Part III – Administrative, Procedural, and Miscellaneous Section 45W Commercial Clean Vehicles and Incremental Cost for 2023

Part III – Administrative, Procedural, and Miscellaneous

Section 45W Commercial Clean Vehicles and Incremental Cost for 2023

Notice 2023-9

SECTION 1. PURPOSE

This notice provides a safe harbor regarding the incremental cost of certain

qualified commercial clean vehicles placed in service in calendar year 2023 for

purposes of the new credit for qualified commercial clean vehicles under § 45W of the

Internal Revenue Code (Code).1

SECTION 2. BACKGROUND

Section 13403(a) of Public Law 117-169, 136 Stat. 1818 (August 16, 2022),

commonly known as the Inflation Reduction Act of 2022, added new § 45W to the Code

to allow a credit for qualified commercial clean vehicles (§ 45W credit), which is

effective for vehicles acquired after December 31, 2022, and before January 1, 2033.

For purposes of § 38, § 45W(a) allows a taxpayer a § 45W credit for the

purchase of each qualified commercial clean vehicle, as defined in § 45W(c), placed in

service by the taxpayer during the taxable year. The amount of the § 45W credit for

each qualified commercial clean vehicle is the lesser of (1) 30 percent of the taxpayer’s

1 Unless otherwise specified, all “section” or “§” references are to sections of the Code.

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basis in the vehicle in the case of a vehicle not powered by a gasoline or diesel internal

combustion engine (15 percent in any other case), or (2) the incremental cost of the

vehicle. See § 45W(b)(1). Under § 45W(b)(4), the maximum credit allowed is $7,500 in

the case of a qualified commercial clean vehicle that has a gross vehicle weight rating

of less than 14,000 pounds, and $40,000 for all other vehicles.

Section 45W(b)(2) provides that the incremental cost of a qualified commercial

clean vehicle is the excess of the purchase price of such vehicle over the price of a

comparable vehicle

nder § 45W(b)(4), the maximum credit allowed is $7,500 in

the case of a qualified commercial clean vehicle that has a gross vehicle weight rating

of less than 14,000 pounds, and $40,000 for all other vehicles.

Section 45W(b)(2) provides that the incremental cost of a qualified commercial

clean vehicle is the excess of the purchase price of such vehicle over the price of a

comparable vehicle. A comparable vehicle with respect to any qualified commercial

clean vehicle is any vehicle that is powered solely by a gasoline or diesel internal

combustion engine and is comparable in size and use to such qualified commercial

clean vehicle. See § 45W(b)(3).

A qualified commercial clean vehicle under § 45W(c) includes (1) a vehicle that is

treated as a motor vehicle for purposes of title II of the Clean Air Act and is

manufactured primarily for use on public streets, roads, and highways, not including a

vehicle operated exclusively on a rail or rails (street vehicle) and (2) mobile machinery

as defined in § 4053(8).

The Department of the Treasury (Treasury Department) has reviewed an

incremental cost analysis of current costs by the Department of Energy (DOE) across

classes of street vehicles (DOE Analysis).2 The DOE Analysis modeled the costs of

representative commercial clean vehicles and comparable internal combustion engine

vehicles. Results of the DOE Analysis show that the modeled incremental cost of all

2 www.energy.gov/node/4825009/

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street vehicles, other than compact car PHEVs,3 that have a gross vehicle weight rating

of less than 14,000 pounds will be greater than $7,500 in calendar year 2023.

SECTION 3. SAFE HARBOR

The DOE Analysis calculated the incremental cost for compact car PHEVs, which

include minicompact and subcompact cars, to be less than $7,500

d incremental cost of all

2 www.energy.gov/node/4825009/

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street vehicles, other than compact car PHEVs,3 that have a gross vehicle weight rating

of less than 14,000 pounds will be greater than $7,500 in calendar year 2023.

SECTION 3. SAFE HARBOR

The DOE Analysis calculated the incremental cost for compact car PHEVs, which

include minicompact and subcompact cars, to be less than $7,500. The Treasury

Department and the Internal Revenue Service (IRS) will accept a taxpayer’s use of the

incremental cost published in the DOE Analysis to calculate the § 45W credit amount for

compact car PHEVs placed in service during calendar year 2023.

In addition, the DOE Analysis provides an incremental cost analysis of current

costs for several representative classes of street vehicles with a gross vehicle weight

rating of 14,000 pounds or more in calendar year 2023. The Treasury Department and

the IRS will accept a taxpayer’s use of the incremental cost published in the DOE

Analysis for the appropriate class of street vehicle to calculate the § 45W credit amount

for vehicles placed in service during calendar year 2023.

For all street vehicles (other than compact car PHEVs) with a gross vehicle

weight rating of less than 14,000 pounds, the DOE Analysis provides that incremental

cost will not limit the available § 45W credit amount for vehicles placed in service in

calendar year 2023. Accordingly, the Treasury Department and IRS will accept a

taxpayer’s use of $7,500 as the incremental cost for all street vehicles (other than

compact car PHEVs) with a gross vehicle weight rating of less than 14,000 pounds to

3Compact cars are defined as those with an interior volume index of less than 110 cubic feet, and for the

purpose of the DOE analysis also include minicompact cars, subcompact cars, and compact cars as

described in 40 CFR 600.315-08(a)(1)(ii), (iii), and (iv)

cremental cost for all street vehicles (other than

compact car PHEVs) with a gross vehicle weight rating of less than 14,000 pounds to

3Compact cars are defined as those with an interior volume index of less than 110 cubic feet, and for the

purpose of the DOE analysis also include minicompact cars, subcompact cars, and compact cars as

described in 40 CFR 600.315-08(a)(1)(ii), (iii), and (iv). PHEVs are defined as commercial clean vehicles

that use a gasoline or diesel internal combustion engine and are 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

(15 kilowatt hours in the case of a vehicle with a gross vehicle weight rating of 14,000 pounds or more)

and are capable of being recharged from an external source of electricity. See § 45W(b)(1) and (c).

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calculate the § 45W credit amount for vehicles placed in service during calendar year

2023.

SECTION 4. DRAFTING INFORMATION

The principal author of this notice is the Office of Associate Chief Counsel

(Passthroughs & Special Industries). However, other personnel from the Treasury

Department and the IRS participated in its development. For further information

regarding this notice contact Chief Counsel on (202) 317-5254 (not a toll-free call).