Background

I. Overview

Public Law 117–169, 136 Stat. 1818 (August 16, 2022), commonly known as the Inflation Reduction Act of 2022 (IRA), amended section 30D of the Internal Revenue Code (Code). Section 30D provides a credit (section 30D credit) against the tax imposed by chapter 1 of the Code (chapter 1) with respect to each new clean vehicle that a taxpayer purchases and places in service. The section 30D credit is determined and allowable with respect to the taxable year in which the taxpayer places the new clean vehicle in service.

This document contains proposed amendments to the Income Tax Regulations (26 CFR part 1) under section 30D. These proposed regulations supplement a notice of proposed rulemaking (REG–120080–22) published in the Federal Register

(88 FR 23370) on April 17, 2023 (April 2023 proposed regulations) that contains initial proposed regulations under section 30D as amended by the IRA, as well as a notice of proposed rulemaking (REG–113064–23) published in the Federal Register (88 FR 70310) on October 10, 2023 (October 2023 proposed regulations) that contains initial and additional proposed regulations under sections 25E, 30D, and 6213 of the Code. This notice of proposed rulemaking does not address written comments that were submitted in response to the April 2023 proposed regulations or the October 2023 proposed regulations. Any comments received in response to this notice of proposed rulemaking will be addressed in the Treasury Decision adopting these regulations as final regulations.

II. Section 30D

Section 30D was enacted by section 205(a) of the Energy Improvement and Extension Act of 2008, Division B of Public Law 110–343, 122 Stat. 3765, 3835 (October 3, 2008), to provide a credit for purchasing and placing in service 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. In general, the amendments made by section 13401 of the IRA to section 30D apply to vehicles placed in service after December 31, 2022, except as provided in section 13401(k)(2) through (5) of the IRA.

Effective beginning on April 18, 2023, section 30D(b) provides a maximum credit of $7,500 per new clean vehicle, consisting of $3,750 if certain critical minerals requirements are met and $3,750 if certain battery components requirements are met. These requirements are described in section 30D(e)(1) and (2), respectively, and the preamble to the April 2023 proposed regulations.

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, under section 30D(c)(2), the section 30D credit is treated as a nonrefundable personal credit allowable under subpart A of part IV of subchapter A of chapter 1. However, under section 30D(c)(1), so much of the credit that would be allowed under section 30D(a) that is attributable to property that is of a character subject to an allowance for depreciation is treated as a current year general business credit under section 38(b) and not allowed under section 30D(a). 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).

The IRA amended section 30D(d) regarding the definition of a new clean vehicle. Section 30D(d)(1) defines “new clean vehicle” as a motor vehicle that satisfies the following 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 which 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 of the Treasury or her delegate (Secretary) containing certain specifically enumerated items.

Section 30D(d)(3) defines “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.

Section 30D(d)(7) excludes from the definition of “new clean vehicle” 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 were extracted, processed, or recycled by a foreign entity of concern (as defined in section 40207(a)(5) of the Infrastructure Investment and Jobs Act (42 U.S.C. 18741(a)(5))), or any vehicle placed in service after December 31, 2023, with respect to which any of the components contained in the battery of such vehicle were manufactured or assembled by a foreign entity of concern (as so defined).

No section 30D credit is allowed with respect to a vehicle placed in service after December 31, 2032.