under

state law. Proposed §§1.25E-3(e)(3) and

1.30D-5(d)(3) included examples that

illustrate the application of the payment

rules referenced by the commenter. The

examples in proposed §§1.25E-3(e)(5)(ii)

and 1.30D-5(d)(5)(ii) address a scenario

in which the eligible entity makes the payment to the electing taxpayer in the form

of a reduction in sale price (rather than as

cash) and concluded that the eligible entity

is eligible to receive an advance payment.

Although addressed in the examples,

reductions in sale price are not explicitly

addressed in proposed §§1.25E-3(e)(3)

and 1.30D-5(d)(3), which articulate the

rules illustrated in the examples. Accordingly, the final regulations adopt proposed

§§1.25E-3(e)(3) and 1.30D-5(d)(3) with

language clarifying that reductions in sale

price are acceptable forms of payment by

an eligible entity.

Bulletin No. 2024–22

5. Vehicle identification number

requirement

Proposed §§1.25E-2(e)(4) and 1.30D5(d)(4) impose certain additional requirements for credit transfer elections. Among

those rules, the proposed regulations provided that the vehicle identification number

requirements of section 30D(f)(9) and, by

reason of section 25E(e), section 25E(d),

would be treated as satisfied if the eligible entity provides the vehicle identification number of such vehicle to the IRS in

the form and manner set forth in guidance

published in the Internal Revenue Bulletin.

The final regulations, consistent with the

Secretary’s general authority under section 30D(g)(1), provide that the electing

taxpayer must provide its vehicle identification number with its Federal income

tax return for the taxable year in which the

vehicle is placed in service. Reporting of

the vehicle identification number by both

the electing taxpayer and the eligible entity

is necessary to reconcile the advance payments under the credit transfer program

with the eligibility of the electing taxpayer,

which helps safeguard program integrity.

6. Increases in Tax

i. Recapture from taxpayer

Section 30D(g)(10) provides that, in

the case of any taxpayer who has made

a credit transfer election and received

a payment from an eligible entity, if the

section 30D credit would otherwise (but

for section 30D(g)) not be allowable to

such taxpayer pursuant to the application

of the Modified AGI limitation, the tax

imposed on such taxpayer under chapter 1

of the Code for the taxable year in which

such vehicle was placed in service will be

increased by the amount of the payment

received by such taxpayer. Because section 25E(f) cross references to section

30D(g), similar rules apply with respect to

the section 25E credit.

Proposed §§1.25E-3(g)(1) and 1.30D5(f)(1) provided that, in the case of a

clean vehicle credit that would otherwise

not be allowable to a taxpayer that made

a credit transfer election because the taxpayer exceeds the limitation based on

Modified AGI, the income tax imposed on

the taxpayer under chapter 1 of the Code

1255

for the taxable year in which the vehicle

was placed in service is increased by the

amount of the payment received by the

taxpayer pursuant to the credit transfer

election. The taxpayer in such a case must

report recapture of the additional amount

on its income tax return for the taxable

year during which the vehicle was placed

in service.

A commenter suggested that §§1.25E3(g)(1) and 1.30D-5(f)(1) should be

revised to apply recapture to taxpayers

purchasing clean vehicles for resale or

for primarily nonpersonal use. Regarding

the purchase for resale aspect of this comment, proposed §§1.25E-2(c)(1)(iii)(E)

and 1.30D-4(f)(1)(iii)(E) provided that

the value of any transferred credit will be

collected from the taxpayer in the event

the taxpayer resells the vehicle within

30 days of placing the vehicle in service. Therefore, the proposed regulations

already addressed the purchase for resale

aspect of this comment and further clarification is not necessary. Regarding the

aspect of the comment related to recapture

in the event of primary nonpersonal use

of the vehicle, Revenue Procedure 202333 provides that a taxpayer must attest to

the IRS under penalty of perjury that the

taxpayer is an individual for purposes of

section 25E, or that the taxpayer will use

the vehicle predominantly for personal

use for purposes of section 30D. Because

nonpersonal use of vehicles is adequately

addressed in sub-regulatory guidance,

additional clarification is not necessary.

Accordingly, the final regulations do not

adopt this comment.

Another commenter requested that the

final regulations clarify who is responsible for recapture and under what circumstances. The final regulations, as

described in this section of the Summary

of Comments and Explanation of Revisions, make clear who is subject to recapture. Accordingly, the final regulations do

not adopt this comment.

Based on the foregoing, the final regulations adopt proposed §§1.25E-2(c)(1)

(iii)(E) and 1.30D-4(f)(1)(iii)(E) without

modification.

ii. Excessive payment to an eligible entity

Section 30D(g)(7)(B) and section

25E(f) (by cross reference to section

May 28, 2024

30D(g)) provide that rules similar to

the rules of section 6417(d)(6) apply

for purposes of the advance payment

program. Proposed §§1.25E-3(g)(2)

and 1.30D-5(f)(2) provided that, in the

case of any advance payment that the

IRS determines constitutes an excessive

payment, the tax imposed on the eligible

entity by chapter 1 of the Code, for the

taxable year in which such determination

is made will be increased by the sum of

the amount of the excessive payment,

plus an amount equal to 20 percent of

such excessive payment. The proposed

regulations further provided that the rule

applies regardless of whether such entity

would otherwise be subject to chapter 1 tax. The additional amount of 20

percent, however, will not apply if the

eligible entity demonstrates to the IRS

that the excessive payment was due to

reasonable cause, which is presumed to

be the case for a clean vehicle returned

within 30 days of placing such vehicle in

service. See proposed §§1.25E-3(g)(2)

(ii) and 1.30D-5(f)(2)(ii).

The proposed regulations provided that

an excessive payment means, with respect

to an advance payment to an eligible

entity pursuant to a credit transfer election

made by an electing taxpayer, an advance

payment made to a registered dealer that

fails to meet the requirements to be an

eligible entity. Additionally, the proposed

regulations define “excessive payment” as

an advance payment to an eligible entity

with respect to a clean vehicle to the

extent the payment exceeds the amount of

the clean vehicle credit that would be otherwise allowable to the electing taxpayer

with respect to the vehicle. See proposed

§§1.25E‑3(g)(2)(iii) and 1.30D-5(f)(2)

(iii). However, any excess payment attributable to a taxpayer exceeding the limitation based on Modified AGI is not treated

as an excessive payment to an eligible

entity.

A commenter requested clarification

that “reasonable cause” includes an eligible entity’s reliance on a manufacturer’s

calculations for purposes of the Critical Minerals and Battery Components

Requirements, as shown on https://fueleconomy.gov or elsewhere. Specifically,

the commenter requested that the final

regulations clearly provide that eligible

entities will not be liable for mistaken

May 28, 2024

determinations with respect to those

requirements.

Section 4.03 of Revenue Procedure

2022-42 provides that a taxpayer may

rely on the information and certifications

(which include certifications with respect

to the Critical Minerals and Battery Components Requirements and the FEOC

Restriction) contained in the qualified

manufacturer’s periodic written reports.

Therefore, in the case of a mistaken calculation by the qualified manufacturer in

a periodic written report, the taxpayer is

not denied the section 30D credit. Accordingly, if that taxpayer transfers the credit

under the advance payment program, the

excess of the advance payment to the

dealer over the credit otherwise allowable

to the taxpayer would be zero, and there

is no excessive payment under proposed

§1.30D-5(f)(2)(iii). Consequently, the eligible entity would have no liability and no

need to demonstrate reasonable cause. For

clarity, the final regulations incorporate

the provisions of section 4.03 of Revenue

Procedure 2022-42 regarding taxpayer

reliance on manufacturer certifications

regarding qualified manufacturer status,

and certifications and information a qualified manufacturer provides to the IRS in

periodic written reports. The final regulations also delineate what taxpayer reliance

means in this context. In addition, the final

regulations add an example to §§1.25E2(g) and 1.30D-5(g)(3) that illustrate that

an excessive payment does not arise in the

situation described by the commenter.

7. Two Credit Transfer Elections per Year

Proposed §§1.25E-3(i) and 1.30D5(h) provided that a taxpayer may make

no more than two credit transfer elections

per taxable year. The proposed regulations

further provided that in the case of a joint

income tax return, each spouse may make

two transfer elections per taxable year, for

a maximum of four credit transfer elections in a taxable year. These proposed

rules were intended to ensure program

integrity by limiting credit transfer elections to vehicle sales that appear to be for

legitimate nonbusiness individual use.

A commenter recommended that the

requirements of proposed §§1.25E-3(i)

and 1.30D-5(h) be deleted because there is

no basis in section 25E or section 30D for

1256

these restrictions. The commenter noted

that an eligible entity working with a taxpayer on a credit transfer would have no

ability to determine whether the taxpayer

would have already made two transfer

elections. Section 30D(g)(1) provides that

the credit transfer election is “[s]ubject to

such regulations or other guidance as the

Secretary determines necessary.” Section

25E(f) adopts section 30D(g) by reference. Therefore, the Treasury Department

and the IRS have the authority to regulate

the credit transfer election to ensure program integrity and sound tax administration. Moreover, pursuant to Revenue Procedure 2023-33, the taxpayer will attest to

the IRS directly that they have not made

more than two transfer elections per year,

and the dealer may rely on the taxpayer’s

attestation. Accordingly, the final regulations do not adopt this comment.

III. New Clean Vehicle Credit – Section

30D

A. Definitions

Section 1.30D-2 of the April Proposed

Regulations provided general definitions

related to the section 30D credit. Section

1.30D-3(c) of the April Proposed Regulations provided definitions applicable

for purposes of the Critical Minerals and

Battery Components Requirements. Section 1.30D-6(a) of the December Proposed Regulations provided definitions

applicable for purposes of the FEOC

Restriction. In the Explanation of Provisions to the December Proposed Regulations, the Treasury Department and the

IRS noted that terms relevant to both the

Critical Minerals and Battery Components Requirements described in proposed

§1.30D-3 and the FEOC Restriction of

proposed §1.30D-6 should be interpreted

consistently between those provisions.

Consistent with this statement, the

final regulations retain proposed §1.30D2, with certain modifications described

in this section of the Summary of Comments and Explanation of Revisions, and

generally move the definitions from proposed §1.30D-3 and proposed §1.30D-6

to §1.30D-2(b). However, the final regulations, under §1.30D-3, retain certain

definitions that are directly relevant to the

calculations under the Critical Minerals

Bulletin No. 2024–22

and Battery Components Requirements;

those definitions are cross-referenced in

§1.30D-2(b). Section 1.30D-2(b) also

cross-references definitions in proposed

§1.30D-5, which provides rules for the

credit transfer election (described in section II.C of this Summary of Comments

and Explanation of Revisions).

The discussion in this section of the

Summary of Comments and Explanation

of Revisions only addresses new definitions, definitions that have been modified,

or definitions for which comments were

received.

1. Applicable Critical Mineral

Proposed §§1.30D-3(c)(1) and 1.30D6(a)(1), consistent with section 30D(e)(1),

defined an “applicable critical mineral” as

an applicable critical mineral defined in

section 45X(c)(6).

In addition, proposed §1.30D-6(c)(4)

(ii)(A) provided that the determination

of whether an applicable critical mineral

is FEOC-compliant takes into account

each step of extraction, processing, or

recycling through the step in which such

mineral is processed or recycled into a

constituent material, even if the mineral

is not in a form listed in section 45X(c)

(6) at every step. Proposed §1.30D-6(c)

(4)(ii)(A) provided an exception to this

general rule in the case of recycling (as

discussed in this Summary of Comments

and Explanation of Revisions at section

III.A.25). Proposed §1.30D-6(c)(4)(ii)

determining whether an applicable critical

mineral is FEOC-compliant, an applicable

critical mineral is disregarded if it is fully

consumed in the production of the constituent material or battery component and no

longer remains in any form in the battery.

Several commenters asked for clarification with respect to graphite. Specifically,

the commenters requested clarification as

to whether graphite that is of a purity of

less than 99.9 percent graphitic carbon,

but that is purified to a minimum purity of

99.9 percent carbon, is an applicable critical mineral under section 45X(c)(6) and

thus section 30D. These comments were

considered in the context of the section

45X proposed regulations. As explained

in the Explanation of Provisions to the

section 45X proposed regulations: “Some

Bulletin No. 2024–22

stakeholders have questioned whether this

definition could be interpreted to refer to a

particular crystalline structure of carbon,

that is, 99.9 percent carbon in a graphitic

form. [. . .] Consistent with the general

intent of section 45X, proposed §1.45X4(b)(14) would clarify that the term ‘99.9

percent graphitic carbon by mass’ means

graphite that is 99.9 percent carbon by

mass.” The Treasury Department and the

IRS will continue to consider this issue

as part of finalizing of the section 45X

regulations. The form of graphite that is

an applicable critical mineral for the purposes of section 30D will be the form that

is determined to be an applicable critical

mineral in the 45X final regulations.

Several commenters requested clarity as to whether synthetic graphite is an

applicable critical mineral. Those commenters requested that the final regulations explicitly state that both graphite

variations, synthetic and natural, qualify

as an applicable critical mineral. A separate commenter suggested that, because

natural and synthetic graphite have

entirely different processing procedures,

synthetic graphite should not be categorized as an applicable critical mineral.

These comments were also considered in

the context of the section 45X proposed

regulations. Proposed §1.45X-4(b)(14)

would provide that “[t]he term graphite

means natural or synthetic graphite that

is purified to a minimum purity of 99.9

percent graphitic carbon by mass.” The

Treasury Department and the IRS will

continue to consider this issue as part of

finalizing of the section 45X regulations.

The form of graphite that is an applicable

critical mineral for the purposes of section

30D will be the form that is determined

to be an applicable critical mineral in the

section 45X final regulations.

Several commenters requested clarification on whether other critical minerals are subject to the Critical Minerals

Requirement and the FEOC Restriction.

One commenter requested that the final

regulations provide clarification with

respect to hydrofluoric acid (HF). HF may

be produced from fluorspar that is purified to a minimum purity of 97 percent

calcium fluoride by mass. In these cases,

the fluorspar is an applicable critical mineral (under section 45X(c)(6)(K)) and the

HF would be an associated constituent

1257

material, both of which would be subject

to the Critical Minerals Requirement and

the FEOC Restriction. The commenter

noted that in other cases, HF may be made

with lower purity fluorspar or through

phosphate mining (without fluorspar).

The commenter requested clarification

that such HF is still subject to the Critical Minerals Requirement and the FEOC

Restriction. Similarly, another commenter

requested clarity as to whether nickel,

manganese, cobalt, and lithium that do not

meet the purity requirements of section

45X(c)(6) are subject to the Critical Minerals Requirement and the FEOC Restriction. This commenter recommended that

such lower-purity minerals not be subject

to these rules.

One

commenter

recommended

expanding the definition of “applicable

critical mineral” to include other chemical forms of the critical minerals identified in section 45X(c)(6), such as nitrates,

hydroxides, oxides, oxide hydroxides,

carbonates, and chlorides. Another commenter stated that the critical minerals list

excludes important minerals, such as iron

and phosphorous, that are prevalent in

FEOC-made batteries, and that this exclusion may introduce a loophole whereby

FEOC-made batteries using non-listed

critical minerals may be eligible for the

critical mineral portion of the 30D credit.

That commenter requested that the Treasury Department and the IRS issue additional rules to address non-U.S. critical

minerals. Finally, one commenter noted

that many minerals that enter battery supply chains prior to attaining the purity

level listed in section 45X or becoming

an associated constituent material come

from FEOCs. That commenter expressed

support for extending FEOC-compliance

for critical minerals throughout production, even if the mineral is not in a final

form listed in section 45X(c)(6) during

each step.

In response to these comments, the

Treasury Department and the IRS note

that under the plain language of sections

30D(e)(1) and 45X(c)(6), minerals other

than those specified in section 45X(c)

(6) are not applicable critical minerals,

and are therefore not subject to the Critical Minerals Requirement and the FEOC

Restriction. In addition, the rules of proposed §§1.30D-6(c)(4)(ii)(A) and 1.30D-

May 28, 2024

6(c)(4)(ii)(C) provided additional clarity

regarding classification as an applicable

critical mineral in cases in which the form

of the mineral changes during the steps

of extraction, processing, or recycling.

The final regulations extend this clarification to the Critical Minerals Requirement

by incorporating it into the definition of

“applicable critical mineral.”

The final regulations adopt the definition in proposed §§1.30D-3(a)(1),

1.30D-6(c)(1), 1.30D-6(c)(4)(ii)(A), and

1.30D-3(c)(4)(ii)(C), with the modification described above, consolidate it, and

move it to §1.30D-2(b) with the modification described previously. Specifically,

the final regulations, like the proposed

regulations, provide that “applicable

critical mineral” means an applicable critical mineral defined in section

45X(c)(6). The final regulations clarify

that the requirements under §§1.30D-3

and 1.30D-6 with respect to an applicable critical mineral take into account

each step of extraction, processing, or

recycling through the step in which such

mineral is processed or recycled into

an associated constituent material, even

if the mineral is not in a form listed in

section 45X(c)(6) at every step of production. The final regulations further

clarify that an applicable critical mineral

is disregarded for purposes of the Critical Minerals Requirement and the FEOC

Restriction if it is fully consumed in

the production of the constituent material or battery component and no longer

remains in any form in the battery.

In addition, the final regulations incorporate the special rule for recycling in proposed §1.30D-6(c)(4)(ii)(A) into the definition of “recycling” in §1.30D-2(b). The

final regulations also provide an example

that illustrates when the determinations

under the Critical Minerals Requirement

and the FEOC Restriction take place with

respect to an applicable critical mineral.

2. Assembly

Proposed §§1.30D-3(c)(2) and 1.30D6(a)(2) defined “assembly,” with respect

to battery components, as the process of

combining battery components into battery cells and battery modules. The final

regulations adopt the definition of “assembly” in proposed §§1.30D-3(c)(2) and

May 28, 2024

1.30D-6(a)(2), consolidate it into a single

provision, and move it to §1.30D-2(b).

One commenter stated that the definition of “assembly” could allow for abuse

under the Battery Components Requirement by allowing a North American manufacturer, for example, to simply affix two

Chinese batteries together, which would

be considered assembly of a North American battery component. However, in this

situation, the incremental value, for purposes of determining the total incremental

value of North American battery components (that is, the numerator in the qualifying battery component content that is

compared to the applicable percentages of

section 30D(e)(2)(B)), would only be the

value of the affixed batteries, less the value

of the batteries prior to assembly. Because

that incremental value would be minimal,

the potential for abuse as described by

the commenter would also be minimal.

Accordingly, the final regulations do not

adopt this comment.

3. Associated Constituent Materials

Proposed §1.30D-6(c)(4)(ii)(B) provided that in determining whether an

applicable critical mineral is FEOC-compliant, a constituent material is associated

with an applicable critical mineral if the

applicable critical mineral has been processed or recycled into a constituent material, even if that processing or recycling

transformed the mineral into a form not

listed in section 45X(c)(6).

The Critical Minerals Requirement

under proposed §1.30D-3 incorporated

the same concept by providing that the

portion of an applicable critical mineral

that is a qualifying critical mineral must

be determined separately for each procurement chain. Proposed §1.30D-3(c)

(14) defined “procurement chain” as 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.

These determinations necessarily

encompass steps in the procurement chain

in which the applicable critical mineral

is transformed into a form not listed in

section 45X(c)(6). Accordingly, the final

regulations add a definition of “associated constituent material” to §1.30D-2(b),

1258

which provides that, with respect to an

applicable critical mineral, an “associated constituent material” is a constituent

material that has been processed or recycled from such mineral into the constituent material with which it is associated,

even if that processing or recycling transformed such mineral into a form not listed

in section 45X(c)(6).

4. Battery

Proposed §§1.30D-3(c)(3) and 1.30D6(a)(3) defined “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. Under proposed

§§1.30D-3(c)(3) and 1.30D-6(a)(3), the

term “battery” did 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. The final regulations adopt the

definition of “battery” in §§1.30D-3(c)(3)

and 1.30D-6(a)(3), consolidate it into a

single provision, and move the definition

to §1.30D-2(b).

The Treasury Department and the IRS

received comments both in support of and

in opposition to the proposed definition of

“battery.” Several commenters requested

a broader definition of “battery,” while

other commenters criticized the definition

of battery as too broad. Similarly, several

commenters disagreed with the definition

of “battery” and recommended that it be

defined as a complete battery pack. The

Explanation of Provisions to the April

Proposed Regulations noted that the proposed definition of “battery” is consistent

with the language and purpose of section

30D because battery modules and cells are

the sources “from which the electric motor

of such vehicle draws electricity.” See

sections 30D(e)(1)(A) and (2)(A). Consistent with this, items that do not directly

contribute to the electrochemical storage

of energy within the battery are not the

subject of the IRA’s incentives to shift to

more secure and resilient electric vehicle battery supply chains. Such items are

generally low-value commodities that are

specific to the end-use of the energy stor-

Bulletin No. 2024–22

age technology, rather than the process of

storing energy. The proposed definition of

“battery” is in keeping with the statutory

purpose of incentivizing the resiliency

and security of the highest-value and most

specialized portions of the battery supply

chain. In addition, the functional definition of “battery” in the proposed regulations allows for technological changes, as

the definition will not be obsolete if battery pack structures change in the future,

but is also consistent with current industry

practice, as electrochemical batteries are

currently standard. Accordingly, the final

regulations do not adopt these comments.

In addition, one commenter requested

that the definition of “battery” exclude

thermal management systems and other

components that do not directly contribute to energy storage. Because the definition of “battery” already excludes such

systems and such other components, no

modification to the definition of “battery”

is required.

Finally, one commenter noted the

necessity of future conversations about

the definitions of “battery” and “battery component” to reflect technological

advances. The Treasury Department and

the IRS will continue to monitor technology in this area in coordination with the

DOE. The Treasury Department and the

IRS welcome additional comments in the

future that discuss technological changes

with respect to electric vehicle batteries.

5. Battery Cell

Proposed §§1.30D-3(c)(4) and 1.30D6(a)(4) defined “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 proposed definition of battery

cell encompassed the smallest combination of battery components necessary for

the function of energy storage. The final

regulations adopt the definition of “battery

cell” in proposed §§1.30D-3(c)(4) and

1.30D-6(a)(4), consolidate it into a single

provision, and move it to §1.30D-2(b).

A commenter requested that the guidance align the definitions of “battery cell”

and “battery component” with those in

section 45X(c)(5). However, section 30D

does not adopt those definitions by refer-

Bulletin No. 2024–22

ence. As noted in section III.A.4 of this

Summary of Comments and Explanation

of Revisions, items that do not directly

contribute to the electrochemical storage

of energy within the battery, which are

generally low-value commodities, are

not the subject of the IRA’s incentives to

shift to more secure and resilient electric

vehicle battery supply chains. For this

reason, the Treasury Department and the

IRS have determined that the section 30D

definitions should be limited to electrochemical energy storage batteries that that

are used in electric vehicles, and do not

need to encompass concepts that are pertinent to other forms of energy storage that

are included in the definitions in section

45X(c)(5) (for example, thermal batteries). Accordingly, the final regulations do

not adopt this comment.

6. Battery Component

Proposed §§1.30D-3(c)(5) and 1.30D6(a)(6) defined “battery component” as

a component that forms part of a battery

and that is manufactured or assembled

from one or more components or constituent materials that are combined through

industrial, chemical, and physical assembly steps. Battery components 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 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 include any piece of the

assembled battery cell that contributes to

electrochemical energy storage.

The Treasury Department and the IRS

received a number of comments regarding the definition of “battery component.”

Several commenters were supportive of

the definition. The proposed definition of

“battery component” included a non-exhaustive list of specific components, and

many commenters proposed additions to

the list. One commenter suggested that the

list specifically include cathode and anode

foil. Other commenters requested clarity

with respect to lead tabs (for battery cells),

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metal components (for battery modules),

and cap assemblies (for the manufacture

of canister battery cells). Other items

suggested for inclusion were separator

coatings, binders, electrolyte solvents and

electrolyte salts, current collectors, cell

contacting layers, voltage sense harnessing, and battery management systems.

Another commenter noted that the inclusion of “but not be limited to” language

creates uncertainty for automakers and

instead asked for a full list of components. In response, the final regulations

add a new definition of “battery materials” (described in section III.A.7 of this

Summary of Comments and Explanation

of Revisions) to §1.30D-2(b). In addition,

the final regulations clarify that battery

materials without applicable critical minerals are not battery components, as they

are not manufactured or assembled. The

final regulations do not provide a complete list of battery components because

electric vehicle battery components may

vary depending on the battery chemistry,

especially as battery technology continues

to evolve. The illustrative list of battery

components in the final regulation allows

for future innovation.

Several commenters raised concerns

regarding the limitation of battery components to items that contribute to electrochemical energy storage. A commenter

supported the limitation as important to

both the workability of and intent behind

the Battery Components Requirement.

On the other hand, another commenter

requested that the final regulations expand

the definition of “battery component” to

include additional enabling technologies,

such as thermal management, cooling, and

housing and enclosure components. The

commenter, mentioned previously, that

requested clarity with respect to lead tabs

and metal components stated that ambiguity with respect to the phrase “electrochemical storage components” made it difficult

to determine whether these items were

battery components. Similarly, commenters suggested that, under the language of

section 30D, battery components should

include thermal barriers. As noted previously, the proposed definition of “battery,”

which informs the definition of “battery

component,” is consistent with the statute

because battery modules and cells are the

sources “from which the electric motor of

May 28, 2024

such vehicle draws electricity.” Section

30D(e)(1)(A) and (2)(A). In addition, this

definition is consistent with the purpose of

section 30D to provide incentives to move

toward more secure and resilient electric

vehicle battery inputs. Inputs that do not

directly contribute to the electrochemical

processes necessary for energy storage

(for example, thermal management systems, battery management systems, housing/enclosure components) are generally

lower-value and specific to the end use of

the battery, rather than the process of storing energy. The same reasoning applies to

battery components. As noted by the Joint

Committee on Taxation, the battery components requirement in section 30D(e)(2)

(A) is “intended to incentivize the manufacturing or assembly of high-value battery components, such as battery cells, in

North America.”4 Accordingly, because

the proposed definition is consistent with

the statutory text and purpose, the final

regulations do not adopt these comments.

Finally, multiple commenters raised

questions and provided recommendations

relating to separators, many of which

relate to the determination under the Battery Components Requirement (discussed

in section III.B.2 of this Summary of

Comments and Explanation of Revisions).

One commenter requested clarification as

to the incremental value of a coated separator, and recommended that the incremental value be determined by subtracting

the value of an uncoated separator (a lithium-ion battery separator) from the value

of the coated separator (a ceramic coated

separator). Another commenter, noting

that “substantially all” in the definition

of “North American Battery Component”

was vague, requested that the final regulations state that a separator coated in North

America is a North American Battery

Component (regardless of where the precoated separator was manufactured). This

commenter stated that up to 60 percent of

the value added by the separator comes

from the coating process. In contrast,

another commenter requested that the

final regulations clarify that coating a separator is not manufacturing or assembly,

to ensure that a separator coated in North

America is not considered a North Amer-

ican Battery Component if the pre-coated

separator was manufactured outside of

North America. A different commenter

advocated against the inclusion of base

film and coating materials used to make

such separator in the definition of “battery

component” for purposes of the Battery

Components Requirement and the FEOC

Restriction. In addition, one commenter

requested that the bare film and binders

incorporated into a ceramic-coated separator be classified as battery sub-components and noted that these items should

qualify under either the Critical Minerals

Requirement or the Battery Components

Requirement if manufactured in North

America or a country with which the

United States has a free trade agreement

in effect. This commenter also made suggestions with respect to various other government rules that may apply to coated

separators, which are outside the scope of

these final regulations.

In response to these comments, the

Treasury Department and the IRS note

that a coated separator is a battery component. In general, the base film and coating

are battery materials, not battery components, because they are processed rather

than manufactured or assembled. If those

battery materials contain applicable critical minerals, those battery materials are

constituent materials. The final regulations clarify this in the definition of “battery component” and the new definition of

“battery materials.”

Finally, several commenters discussed

the relationship between the Battery

Components Requirement and the FEOC

Restriction. One commenter encouraged

the Treasury Department and the IRS to

use the same definition of “battery component” for purposes of the Battery Components Requirement and the FEOC Restriction. In contrast, another commenter

suggested that the final regulations adopt

a broader definition of “battery component” for purposes of the FEOC Restriction that includes components otherwise

included in the definition of “constituent material” for purposes of the Critical

Minerals Requirements. As noted in the

Explanation of Provisions to the December Proposed Regulations, the Treasury

Department and the IRS intend that terms

relevant to both the Critical Minerals and

Battery Components Requirement and the

FEOC Restriction be interpreted consistently. Consistent with that, the final regulations include one general definition of

“battery component” for purposes of section 30D, and do not adopt the comment

suggesting a broader definition for purposes of the FEOC Restriction.

The final regulations, in §1.30D-2(b),

adopt a definition of “battery component” that clarifies the treatment of separators and incorporates the new definition

of “battery materials.” The definition is

modified to improve clarity regarding the

relationship between battery components,

constituent materials, and battery materials.

7. Battery Materials

To further clarify the line between battery components and constituent materials, the final regulations add a definition

of “battery materials” to §1.30D-2(b).

The final regulations define “battery

materials” as direct and indirect inputs

to battery components that are produced

through processing, rather than manufacturing or assembly. Battery materials are

not considered a type of battery component, although battery materials may be

manufactured or assembled into battery

components. The three categories of battery materials are applicable critical minerals, constituent materials, and battery

materials without applicable critical minerals. Examples of battery materials that

may or may not contain applicable critical

minerals include a separator base film (if

not manufactured or assembled) and separator coating. Examples of battery materials without applicable critical minerals

include conductive additives, copper foils

prior to graphite deposition, and electrolyte solvents.

8. Clean Vehicle Battery

The final regulations add a definition

of “clean vehicle battery” to §1.30D-2(b).

Consistent with section 30D(d)(1)(F)

and 30D(e), the final regulations define

Joint Committee on Taxation, Joint Committee on Taxation, General Explanation of Tax Legislation Enacted in the 117 Congress (JCS 1-23), December 2023, at 252, n.1070.

May 28, 2024

1260

Bulletin No. 2024–22

“clean vehicle battery,” with respect to a

new clean vehicle, means the battery from

which the electric motor of the vehicle

draws electricity to propel such vehicle.

9. Compliant-battery Ledger

Proposed §1.30D-6(a)(7) defined

“compliant-battery ledger,” for a qualified manufacturer for a calendar year, as

a ledger that tracks the number of available FEOC-compliant batteries for such

calendar year. Proposed §1.30D-6(d) set

forth rules applicable to compliant-battery

ledgers. The Treasury Department and

the IRS received several comments about

the rules for establishing, updating, and

reconciling the compliant-battery ledger.

These comments are included as part of

the discussion of proposed §1.30D-6(d) in

section III.D.3 of this Summary of Comments and Explanation of Revisions.

The final regulations adopt the proposed definition and move it to §1.30D2(b).

10. Constituent Materials

Proposed §§1.30D-3(c)(6) and 1.30D6(a)(8) defined “constituent materials” as

materials that contain applicable critical

minerals and are employed directly in the

manufacturing of battery components.

Constituent materials could 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. As explained in the Explanation of

Provisions to the April Proposed Regulations, 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 are the final products relevant for calculating the value of the applicable critical minerals in the battery.

The Treasury Department and the IRS

received multiple comments with respect

to the definition of “constituent materials.” Several commenters expressed support for the proposed definition. However,

other commenters criticized the definition

as not supported by the statute; as at odds

Bulletin No. 2024–22

with section 45X, which includes “electrode active materials” as qualifying battery components; and as an inappropriate

reclassification of items that should be

battery components, and thus subject to

the Battery Components Requirement.

One commenter suggested that constituent

materials be included within the definition of “battery component” or otherwise

phased in to allow for additional time to

relocate production facilities to North

America. Another commenter indicated

that the definition of “constituent materials” could be exploited to exclude critical

minerals.

In response to these comments, the

Treasury Department and the IRS note

that although section 30D does not define

“battery component,” it consistently refers

to components as “manufactured or assembled,” and it consistently refers to “applicable critical minerals” as “extracted,

processed, or recycled.” To avoid a gap in

the supply chain between applicable critical minerals and battery components, the

proposed regulations introduced the concept of constituent materials to make clear

that materials downstream of applicable

critical minerals, but still processed rather

than manufactured or assembled, belong

in the analysis of a battery’s applicable

critical minerals. Section 30D looks to a

material’s production steps to determine

its status as an applicable critical mineral

or a battery component. The constituent

materials concept does not alter how the

statute works; rather, it clarifies how the

statute applies to certain materials.

One commenter suggested modifying

the definition of “constituent materials”

to include domestic alternatives that serve

the same purpose as constituent materials

but do not contain applicable critical minerals. The final regulations do not adopt

this comment because the commenter’s

proposal would be at odds with the Critical Minerals Requirement and the FEOC

Restriction (as applicable to applicable

critical minerals).