Government Takes Bold Step Forward with Clean Vehicle Regulations, Treasury and IRS Lead the Charge!

The Treasury Department and the Internal Revenue Service have announced the issuance of Notice 2023-01, which will provide guidance related to the new clean vehicle credit provided under the Inflation Reduction Act of 2022 (IRA), based on a released notice indicated on the official website of the IRS on December 29, 2022.

The IRA (enacted in 2022) provides a tax credit for clean vehicles bought and used in the same taxable year. Eligible vehicles must be assembled in North America and have a manufacturer’s retail price below a specified limit, based on classification.

The notice issued by the Treasury Department and the IRS states that they intend to propose regulations to address the definitions of certain terms relevant to the credit, including final assembly, North America, manufacturer’s suggested retail price, classifications for categories of vehicles such as vans, sport utility vehicles, pickup trucks, and others, and placed in service.

The proposed regulations will address the amendments made to Section 30D of the Internal Revenue Code (Code) by the IRA, according to the notice. The regulations will provide definitions of the terms listed above and additional guidance necessary to determine the eligibility of vehicles for the credit.

This new clean vehicle credit is aimed at promoting the use of environmentally friendly vehicles and reducing carbon emissions. The Treasury Department and the IRS expect the proposed regulations to provide clarity for taxpayers who wish to take advantage of this credit.

The notice provides that the proposed regulations will be published in the near future, and taxpayers are encouraged to review the notice for further information. The Treasury Department and the IRS will also be accepting comments from the public on the proposed regulations once they are published.