Treasury and IRS Give Boost to Clean Fleet Efforts with New Incremental Cost Credit!

Good news for commercial vehicle owners! The Treasury Department and Internal Revenue Service have issued Notice 2023-9 regarding the commercial clean vehicle credit for vehicles purchased and put into service during the taxable year 2023. The guidance informs taxpayers that the incremental cost of street vehicles with a gross vehicle weight rating of less than 14,000 pounds will not limit the available credit amount for the year 2023, according to a released notice on the website of the IRS.

Based on the notice, the Department of the Treasury and the Internal Revenue Service have reviewed the incremental cost of street vehicles for 2023 and found that the incremental cost for all street vehicles, except for compact car plug-in electric hybrids (PHEVs), will be greater than $7,500. For compact car PHEVs, the Treasury Department and the IRS will accept the incremental cost published by the Department of Energy to calculate the credit amount.

The commercial clean vehicle credit under  45W of the Internal Revenue Code allows a credit for qualified commercial clean vehicles, effective for vehicles acquired after December 31, 2022, and before January 1, 2033. The credit amount for each qualified commercial vehicle is the lesser of 30% of the taxpayer’s basis in the vehicle or the incremental cost of the vehicle, with a maximum credit limit of $7,500 for vehicles with a gross vehicle weight rating of less than 14,000 pounds.

In 2023, the Treasury Department and IRS will use the Department of Energy’s published incremental cost to calculate tax credits for certain qualified commercial clean vehicles. This notice provides a safe harbor for taxpayers.