70310 Federal Register / Vol. 88, No. 194 / Tuesday, October 10, 2023 / Proposed Rules 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Parts 1 and 301 

[REG–113064–23] 

RIN 1545–BQ86 

Transfer of Clean Vehicle Credits 

Under Section 25E and Section 30D 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: This document contains 

proposed regulations that would 

provide guidance regarding certain 

clean vehicle credits as established by 

the Inflation Reduction Act of 2022. The 

proposed regulations would provide 

guidance for taxpayers who purchase 

qualifying previously-owned clean 

vehicles or purchase qualifying new 

clean vehicles and intend to transfer the 

amount of any previously-owned clean 

vehicle credit or new clean vehicle 

credit to dealers who are entities eligible 

to receive advance payments of either 

credit. The proposed regulations also 

would 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. The proposed 

regulations would affect taxpayers 

intending to transfer previously-owned 

clean vehicle or new clean vehicle 

credits and eligible entities to whom the 

credits are transferred, as well as 

taxpayers who purchased previouslyowned clean vehicles or new clean 

vehicles in the event the vehicles cease 

being eligible for the credits. The 

proposed regulations also 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: Written or electronic comments 

and requests for a public hearing must 

be received by December 11, 2023. 

Requests for a public hearing must be 

submitted as prescribed in the 

‘‘Comments and Requests for a Public 

Hearing’’ section. 

ADDRESSES: Commenters are strongly 

encouraged to submit public comments 

electronically via the Federal 

eRulemaking Portal at https://

www.regulations.gov (indicate IRS and 

REG–113064–23) by following the 

online instructions for submitting 

comments. Requests for a public hearing 

must be submitted as prescribed in the 

‘‘Comments and Requests for a Public 

Hearing’’ section. Once submitted to the 

Federal eRulemaking Portal, comments 

cannot be edited or withdrawn. The 

Department of the Treasury (Treasury 

Department) and the IRS will publish 

for public availability any comments 

submitted to the IRS’s public docket. 

Send paper submissions to: 

CC:PA:LPD:PR (REG–113064–23), Room 

5203, Internal Revenue Service, P.O. 

Box 7604, Ben Franklin Station, 

Washington, DC 20044. 

FOR FURTHER INFORMATION CONTACT: 

Concerning the proposed regulations, 

the Office of Associate Chief Counsel 

(Passthroughs & Special Industries) at 

(202) 317–6853 (not a toll-free number); 

concerning submissions of comments 

and requests for a public hearing, call 

Vivian Hayes (202) 317–6901 (not a tollfree number) or send an email to 

publichearings@irs.gov (preferred). 

SUPPLEMENTARY INFORMATION: 

Background 

I. Overview 

Public Law 117–169, 136 Stat. 1818 

(August 16, 2022), commonly known as 

the Inflation Reduction Act of 2022 

(IRA), added section 25E to the Internal 

Revenue Code (Code) and amended 

section 30D of the Code. Section 25E 

provides a credit (section 25E credit) 

against the tax imposed by chapter 1 of 

the Code (chapter 1) with respect to a 

previously-owned clean vehicle that a 

taxpayer purchases and places in 

service. Section 30D provides a credit 

(section 30D credit) against the tax 

imposed by chapter 1 with respect to 

each new clean vehicle that a taxpayer 

purchases and places in service. Both 

the section 25E credit and section 30D 

credit are determined and allowable 

with respect to the taxable year in 

which the taxpayer places the 

previously-owned clean vehicle or new 

clean vehicle, as applicable, in service. 

In addition, several of the provisions of 

section 25E incorporate by crossreference some of the definitions and 

rules of section 30D. The IRA also 

amended section 6213 of the Code by 

adding three new definitions to the 

exclusive list of ‘‘mathematical or 

clerical errors’’ in section 6213(g)(2). 

These new definitions are set out in 

sections 6213(g)(2)(T), (U), and (V). 

This document contains proposed 

amendments to the Income Tax 

Regulations (26 CFR part 1) under 

sections 25E and 30D and to the 

Procedure and Administration 

Regulations (26 CFR part 301) under 

section 6213 (proposed regulations). 

The proposed regulations under section 

30D 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. 

A. Section 30D New Clean Vehicle 

Credit 

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 

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, 

the section 30D credit is treated as a 

personal credit allowable under subpart 

A of part IV of subchapter A of chapter 

1. 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. 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). 

The April 2023 proposed regulations 

addressed the case of mixed-use 

vehicles. Section 30D(c)(1) requires that 

so much of the section 30D credit that 

would be allowed under section 30D(a) 

for any taxable year (determined 

without regard to section 30D(c)) that is 

attributable to a depreciable vehicle 

must be treated as a general business 

credit under section 38 that is listed in 

section 38(b)(30) for such taxable year 

(and not allowed under section 30D(a)). 

In the case of a depreciable vehicle the 

use of which is 50 percent or more 

business use in the taxable year such 


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Federal Register / Vol. 88, No. 194 / Tuesday, October 10, 2023 / Proposed Rules 70311 

vehicle is placed in service, the section 

30D credit that would be allowed under 

section 30D(a) for that taxable year 

(determined without regard to section 

30D(c)) that is attributable to such 

depreciable vehicle must be treated as a 

general business credit under section 38 

that is listed in section 38(b)(30) for 

such taxable year (and not allowed 

under section 30D(a)). In the case of a 

depreciable vehicle the business use of 

which is less than 50 percent of a 

taxpayer’s total use of the vehicle for the 

taxable year in which the vehicle is 

placed in service, the taxpayer’s section 

30D credit for that taxable year with 

respect to that vehicle must be 

apportioned as follows: (i) the portion of 

the section 30D credit corresponding to 

the percentage of the taxpayer’s 

business use of the vehicle is treated as 

a general business credit under section 

30D(c)(1) (and not allowed under 

section 30D(a)); and (ii) the portion of 

the section 30D credit corresponding to 

the percentage of the taxpayer’s 

personal use of the vehicle is treated as 

a section 30D credit allowed under 

section 30D(a) pursuant to section 

30D(c)(2). 

The IRA added several special rules 

under section 30D(f) applicable to 

vehicles placed in service after 

December 31, 2022. These special rules 

include the rule in section 30D(f)(9) that 

requires a taxpayer to include on the 

taxpayer’s return for the taxable year the 

vehicle identification number (VIN) of 

the vehicle for which the section 30D 

credit is claimed. In addition, 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 adjusted gross income of the 

taxpayer for such taxable year, or (II) the 

modified adjusted gross income of the 

taxpayer for the preceding taxable year, 

exceeds (ii) the threshold amount 

(modified adjusted gross income (AGI) 

Limitation). 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 

adjusted gross income’’ as adjusted 

gross income (AGI) increased by any 

amount excluded from gross income 

under sections 911, 931, or 933. 

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 of the Treasury or her 

delegate (Secretary) determines 

necessary, a taxpayer may elect to 

transfer a section 30D credit with 

respect to a new clean vehicle to an 

eligible entity (vehicle transfer election). 

If the taxpayer who acquires a new 

clean vehicle makes a vehicle 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 vehicle 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 vehicle 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 otherwise 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 vehicle 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 

vehicle 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 

vehicle 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 vehicle 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). 


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70312 Federal Register / Vol. 88, No. 194 / Tuesday, October 10, 2023 / Proposed Rules 

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

the case of any taxpayer who has made 

a vehicle 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 

limitations in section 30D(f)(10), the 

income tax imposed on such taxpayer 

under chapter 1 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. 

No section 30D credit is allowed with 

respect to a vehicle placed in service 

after December 31, 2032. 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. 

B. Section 25E Previously-Owned 

Clean Vehicles Credit 

Section 13402 of the IRA added 

section 25E to the Code. Section 25E 

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 (that is, 

the section 25E credit) is allowed for the 

taxable year in an amount 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 and provides that no section 

25E credit is allowed for any taxable 

year if (A) the lesser of (i) the modified 

adjusted gross income of the taxpayer 

for such taxable year, or (ii) the 

modified adjusted gross income 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)), the threshold amount 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 adjusted 

gross income as adjusted gross income 

increased by any amount excluded from 

gross income under sections 911, 931, or 

933. 

Section 25E(c) defines certain terms 

for purposes of the section 25E credit. 

Section 25E(c)(1) defines a ‘‘previouslyowned clean vehicle’’ as, with respect to 

a taxpayer, a motor vehicle that satisfies 

the following four requirements set forth 

in section 25E(c)(1)(A) through (D): (i) 

the model year of the motor vehicle is 

at least 2 years earlier than the calendar 

year in which the taxpayer acquires 

such vehicle; (ii) the original use of the 

motor vehicle commences with a person 

other than the taxpayer; (iii) the motor 

vehicle is acquired by the taxpayer in a 

qualified sale, and (iv) the motor vehicle 

meets the requirements of section 

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

(except for the original use requirement 

of section 30D(d)(1)(H)(iv)), or is a 

motor vehicle that satisfies the 

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

and (B), and has a gross vehicle weight 

rating of less than 14,000 pounds. 

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

sale’’ as a sale of a motor vehicle (i) by 

a dealer (as defined in section 

30D(g)(8)), (ii) for a sale price which 

does not exceed $25,000, and (iii) that 

is the first transfer since the date of 

enactment of the IRA (that is, August 16, 

2022) to a qualified buyer other than the 

person with whom the original use of 

such vehicle commenced. 

Section 25E(c)(3) defines a ‘‘qualified 

buyer’’ as, with respect to a sale of a 

motor vehicle, a taxpayer who is an 

individual with respect to whom no 

deduction is allowable with respect to 

another taxpayer under section 151, 

who purchases such vehicle for use and 

not for resale, and 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 a ‘‘motor 

vehicle’’ and ‘‘capacity’’ to have the 

meaning given to such terms in section 

30D(d)(2) and (4), respectively. 

Section 25E(d) provides that no 

section 25E credit is allowed with 

respect to any vehicle unless the 

taxpayer includes the VIN of such 

vehicle on the taxpayer’s tax return for 

the taxable year. Section 25E(e) provides 

that rules similar to the rules of section 

30D(f) (without regard to paragraph (10) 

or (11) thereof) apply for purposes of 

section 25E. Section 25E(f) provides that 

rules similar to section 30D(g) apply to 

the transfer of a section 25E credit for 

previously-owned vehicles (thus, a 

taxpayer also may elect to transfer a 

section 25E credit). 

Section 25E applies to vehicles 

acquired after December 31, 2022. No 

section 25E credit is allowed with 

respect to a vehicle acquired after 

December 31, 2032. 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. 

C. Section 45W Qualified Commercial 

Clean Vehicle Credit 

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(b)(1) provides that the amount of 

the section 45W credit is the lesser of: 

15 percent of the taxpayer’s basis in the 

vehicle (30 percent in the case of a 

vehicle not powered by a gasoline or 

diesel internal combustion engine), or 

the incremental cost of the vehicle. 

Section 45W(b)(2) provides that the 

incremental cost of any qualified 

commercial clean vehicle is an amount 

equal to the excess of the purchase price 

for such vehicle over the purchase price 

of a comparable vehicle. Section 

45W(b)(3) defines ‘‘comparable vehicle’’ 

to mean any vehicle that is powered 

solely by a gasoline or diesel internal 

combustion engine and is comparable in 

size and use to such vehicle. Section 

45W(b)(4) provides that the 45W credit 

is limited to $7,500 in the case of a 

vehicle that has a gross vehicle weight 

rating of less than 14,000 pounds, and 

$40,000 for all other vehicles. 

Section 45W(c) defines ‘‘qualified 

commercial clean vehicle’’ for purposes 

of the section 45W credit. Section 

45W(d) establishes special rules for 

purposes of the section 45W credit, 

including the application of basis 

reduction, domestic usage, and 

recapture rules similar to those under 

section 30D(f) of the Code and a rule 

disallowing a double benefit under 

section 45W for a taxpayer claiming a 

new clean vehicle credit under section 

30D. 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. Section 45W(f) grants the Secretary 

authority to issue regulations or other 

guidance to carry out the purposes of 

section 45W, including regulations or 

other guidance relating to determination 

of the incremental cost of any qualified 

commercial clean vehicle. 

D. Section 6213 Restrictions 

Applicable to Deficiencies; Petition to 

Tax Court 

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). In lieu of a notice of 

deficiency giving the taxpayer 90 days 


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to file a petition in the Tax Court, 

section 6213(b)(1) requires the IRS to 

provide the taxpayer notice that an 

assessment has been or will be made 

based on a mathematical or clerical 

error. Section 6213(b)(2)(A) provides 

that the taxpayer has 60 days to request 

an abatement of such assessment. If the 

taxpayer timely requests abatement, 

then the IRS must abate the assessment. 

If an assessment is abated, the IRS must 

first provide a notice of deficiency 

under section 6213(a) before the IRS can 

reassess the tax. 

Math error assessments were first 

authorized by section 274(f) of the 

Revenue Bill of 1926. The legislative 

history provided that ‘‘in the case of a 

mere mathematical error appearing 

upon the face of the return, assessment 

of a tax due to such mathematical error 

may be made at any time, and that such 

assessment shall not be regarded as a 

deficiency notification.’’ H.R. Rep. No. 

69–1, at 11 (1926). The Tax Reform Act 

of 1976 added section 6213(f)(2) 

(current section (g)(2)) to the Code, 

which defined ‘‘mathematical or clerical 

error’’ as: (A) an error in addition, 

subtraction, multiplication, or division 

shown on the return; (B) an incorrect 

use of an IRS table if the error is 

apparent from the existence of other 

information on the return; (C) 

inconsistent entries on the return; (D) an 

omission of information required to be 

supplied on the return in order to 

substantiate an item on that return; and 

(E) an entry of a deduction or credit 

item in an amount which exceeds a 

statutory limit which is either (a) a 

specified monetary amount or (b) a 

percentage, ratio, or fraction—if the 

items entering into the application of 

that limit appear on that return. 

The definition of mathematical or 

clerical error as set out in 1976 

contained only these five specific items, 

all of which could be ascertained 

directly from the face of a return. These 

items remain in current section 

6213(g)(2)(A)–(E). Since that time, 

Congress has expanded the definition of 

‘‘mathematical or clerical error’’ in 

section 6213(g)(2) several times, and in 

1998, added flush language to section 

6213(g)(2) that applies to all section 

6213(g)(2) subparagraphs: ‘‘A taxpayer 

shall be treated as having omitted a 

correct TIN [taxpayer identification 

number] for purposes of the preceding 

sentence if information provided by the 

taxpayer on the return with respect to 

the individual whose TIN was provided 

differs from the information the 

Secretary obtains from the person 

issuing the TIN.’’ The legislative history 

indicates that Congress added this 

language to clarify that a correct TIN is 

one that was assigned by the Social 

Security Administration (SSA) or the 

IRS to the individual identified on the 

return, and that there should be no 

inconsistencies between the data that is 

reported on the return and the data from 

the agency issuing the TIN. H.R. Conf. 

Rep. No. 825, 105th Cong. 2d Sess. 1588 

(1998). 

II. Prior Guidance 

A. Notice 2022–46 

On October 5, 2022, the Treasury 

Department and the IRS published 

Notice 2022–46, 2022–43 I.R.B. 302. The 

notice requested general comments on 

issues arising under sections 25E and 

30D, as well as specific comments 

concerning: (1) definitions; (2) critical 

minerals and battery components; (3) 

foreign entities of concern; (4) 

recordkeeping and reporting; (5) eligible 

entities; (6) elections to transfer and 

advance payments; and (7) recapture. 

The Treasury Department and the IRS 

received 884 comments from industry 

participants, environmental groups, 

individual consumers, and other 

stakeholders. The Treasury Department 

and the IRS appreciate the commenters’ 

interest and engagement on these issues. 

These comments have been carefully 

considered in the preparation of the 

proposed regulations. 

B. Revenue Procedure 2022–42 

On December 12, 2022, the Treasury 

Department and the IRS published 

Revenue Procedure 2022–42, 2022–52 

I.R.B. 565, providing guidance for 

qualified manufacturers to enter into 

written agreements with the IRS, as 

required in sections 30D, 25E, and 45W, 

and to report certain information 

regarding vehicles produced by such 

manufacturers that may be eligible 

credits under these sections. In 

addition, Revenue Procedure 2022–42 

provides the procedures for sellers of 

new clean vehicles or previously-owned 

clean vehicles to report certain 

information to the IRS and the 

purchasers of such clean vehicles. 

C. April 2023 Proposed Regulations 

On April 17, 2023, the Treasury 

Department and the IRS published the 

April 2023 proposed regulations in the 

Federal Register, 88 FR 23370, which 

provided proposed definitions for 

certain terms related to section 30D; 

proposed rules regarding personal and 

business use and other special rules; 

and additional proposed rules related to 

the critical mineral and battery 

component requirements. The deadline 

to submit public comments expired on 

June 16, 2023. 

D. Revenue Procedure 2023–33 

On October 6, 2023, in addition to 

filing this notice of proposed 

rulemaking for public inspection, the 

Treasury Department and the IRS 

released Revenue Procedure 2023–33, 

which will be published on October 23, 

2023, in Internal Revenue Bulletin 

2023–43, to provide guidance for 

taxpayers electing to transfer credits 

under section 25E or 30D and for 

eligible entities receiving advance 

payments of credits under sections 30D 

and 25E. This revenue procedure sets 

forth the procedures under sections 

30D(g) and 25E(f) for the transfer of the 

previously-owned clean vehicle credit 

and the new clean vehicle credit from 

the taxpayer to an eligible entity, 

including the procedures for dealer 

registration with the IRS, the procedures 

for the revocation and suspension of 

that registration, and the establishment 

of an advance payment program to 

eligible entities. In addition, this 

revenue procedure supersedes sections 

5.01 and 6.03 of Revenue Procedure 

2022–42, providing new information for 

the timing and manner of submission of 

seller reports, respectively. This revenue 

procedure also supersedes sections 6.01 

and 6.02 of Revenue Procedure 2022– 

42, providing updated information on 

submission of written agreements by 

manufacturers to the IRS to be 

considered qualified manufacturers, as 

well as the method of submission of 

monthly reports by qualified 

manufacturers. 

Explanation of Provisions 

I. Proposed Section 25E Regulations 

A. Overview 

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. Proposed § 1.25E–1(a) 

would state the general rule that an 

income tax credit is available under 

section 25E for a qualified buyer of a 

previously-owned clean vehicle placed 

in service during the taxable year in an 

amount 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. Proposed § 1.25E–1(b) would 

provide definitions that apply for 

purposes of section 25E and the 

proposed section 25E regulations (that 

is, proposed §§ 1.25E–1 through 1.25E– 

3). Proposed § 1.25E–1(c) would provide 

rules regarding the modified adjusted 


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70314 Federal Register / Vol. 88, No. 194 / Tuesday, October 10, 2023 / Proposed Rules 

gross income limitation. Proposed 

§ 1.25E–1(d) would provide rules 

regarding multiple owners of a vehicle. 

Proposed § 1.25E–2 would provide 

special rules under section 25E(e). 

Proposed § 1.25E–3 would provide rules 

regarding the election to transfer the 25E 

credit under section 25E(f). 

As discussed later in this Explanation 

of Provisions section, the proposed rules 

under section 25E also include 

severability clauses and generally are 

proposed to apply to taxable years 

beginning after the date these 

regulations are published in the Federal 

Register. 

B. General Rules for Purposes of Section 

25E 

1. Limitations on Modified Adjusted 

Gross Income 

Proposed § 1.25E–1(c)(1) would 

provide, consistent with section 25E(b), 

limitations based on the amount of a 

taxpayer’s modified adjusted gross 

income, proposing that no credit is 

allowed under section 25E for any 

taxable year if the lesser of the modified 

adjusted gross income of the taxpayer 

for such taxable year, or, the modified 

adjusted gross income of the taxpayer 

for the preceding taxable year, exceeds 

the threshold amount. Proposed 

§ 1.25E–1(c)(2), consistent with section 

25E(b)(2), would define the ‘‘threshold 

amount’’ as, in the case of a joint return 

or a surviving spouse (as defined in 

section 2(a)), $150,000; in the case of a 

head of household (as defined in section 

2(b)), $112,500; and in any other case, 

$75,000. Proposed § 1.25E–1(b)(3) 

would define ‘‘modified adjusted gross 

income’’ as adjusted gross income 

increased by any amount excluded from 

gross income under sections 911, 931, or 

933 of the Code. Proposed § 1.25E– 

1(c)(3) would provide that if the 

taxpayer’s filing status for the taxable 

year differs from the taxpayer’s filing 

status in the preceding taxable year, the 

taxpayer satisfies the limitation if the 

taxpayer’s modified AGI does not 

exceed the threshold amount in either 

year based on the applicable filing 

status for that taxable year. This 

proposed rule is consistent with 

proposed § 1.30D–4(b)(4) in the April 

2023 proposed regulations. 

2. Limitation on Multiple Owners 

Proposed § 1.25E–1(d)(1) would 

provide that the amount of the section 

25E credit attributable to a previouslyowned clean vehicle may be claimed on 

only one tax return. In the event a 

previously-owned clean vehicle is 

placed in service by multiple owners, 

no allocation or proration of the section 

25E credit is available. This proposed 

rule is necessary because the structure 

of section 25E provides for one taxpayer 

to claim the section 25E credit per 

vehicle placed in service. See generally 

section 25E(a), (c)(3), (e) (providing for 

rules similar to section 30D(f)(8) and (9)) 

and section 6213(g)(2)(U) of the Code. 

Section 25E does not contain rules for 

allocation or proration of the section 

25E credit with respect to a single 

vehicle to multiple taxpayers placing 

that vehicle in service, and such an 

allocation or proration would present 

administrative challenges. Proposed 

§ 1.25E–1(d)(2) would provide that for 

seller reporting, the name and taxpayer 

identification number of the vehicle 

owner claiming the section 25E credit 

must be listed on the seller report 

pursuant to sections 25E(c)(1)(D)(i) and 

30D(d)(1)(H). The credit will be allowed 

only on the tax return of the owner 

listed in the seller report. This proposed 

rule is consistent with proposed 

§ 1.30D–4(c) in the April 2023 proposed 

regulations. 

C. Definitions for Purposes of Section 

25E 

1. Dealer 

Proposed § 1.25E–1(b)(1) would 

define ‘‘dealer’’ by reference to the 

statutory definition provided in section 

25E(c)(2)(A) and section 30D(g) except 

that the term does not include persons 

licensed solely by a territory of the 

United States, and does include a dealer 

licensed in any jurisdiction described in 

section 30D(g) (other than one 

exclusively licensed in a territory) that 

makes sales at sites outside of the 

jurisdiction in which its licensed. The 

dealer does 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. In addition, 

United States citizens who are bona fide 

residents of U.S. territories are generally 

ineligible for Federal tax credits. See 

sections 931, 932, 933, and former 

section 935 of the Code. To allow for 

flexibility, especially in the case of 

direct-to-consumer sales, the proposed 

definition of dealer includes a dealer 

licensed in any jurisdiction described in 

section 30D(g) (other than one 

exclusively licensed in a U.S. territory) 

that makes sales in jurisdictions in 

which it may not be licensed. 

2. Incentive 

Proposed § 1.25E–1(b)(2) would 

define ‘‘incentive,’’ for purposes of the 

sale price definition in proposed 

§ 1.25E–1(b)(9), as any reduction in total 

sale price offered to and accepted by a 

taxpayer from the dealer or 

manufacturer, other than a reduction in 

the form of a partial payment or down 

payment for the purchase of a 

previously-owned clean vehicle 

pursuant to section 25E(f) and proposed 

§ 1.25E–3. 

3. Modified Adjusted Gross Income 

Proposed § 1.25E–1(b)(3) would 

define ‘‘modified adjusted gross 

income’’ by reference to the statutory 

definition provided in section 25E(b)(3). 

4. Placed in Service 

Proposed § 1.25E–1(b)(4) would 

provide that a previously-owned clean 

vehicle is considered to be placed in 

service on the date the taxpayer takes 

possession of the vehicle. This proposed 

definition is consistent with the 

meaning of ‘‘placed in service’’ for 

purposes of other provisions of the Code 

under which property is considered to 

be ‘‘placed in service’’ when the 

property is ‘‘placed in a condition or 

state of readiness and availability for a 

specifically assigned function’’ and as 

‘‘the date on which the owner of the 

vehicle took actual possession of the 

vehicle.’’ See §§ 1.46–3(d)(1)(ii) and 

(d)(4)(i), 1.179–4(e), and 145.4051– 

1(c)(2); see also § 1.1250–4(b)(2); 

Consumers Power Co. v. Commissioner, 

89 T.C. 710 (1987); Noell v. 

Commissioner, 66 T.C. 718, 728–729 

(1976). 

5. Previously-Owned Clean Vehicle 

Proposed § 1.25E–1(b)(5) would 

define ‘‘previously-owned clean 

vehicle’’ by reference to the statutory 

definition provided in section 25E(c)(1). 

6. Qualified Buyer 

Proposed § 1.25E–1(b)(6), consistent 

with section 25E(c)(3), would define 

‘‘qualified buyer’’ as, with respect to a 

sale of a motor vehicle, a taxpayer who 

is an individual, who purchases such 

vehicle for use and not for resale, with 

respect to whom no deduction is 

allowable to another taxpayer under 

section 151, and 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. 

7. Qualified Manufacturer 

Proposed § 1.25E–1(b)(7) would 

define ‘‘qualified manufacturer’’ by 

reference to section 30D(d)(3). 

8. Qualified Sale 

Section 25E(c)(2) defines ‘‘qualified 

sale’’ as a sale of a motor vehicle by a 


ddrumheller on DSK120RN23PROD with PROPOSALS3
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1A list of approved National Motor Vehicle Title 

Information System data providers can be found at: 

vehiclehistory.bja.ojp.gov/nmvtis_vehiclehistory. 

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

for a sale price which does not exceed 

$25,000, and which 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) 

would define ‘‘qualified sale’’ as a sale 

of a motor vehicle by a dealer (as 

defined in proposed § 1.25E–1(b)(1)) for 

a sale price which does not exceed 

$25,000, and which 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. 

9. First Transfer Rule 

Proposed § 1.25E–1(b)(8)(ii) would 

provide the first transfer rule, which 

proposes that to be a qualified sale, a 

transfer must be the first transfer of the 

previously-owned clean vehicle since 

August 16, 2022, as shown by the 

vehicle history of such vehicle, after the 

sale to the original owner. The proposed 

first transfer rule would provide 

certainty that the previously-owned 

clean vehicle is eligible for the section 

25E credit, since the dealer and taxpayer 

may not otherwise know if the transfer 

was a qualified sale due to the 

difficulties in determining whether 

previous transfers were to qualified 

buyers. For example, dealers and 

taxpayers would not be able to 

determine whether a previous transfer 

of the vehicle as a used vehicle was to 

an individual or to a taxpayer who is 

not a dependent. The taxpayer would be 

able to rely on the dealer’s 

representation of the vehicle history in 

determining whether the first transfer 

rule is satisfied, provided the seller 

report is accepted by the IRS. However, 

taxpayers would also be encouraged to 

independently examine the vehicle 

history to confirm whether the first 

transfer rule is satisfied, using publicly 

available tools.1

For purposes of the proposed first 

transfer rule, the proposed regulations 

would ignore a transfer to or between 

dealers. The definition of qualified sale 

in section 25E(c)(2) requires that a sale 

must be by a dealer to an individual for 

the buyer to be able to claim the section 

25E credit. If a transfer to a dealer were 

taken into account as a transfer, the vast 

majority of eligible vehicles would 

never qualify for the section 25E credit 

because a dealer (itself ineligible for the 

credit) selling a used vehicle will have 

acquired the vehicle from the prior 

owner (for example, as a trade-in) before 

selling the vehicle as a used vehicle. 

Treating transfers to dealers as a transfer 

would thus frustrate Congress’s purpose 

in enacting section 25E. In addition, the 

Treasury Department and the IRS 

understand that transfers between 

dealers generally do not result in a 

change of title that would appear on a 

vehicle history. Accordingly, selling or 

trading in a vehicle to a dealer for resale 

should not disqualify the vehicle for 

purposes of the first transfer rule. 

Examples illustrating the first transfer 

rule are provided in proposed § 1.25E– 

1(e). 

10. Sale Price 

Proposed § 1.25E–1(b)(9) would 

define the ‘‘sale price’’ of a previouslyowned 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 separatelystated taxes and fees required by law. 

The sale price of a previously-owned 

clean vehicle is determined before the 

application of any trade-in value. This 

proposed definition of sale price would 

include fees and charges imposed by the 

dealer to prevent dealers from allocating 

a portion of the price of the previouslyowned clean vehicle to separately stated 

fees (other than those required by law) 

and charges to avoid the $25,000 sales 

price cap in section 25E(c)(2)(B). This 

proposed definition does not include 

separate financing, extended warranties, 

insurance, or maintenance service 

charges. 

11. Section 25E Regulations 

Proposed § 1.25E–1(b)(10) would 

define ‘‘section 25E regulations’’ to 

mean proposed §§ 1.25E–1, 1.25E–2, 

and 1.25E–3. 

12. Seller Report 

Proposed § 1.25E–1(b)(11) would 

define ‘‘seller report’’ as the report 

described in section 25E(c)(1)(D)(i) by 

reference to section 30D(d)(1)(H) and 

provided by the dealer of a vehicle to 

the taxpayer and the IRS in the manner 

provided in, and containing the 

information described in Revenue 

Procedure 2023–33. Seller reports must 

be provided to the IRS electronically. 

See section II of this Explanation of 

Provisions for a more detailed 

discussion of this definition. 

II. Section 1.30D–2 Definitions 

As noted in part II.C of the 

Background section, the April 2023 

proposed regulations provided, in 

relevant part, definitions that apply for 

purposes of section 30D and the section 

30D regulations. These proposed 

regulations would modify proposed 

§ 1.30D–2 by adding paragraph (j), 

which proposes a definition for seller 

report. Sections 5 and 6 of Revenue 

Procedure 2022–42 provided initial 

procedures for sellers of vehicles to 

provide seller reports to the IRS. 

Proposed § 1.30D–2(j) would define a 

‘‘seller report’’ as the report described in 

section 30D(d)(1)(H) (which section 

25E(c)(1)(D)(i) cross references as part of 

the definition of a previously-owned 

clean vehicle) that is provided by the 

seller of a vehicle to the taxpayer and 

the IRS. The seller report must be 

provided to the IRS electronically, and 

the additional time and manner 

procedures for providing the seller 

report, as well as the information that 

must be included in the seller report, is 

contained in Revenue Procedure 2023– 

33, which will supersede relevant 

portions of Revenue Procedure 2022–42. 

III. Special Rules That Apply for 

Purposes of Section 25E and Section 

30D 

A. In General 

As noted in section II.C of the 

Background section of this preamble, 

the April 2023 proposed regulations 

provided guidance regarding the special 

rules under section 30D(f). See proposed 

§ 1.30D–4 of the April 2023 proposed 

regulations. These proposed regulations 

add provisions to those special rules 

that are relevant to recapture of the 

section 25E credit and the section 30D 

credit. These proposed regulations also 

add special rules relevant to section 

25E. These proposed regulations are 

accompanied by Revenue Procedure 

2023–33. 

B. No Double Benefit Rule 

Proposed § 1.25E–2(b)(1) would 

provide that for purposes of sections 

25E(e) and 30D(f)(2), the amount of any 

deduction or other credit allowable 

under chapter 1 of the Code for a 

vehicle for which a section 25E credit is 

allowable must be reduced by the 

amount of the section 25E credit 

allowed for such vehicle. Proposed 

§ 1.25E–2(b)(2) would provide rules for 

the interaction of sections 30D and 

section 25E and provide that a section 

30D credit that has been allowed with 

respect to a vehicle in a taxable year 

before the year in which a section 25E 

credit is allowable for that vehicle does 

not reduce the amount allowable under 

section 25E. Accordingly, a taxpayer 

who otherwise satisfies the 

requirements of section 25E would be 


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eligible to claim the section 25E credit 

for a vehicle for which another taxpayer 

previously claimed the section 30D 

credit. 

C. Recapture of the Section 25E Credit 

or the Section 30D Credit 

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. 

Thus, proposed §§ 1.25E–2(c) and 

1.30D–4(d) would provide 

corresponding rules under section 

30D(f)(5) for cancelled sales, returns, 

and resales of the vehicle. Because the 

rules proposed under each section 

generally are the same, with the 

exception of references to the clean 

vehicle credit applicable to the section 

(that is, the section 25E credit under 

proposed § 1.25E–2(c) and the section 

30D credit under proposed § 1.30D– 

4(d)), the discussion in section III.D.1 

through III.D.3 of this Explanation of 

Provisions, unless otherwise noted, 

refers to a ‘‘clean vehicle credit’’ to 

denote the credit under section 25E and 

section 30D. 

1. Cancelled Sale 

Proposed §§ 1.25E–2(c)(1)(i) and 

1.30D–4(d)(1)(i) would provide 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). Specifically, 

in the case of a cancelled sale, the 

taxpayer may not claim a clean vehicle 

credit with respect to the vehicle. The 

vehicle will still be eligible for a clean 

vehicle credit upon a subsequent 

qualifying sale to another taxpayer 

because the vehicle was not placed in 

service as part of the prior cancelled 

sale. Additionally, the seller report (as 

defined in proposed §§ 1.25E–1(b)(11) 

and 1.30D–2(j) and described in part II 

of this Explanation of Provisions), if 

already submitted, must be rescinded by 

the seller pursuant to the procedures in 

the procedural guidance published in 

Revenue Procedure 2023–33. Finally, 

because the taxpayer is not eligible for 

the credit, no vehicle transfer election is 

available under the clean vehicle credit 

transfer rules described in section IV of 

this Explanation of Provisions. 

2. Vehicle Returns 

Proposed §§ 1.25E–2(c)(1)(ii) and 

1.30D–4(d)(1)(ii) would provide 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. Specifically, in 

the case of such return, the taxpayer 

cannot claim a clean vehicle credit with 

respect to the vehicle. The Treasury 

Department and the IRS understand that 

vehicle retailers may have return 

policies that range from several days up 

to 30 days, so the proposed rules 

regarding returns within 30 days reflect 

industry practice. 

In the case of a return within 30 days 

of what was a new clean vehicle, the 

vehicle, once returned, already was 

placed in service by the taxpayer and 

therefore is not available for original use 

by another taxpayer. Because section 

30D(d)(1)(A) requires that original use of 

a new clean vehicle commence with the 

taxpayer, for purposes of section 30D, 

the returned vehicle is not eligible for 

the section 30D credit upon a 

subsequent sale. In the case of a return 

of a previously-owned clean vehicle, the 

vehicle, once returned, is not eligible for 

the section 25E credit upon a 

subsequent sale if the vehicle history 

reflects that the prior sale and return 

was a qualified sale per section 

25E(c)(2)(C). However, if the vehicle 

history does not reflect the prior sale 

and return, the vehicle remains eligible 

for the section 25E credit under the first 

transfer rule described in proposed 

§ 1.25E–1(b)(8)(ii). The seller report, in 

the case of a return, must be updated by 

the seller to reflect the return pursuant 

to the procedures published in Revenue 

Procedure 2023–33. Finally, if the 

taxpayer made an election to transfer 

the clean vehicle credit, that vehicle 

transfer election is nullified, and any 

advance payment made pursuant to the 

clean vehicle transfer rules will be 

recaptured from the eligible entity as an 

excessive payment. 

See section IV.E.1 of this Explanation 

of Provisions for a discussion of the 

excessive payment rules described in 

the preceding paragraph. 

3. Resales 

Proposed §§ 1.25E–2(c)(1)(iii) and 

1.30D–4(d)(1)(iii) would treat the 

taxpayer as having purchased the 

vehicle with an intent to resell such 

vehicle if the resale occurs within 30 

days of the taxpayer placing the vehicle 

in service. Section 30D(d)(1)(B) provides 

that a new clean vehicle must be 

acquired for use or lease by the taxpayer 

and not for resale, and section 

25E(c)(3)(B) defines a qualified buyer as 

purchasing the vehicle for use and not 

for resale. The Treasury Department and 

the IRS propose that a resale within 30 

days is a sufficiently short period of 

time to presume that the purchase was 

done with the intent to resell. As a 

result, in such a case the taxpayer who 

purchased the new clean vehicle and 

resold it within 30 days may not claim 

a clean vehicle credit with respect to the 

vehicle. 

In the case of a resale by the taxpayer 

within 30 days of what was a new clean 

vehicle, the vehicle, once placed in 

service for use by the taxpayer, is not 

considered available for original use by 

another taxpayer for purposes of section 

30D, so the vehicle is not eligible for the 

section 30D credit upon a subsequent 

sale. In the case of a resale by the 

taxpayer within 30 days of what was a 

previously-owned clean vehicle, the 

vehicle, once placed in service for use 

by the taxpayer, is not eligible for the 

section 25E credit upon a subsequent 

sale. In the case of a resale of such 

vehicle, however, the seller report is not 

required to be updated because the 

seller may not have knowledge of the 

subsequent resale. Finally, if the 

taxpayer made an election to transfer 

the clean vehicle credit, that vehicle 

transfer election remains in effect and 

the value of any transferred credit 

pursuant to the clean vehicle transfer 

rules will be recaptured from the 

taxpayer (as opposed to the advance 

payment being collected from the 

eligible entity as an excessive payment, 

since the eligible entity is not a party to 

the subsequent resale). 

See section IV.E.2 of this Explanation 

of Provisions for a discussion of the 

excessive payment rules of proposed 

§§ 1.25E–3(g)(2) and 1.30D–5(f)(2) 

described in the preceding paragraph. 

4. Other Returns or Resales 

Proposed §§ 1.25E–2(c)(1)(iv) and 

1.30D–4(d)(iv) would provide a rule for 

returns or resales not described in 

section III.D.2 and 3 of this Explanation 

of Provisions (that is, 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 in service will remain 

eligible for the section 30D or section 

25E credit for the purchase of such 

vehicle. The proposed regulations 

would provide that, in the case of what 

was a new clean vehicle before the 

return or resale, 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 

what was a previously-owned clean 

vehicle before the return or resale, the 

vehicle, once returned or resold, 

generally is not eligible for the section 

25E credit upon a subsequent sale 


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Federal Register / Vol. 88, No. 194 / Tuesday, October 10, 2023 / Proposed Rules 70317 

pursuant to the first transfer rule 

described in proposed § 1.25E– 

1(b)(8)(ii). In the case of 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 vehicle 

transfer election remains in effect and 

the value of any transferred credit 

pursuant to the clean vehicle transfer 

rules generally is not subject to 

recapture or excessive payment. 

Although the proposed regulations 

would 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 

upon facts and circumstances that a 

clean vehicle was purchased with the 

intent to return or resell and may 

disallow the clean vehicle credit in such 

cases. 

The Treasury Department and the IRS 

request comments as to whether 30 days 

is the appropriate length of time for the 

return rule in proposed §§ 1.25E– 

2(c)(1)(ii) and 1.30D–4(d)(1)(ii) and the 

resale rule in proposed §§ 1.25E– 

2(c)(1)(iii) and 1.30D–4(d)(1)(iii). 

D. Branded Title Rule 

Proposed § 1.25E–2(d) would provide 

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. 

E. Seller Registration 

In general, to be eligible for the 

section 25E credit and the section 30D 

credit, a clean vehicle must be 

accompanied by a seller report. See 

sections 30D(d)(1)(H) and 

25E(c)(1)(D)(i). Proposed §§ 1.25E–2(e) 

and 1.30D–4(g) would provide that the 

seller must register with the IRS in the 

manner set forth in Revenue Procedure 

2023–33 for purposes of filing seller 

reports. 

F. Requirement To File a Complete 

Income Tax Return 

As discussed in the April 2023 

proposed regulations and in these 

regulations, a taxpayer will continue to 

use Form 8936, now titled Clean 

Vehicle Credits, to claim the section 25E 

or 30D credit, regardless of whether the 

taxpayer transfers the credit to the 

dealer. The IRS cannot properly monitor 

claims of these credits if taxpayers do 

not include a completed Form 8936 

with their individual income tax 

returns. Section 6213(g)(2)(D) defines a 

‘‘mathematical or clerical error’’ for 

purposes of math error authority, to 

include an omission of information 

which is required to be supplied on the 

return to substantiate an entry on the 

return. To ensure that the IRS can 

appropriately monitor these credits, 

proposed §§ 1.25E–2(f) and 1.30D–4(h) 

would clarify that taxpayers must file an 

income tax return for the taxable year in 

which the clean vehicle is placed in 

service to be entitled to the credit under 

section 25E or 30D. For this purpose, an 

income tax return is defined as a Form 

1040, U.S. Individual Income Tax 

Return, with an attached Form 8936, 

Clean Vehicle Credits, 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 that includes all of the 

information required on the forms and 

in instructions. 

IV. Transfer Rules for the Section 25E 

Credit and the Section 30D Credit 

Section 30D(g), as noted in more 

detail in section I.A of the Background 

section of this preamble, 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 and 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. 

The proposed regulations described in 

this section IV of the Explanation of 

Provisions are designed in part to 

ensure program integrity. Advance 

payment of the section 30D and section 

25E credits poses unique compliance 

challenges, since such advance 

payments are not subject to the same tax 

administration procedures that apply to 

claiming a credit via return filing. 

Furthermore, participation in the credit 

transfer and advance payment program 

is optional. The transfer of the section 

30D and 25E credits is elective on the 

part of the taxpayer, and the eligible 

entity can decide whether to offer to the 

taxpayer the ability to transfer such 

credits (thereby participating in the 

advance payment program). Taxpayers 

instead may choose to wait and claim a 

section 30D or section 25E credit on the 

taxpayer’s return. Section 30D(g)(1) 

provides that a taxpayer election to 

transfer the 30D credit is subject to the 

regulations or other guidance that the 

Secretary determines necessary. Section 

30D(g)(7) instructs the Secretary to 

establish a program for making advance 

payments to eligible entities—that is, 

payments made by the IRS to the 

eligible entity before the eligible entity 

files its Federal income tax return for 

the relevant taxable year. Taken 

together, these provisions provide 

authority for the Secretary to establish 

the parameters and conditions of the 

transfer election and the accompanying 

advance payment program for those 

taxpayers and eligible entities that 

choose to participate, in furtherance of 

sound tax administration. 

Proposed §§ 1.25E–3 and 1.30D–5 

would provide transfer rules under 

these provisions (section 30D(g) and 

section 25E(f) by cross reference to 

section 30D(g)), including by 

establishing an advance payment 

program for such transfers. Because the 

rules proposed under each section are 

the same, with the exception of 

references to the clean vehicle credit 

applicable to the section (that is, the 

section 25E credit under proposed 

§ 1.25E–3 and the section 30D credit 

under proposed § 1.30D–5), the 

discussion in section IV of this 

Explanation of Provisions, unless 

otherwise noted, refers to a ‘‘clean 

vehicle credit’’ to denote the credit 

under section 25E and section 30D. 

The rules below do not specifically 

address the requirements, under section 

30D(g)(2)(B)(ii) and (D), relating to the 

disclosure by the dealer of other 

incentives and the requirement that the 

dealer ensures that the availability or 

use of such other incentives do not limit 

the ability of a taxpayer to make a 

vehicle transfer election, and such 

election does not limit the value or use 

of such incentives. The Treasury 

Department and the IRS request 

comments as what guidance, if any, 

should be given here. 

A. Definitions That Apply for Purposes 

of the Transfer Rules 

Proposed §§ 1.25E–3(b) and 1.30D– 

5(a) would provide definitions that 

apply for purposes of the transfers of a 

clean vehicle credit. The definitions 

described in this section IV.A of the 

Explanation of Provisions apply to both 

proposed § 1.25E–3(b) and proposed 

§ 1.30D–5(a). 


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70318 Federal Register / Vol. 88, No. 194 / Tuesday, October 10, 2023 / Proposed Rules 

1. Advance Payment Program 

Proposed regulations 1.25E–3(b)(1) 

and 1.30D–5(a)(1) would define 

‘‘advance payment program’’ as the 

program described in section 30D(g)(7) 

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

section 30D(g)) and these proposed 

regulations under which an eligible 

entity may receive an advance payment 

from the Treasury Department in the 

case of a vehicle transfer election made 

by an electing taxpayer. The advance 

payment program represents the 

exclusive means by which an eligible 

entity may receive a transferred clean 

vehicle credit. 

2. Dealer 

Dealer for purposes of the transfer 

rules in proposed §§ 1.25E–3(b)(2) and 

1.30D–(a)(2) has the same meaning as 

that in proposed § 1.25E–1(b)(1) and 

described in section I.C.1 of this 

Explanation of Provisions. 

3. Dealer Tax Compliance 

Dealer tax compliance means that all 

required Federal information and tax 

returns of the dealer have been filed, 

including for Federal income and 

employment tax, and the dealer has 

paid all Federal tax, penalties, and 

interest due of the dealer at the time of 

sale. In the case of an installment 

agreement, the proposed regulations 

clarify that a dealer is in dealer tax 

compliance if the dealer is current on its 

obligations under that installment 

agreement. See proposed §§ 1.25E– 

3(b)(2) and 1.30D–5(a)(3). 

4. Electing Taxpayer 

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. To be an 

electing taxpayer, the individual must 

make certain attestations regarding 

anticipated eligibility for the credit to a 

registered dealer as provided in 

Revenue Procedure 2023–33. See 

proposed §§ 1.25E–3(b)(3) and 1.30D– 

5(a)(4). For example, the electing 

taxpayer must make an attestation 

regarding satisfaction of the modified 

adjusted gross income limitations for 

the clean vehicle credit. In addition, for 

purposes of section 30D, the electing 

taxpayer must attest to the registered 

dealer that it plans to use the vehicle 

predominantly for personal use. Id. 

Because the election to transfer a credit 

under section 30D(g) is limited to the 

credit allowable under subsection 30D, 

a taxpayer may not elect to transfer a 

general business credit for a new clean 

vehicle allowable under section 38 

instead of section 30D, pursuant to 

section 30D(c)(1). As described in 

proposed § 1.30D–1(b)(1) of the April 

2023 proposed regulations, a 

depreciable vehicle the use of which is 

50 percent or more business use in the 

taxable year the vehicle is placed in 

service is not apportioned between 

section 38 and section 30D, but instead 

is creditable entirely under section 38 as 

a general business credit. 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). 

These attestations will help prevent a 

transfer of the credit for which the 

taxpayer is ineligible, and therefore will 

reduce instances of recapture. 

5. Eligible Entity 

Eligible entity means 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. See 

proposed §§ 1.25E–3(b)(4) and 1.30D– 

5(a)(5). The requirements the eligible 

entity must meet are described in 

section IV.D of this Explanation of 

Provisions. 

6. Registered Dealer 

Registered dealer refers to a dealer 

that has completed the registration 

described in proposed §§ 1.25E–3(c) and 

1.30D–5(b) and section IV.B of this 

Explanation of Provisions. See proposed 

§§ 1.25E–3(b)(5) and 1.30D–5(a)(6). 

7. Time of Sale 

Time of sale means the date the clean 

vehicle is placed in service. The date 

the clean vehicle is placed in service is 

the date the taxpayer takes possession of 

the vehicle. See proposed §§ 1.25E– 

3(b)(6) and 1.30D–5(a)(7); see also 

proposed § 1.30D–2(e) of the April 2023 

proposed regulations for the definition 

of placed in service. 

B. Dealer Registration and Taxpayer 

Election 

1. Dealer Registration 

Proposed §§ 1.25E–3(c)(1) and 1.30D– 

5(b)(1) would provide that, before being 

eligible to participate in the advance 

payment program and receive transfers 

of clean vehicle credits from an electing 

taxpayer, a dealer must register (thereby 

becoming a registered dealer). The 

dealer will register in the manner set 

forth in Revenue Procedure 2023–33. 

Proposed §§ 1.25E–3(c)(2) and 1.30D– 

5(b)(2) would provide rules regarding 

dealer tax compliance. Specifically, 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 to 

become a registered dealer, but the 

dealer cannot receive advance payments 

under the advance payment program 

until the dealer tax compliance issue is 

resolved. In such case, the dealer, while 

registered, is not an eligible entity until 

it comes into dealer tax compliance. 

Relevant procedural guidance regarding 

dealer tax compliance will be published 

in the Internal Revenue Bulletin. 

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. Requiring registration of a 

dealer before it may participate in the 

advance payment program ensures that 

only entities that are valid, licensed 

vehicle dealers are eligible to receive 

advance payments of the transferred 

credits. In addition, requiring dealer tax 

compliance ensures that entities 

receiving advance payments are current 

on their Federal tax obligations. Taken 

together, these requirements help ensure 

that only compliant, registered dealers 

receive the benefit of the elective 

advance payment program by 

preventing fraud and ensuring sound 

tax administration. 

2. Vehicle Transfer Election 

For clean vehicles placed in service 

after December 31, 2023, the proposed 

regulations would provide that an 

electing taxpayer may make an election 

to transfer a clean vehicle credit 

otherwise allowable to the electing 

taxpayer to an eligible entity pursuant to 

a vehicle transfer election. See proposed 

§§ 1.25E–3(d) and 1.30D–5(c). The 

vehicle transfer election is made by the 

electing taxpayer no later than at the 

time of sale pursuant to Revenue 

Procedure 2023–33, and, once made, the 

vehicle transfer election is irrevocable. 

To make a valid vehicle transfer 

election, the electing taxpayer must 

transfer the entire amount of the clean 

vehicle credit otherwise allowable to it 

and, in exchange for the transferred 

clean vehicle credit, the eligible entity 

must pay the electing taxpayer an 

amount equal to the clean vehicle credit 

included in the vehicle transfer election 

or treat the credit amount as a down 

payment or partial payment. 

C. Federal Income Tax Consequences of 

the Vehicle Transfer Election 

1. Treatment of Electing Taxpayer 

Proposed §§ 1.25E–3(e)(1) and 1.30D– 

5(d)(1) would provide the Federal 

income tax treatment of a vehicle 

transfer election as to an electing 


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Federal Register / Vol. 88, No. 194 / Tuesday, October 10, 2023 / Proposed Rules 70319 

taxpayer. Specifically, the proposed 

regulations provide that the amount of 

the clean vehicle credit an electing 

taxpayer may transfer as part of a 

vehicle transfer election can exceed the 

electing taxpayer’s regular tax liability 

(as defined in section 26(b)(1) of the 

Code) for the taxable year in which the 

sale occurs, and the excess amount, if 

any, generally is not subject to recapture 

unless recapture pursuant to section 

30D(f)(5) or (g)(10) applies. In addition, 

the payment made (whether in cash or 

in the form of a partial payment or 

down payment for the purchase of such 

vehicle) by the eligible entity to the 

electing taxpayer is not includible in the 

electing taxpayer’s gross income for the 

taxable year. Finally, to ensure 

appropriate application of the basis 

reduction rule in section 30D(f)(1) (and 

section 25E(e) by cross reference to 

section 30D(f)(1)), the proposed 

regulations would provide that the 

payment described in the preceding 

sentence is treated as repaid by the 

electing taxpayer to the eligible entity as 

part of the purchase price of the vehicle. 

2. Treatment of Eligible Entity 

Proposed §§ 1.25E–3(e)(2) and 1.30D– 

5(d)(2) would provide the Federal 

income tax treatment of a vehicle 

transfer election as to an eligible entity. 

Specifically, the eligible entity may 

receive as an advance payment from the 

Treasury Department the amount of the 

clean vehicle credit transferred to the 

eligible entity as part of a vehicle 

transfer election, which is not 

includible in the eligible entity’s gross 

income for the taxable year in which 

such payment is received or accrued, as 

appropriate, and such payment may 

exceed the eligible entity’s regular tax 

liability (as defined in section 26(b)(1)) 

for such taxable year and generally is 

not subject to recapture unless the 

excessive payment rules apply. The 

eligible entity may not deduct the 

payment made to the electing taxpayer, 

and, consistent with the treatment as to 

the electing taxpayer described in 

section IV.C.1 of this Explanation of 

Provisions, the electing taxpayer is 

treated as paying the eligible entity the 

amount of the transferred clean vehicle 

credit as part of the purchase price of 

the clean vehicle. The amount of this 

payment by the electing taxpayer is 

treated as part of the amount realized by 

the eligible entity under section 1001 

from the sale of the clean vehicle. 

The proposed regulations would 

provide special rules in the case of an 

eligible entity that is a partnership or an 

S corporation. See proposed §§ 1.25E– 

3(e)(2)(vi) and 1.30D–5(d)(2)(vi). 

Because the electing taxpayer is treated 

as paying the eligible entity the amount 

of the transferred clean vehicle credit as 

part of the purchase price of the clean 

vehicle and the amount of this payment 

is treated as part of the amount realized 

by the eligible entity under section 1001 

from the sale of the clean vehicle, the 

advance payment is not treated as tax 

exempt income to the partnership or S 

corporation for purposes of the Code. 

These rules would ensure proper basis 

and capital accounting reporting for 

advance payments received by 

partnerships and S corporations and 

parity in Federal tax treatment 

regardless of the form through which 

the eligible entity conducts its business. 

3. Other Rules 

Proposed §§ 1.25E–3(e)(3) and 1.30D– 

5(d)(3) would provide that the Federal 

income tax treatment of the payments 

associated with a vehicle 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. Additionally, proposed 

§§ 1.25E–3(e)(4) and 1.30D–5(d)(4) 

would describe the additional rules that 

apply by reason of a vehicle transfer 

election (that is, section 30D(f)(1) and 

(f)(2), section 30D(f)(6), and section 

30D(f)(9), including with respect to the 

section 25E proposed regulations by 

reason of the cross reference to section 

30D(g) in section 25E(f)). 

Proposed § 1.30D–5(d)(5) would 

provide examples demonstrating the 

Federal income tax treatment of a 

vehicle transfer election. 

D. Advance Payment Program 

As noted earlier in this section, the 

advance payment program allows an 

eligible entity to receive payments from 

the IRS corresponding to the amount of 

the clean vehicle credit for which a 

vehicle transfer election was made 

before the eligible entity files its Federal 

income tax return for the taxable year 

with respect to which the vehicle 

transfer election relates. See proposed 

§§ 1.25E–3(f) and 1.30D–5(e). To qualify 

for the advance payment program, a 

registered dealer (that is, a dealer that 

meets the registration requirements 

described in section IV.B of this 

Explanation of Provisions), must meet 

additional requirements to be an eligible 

entity. Those requirements are that the 

registered dealer must submit additional 

registration information and be in dealer 

tax compliance, the registered dealer 

must retain information related to the 

vehicle transfer election for the period 

specified in the proposed regulations, 

and the registered dealer must meet any 

other requirements provided in 

procedural guidance published in the 

Internal Revenue Bulletin. 

The proposed regulations would also 

refer to suspension and revocation 

procedures identified in Revenue 

Procedure 2023–33. See proposed 

§§ 1.25E–3(f)(3) and (4) and 1.30D– 

5(e)(3) and (4). Section 7803(e)(3) 

provides it is the function of the IRS 

Independent Office of Appeals 

(Appeals) to resolve Federal tax 

controversies without litigation. 

Decisions made by the IRS relating to 

the suspension or revocation of a 

dealer’s registration are not Federal tax 

controversies within the meaning of the 

section 7803(e)(3) because registration is 

too attenuated and separate from any tax 

liability of the registering dealer. These 

registration-related decisions would 

have no direct effect on the amount of 

a dealer’s tax liability and likely would 

only affect the source of the dealer’s 

income. For example, a dealer’s ability 

to benefit from sections 30D(g) or 25E(f) 

is predicated on registration, a buyer 

purchasing the eligible clean vehicle, 

and a buyer making an election to 

transfer the credit under sections 30D(g) 

or 25E(f). Only upon those three events 

would the registration affect the dealer’s 

tax liability. Accordingly, proposed 

§§ 1.25E–3(f)(3) and (4) and 1.30D– 

5(e)(3) and (4) would provide that a 

dealer could not administratively appeal 

the IRS’s decisions relating to the 

suspension or revocation of a dealer’s 

registration unless the IRS and the IRS 

Independent Office of Appeals agree 

that such review is available and the IRS 

provides the time and manner for such 

review. 

E. Increases in Tax 

1. Recapture From Taxpayer 

As noted in section I of the 

Background section of this preamble, 

section 30D(g)(10) provides that, in the 

case of any taxpayer who has made an 

election described in section 30D(g)(1) 

with respect to a new clean vehicle and 

received a payment described in section 

30D(g)(2)(C) from an eligible entity, if 

the credit under section 30D would 

otherwise (but for section 30D(g)) not be 

allowable to such taxpayer pursuant to 

the application of section 30D(f)(10) 

(relating to the modified adjusted gross 

income limitation), the tax imposed on 

such taxpayer under chapter 1 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 of the section 

25E(f) cross reference to section 30D(g), 

similar rules will apply for previouslyowned clean vehicles. 


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70320 Federal Register / Vol. 88, No. 194 / Tuesday, October 10, 2023 / Proposed Rules 

Proposed §§ 1.25E–3(g)(1) and 1.30D– 

5(f)(1) would provide that, in the case of 

a clean vehicle credit that would 

otherwise not be allowable to a taxpayer 

that made a vehicle transfer election 

because the taxpayer exceeds the 

limitation based on modified adjusted 

gross income, the income tax imposed 

on the taxpayer under chapter 1 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 vehicle transfer 

election. The taxpayer in such a case 

must reconcile the amounts on its tax 

return for the taxable year. 

2. Excessive Payment as to Eligible 

Entity 

As noted in section I of the 

Background section of this preamble, 

section 30D(g)(7)(B) (and section 25E(f) 

by cross reference to section 30D(g)) 

provides 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) would provide 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, regardless of 

whether such entity would otherwise be 

subject to chapter 1 tax, 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 latter 

amount, 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 would 

provide that an excessive payment 

means, with respect to an advance 

payment to an eligible entity pursuant 

to a vehicle 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, or 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 

attributable to a taxpayer exceeding the 

limitation based on modified adjusted 

gross income is not treated as an 

excessive payment to an eligible entity. 

F. Requirement To File Return 

Proposed §§ 1.25E–3(h) and 1.30D– 

5(g) would provide that an electing 

taxpayer must file an income tax return 

for the taxable year in which the vehicle 

transfer election is made that reports 

such election. Specifically, the electing 

taxpayer must file a Form 1040, U.S. 

Individual Income Tax Return, with an 

attached Form 8936, Clean Vehicle 

Credits, or successor form, and any 

other additional forms, schedules, or 

statements prescribed by the 

Commissioner for purposes of making a 

return to report tax under chapter 1. The 

electing taxpayer must include the VIN 

of the clean vehicle on the return of tax 

for the taxable year in which the vehicle 

transfer election is made, as provided 

for in forms and instructions. 

G. Two Vehicle Transfer Elections per 

Year 

Proposed §§ 1.25E–3(i) and 1.30D– 

5(h) would provide that a taxpayer may 

make no more than two transfer 

elections per taxable year, consisting of 

elections either for two section 30D 

credits or for one section 30D credit and 

one section 25E credit. In the case of a 

joint return, each spouse may make two 

transfer elections per taxable year, for a 

maximum of four vehicle transfer 

elections in a taxable year. This 

proposed rule is intended to ensure 

program integrity by limiting transfer 

elections to vehicle sales that appear to 

be for legitimate personal or individual 

use. The section 30D credit may only be 

transferred for clean vehicles that are for 

predominantly personal use, and a 

taxpayer transferring the section 25E 

credit must be an individual. Moreover, 

a qualified buyer of a previously-owned 

clean vehicle for the section 25E credit 

must not have been allowed a prior 

section 25E credit for a sale in the prior 

three years. The Treasury Department 

and the IRS believe that it is unlikely 

that an individual who meets the 

modified adjusted gross income 

limitations would purchase more than 

two clean vehicles in a taxable year for 

legitimate personal or individual use. 

Accordingly, in light of the unique 

compliance challenges posed by 

advance payments of the section 30D 

and section 25E credits and pursuant to 

the broad authority conferred by section 

30D(g)(1) and section 25E(f), the 

proposed regulations would limit 

taxpayers to two vehicle transfer 

elections in a taxable year. 

V. Proposed Regulations Under Section 

6213(g)(2) 

A. Omission of a Correct Vehicle 

Identification Number 

The IRA added three new definitions 

to the exclusive list of ‘‘mathematical or 

clerical errors’’ in section 6213(g)(2). 

These new definitions are set out in 

sections 6213(g)(2)(T), (U), and (V). 

Section 6213(g)(2)(T) provides that the 

term ‘‘mathematical or clerical error’’ 

means an omission of a correct VIN 

required under section 30D(f)(9) 

(relating to credit for new clean 

vehicles) to be included on a return; 

section 6213(g)(2)(U) provides that the 

term ‘‘mathematical or clerical error’’ 

means an omission of a correct VIN 

required under section 25E(d) (relating 

to credit for previously-owned clean 

vehicles) to be included on a return; and 

section 6213(g)(2)(V) provides that the 

term ‘‘mathematical or clerical error’’ 

means an omission of a correct VIN 

required under section 45W(e) (relating 

to commercial clean vehicle credit) to be 

included on a return. 

The flush language added by Congress 

in 1998 to clarify the meaning of a 

correct TIN does not provide the 

clarification that is necessary to 

determine the meaning of ‘‘an omission 

of a correct vehicle identification 

number’’ under sections 6213(g)(2)(T) 

through (V). Accordingly, proposed 

§ 301.6213–2 would provide rules for 

determining when the IRS is authorized 

to use math error authority to make a 

summary assessment when there has 

been an ‘‘omission of a correct vehicle 

identification number’’ on a taxpayer’s 

return when claiming or electing to 

transfer the credits under sections 30D, 

25E and 45W. 

Proposed § 301.6213–2 would 

describe when taxpayers will be treated 

as having omitted a correct VIN required 

to be included on a taxpayer’s return 

under section 30D, section 25E, and 

section 45W. Under proposed 

§ 301.6213–2(b), a taxpayer would be 

treated as having omitted a correct VIN 

(1) when the VIN required to be 

reported under section 30D(f)(9), 25E(d), 

or 45W(e) is not included on the tax 

return; (2) when the VIN required to be 

reported under section 30D(f)(9), 25E(d), 

or 45W(e) is included on the tax return 

but is not a VIN for an eligible vehicle 

under section 30D(d)(1), 25E(c)(1), or 

45W(c); (3) when the VIN required to be 

reported under section 30D(f)(9), 25E(d), 

or 45W(e) is included on the tax return 

but the taxpayer claims the credit for a 

year in which the vehicle is not eligible 

for the credit; (4) when the VIN required 

to be reported under section 30D(f)(9) is 

included on the tax return but differs 


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Federal Register / Vol. 88, No. 194 / Tuesday, October 10, 2023 / Proposed Rules 70321 

from the VIN reported to the Secretary 

under section 30D(d)(1)(H) for the 

taxpayer who was issued the report; and 

(5) when the VIN required to be 

reported under section 25E(d) is 

included on the tax return but differs 

from the VIN reported to the Secretary 

under section 25E(c)(1)(D)(i) for the 

taxpayer who was issued the report. 

B. Failure To Include the Vehicle 

Identification Number on the Tax 

Return 

A taxpayer claiming a credit with 

respect to a new clean vehicle under 

section 30D, a previously-owned clean 

vehicle under section 25E(a), or a 

commercial clean vehicle under section 

45W(a), is required under sections 

30D(f)(9), 25E(d), or 45W(e), whichever 

is applicable, to report the VIN of such 

vehicle on the taxpayer’s return. Under 

proposed § 301.6213–2, a taxpayer 

would be treated as having omitted a 

correct VIN required under sections 

30D(f)(9), 25E(d), and 45W(e), if the VIN 

is missing from the taxpayer’s return or 

the number reported on the return is an 

invalid VIN. A VIN is a unique 

identifying code for a specific 

automobile. Modern VINs comprise 17 

characters (digits and capital letters) 

that act as a unique identifier for the 

vehicle and displays the car’s unique 

features, specifications, and 

manufacturer. An invalid VIN is a 

number that does not match any 

existing VIN reported by a qualified 

manufacturer. Under the proposed 

regulation, if the IRS determines that a 

taxpayer has failed to include the VIN 

with the tax return for the taxable year 

because the VIN is missing or invalid, 

the IRS is authorized to make an 

assessment of the tax based on an 

omission of a correct VIN under either 

section 6213(g)(2)(T), (U), or (V), 

whichever is applicable. 

C. Vehicle Identification Number 

Included on the Return Is for Ineligible 

Vehicle 

The credit under sections 30D, 25E, or 

45W is available for vehicles that 

qualify as a new clean vehicle under 

section 30D(d)(1), a previously-owned 

clean vehicle under section 25E(c)(1), or 

a qualified commercial clean vehicle 

under section 45W(c). Under proposed 

§ 301.6213–2, a taxpayer would be 

treated as having omitted a correct VIN 

required under sections 30D(f)(9), 

25E(d), or 45W(e), if the VIN included 

on the taxpayer’s return is not that of a 

new clean vehicle under section 

30D(d)(1), a previously-owned clean 

vehicle under section 25E(c)(1), or a 

qualified commercial clean vehicle 

under section 45W(c). Under the 

proposed regulation, if the IRS 

determines that a taxpayer reported a 

VIN but the VIN is not for a vehicle 

described in sections 30D(d)(1), 

25E(c)(1), or 45W(c), the IRS is 

authorized to make an assessment of the 

tax based on an omission of a correct 

VIN under section 6213(g)(2)(T), (U), or 

(V), whichever is applicable. 

D. Vehicle Identification Number Is 

Included on the Return but Is Claimed 

for a Year in Which the Vehicle Is Not 

Eligible for the Credit 

The credit under section 30D is 

available for each new clean vehicle 

placed in service by the taxpayer during 

the taxable year if the new clean vehicle 

meets the critical mineral and battery 

component requirements applicable for 

that year, as defined in sections 

30D(e)(1) and (2). Beginning in 2023, the 

percentage of the value of the applicable 

critical minerals contained in the 

vehicle’s battery, as well as the 

percentage of the value of the 

components contained in the vehicle’s 

battery that were manufactured or 

assembled in North America, must 

equal or exceed the applicable 

percentages identified in sections 

30D(e)(1) or (2) for the relevant year. If 

the vehicle does not meet at least one of 

the applicable percentage requirements 

for critical minerals and battery 

components for the specified year in 

which it is placed in service, the vehicle 

is ineligible for the section 30D credit 

for the claimed year. Therefore, a VIN 

reported on a taxpayer’s return that does 

not meet the section 30D(e)(1) or (2) 

requirements for the applicable year 

cannot be a correct VIN under section 

30D. 

The credits under sections 30D, 25E, 

and 45W are available for vehicles that 

qualify as a new clean vehicle under 

section 30D(d)(1), a previously-owned 

clean vehicle under section 25E(c)(1), or 

a qualified commercial clean vehicle 

under section 45W(c) for the taxable 

year the vehicle is placed in service. If 

a taxpayer claims the credit under 

sections 30D, 25E, or 45W, whichever is 

applicable, for a year other than the year 

that the vehicle was placed in service, 

the vehicle is ineligible for the credit for 

the claimed year. Therefore, a VIN 

reported on a taxpayer’s return for a 

vehicle that was not placed in service 

for the year the taxpayer claims the 

credit cannot be a correct VIN under 

sections 30D, 25E or 45W. Under 

proposed § 301.6213–2(b)(3), a taxpayer 

would be treated as having omitted a 

correct VIN required under section 

30D(f)(9) if the VIN included on the tax 

return is for a vehicle that is not eligible 

for such credit under section 30D(e)(1) 

or (2) in the taxable year that the 

taxpayer claims the credit, if the 

taxpayer claims the credit under section 

30D, 25E, or 45W for a year other than 

the year that the vehicle was placed in 

service, or if the taxpayer claims a credit 

under section 25E for a previouslyowned clean vehicle with a model year 

that is not at least two model years 

earlier than the calendar year in which 

such vehicle is acquired. Under the 

proposed regulation, if the IRS 

determines the taxpayer omitted a 

correct VIN required under section 

30D(f)(9) because the VIN included on 

the tax return is for a vehicle that is not 

eligible for such credit under section 

30D(e)(1) or (2) in the taxable year that 

the taxpayer claims the credit, or if the 

taxpayer claims the credit under section 

30D, 25E, or 45W for a year other than 

the year that the vehicle was placed in 

service, the IRS is authorized to make an 

assessment of the tax based on an 

omission of a correct VIN under section 

6213(g)(2)(T), (U), or (V), whichever is 

applicable. 

E. Vehicle Identification Number Is 

Included on the Return but Does Not 

Match the Vehicle Identification 

Number Included in the Section 

30D(d)(1)(H) Seller Report for a 

Particular Taxpayer 

Section 30D(d)(1)(H) requires the 

person who sells a new clean vehicle to 

the taxpayer to furnish a report to the 

taxpayer and to the Secretary that 

contains (i) the name and TIN of the 

taxpayer, (ii) the VIN of the vehicle, 

unless, in accordance with any 

applicable rules promulgated by the 

Secretary of Transportation, the vehicle 

is not assigned such a number, (iii) the 

battery capacity of the vehicle, (iv) 

verification that original use of the 

vehicle commences with the taxpayer, 

(v) the maximum credit under section 

30D allowable to the taxpayer with 

respect to the vehicle, and (vi) in the 

case of a taxpayer who makes a vehicle 

transfer election, any amount described 

in section 30D(g)(2)(C) that was paid to 

such taxpayer. These requirements for 

the seller report reflect that it is a 

fundamental reporting requirement that 

the VIN for each vehicle eligible for the 

credit be linked to a particular 

taxpayer’s TIN. A VIN reported on a 

taxpayer’s return by anyone other than 

the reported taxpayer’s TIN cannot, 

therefore, be a correct VIN for the 

taxpayer claiming the section 30D 

credit. 

To reflect this TIN/VIN linkage and 

ensure that only the taxpayer who 

purchased the vehicle is able to claim 

the VIN for the vehicle eligible for the 

section 30D credit, proposed 


ddrumheller on DSK120RN23PROD with PROPOSALS3
70322 Federal Register / Vol. 88, No. 194 / Tuesday, October 10, 2023 / Proposed Rules 

§ 301.6213–2(b)(4) would provide that a 

taxpayer is treated as having omitted a 

correct VIN on a tax return as required 

under section 30D(f)(9) if the VIN on the 

tax return does not match the VIN 

included in the seller report under 

section 30D(d)(1)(H) for the taxpayer 

claiming the credit. Under the proposed 

regulation, if the IRS determines that a 

taxpayer reported a VIN but the VIN 

claimed on the taxpayer’s return is not 

for a vehicle that was reported to the 

IRS and the taxpayer on the section 

30D(d)(1)(H) report for that taxpayer, the 

IRS is authorized to make an assessment 

of the tax based on an omission of a 

correct VIN under section 6213(g)(2)(T). 

F. Vehicle Identification Number Is 

Included on the Return but Does Not 

Match the Vehicle Identification 

Number Included in the Section 

25E(c)(1)(D)(i) Seller Report for a 

Particular Taxpayer 

Section 25E(c)(1)(D)(i) requires the 

person who sells a previously-owned 

clean vehicle to the taxpayer to furnish 

a report to the taxpayer and to the 

Secretary that meets the requirements of 

section 30D(d)(1)(H) (except for clause 

(iv) thereof). Just like the requirements 

for the seller report for a new clean 

vehicle, the requirements for the seller’s 

previously-owned clean vehicle report 

reflect a fundamental linkage between 

the VIN for each vehicle eligible for the 

credit and a particular taxpayer’s TIN. 

For the same reasons listed in section 

V.E of this Explanation of Provisions, a 

VIN reported on a taxpayer’s return by 

anyone other than the reported 

taxpayer’s TIN cannot, therefore, be a 

correct VIN for the taxpayer claiming 

the section 25E credit. 

To reflect this TIN/VIN linkage and 

ensure that only the taxpayer who 

purchased the vehicle is able to claim 

the VIN for the vehicle eligible for the 

section 25E credit, proposed 

§ 301.6213–2(b)(5) would provide that a 

taxpayer is treated as having omitted a 

correct VIN on a tax return as required 

under section 25E(d) if the VIN on the 

tax return does not match the VIN 

included in the seller report under 

section 25E(c)(1)(D)(i) for a taxpayer 

claiming the credit. Under the proposed 

regulation, if the IRS determines that a 

taxpayer included a VIN on a tax return 

but the VIN claimed on the taxpayer’s 

return is not for a vehicle that was 

reported to the IRS and the taxpayer 

under sections 25E(c)(1)(D)(i) for that 

taxpayer, the IRS would be authorized 

to make an assessment of the tax based 

on an omission of a correct VIN under 

section 6213(g)(2)(U). 

VI. Severability 

If any provision in this proposed 

rulemaking is held to be invalid or 

unenforceable facially, or as applied to 

any person or circumstance, it shall be 

severable from the remainder of this 

rulemaking, and shall not affect the 

remainder thereof, or the application of 

the provision to other persons not 

similarly situated or to other dissimilar 

circumstances. 

Proposed Applicability Dates 

Except as described in the following 

paragraph, these regulations are 

generally proposed to apply to new 

clean vehicles and previously-owned 

clean vehicles placed in service in 

taxable years beginning after October 10, 

2023. 

Proposed §§ 1.25E–3, 1.30D–5, and 

301.6213–2 are proposed to apply to 

taxable years beginning after December 

31, 2023. The applicability date of 

proposed §§ 1.25E–3 and 1.30D–5 

would align with the applicability date 

of the transfer provisions of the section 

25E or section 30D credit, which apply 

to vehicles acquired or placed in 

service, respectively, after December 31, 

2023. Proposed § 301.6213–2 describes 

the exercise of math error authority with 

respect to omission of a correct VIN, 

which relates in part to seller reporting. 

Application of this proposed rule to 

taxable years beginning after December 

31, 2023, would align with the 

commencement of the electronic 

submission of seller reporting to 

improve administration of the section 

25E and section 30D credits. 

Effect on Other Documents 

This notice of proposed rulemaking 

modifies proposed §§ 1.30D–2 and 

1.30D–4 of the April 2023 proposed 

regulations. 

Special Analyses 

I. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(44 U.S.C. 3501–3520) (PRA) generally 

requires that a Federal agency obtain the 

approval of the Office of Management 

and Budget (OMB) before collecting 

information from the public, whether 

such collection of information is 

mandatory, voluntary, or required to 

obtain or retain a benefit. 

For purposes of the PRA, the 

reporting burden associated with the 

collection of information in proposed 

§§ 1.25E–3 and 1.30D–5 regarding 

vehicle transfer elections will be 

reflected in the PRA Submissions 

associated with Revenue Procedure 

2023–33. The IRS is seeking OMB 

approval and requesting a new OMB 

control number for Revenue Procedure 

2023–33. These proposed regulations do 

not alter previously accounted for 

information collection requirements and 

do not create new collection 

requirements. OMB Control Number 

1545–2137 covers Form 8936 and Form 

8936–A regarding electric vehicle 

credits, including the new requirement 

in section 30D(f)(9) to include on the 

taxpayer’s return for the taxable year the 

VIN of the vehicle for which the section 

30D credit is claimed. Revenue 

Procedure 2022–42 describes the 

procedural requirements for qualified 

manufacturers to make periodic written 

reports to the Secretary to provide 

information related to each vehicle 

manufactured by such manufacturer 

that is eligible for the section 30D credit 

as required in section 30D(d)(3), 

including the critical mineral and 

battery component certification 

requirements in section 30D(e)(1)(A) 

and (2)(A). In addition, Revenue 

Procedure 2022–42 also provides the 

procedures for sellers of new clean 

vehicles to report information required 

by section 30D(d)(1)(H) for vehicles to 

be eligible for the section 30D credit. 

The collections of information 

contained in Revenue Procedure 2022– 

42 are described in that document and 

were submitted to the Office of 

Management and Budget in accordance 

with the PRA under control number 

1545–2137. 

II. Regulatory Flexibility Act 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) (RFA) imposes 

certain requirements with respect to 

Federal rules that are subject to the 

notice and comment requirements of 

section 553(b) of the Administrative 

Procedure Act (5 U.S.C. 551 et seq.) and 

that are likely to have a significant 

economic impact on a substantial 

number of small entities. Unless an 

agency determines that a proposal will 

not have a significant economic impact 

on a substantial number of small 

entities, section 603 of the RFA requires 

the agency to present an initial 

regulatory flexibility analysis (IRFA) of 

the proposed rule. The Treasury 

Department and the IRS have not 

determined whether the proposed rule, 

when finalized, will have a significant 

economic impact on a substantial 

number of small entities. This 

determination requires further study. 

However, because there is a possibility 

of a significant economic impact on a 

substantial number of small entities, an 

IRFA is provided in these proposed 

regulations. The Treasury Department 

and the IRS invite comments on both 


ddrumheller on DSK120RN23PROD with PROPOSALS3
Federal Register / Vol. 88, No. 194 / Tuesday, October 10, 2023 / Proposed Rules 70323 

the number of entities affected and the 

economic impact on small entities. 

A. Need for and Objectives of the Rule 

The proposed regulations would 

provide the eligibility rules and key 

definitions regarding the section 25E 

credit to allow taxpayers to know 

whether their purchase of a used vehicle 

is eligible for the section 25E credit. In 

addition, the proposed regulations 

would provide rules regarding the 

recapture authority under sections 

30D(f)(5) and 25E(e), so that taxpayers 

and the IRS have clear rules regarding 

when a clean vehicle may cease being 

eligible property for purposes of the 

section 25E and section 30D credits. 

Further, the proposed regulations would 

provide rules regarding the meaning of 

the omission of a correct VIN for 

purposes of math error authority as 

described in section 6213(g)(2). Clear 

rules regarding the exercise of math 

error authority will provide for efficient 

and fair tax administration. 

The proposed regulations would 

provide guidance for purposes of 

taxpayers electing to transfer vehicle 

credits under sections 25E(f) and 30D(g) 

to eligible entities and for eligible 

entities participating in the advance 

payment program with respect to those 

transferred credits. The proposed rules 

would provide rules regarding the 

process for taxpayers to elect to transfer 

the credit and for eligible entities to 

register and receive advance payments 

from the IRS and rules regarding the 

Federal income tax treatment of the 

vehicle transfer election, including 

recapture and excessive payments. The 

proposed rules regarding the vehicle 

transfer election ensure certainty 

regarding the consequences of the 

transfer election, decrease the risk of 

fraud, and expedite the process by 

which an eligible entity may receive an 

advance payment under section 25E(f) 

or 30D(g). 

The proposed rules are expected to 

encourage taxpayers to increase the 

placing in service of new and 

previously-owned clean vehicles. Thus, 

the Treasury Department and the IRS 

intend and expect that the proposed 

rules will deliver benefits across the 

economy and environment that will 

beneficially impact various industries, 

including clean vehicle manufacturers 

and dealers. 

B. Affected Small Entities 

The Small Business Administration 

estimates in its 2023 Small Business 

Profile that 99.9 percent of United States 

businesses meet its definition of a small 

business. The applicability of these 

proposed regulations does not depend 

on the size of the business, as defined 

by the Small Business Administration. 

As described more fully in the preamble 

to this proposed regulation and in this 

IRFA, these rules may affect a variety of 

different businesses across several 

different industries, but will primarily 

affect dealers of new and previouslyowned clean vehicles who would like to 

be eligible entities to receive a 

transferred credit from the buyers of a 

clean vehicle. The Treasury Department 

and the IRS currently estimate the 

number of dealers of new clean vehicles 

to be approximately 16,000, and the 

number of dealers of previously-owned 

clean vehicles to be approximately 

36,000. 

Of the estimated 16,000 dealers of 

new clean vehicles, we estimate that 

10,000 will have receipts in excess of 

$25 million; 3,000 will have receipts 

between $10-$25 million; 1,000 will 

have receipts between $5–10 million, 

and 2,000 will have receipts under $5 

million. Of the estimated 36,000 dealers 

of previously-owned clean vehicles, we 

estimate that 500 will have receipts in 

excess of $25 million; 1,500 will have 

receipts between $10-$25 million; 2,000 

will have receipts between $5–10 

million, and 32,000 will have receipts 

under $5 million. 

The Treasury Department and the IRS 

expect to receive more information on 

the impact on small businesses through 

comments on this proposed rule and 

again when participation in the election 

to transfer credits under sections 25E(f) 

and 30D(g) commences. 

1. Impact of the Rules 

The recordkeeping and reporting 

requirements would increase for 

taxpayers who elect to transfer the 

section 25E or 30D credit to an eligible 

entity. In addition, the recordkeeping 

and reporting requirements would 

increase for dealers who seek to qualify 

as eligible entities and participate in the 

advance payment program. Although 

the Treasury Department and the IRS do 

not have sufficient data to determine 

precisely the likely extent of the 

increased costs of compliance, the 

estimated burden of complying with the 

recordkeeping and reporting 

requirements are described in the PRA 

section of the preamble. The Treasury 

Department and IRS estimate that, based 

on the total of 52,000 dealers of new 

(16,000) and previously-owned (36,000) 

clean vehicles, it will take 

approximately one hour to register as 

entities eligible to receive advance 

payments of credits under sections 25E 

and 30D, for a total of 52,000 hours 

total. The Treasury Department and IRS 

further estimate that there are 

approximately 950,000 taxpayers who 

will purchase new clean vehicles and 

28,750 taxpayers who will purchase 

previously-owned clean vehicles who 

will elect to transfer their respective 

credits to the eligible entity, for a total 

of 978,750 elections annually. The 

Treasury Department and IRS estimate 

each election will take approximately 15 

minutes to complete, for a total burden 

of approximately 244,688 hours per 

year. 

2. Alternatives Considered 

The Treasury Department and the IRS 

considered various alternatives in 

promulgating these proposed 

regulations. Significant alternatives 

considered include: (1) the sale price 

definition in proposed § 1.25E–1(b)(9); 

(2) the first transfer rule described in 

proposed § 1.25E–1(b)(8); (3) the 

recapture rules provided in proposed 

§§ 1.25E–2(c) and 1.30D–4(f), and (4) the 

dealer registration requirements 

provided in proposed §§ 1.25E–3(b) and 

1.30D–5(b). 

Regarding the sale price definition in 

proposed § 1.25E–1(b)(9), the Treasury 

Department and the IRS considered the 

appropriate scope of the definition and 

how the definition of sale price should 

be consistent with or diverge from the 

definition of manufacturer’s suggested 

retail price for purposes of section 

30D(f)(11). The definition of 

manufacturer’s suggested retail price in 

proposed § 1.30D–2(c) of the April 2023 

proposed regulations refers to a 

statutory definition in 15 U.S.C. 1232 

that is used for purposes of vehicle 

labeling on the vehicle window sticker. 

That proposed definition includes 

optional accessories or items included 

by the manufacturer at the time of 

delivery to the dealer but excludes 

delivery charges to the dealer. For used 

vehicles, however, there are not similar 

vehicle labeling standards that provide 

a standard for defining sales price. In 

addition, in a used vehicle sale the 

dealer and buyer may negotiate to 

characterize a portion of the sale price 

as a separately stated fee or charge 

(other than those required by law) to 

avoid the section 25E sales price cap of 

$25,000. To prevent this type of 

recharacterization, proposed § 1.25E– 

1(b)(9) defines sale price to mean the 

total sale price agreed upon by the buyer 

and the dealer, including any delivery 

charges. This definition specifically 

excludes separately-stated taxes and 

fees required by State or local law, since 

such taxes and fees are not subject to 

negotiation or recharacterization by the 

dealer and buyer. 

The Treasury Department and the IRS 

considered various alternatives to the 


ddrumheller on DSK120RN23PROD with PROPOSALS3
70324 Federal Register / Vol. 88, No. 194 / Tuesday, October 10, 2023 / Proposed Rules 

first transfer rule described in proposed 

§ 1.25E–1(b)(8). This rule is necessary to 

determine whether a sale of a 

previously-owned clean vehicle is a 

qualified sale pursuant to section 

25E(c)(2). One of the 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. 

However, some of the characteristics of 

being a qualified buyer are unknowable 

to the dealer and the buyer in a 

subsequent sale, including that a 

qualified buyer be an individual, not be 

a dependent, and not have claimed the 

section 25E credit in the prior three 

years. As a result, if a previously-owned 

clean vehicle is transferred more than 

once after the date of enactment of 

section 25E, there is no way for the 

parties after the first transfer to know if 

the first transfer was to a qualified 

buyer. Because the IRS may have access 

to some information necessary to 

determine whether a first transfer was to 

a qualified buyer, the Treasury 

Department and the IRS considered 

alternatives to the first transfer rule such 

as a look-up tool regarding prior claims 

of the section 25E credit for a particular 

vehicle or information regarding prior 

vehicle purchasers. However, disclosure 

of this information raises significant 

confidentiality issues. Accordingly, the 

Treasury Department and the IRS have 

proposed the first transfer rule to 

provide certainty to buyers and dealers 

as to which transfer of a previouslyowned clean vehicle is the first transfer 

and will qualify for the section 25E 

credit by relying on the vehicle history. 

The Treasury Department and the IRS 

considered alternatives to the recapture 

rules provided in proposed §§ 1.25E– 

2(c) and 1.30D–4(f). Given the increased 

availability and benefits of the section 

30D credit and the new section 25E 

credit when the credit can be transferred 

to an eligible entity and is not limited 

by the taxpayer’s tax liability, the 

Treasury Department and the IRS 

determined it was necessary to provide 

rules regarding when the value of the 

clean vehicle credits can be recaptured. 

The Treasury Department and the IRS 

also considered the appropriate length 

of time within which a return or resale 

of a vehicle would make the taxpayer 

ineligible for the credit. Longer and 

shorter periods of time were considered. 

Based on industry standard return 

policies, including money back 

guarantees, the Treasury Department 

and the IRS determined that it was 

appropriate to deny the benefit of the 

credit if the credit was returned within 

30 days. In addition, the Treasury 

Department and the IRS determined it 

was reasonable to assume an intent to 

resell the vehicle, making the purchase 

of the vehicle ineligible, if the vehicle 

was resold within 30 days. 

Finally, with respect to the dealer 

registration requirements provided in 

proposed §§ 1.25E–3(b) and 1.30D–5(b), 

the Treasury Department and the IRS 

considered various processes by which 

a seller could become an eligible entity 

and participate in the advance payment 

program. The Treasury Department and 

the IRS considered a process that did 

not require submission of a significant 

amount of information prior to the 

dealer becoming an eligible entity, but 

such an approach could require more 

back-end compliance. To ensure 

efficient tax administration and reduce 

fraud, the Treasury Department and the 

IRS determined that an up-front, 

electronic registration process was 

necessary for the IRS to effectively 

review and validate eligible entity 

status. To ensure efficient tax 

administration and reduce fraud, the 

Treasury Department and the IRS 

determined that an up-front, electronic 

registration process was necessary for 

the IRS to effectively review and 

validate eligible entity status. In 

addition, the Treasury Department and 

the IRS determined that dealers must 

submit identity information and 

attestations regarding their participation 

in the advance payment program to 

ensure program integrity. Finally, the 

Treasury Department and the IRS 

determined that dealer tax compliance 

was necessary to ensure that advance 

payments are being paid only to 

compliant dealers. 

3. Duplicative, Overlapping, or 

Conflicting Federal Rules 

The proposed rule would not 

duplicate, overlap, or conflict with any 

relevant Federal rules. As discussed in 

the Explanation of Provisions, the 

proposed rules would merely provide 

requirements, procedures, and 

definitions related to the clean vehicle 

transfer election programs for sections 

25E and 30D. The Treasury Department 

and the IRS invite input from interested 

members of the public about identifying 

and avoiding overlapping, duplicative, 

or conflicting requirements. 

III. Section 7805(f) 

Pursuant to section 7805(f), this 

notice of proposed rulemaking has been 

submitted to the Chief Counsel for the 

Office of Advocacy of the Small 

Business Administration for comment 

on its impact on small business. 

IV. Unfunded Mandates Reform Act 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

requires that agencies assess anticipated 

costs and benefits and take certain other 

actions before issuing a final rule that 

includes any Federal mandate that may 

result in expenditures in any one year 

by a State, local, or Tribal government, 

in the aggregate, or by the private sector, 

of $100 million (updated annually for 

inflation). This proposed rule does not 

include any Federal mandate that may 

result in expenditures by State, local, or 

Tribal governments, or by the private 

sector in excess of that threshold. 

V. Executive Order 13132: Federalism 

Executive Order 13132 (Federalism) 

prohibits an agency from publishing any 

rule that has federalism implications if 

the rule either imposes substantial, 

direct compliance costs on State and 

local governments, and is not required 

by statute, or preempts State law, unless 

the agency meets the consultation and 

funding requirements of section 6 of the 

Executive order. This proposed rule 

does not have federalism implications 

and does not impose substantial direct 

compliance costs on State and local 

governments or preempt State law 

within the meaning of the Executive 

order. 

VI. Regulatory Planning and Review 

Pursuant to the Memorandum of 

Agreement, Review of Treasury 

Regulations under Executive Order 

12866 (June 9, 2023), tax regulatory 

actions issued by the IRS are not subject 

to the requirements of section 6 of 

Executive Order 12866, as amended. 

Therefore, a regulatory impact 

assessment is not required. 

Comments and Requests for a Public 

Hearing 

Before these proposed amendments to 

the regulations are adopted as final 

regulations, consideration will be given 

to comments that are submitted timely 

to the IRS as prescribed in this preamble 

under the ADDRESSES section. The 

Treasury Department and the IRS 

request comments on all aspects of the 

proposed regulations. Any comments 

submitted will be made available at 

https://www.regulations.gov or upon 

request. 

A public hearing will be scheduled if 

requested in writing by any person who 

timely submits electronic or written 

comments. Requests for a public hearing 

are also encouraged to be made 

electronically. If a public hearing is 

scheduled, notice of the date and time 

for the public hearing will be published 

in the Federal Register. 


ddrumheller on DSK120RN23PROD with PROPOSALS3
Federal Register / Vol. 88, No. 194 / Tuesday, October 10, 2023 / Proposed Rules 70325 

Announcement 2023–16, 2023–20 

I.R.B. 854 (May 15, 2023), provides that 

public hearings will be conducted in 

person, although the IRS will continue 

to provide a telephonic option for 

individuals who wish to attend or 

testify at a hearing by telephone. Any 

telephonic hearing will be made 

accessible to people with disabilities. 

Statement of Availability of IRS 

Documents 

Guidance cited in this preamble is 

published in the Internal Revenue 

Bulletin and is available from the 

Superintendent of Documents, U.S. 

Government Publishing Office, 

Washington, DC 20402, or by visiting 

the IRS website at https://www.irs.gov. 

Drafting Information 

The principal author of these 

proposed regulations is the Office of the 

Associate Chief Counsel (Passthroughs 

and Special Industries). However, other 

personnel from the Treasury 

Department and the IRS participated in 

their development. 

List of Subjects 

26 CFR Part 1 

Income taxes, Reporting and 

recordkeeping requirements. 

26 CFR Part 301 

Employment taxes, Estate taxes, 

Excise taxes, Gift taxes, Income taxes, 

Penalties, Reporting and recordkeeping 

requirements. 

Proposed Amendments to the 

Regulations 

Accordingly, the Treasury Department 

and the IRS propose to amend 26 CFR 

parts 1 and 301 as follows: 

PART 1—INCOME TAXES 

■ Paragraph 1. The authority citation 

for part 1 is amended by adding entries 

in numerical order for §§ 1.25E–1 

through 1.25E–3 and 1.30D–5 to read in 

part as follows: 

Authority: 26 U.S.C. 7805 * * * 

Sections 1.25E–1 through 1.25E–3 also 

issued under 26 U.S.C. 25E. 

* * * * * 

Section 1.30D–5 also issued under 26 

U.S.C. 30D. 

* * * * * 

■ Par 2. Sections 1.25E–0 through 

1.25E–3 are added to read as follows: 

Sec. 

* * * * * 

1.25E–0 Table of contents. 

1.25E–1 Credit for previously-owned clean 

vehicles. 

1.25E–2 Special rules. 

1.25E–3 Transfer of credit. 

* * * * * 

§ 1.25E–0 Table of contents. 

This section lists the captions 

contained in §§ 1.25E–1 through 1.25E– 

3. 

§ 1.25E–1 Credit for previously-owned clean 

vehicles. 

(a) In general. 

(b) Definitions. 

(1) Dealer. 

(2) Incentive. 

(3) Modified adjusted gross income. 

(4) Placed in service. 

(5) Previously-owned clean vehicle. 

(6) Qualified buyer. 

(7) Qualified manufacturer. 

(8) Qualified sale. 

(i) In general. 

(ii) First transfer rule. 

(9) Sale price. 

(10) Section 25E regulations. 

(11) Seller report. 

(c) Limitation based on modified adjusted 

gross income. 

(1) In general. 

(2) Threshold amount. 

(3) Special rule for change in filing status. 

(d) Limitation on multiple owners. 

(1) In general. 

(2) Seller reporting. 

(e) Examples. 

(1) Example 1. 

(2) Example 2. 

(3) Example 3. 

(4) Example 4. 

(5) Example 5. 

(6) Example 6. 

(f) Severability. 

(g) Applicability date. 

§ 1.25E–2 Special rules. 

(a) In general. 

(b) No double benefit. 

(1) In general. 

(2) Interaction of section 30D and section 

25E no double benefit rules. 

(c) Recapture. 

(1) In general. 

(i) Cancelled sale. 

(ii) Vehicle return. 

(iii) Resale. 

(iv) Other returns and resales. 

(2) Recapture rules in the case of a vehicle 

transfer election. 

(3) Example. 

(d) Branded title. 

(e) Seller registration. 

(f) Requirement to file a complete income 

tax return. 

(g) Severability. 

(h) Applicability date. 

§ 1.25E–3 Transfer of credit. 

(a) In general. 

(b) Definitions. 

(1) Advance payment program. 

(2) Dealer. 

(3) Dealer tax non-compliance. 

(4) Electing taxpayer. 

(5) Eligible entity. 

(6) Registered dealer. 

(7) Time of sale. 

(8) Vehicle transfer election. 

(c) Dealer registration. 

(1) In general. 

(2) Effect of dealer tax non-compliance. 

(d) Vehicle transfer election by electing 

taxpayer to transfer credit. 

(e) Federal income tax consequences of the 

vehicle transfer election. 

(1) Treatment of electing taxpayer. 

(2) Treatment of eligible entity. 

(3) Form of payment from eligible entity to 

electing taxpayer. 

(4) Application of certain other 

requirements. 

(5) Examples. 

(f) Advance payments received by eligible 

entities. 

(1) In general. 

(2) Requirements for a registered dealer to 

become an eligible entity. 

(3) Suspension of registered dealer 

eligibility. 

(4) Revocation of registered dealer 

eligibility. 

(g) Increase in tax. 

(1) Recapture where taxpayer exceeds 

modified adjusted gross income limitation. 

(2) Excessive payments. 

(i) In general. 

(ii) Reasonable cause. 

(iii) Excessive payment defined. 

(iv) Special rule for cases in which the 

purchaser’s modified adjusted gross income 

exceeds the limitation. 

(3) Example. 

(h) Requirement of return. 

(1) In general. 

(2) Income tax return. 

(i) Two vehicle transfer elections per year. 

(j) Severability. 

(k) Applicability date. 

§ 1.25E–1 Credit for previously-owned 

clean vehicles. 

(a) In general. Section 25E(a) of the 

Internal Revenue Code (Code) allows as 

a credit against the tax imposed by 

chapter 1 of the Code (chapter 1) for the 

taxable year of a taxpayer an amount 

equal to the lesser of $4,000, or the 

amount equal to 30 percent of the sale 

price of a previously-owned clean 

vehicle, when that previously-owned 

clean vehicle is placed in service during 

the taxable year by a taxpayer that 

acquired the previously-owned clean 

vehicle in a qualified sale in which that 

taxpayer is a qualified buyer. This 

section provides definitions and 

generally applicable rules that apply for 

purposes of determining the credit 

under section 25E and the section 25E 

regulations (as defined in paragraph 

(b)(10) of this section) (section 25E 

credit). Section 1.25E–2 provides 

special rules under section 25E(e). 

Section 1.25E–3 provides rules under 

section 25E(f). 

(b) Definitions. The following 

definitions apply for purposes of the 

section 25E regulations. 

(1) Dealer. Dealer has the meaning 

provided in section 25E(c)(2)(A) by 

reference to section 30D(g)(8), except 

that the term does not include persons 


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70326 Federal Register / Vol. 88, No. 194 / Tuesday, October 10, 2023 / Proposed Rules 

licensed solely by a territory of the 

United States, and includes 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. 

(2) Incentive. For purposes of the 

definition of sale price in paragraph 

(b)(9) of this section, incentive means 

any reduction in total sale price offered 

to and accepted by a taxpayer from the 

dealer or manufacturer, other than a 

reduction in the form of a partial 

payment or down payment for the 

purchase of a previously-owned clean 

vehicle pursuant to section 25E(f) and 

§ 1.25E–3. 

(3) Modified adjusted gross income. 

Modified adjusted gross income has the 

meaning provided in section 25E(b)(3). 

(4) Placed in service. A previouslyowned clean vehicle is considered to be 

placed in service on the date the 

taxpayer takes possession of the vehicle. 

(5) Previously-owned clean vehicle. 

Previously-owned clean vehicle has the 

meaning provided in section 25E(c)(1). 

(6) Qualified buyer. Qualified buyer 

means, with respect to a sale of a motor 

vehicle, a taxpayer— 

(i) Who is an individual; 

(ii) Who purchases such vehicle for 

use and not for resale; 

(iii) With respect to whom no 

deduction is allowable to another 

taxpayer under section 151 of the Code; 

and 

(iv) Who has not been allowed a 

credit under section 25E and this 

section for any sale occurring during the 

period beginning three calendar years 

before the date of the sale of the vehicle 

and ending on the date of the sale. 

(7) Qualified manufacturer. Qualified 

manufacturer has the meaning provided 

in section 30D(d)(3). 

(8) Qualified sale—(i) In general. 

Qualified sale means a sale of a motor 

vehicle— 

(A) By a dealer (as defined in 

paragraph (b)(1) of this section); 

(B) For a sale price that does not 

exceed $25,000; and 

(C) That is the first transfer of the 

motor vehicle after 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. 

(ii) First transfer rule. 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. For purposes of this 

paragraph (b)(8)(ii), a transfer to or 

between dealers is ignored. The 

taxpayer may rely on the dealer’s 

provision of the vehicle history in 

determining whether the first transfer 

rule in this paragraph (b)(8)(ii) is 

satisfied. 

(9) Sale price. The sale price of a 

previously-owned clean vehicle means 

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 separatelystated taxes and fees required by State 

or local law. The sale price of a 

previously-owned clean vehicle is 

determined before the application of 

any trade-in value. 

(10) Section 25E regulations. Section 

25E regulations means this section and 

§§ 1.25E–2 and 1.25E–3. 

(11) Seller report. Seller report means 

the report described in section 

25E(c)(1)(D)(i) by reference to section 

30D(d)(1)(H) and provided by the seller 

of a vehicle to the taxpayer and to the 

IRS electronically in the manner 

provided in, and containing the 

information described in, guidance 

published in the Internal Revenue 

Bulletin (see § 601.601(d)(2)(ii)(a) of this 

chapter). The seller report must be 

provided to the IRS electronically. The 

term seller report does not include a 

report rejected by the IRS due to the 

information contained therein not 

matching IRS records. 

(c) Limitation based on modified 

adjusted gross income—(1) In general. 

No section 25E credit is allowed for any 

taxable year if— 

(i) The lesser of— 

(A) The modified adjusted gross 

income of the taxpayer for such taxable 

year; or 

(B) The modified adjusted gross 

income of the taxpayer for the preceding 

taxable year; exceeds 

(ii) The threshold amount. 

(2) Threshold amount. For purposes 

of paragraph (c)(1) of this section, the 

threshold amount is determined based 

on the taxpayer’s return filing status for 

the taxable year, as set forth in 

paragraphs (c)(2)(i) through (iii) of this 

section— 

(i) In the case of a joint return or a 

surviving spouse (as defined in section 

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

is $150,000. 

(ii) In the case of a head of household 

(as defined in section 2(b) of the Code), 

the threshold amount is $112,500. 

(iii) In the case of a taxpayer not 

described in paragraph (c)(2)(i) or (ii) of 

this section, the threshold amount is 

$75,000. 

(3) Special rule for change in filing 

status. If the taxpayer’s filing status for 

the taxable year differs from the 

taxpayer’s filing status in the preceding 

taxable year, then the taxpayer satisfies 

the limitation described in paragraph 

(c)(1) of this section if the taxpayer’s 

modified adjusted gross income does 

not exceed the threshold amount in 

either year based on the applicable 

filing status for that taxable year. 

(d) Limitation on multiple owners— 

(1) In general. The amount of the section 

25E credit attributable to a previouslyowned clean vehicle may be claimed on 

only one tax return. In the event a 

previously-owned clean vehicle is 

placed in service by multiple owners 

(for example, in the case of married 

individuals filing separate returns), no 

allocation or proration of the section 

25E credit is available. 

(2) Seller reporting. The name and 

taxpayer identification number of the 

vehicle owner claiming the section 25E 

credit must be listed on the seller report 

pursuant to sections 25E(c)(1)(D)(i) and 

30D(d)(1)(H). The credit will be allowed 

only on the tax return of the owner 

listed in the seller report. 

(e) Examples. The following examples 

illustrate the application of the rules in 

this section. 

(1) Example 1: First transfer since 

enactment of section 25E. A two-yearold qualifying vehicle has been sold as 

used prior to August 16, 2022 (the date 

of enactment of section 25E). The next 

sale of the vehicle occurs on September 

1, 2023, for a sale price below $25,000 

from a dealer to a qualified buyer whose 

modified adjusted gross income does 

not exceed the limitation described in 

paragraph (c) of this section. This sale 

is a qualified sale pursuant to paragraph 

(b)(8) of this section and, therefore, the 

buyer will qualify for the section 25E 

credit. 

(2) Example 2: Multiple transfers 

since enactment of section 25E. The 

facts are the same as in paragraph (e)(1) 

of this section (Example 1), except that 

the first sale of the used vehicle occurs 

after August 16, 2022, for a sale price 

above $25,000. The first sale of the used 

vehicle would not qualify for a credit 

under section 25E because the sale price 

exceeded $25,000. The second sale is 

not a qualified sale because it was not 

the first transfer after enactment of 

section 25E. 

(3) Example 3: First buyer is a 

commercial buyer. The facts are the 

same as in paragraph (e)(1) of this 

section (Example 1), except that the first 

sale of the used vehicle occurs after 

August 16, 2022, to a partnership, for a 

sale price below $25,000. The first sale 

would not qualify for a credit under 


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Federal Register / Vol. 88, No. 194 / Tuesday, October 10, 2023 / Proposed Rules 70327 

section 25E because the buyer is a 

partnership, not an individual. The 

second sale is not a qualified sale 

because it is not the first transfer after 

enactment of section 25E. 

(4) Example 4: First buyer exceeds the 

modified adjusted gross income limits. 

The facts are the same as in paragraph 

(e)(1) of this section (Example 1), except 

that the first sale of the used vehicle 

occurs after August 16, 2022, and was 

sold to a buyer whose modified adjusted 

gross income exceeds the limitation 

described in paragraph (c) of this 

section. Subsequently, the vehicle is 

sold again for less than $25,000 to a 

qualified buyer whose modified 

adjusted gross income is below the 

limitation. The first sale would not 

qualify for a credit under section 25E 

because the buyer’s modified adjusted 

gross income exceeds the limitation, 

and the second sale is not a qualified 

sale because it is not the first transfer 

after the enactment of section 25E. 

(5) Example 5: First buyer elects to not 

take the section 25E credit. The facts are 

the same as in paragraph (e)(1) of this 

section (Example 1), except that the first 

sale of the used vehicle occurred after 

August 16, 2022, and was sold to a 

qualified buyer for a sale price below 

$25,000, but that first buyer elects to not 

claim the section 25E credit. The second 

sale is not a qualified sale because it is 

not the first transfer after the enactment 

of section 25E. 

(f) Severability. The provisions of this 

section are separate and severable from 

one another. If any provision of this 

section is stayed or determined to be 

invalid, it is the agencies’ intention that 

the remaining provisions shall continue 

in effect. 

(g) Applicability date. This section 

applies to previously-owned clean 

vehicles placed in service in taxable 

years beginning after October 10, 2023. 

§ 1.25E–2 Special rules. 

(a) In general. This section provides 

additional guidance under section 

25E(e) of the Internal Revenue Code 

(Code), which incorporates rules similar 

to the rules of section 30D(f) other than 

section 30D(f)(10) or 30D(f)(11). Unless 

otherwise provided in this section, the 

rules of section 30D(f) apply to section 

25E and the section 25E regulations (as 

defined in § 1.25E–1(b)(10)) in the same 

manner by replacing, if applicable, any 

reference to section 30D or the section 

30D credit with a reference to section 

25E or the section 25E credit. 

(b) No double benefit—(1) In general. 

Under sections 25E(e) and 30D(f)(2), the 

amount of any deduction or other credit 

allowable under chapter 1 of the Code 

(chapter 1) for a vehicle for which a 

section 25E credit is allowable must be 

reduced by the amount of the section 

25E credit allowed for such vehicle. 

(2) Interaction of section 30D and 

section 25E no double benefit rules. A 

section 30D credit that has been allowed 

with respect to a vehicle in a taxable 

year before the year in which a section 

25E credit under section 25E is 

allowable for that vehicle does not 

reduce the amount allowable under 

section 25E. 

(c) Recapture—(1) In general. This 

paragraph (c) provides rules regarding 

the recapture of the section 25E credit. 

(i) Cancelled sale. If the sale of a 

vehicle between the taxpayer and dealer 

is cancelled before the taxpayer places 

the vehicle in service, then— 

(A) The taxpayer may not claim the 

section 25E credit with respect to the 

vehicle; 

(B) The sale will be treated as not 

having occurred (and no transfer is 

considered to have occurred by reason 

of the cancelled sale), and the vehicle 

will, therefore, still qualify for the 

section 25E credit upon a subsequent 

sale meeting the requirements of section 

25E and the section 25E regulations; 

(C) The seller report (as defined in 

§ 1.25E–1(b)(11)) must be rescinded by 

the seller in the manner set forth in 

guidance published in the Internal 

Revenue Bulletin (see 

§ 601.601(d)(2)(ii)(a) of this chapter); 

and 

(D) The taxpayer cannot make an 

election to transfer the credit under 

section 25E(f) and § 1.25E–3. 

(ii) Vehicle return. If a taxpayer 

returns a vehicle to the dealer within 30 

days of placing such vehicle in service, 

then— 

(A) The taxpayer cannot claim the 

section 25E credit with respect to the 

vehicle; 

(B) The sale will be treated as having 

occurred (and a transfer is therefore 

considered as having occurred by reason 

of the sale), and the vehicle will not 

qualify for the section 25E credit upon 

a subsequent sale, unless the vehicle 

history does not reflect the prior sale 

and return; if the vehicle history does 

not reflect the prior sale and return, the 

vehicle remains eligible for the section 

25E credit under the first transfer rule 

described in § 1.25E–1(b)(8)(ii); 

(C) The seller report (as defined in 

§ 1.25E–1(b)(11)) must be updated by 

the seller; and 

(D) Any vehicle transfer election 

made pursuant to section 25E(f) and 

§ 1.25E–3, if applicable, will be treated 

as nullified and any advance payment 

made pursuant to section 25E(f) and 

§ 1.25E–3, if applicable, will be 

collected from the eligible entity as an 

excessive payment pursuant to § 1.25E– 

3. 

(iii) Resale. If a taxpayer resells the 

vehicle within 30 days of placing the 

vehicle in service, then the taxpayer is 

treated as having purchased the 

previously-owned clean vehicle with 

the intent to resell, and— 

(A) The taxpayer may not claim the 

section 25E credit with respect to the 

vehicle; 

(B) The sale to the taxpayer will be 

treated as occurring (and a transfer is 

therefore considered as occurring by 

reason of the sale), and the vehicle will 

not qualify for the section 25E credit 

upon a subsequent sale; 

(C) The seller report (as defined in 

§ 1.25E–1(b)(11)) will not be updated; 

and 

(D) Any vehicle transfer election 

made pursuant to section 25E(f) and 

§ 1.25E–3, if applicable, will remain in 

effect and any advance payment made 

pursuant to section 25E(f) and § 1.25E– 

3 will not be collected from the eligible 

entity; and 

(E) The value of the transferred credit 

will be collected from the taxpayer. 

(iv) Other returns and resales. In the 

case of a vehicle return not described in 

paragraph (c)(1)(ii) or a resale not 

described in paragraph (c)(1)(iii), the 

vehicle will no longer be eligible for the 

section 25E credit upon a subsequent 

sale. 

(2) Recapture rules in the case of a 

vehicle transfer election. For additional 

recapture rules that apply in the case of 

a vehicle transfer election, see § 1.25E– 

3(g)(1). For excessive payment rules that 

apply in the case where an advance 

payment is made to an eligible entity, 

see § 1.25E–3(g)(2). 

(3) Example: First buyer returns 

vehicle. A two-year-old qualifying 

vehicle is sold to a qualified buyer after 

August 16, 2022, for less than $25,000, 

but the buyer returns the vehicle to the 

dealer within 30 days and does not 

claim the credit under section 25E. The 

vehicle history reflects the first used 

sale and return. A second sale of the 

used vehicle is not a qualified sale 

because the first sale occurred after the 

enactment of section 25E, regardless of 

whether the first buyer claimed the 

credit under section 25E. 

(d) Branded title. 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. 

(e) Seller registration. A seller must 

register with the IRS in the manner set 

forth in guidance published in the 

Internal Revenue Bulletin (see 


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70328 Federal Register / Vol. 88, No. 194 / Tuesday, October 10, 2023 / Proposed Rules 

§ 601.601(d)(2)(ii)(a) of this chapter) for 

purposes of filing seller reports. 

(f) Requirement to file a complete 

income tax return. No section 25E credit 

is allowed unless the taxpayer claiming 

such credit files an income tax return 

for the taxable year in which the 

previously-owned clean vehicle is 

placed in service. For purpose of this 

paragraph (f), the term income tax 

return means a Form 1040, U.S. 

Individual Income Tax Return, with an 

attached Form 8936, Clean Vehicle 

Credits, or successor forms, 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 that includes all of the 

information required on the forms and 

in instructions. 

(g) Severability. The provisions of this 

section are separate and severable from 

one another. If any provision of this 

section is stayed or determined to be 

invalid, it is the agencies’ intention that 

the remaining provisions shall continue 

in effect. 

(h) Applicability date. This section 

applies to previously-owned clean 

vehicles placed in service in taxable 

years beginning after [DATE OF 

PUBLICATION OF FINAL RULE]. 

§ 1.25E–3 Transfer of credit. 

(a) In general. This section provides a 

credit transfer program under section 

25E(f). 

(b) Definitions. This paragraph (b) 

provides definitions that apply for 

purposes of section 25E(f) and this 

section. 

(1) Advance payment program. 

Advance payment program means the 

program described in paragraph (f)(1) of 

this section. 

(2) Dealer. Dealer has the meaning 

provided in § 1.25–1(b)(1). 

(3) Dealer tax compliance. Dealer tax 

compliance means that all required 

Federal information and tax returns of 

the dealer have been filed, including for 

Federal income and employment tax 

purposes, and all Federal tax, penalties, 

and interest due of the dealer as of the 

time of sale have been paid. A dealer 

that has entered into an installment 

agreement with the IRS for which a 

dealer is current on its obligations is 

treated as being in dealer tax 

compliance. 

(4) Electing taxpayer. Electing 

taxpayer means the individual who 

purchases the previously-owned clean 

vehicle and elects to transfer the section 

25E credit that would otherwise be 

allowable to such individual to an 

eligible entity pursuant to section 25E(f) 

and the rules of this section. A taxpayer 

is an electing taxpayer only if the 

taxpayer makes certain attestations to 

the registered dealer, pursuant to 

procedures provided in guidance 

published in the Internal Revenue 

Bulletin, including that the taxpayer 

does not anticipate exceeding the 

modified adjusted gross income 

limitations. 

(5) Eligible entity. Eligible entity has 

the meaning provided in section 

30D(g)(2) and paragraph (f)(2) of this 

section. 

(6) Registered dealer. Registered 

dealer is a dealer that has completed 

registering with the IRS as provided in 

paragraph (c) of this section. 

(7) Time of sale. Time of sale means 

the date the previously-owned clean 

vehicle is placed in service, as defined 

in § 1.25E–1(b)(4). 

(8) Vehicle transfer election. Vehicle 

transfer election has the meaning 

provided in sections 25E(f) and 30D(g) 

and paragraph (d) of this section. 

(c) Dealer registration—(1) In general. 

A dealer must first register with the IRS 

in the manner set forth in guidance 

published in the Internal Revenue 

Bulletin (see § 601.601(d)(2)(ii)(a) of this 

chapter) for the dealer to receive credits 

transferred by an electing taxpayer 

pursuant to section 25E(f) and 

paragraph (d) of this section. 

(2) Effect of dealer tax noncompliance. If the dealer is not in dealer 

tax compliance for any of the taxable 

periods during the last five taxable 

years, then the dealer may complete its 

initial registration with the IRS, but the 

dealer will not be eligible for the 

advance payment program (and, 

therefore, the dealer will not be eligible 

to receive transferred section 25E 

credits) until the compliance issue is 

resolved. The IRS will notify the dealer 

in writing that the dealer is not in dealer 

tax compliance, and the dealer will have 

the opportunity to address any failure 

through regular procedures. If the 

failure is corrected, the IRS will 

complete the dealer’s registration for the 

advance payment program, and, 

provided all other requirements of this 

section are met, the dealer will then be 

allowed to participate in the advance 

payment program. Additional 

procedural guidance regarding this 

paragraph (c)(2) will be set forth in 

guidance published in the Internal 

Revenue Bulletin. 

(d) Vehicle transfer election by 

electing taxpayer to transfer credit. For 

a previously-owned clean vehicle 

placed in service after December 31, 

2023, an electing taxpayer may elect to 

apply the rules of section 25E(f) and this 

section to make a vehicle transfer 

election with respect to the vehicle, so 

that the 25E credit with respect to the 

vehicle is allowed to the eligible entity 

specified in the vehicle transfer election 

(and not to the taxpayer) pursuant to the 

advance payment program described in 

paragraph (f) of this section. The 

electing taxpayer, as part of the vehicle 

transfer election, must transfer the 

entire amount of the section 25E credit 

that would otherwise be allowable to 

the electing taxpayer with respect to the 

vehicle, and the eligible entity specified 

in the vehicle transfer election must pay 

the electing taxpayer an amount equal to 

the amount of the credit included in the 

vehicle transfer election. A vehicle 

transfer election is made no later than 

at the time of sale in the manner set 

forth in guidance published in the 

Internal Revenue Bulletin (see 

§ 601.601(d)(2)(ii)(a) of this chapter), 

and, once made the vehicle transfer 

election is irrevocable. 

(e) Federal income tax consequences 

of the vehicle transfer election—(1) 

Treatment of electing taxpayer. In the 

case of a vehicle transfer election, the 

Federal income tax consequences for the 

electing taxpayer are as follows— 

(i) The amount of the section 25E 

credit that the electing taxpayer elects to 

transfer to the eligible entity under 

section 30D(g) (by reason of section 

25E(f)) and paragraph (d) of this section 

may exceed the electing taxpayer’s 

regular tax liability (as defined in 

section 26(b)(1) of the Code) for the 

taxable year in which the sale occurs, 

and the excess, if any, is not subject to 

recapture; 

(ii) The payment made by an eligible 

entity to an electing taxpayer under 

section 30D(g)(2)(C) (by reason of 25E(f)) 

and paragraph (d) of this section to an 

electing taxpayer pursuant to a vehicle 

transfer election is not includible in the 

gross income of the electing taxpayer; 

and 

(iii) The payment made by an eligible 

entity under section 30D(g)(2)(C) (by 

reason of section 25E(f)) and paragraph 

(d) of this section is treated as repaid by 

the electing taxpayer to the eligible 

entity as part of the purchase price of 

the previously-owned clean vehicle. 

Thus, the repayment by the electing 

taxpayer is part of the electing 

taxpayer’s basis in the previouslyowned clean vehicle prior to the 

application of the basis reduction rule of 

section 30D(f)(1) that applies by reason 

of section 25E(e) and § 1.25E–2(a). 

(2) Treatment of eligible entity. In the 

case of a vehicle transfer election, the 

Federal income tax consequences for the 

eligible entity are as follows— 

(i) The eligible entity is allowed the 

section 25E credit with respect to the 

previously-owned clean vehicle and 


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may receive an advance payment 

pursuant to section 30D(g)(7) (by reason 

of section 25(f)) and paragraph (f) of this 

section; 

(ii) Advance payments received by the 

eligible entity are not treated as a tax 

credit in the hands of the eligible entity 

and may exceed the eligible entity’s 

regular tax liability (as defined in 

section 26(b)(1)) for the taxable year in 

which the sale occurs; 

(iii) An advance payment received by 

the eligible entity is not included in the 

gross income of the eligible entity; 

(iv) The payment made by an eligible 

entity under section 30D(g)(2)(C) (by 

reason of section 25(f)) and paragraph 

(d) of this section to an electing taxpayer 

is not deductible by the eligible entity; 

and 

(v) The payment made by an eligible 

entity to the electing taxpayer under 

section 30D(g)(2)(C) (by reason of 

section 25(f)) and paragraph (d) of this 

section is treated as paid by the electing 

taxpayer to the eligible entity as part of 

the purchase price of the previouslyowned clean vehicle. Thus, the 

repayment by the electing taxpayer is 

treated as an amount realized of the 

eligible entity under section 1001 of the 

Code and the regulations in this part 

under section 1001. 

(vi) If the eligible entity is a 

partnership or an S corporation, then— 

(A) The IRS will make the advance 

payment to such partnership or S 

corporation equal to the amount of the 

section 25E credit allowed that is 

transferred to the eligible entity; 

(B) Such section 25E credit is reduced 

to zero and is, for any other purpose of 

the Code, deemed to have been allowed 

solely to such entity (and not allocated 

or otherwise allowed to its partners or 

shareholders) for such taxable year; and 

(C) The amount of the advance 

payment is not treated as tax exempt 

income to the partnership or S 

corporation for purposes of the Code. 

(3) Form of payment from eligible 

entity to electing taxpayer. The tax 

treatment of the payment made by the 

eligible entity to the electing taxpayer 

described in paragraphs (e)(1) and (2) of 

this section is the same regardless of 

whether the payment is made in cash or 

in the form of a partial payment or 

down payment for purchase of the 

previously-owned clean vehicle. 

(4) Application of certain other 

requirements. In the case of a vehicle 

transfer election, the following 

additional rules apply— 

(i) The requirements of section 

30D(f)(1) (regarding basis reduction) and 

30D(f)(2) (regarding no double benefit), 

by reason of section 25E(e), apply to the 

electing taxpayer as if the vehicle 

transfer election were not made (so, for 

example, the electing taxpayer must 

reduce the taxpayer’s basis in the 

vehicle by the amount of the section 25E 

credit, regardless of the vehicle transfer 

election). 

(ii) Section 30D(f)(6) (regarding the 

election not to take the credit), by 

reason of section 25E(e), will not apply 

(in other words, by electing to transfer 

the credit, the electing taxpayer is 

electing to take the credit). 

(iii) Section 30D(f)(9) (regarding the 

vehicle identification number (VIN) 

requirement), by reason of section 

25E(e), and section 25E(d) (regarding the 

VIN requirement) will be treated as 

satisfied if the eligible entity provides 

the VIN of such vehicle to the IRS in the 

form and manner set forth in guidance 

published in the Internal Revenue 

Bulletin. 

(5) Examples. The following examples 

illustrate the rules under paragraph (e) 

of this section. 

(i) Example 1: Electing taxpayer’s 

regular tax liability less than value of 

the credit—(A) Facts. A taxpayer, who 

is an individual, purchases a 

previously-owned clean vehicle from a 

dealer, which is a C corporation. The 

taxpayer satisfies the requirements to be 

an electing taxpayer and elects to 

transfer the section 25E credit to the 

dealer. The dealer is a registered dealer 

and satisfies the requirements to be an 

eligible entity. The sales price the 

vehicle is $24,000. The section 25E 

credit otherwise allowable to the 

electing taxpayer is $4,000. The eligible 

entity makes the payment required to be 

made to the electing taxpayer in the 

form of a cash payment of $4,000. The 

electing taxpayer pays back the $4,000 

to the eligible entity and pays an 

additional $20,000 as the purchase price 

of the vehicle. The electing taxpayer’s 

regular tax liability for the year is less 

than $4,000. 

(B) Analysis. Under paragraph (e)(1) 

of this section, the electing taxpayer 

may transfer the credit even though the 

electing taxpayer’s regular tax liability is 

less than $4,000, and no amount of the 

credit will be recaptured from the 

taxpayer on the basis that the allowable 

credit exceeded their regular tax 

liability. The eligible entity’s $4,000 

payment to the electing taxpayer is not 

included in the electing taxpayer’s gross 

income, and the electing taxpayer’s 

purchase price for the vehicle is $24,000 

(including both the $4,000 payment and 

the additional $20,000 purchase price 

paid), prior to the application of the 

basis reduction rule of section 30D(f)(1) 

(by reason of section 25E(e)). After 

application of the basis reduction, the 

electing taxpayer’s basis in the vehicle 

is $20,000. The eligible entity is eligible 

to receive an advance payment of $4,000 

for the transferred section 25E credit as 

provided in section 30D(g)(7) (by reason 

of section 25E(f)) and paragraph (f) of 

this section. Under paragraph (d)(2) of 

this section, the eligible entity may 

receive the advance payment regardless 

of whether the eligible entity’s regular 

tax liability is less than $4,000. The 

advance payment is not treated as a 

credit toward the eligible entity’s tax 

liability (if any), nor is it included in the 

eligible entity’s gross income, the 

eligible entity’s $4,000 payment to the 

electing taxpayer is not deductible, and 

the eligible entity’s amount realized is 

$24,000 upon the sale of the vehicle 

(including both the $4,000 payment and 

the additional $20,000 purchase price of 

the vehicle). 

(ii) Example 2: Non-cash payment by 

eligible entity to electing taxpayer—(A) 

Facts. The facts are the same as in 

paragraph (e)(5)(i)(A) of this section 

(facts of Example 1), except that the 

eligible entity makes the payment to the 

electing taxpayer in the form of a 

reduction in the purchase price (rather 

than as a cash payment). 

(B) Analysis. Paragraph (e)(3) of this 

section provides that the application of 

paragraphs (e)(1) and (2) of this section 

is not dependent on the form of 

payment from an eligible entity to an 

electing taxpayer (for example, a 

payment in cash or a payment in the 

form of a reduction in purchase price). 

Thus, the analysis is the same as in 

paragraph (e)(5)(i)(B) of this section 

(analysis of Example 1). 

(iii) Example 3: Eligible entity is a 

partnership—(A) Facts. The facts are the 

same as in paragraph (e)(5)(i)(A) of this 

section (facts of Example 1), except that 

the dealer is a partnership. 

(B) Analysis. The analysis as to the 

electing taxpayer is the same as in 

paragraph (e)(5)(i)(B) of this section 

(analysis of Example 1). Because the 

eligible entity is a partnership, 

paragraph (e)(2)(vi) of this section 

applies. Thus, the advance payment is 

made to the partnership, the credit is 

reduced to zero and is, for any other 

purpose of the Code, deemed to have 

been allowed solely to the partnership 

(and not allocated or otherwise allowed 

to its partners) for such taxable year. 

The amount of the advance payment is 

not treated as tax exempt income to the 

partnership for purposes of the Code. 

(f) Advance payments received by 

eligible entities—(1) In general. An 

eligible entity may receive advance 

payments from the IRS corresponding to 

the amount of the section 25E credit for 

which an election was made by an 

electing taxpayer to transfer the credit to 


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70330 Federal Register / Vol. 88, No. 194 / Tuesday, October 10, 2023 / Proposed Rules 

the eligible entity pursuant to section 

30D(g) (by reason of section 25E(f)) and 

paragraph (d) of this section before the 

eligible entity files its Federal income 

tax return for the taxable year that 

includes the taxable year with respect to 

which the vehicle transfer election 

corresponds. This advance payment 

program is the exclusive mechanism for 

an eligible entity to receive the section 

25E credit transferred under section 

25E(f) pursuant to paragraph (d) of this 

section. An eligible entity receiving an 

advance payment may not claim the 

section 25E credit on a Federal income 

tax return. 

(2) Requirements for a registered 

dealer to become an eligible entity. A 

registered dealer qualifies as an eligible 

entity, and may therefore receive an 

advance payment, by meeting the 

following requirements— 

(i) The registered dealer submits all 

required registration information and is 

in dealer tax compliance. 

(ii) The registered dealer retains 

information regarding the vehicle 

transfer election for three calendar years 

beginning with the year immediately 

after the year in which the vehicle is 

placed in service, as described in 

guidance published in the Internal 

Revenue Bulletin (see § 601.601 of this 

chapter). 

(iii) The eligible entity meets any 

other requirements of section 25E(f) by 

reference to section 30D(g) and this 

section included in guidance published 

in the Internal Revenue Bulletin (see 

§ 601.601 of this chapter) or in forms 

and instructions. 

(3) Suspension of registered dealer 

eligibility. A registered dealer may be 

suspended from the advance payment 

program pursuant to the procedures 

described in guidance published in the 

Internal Revenue Bulletin (see § 601.601 

of this chapter). Any decision made by 

the IRS relating to the suspension of a 

dealer’s registration is not subject to 

administrative appeal to the IRS 

Independent Office of Appeals unless 

the IRS and the IRS Independent Office 

of Appeals agree that such review is 

available and the IRS provides the time 

and manner for such review. 

(4) Revocation of registered dealer 

eligibility. A registered dealer’s 

registration may be revoked pursuant to 

the procedures described in guidance 

published in the Internal Revenue 

Bulletin (see § 601.601 of this chapter). 

Any decision made by the IRS relating 

to the revocation of a dealer’s 

registration is not subject to 

administrative appeal to the IRS 

Independent Office of Appeals unless 

the IRS and the IRS Independent Office 

of Appeals agree that such review is 

available and the IRS provides the time 

and manner for such review. 

(g) Increase in tax—(1) Recapture 

where taxpayer exceeds modified 

adjusted gross income limitation. If a 

taxpayer who elected to transfer the 

credit under section 25E(f) and this 

section has modified adjusted gross 

income that exceeds the limitation in 

section 25E(b), the income tax imposed 

on such taxpayer under chapter 1 of the 

Code (chapter 1) for the taxable year in 

which the vehicle was placed in service 

is increased by the amount of the 

payment received by the taxpayer. The 

taxpayer must reconcile such amounts 

on the tax return described in paragraph 

(h) of this section. 

(2) Excessive payments—(i) In 

general. This paragraph (g)(2) provides 

rules under section 25E(f) by reference 

to section 30D(g)(7)(B), under which 

rules similar to the rules of section 

6417(d)(6) of the Code apply to the 

advance payment program. In the case 

of any advance payment that the IRS 

determines constitutes an excessive 

payment, the tax imposed on the 

eligible entity under chapter 1, 

regardless of whether such entity would 

otherwise be subject to tax under 

chapter 1, for the taxable year in which 

such determination is made will be 

increased by the sum of: 

(A) The amount of the excessive 

payment; plus 

(B) An amount equal to 20 percent of 

such excessive payment. 

(ii) Reasonable cause. The amount 

described in paragraph (g)(2)(i)(B) of 

this section will not apply to an eligible 

entity if the eligible entity demonstrates 

to the satisfaction of the IRS that the 

excessive payment resulted from 

reasonable cause. In the case of a 

vehicle returned to the eligible entity 

within 30 days of placing the vehicle in 

service for which a vehicle transfer 

election was made by the electing 

taxpayer, as described in § 1.25E– 

2(c)(1)(ii), the eligible entity will be 

treated as demonstrating reasonable 

cause. 

(iii) Excessive payment defined. 

Excessive payment means an advance 

payment made— 

(A) To a registered dealer that fails to 

meet the requirements to be an eligible 

entity provided in paragraph (f)(2) of 

this section; or 

(B) Except as provided in paragraph 

(g)(2)(iv) of this section, to an eligible 

entity with respect to a vehicle to the 

extent the payment exceeds the amount 

of the credit that, without application of 

section 25E(f) and this section, would be 

otherwise allowable to the electing 

taxpayer with respect to the vehicle for 

such tax year. 

(iv) Special rule for cases in which the 

purchaser’s modified adjusted gross 

income exceeds the limitation. Any 

excess described in paragraph 

(g)(2)(iii)(B) of this section due to the 

purchaser exceeding the limitation 

based on modified adjusted gross 

income provided in section 25E(b) is not 

an excessive payment. Instead, the value 

of the amount of the advance payment 

is recaptured from the purchaser under 

section 25E(e) and paragraph (g)(1) of 

this section. 

(3) Example. This paragraph (g)(3) 

provides an example to illustrate the 

excessive payment rules provided in 

paragraph (g)(2) of this section. 

(i) Facts. In 2024, D, a registered 

dealer, receives an advance payment of 

$4,000 with respect to a credit 

transferred under section 25E(f)(1) and 

paragraph (d) of this section with 

respect to a previously-owned clean 

vehicle. In 2025, the IRS determines that 

the registered dealer was not an eligible 

entity with respect to the vehicle at the 

time of the receipt of the advance 

payment in 2024 because the registered 

dealer failed to satisfy a requirement in 

section 30D(g)(2) (applicable by reason 

of section 25E(f)) and paragraph (f)(2) of 

this section to be an eligible entity with 

respect to the vehicle. D is unable to 

show reasonable cause for the failure. 

(ii) Analysis. Under paragraph (g)(2)(i) 

of this section, the tax imposed on D is 

increased by the amount of the 

excessive payment if the advance 

payment received by D constitutes an 

excessive payment. Under paragraph 

(g)(2)(iii) of this section, the entire 

amount of the $4,000 advance payment 

received by D is an excessive payment 

because D did not meet the 

requirements to be an eligible entity 

under section 30D(g)(2) (applicable by 

reason of section 25E(f)) and paragraph 

(g)(2) of this section. Additionally, 

because D cannot show reasonable 

cause for its failure to meet these 

requirements, the tax imposed under 

chapter 1 on D is increased by $4,800 

in 2025 (the taxable year of the IRS 

determination). This is comprised of the 

$4,000 value of the credit plus the $800 

penalty, calculated as 20% penalty on 

such $4,000 (20% * $4,000 = $800). 

This treatment applies regardless of 

whether D is otherwise subject to tax 

under chapter 1 (for example, if D is a 

partnership). 

(h) Requirement of return—(1) In 

general. An electing taxpayer that makes 

a vehicle transfer election must file an 

income tax return for the taxable year in 

which the vehicle transfer election is 

made and indicate such election on the 

return per instructions. The electing 

taxpayer must include the VIN of the 


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Federal Register / Vol. 88, No. 194 / Tuesday, October 10, 2023 / Proposed Rules 70331 

new clean vehicle on such return, as 

provided for in forms and instructions. 

(2) Income tax return. For purposes of 

this section, the term income tax return 

means a Form 1040, U.S. Individual 

Income Tax Return, with an attached 

Form 8936, Clean Vehicle Credits, or 

successor forms, or any other forms, 

schedules, or statements prescribed by 

the Commissioner for the purpose of 

making a return to report the tax under 

chapter 1 that includes all of the 

information required on the forms and 

in instructions. 

(i) Two vehicle transfer elections per 

year. A taxpayer may make no more 

than two transfer elections per taxable 

year, consisting of either two section 

30D credits or one section 30D credit 

and one section 25E credit. In the case 

of a joint return, each individual 

taxpayer may make no more than two 

transfer elections per taxable year. 

(j) Severability. The provisions of this 

section are separate and severable from 

one another. If any provision of this 

section is stayed or determined to be 

invalid, it is the agency’s intention that 

the remaining provisions will continue 

in effect. 

(k) Applicability date. This section 

applies to taxable years ending after 

December 31, 2023. 

■ Par 3. Section 1.30D–0, as proposed to 

be added at 88 FR 23370 (April 17, 

2023), is amended by: 

■ 1. Adding entry (j) to § 1.30D–2; 

■ 2. In § 1.30D–4: 

■ i. Revising the heading; and 

■ ii. Adding entries (f), (f)(1), (f)(1)(i) 

through (iv), (f)(2), (g), and (h); and 

■ 3. Adding an entry in numerical order 

for § 1.30D–5. 

The revisions and additions read as 

follows: 

§ 1.30D–0 Table of contents. 

* * * * * 

§ 1.30D–2 Definitions for purposes of 

section 30D. 

* * * * * 

(j) Seller report. 

* * * * * 

§ 1.30D–4 Special rules. 

* * * * * 

(f) Recapture rules. 

(1) In general. 

(i) Cancelled sale. 

(ii) Vehicle return. 

(iii) Resale. 

(iv) Other vehicle returns and resales. 

(2) Recapture rules in the case of a vehicle 

transfer election. 

(g) Seller registration. 

(h) Requirement to file a complete income 

tax return. 

§ 1.30D–5 Transfer of credit and recapture. 

(a) Definitions. 

(1) Advance payment program. 

(2) Dealer. 

(3) Dealer tax compliance. 

(4) Electing taxpayer. 

(5) Eligible entity. 

(6) Registered dealer. 

(7) Time of sale. 

(8) Vehicle registration election. 

(b) Dealer registration. 

(1) In general. 

(2) Effect of dealer tax non-compliance. 

(c) Election by electing taxpayer to transfer 

credit. 

(d) Federal income tax consequences of the 

vehicle transfer election. 

(1) Treatment of electing taxpayer. 

(2) Treatment of eligible entity. 

(3) Form of payment from eligible entity to 

electing taxpayer. 

(4) Application of certain other 

requirements. 

(5) Examples. 

(e) Advance payments received by eligible 

entities. 

(1) In general. 

(2) Requirements for a registered dealer to 

become an eligible entity. 

(3) Suspension of registered dealer 

eligibility. 

(4) Revocation of registered dealer 

eligibility. 

(f) Increase in tax. 

(1) Recapture where taxpayer exceeds 

modified adjusted gross income limitation. 

(2) Excessive payments. 

(i) In general. 

(ii) Reasonable cause. 

(iii) Excessive payment defined. 

(iv) Special rule for cases in which the 

purchaser’s modified adjusted gross income 

exceeds the limitation. 

(3) Example. 

(g) Requirement of return. 

(1) In general. 

(2) Income tax return. 

(h) Two vehicle transfer elections per year. 

(i) Severability. 

(j) Applicability date. 

■ Par 4. Section 1.30D–2, as proposed to 

be added at 88 FR 23370 (April 17, 

2023), is amended by adding paragraph 

(j) to read as follows: 

§ 1.30D–2 Definitions for purposes of 

section 30D. 

* * * * * 

(j) Seller report. Seller report means 

the report described in section 

30D(d)(1)(H) and provided by the seller 

of a vehicle to the taxpayer and the IRS 

in the manner provided in, and 

containing the information described in, 

guidance published in the Internal 

Revenue Bulletin (see 

§ 601.601(d)(2)(ii)(a) of this chapter). 

The seller report must be provided to 

the IRS electronically. The term seller 

report does not include a report rejected 

by the IRS due to the information 

contained therein not matching IRS 

records. 

■ Par 5. Section 1.30D–4, as proposed to 

be added at 88 FR 23370 (April 17, 

2023), is amended by adding paragraphs 

(f) through (h) to read as follows: 

§ 1.30D–4 Special rules. 

* * * * * 

(f) Recapture rules—(1) In general. 

This paragraph (f) provides rules under 

section 30D(f)(5) regarding the recapture 

of the section 30D credit. 

(i) Cancelled sale. If the sale of a 

vehicle between the taxpayer and seller 

is cancelled before the taxpayer places 

the vehicle in service, then— 

(A) The taxpayer may not claim the 

section 30D credit with respect to the 

vehicle; 

(B) The sale will be treated as not 

having occurred and the vehicle will be 

considered available for original use by 

another taxpayer (regardless of the 

cancelled sale), and the vehicle will, 

therefore, still be eligible for the section 

30D credit; 

(C) The seller report must be 

rescinded by the seller in the manner set 

forth in guidance published in the 

Internal Revenue Bulletin (see 

§ 601.601(d)(2)(ii)(a) of this chapter); 

and 

(D) The taxpayer cannot make a 

vehicle transfer election under section 

30D(g) and § 1.30D–5(c) with respect to 

the cancelled sale. 

(ii) Vehicle return. If a taxpayer 

returns to the seller a vehicle within 30 

days of placing such vehicle in service, 

then— 

(A) The taxpayer cannot claim the 

section 30D credit with respect to the 

vehicle; 

(B) The vehicle will no longer be 

considered available for original use by 

another taxpayer, and, therefore, the 

vehicle will no longer be eligible for the 

section 30D credit; 

(C) The seller report must be updated 

by the seller; and 

(D) A vehicle transfer election under 

30D(g) and § 1.30D–5(c), if applicable, 

will be treated as nullified and any 

advance payment made pursuant to 

section 30D(g) and § 1.30D–5(e) will be 

collected from the eligible entity as an 

excessive payment pursuant to § 1.30D– 

5(f). 

(iii) Resale. If a taxpayer resells the 

vehicle within 30 days of placing the 

vehicle in service, then the taxpayer is 

treated as having purchased the new 

clean vehicle with the intent to resell, 

and— 

(A) The taxpayer cannot claim the 

section 30D credit with respect to the 

vehicle; 

(B) The vehicle will no longer be 

considered available for original use by 

another taxpayer, and, therefore, the 

vehicle will no longer be eligible for the 

section 30D credit; 

(C) The seller report will not be 

updated; 


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70332 Federal Register / Vol. 88, No. 194 / Tuesday, October 10, 2023 / Proposed Rules 

(D) A vehicle transfer election under 

30D(g) and § 1.30D–5(c), if applicable, 

will remain in effect and any advance 

payment made pursuant to section 

30D(g) and § 1.30D–5(e) will not be 

collected from the eligible entity; and 

(E) The value of any transferred credit 

will be collected from the taxpayer. 

(iv) Other vehicle returns and resales. 

In the case of a vehicle return not 

described in paragraph (f)(1)(ii) of this 

section or a resale not described in 

paragraph (f)(1)(iii) of this section, the 

vehicle will no longer be considered 

available for original use by another 

taxpayer, and, therefore, the vehicle will 

no longer be eligible for the section 30D 

credit. 

(2) Recapture rules in the case of a 

vehicle transfer election. For additional 

recapture rules that apply in the case of 

a vehicle transfer election, see § 1.30D– 

5(f)(1). For excessive payment rules that 

apply in the case where an advance 

payment is made to an eligible entity, 

see § 1.30D–5(f)(2). 

(g) Seller registration. A seller must 

first register with the IRS in the manner 

set forth in guidance published in the 

Internal Revenue Bulletin (see 

§ 601.601(d)(2)(ii)(a) of this chapter) for 

purposes of filing seller reports. 

(h) Requirement to file a complete 

income tax return. No section 30D 

credit is allowed unless the taxpayer 

claiming such credit files an income tax 

return for the taxable year in which the 

new clean vehicle is placed in service. 

For purpose of this paragraph (h), the 

term income tax return means a Form 

1040, U.S. Individual Income Tax 

Return, with an attached Form 8936, 

Clean Vehicle Credits, or successor 

forms, 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 that includes all of the 

information required on the forms and 

in instructions. 

■ Par 6. Section 1.30D–5 is added to 

read as follows: 

§ 1.30D–5 Transfer of credit and recapture. 

(a) Definitions. This paragraph (a) 

provides definitions that apply for 

purposes of section 30D(g) and this 

section. 

(1) Advance payment program. 

Advance payment program means the 

program described in paragraph (e)(1) of 

this section. 

(2) Dealer. Dealer has the meaning 

provided in section 30D(g)(8), except 

that, for purposes of this section, the 

term does not include persons licensed 

solely by a territory of the United States, 

and includes a dealer licensed in any 

jurisdiction (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. 

(3) Dealer tax compliance. Dealer tax 

compliance means that all required 

Federal information and tax returns of 

the dealer have been filed, including for 

Federal income and employment tax 

purposes, and all Federal tax, penalties, 

and interest due of the dealer as of the 

time of sale have been paid. A dealer 

who has entered into an installment 

agreement with the Internal Revenue 

Service (IRS) for which a dealer is 

current on its obligations is treated as in 

Dealer tax compliance. 

(4) Electing taxpayer. Electing 

taxpayer means the individual who 

purchases and places in service a new 

clean vehicle and elects to transfer the 

credit under section 30D that would 

otherwise be allowable to such 

individual to an eligible entity pursuant 

to section 30D(g) and paragraph (c) of 

this section. A taxpayer is an electing 

taxpayer only if the taxpayer make 

certain attestations to the registered 

dealer, pursuant to procedures provided 

in guidance published in the Internal 

Revenue Bulletin, including that the 

taxpayer does not anticipate exceeding 

the modified adjusted gross income 

limitations and that the taxpayer will 

use the vehicle predominantly for 

personal use. 

(5) Eligible entity. Eligible entity has 

the meaning provided in section 

30D(g)(2) and paragraph (e)(2) of this 

section. 

(6) Registered dealer. A registered 

dealer is a dealer that has completed 

registration with the IRS as provided in 

paragraph (b) of this section. 

(7) Time of sale. Time of sale means 

the date the new clean vehicle is placed 

in service. A new clean vehicle is 

placed in service on the date the 

electing taxpayer takes possession of the 

vehicle. 

(8) Vehicle transfer election. Vehicle 

transfer election has the meaning 

provided in section 30D(g) and 

paragraph (c) of this section. 

(b) Dealer registration—(1) In general. 

A dealer must first register with the IRS 

in the manner set forth in guidance 

published in the Internal Revenue 

Bulletin (see § 601.601(d)(2)(ii)(a) of this 

chapter) for the dealer to receive credits 

transferred by an electing taxpayer 

pursuant to section 30D(g) and 

paragraph (c) of this section. 

(2) Effect of dealer tax noncompliance. If the dealer is not in dealer 

tax compliance for any of the taxable 

periods during the last five taxable 

years, the dealer may complete its initial 

registration with the IRS, but the dealer 

will not be eligible for the advance 

payment program (and, therefore, the 

dealer will not be eligible to receive 

transferred section 30D credits) until the 

compliance issue is resolved. If the 

failure is corrected, the IRS will 

complete the dealer’s registration for the 

advance payment program, and, 

provided all other requirements of 

section 30D(g) and this section are met, 

the dealer will then be allowed to 

participate in the advance payment 

program. Additional procedural 

guidance regarding this paragraph (b)(2) 

will be set forth in guidance published 

in the Internal Revenue Bulletin. 

(c) Vehicle transfer election by 

electing taxpayer to transfer credit. For 

a new clean vehicle placed in service 

after December 31, 2023, an electing 

taxpayer may elect to apply the rules of 

section 30D(g) and this section to make 

a vehicle transfer election with respect 

to the vehicle so that the section 30D 

credit with respect to the vehicle is 

allowed to the eligible entity specified 

in the vehicle transfer election (and not 

to the electing taxpayer) pursuant to the 

advance payment program described in 

paragraph (e) of this section. The 

electing taxpayer, as part of the vehicle 

transfer election, must transfer the 

entire amount of the credit that would 

otherwise be allowable to the electing 

taxpayer under section 30D with respect 

to the vehicle, and the eligible entity 

specified in the vehicle transfer election 

must pay the electing taxpayer an 

amount equal to the amount of the 

credit included in the vehicle transfer 

election. A vehicle transfer election is 

made not later than at the time of sale 

in the manner set forth in guidance 

published in the Internal Revenue 

Bulletin, and, once made, the vehicle 

transfer election is irrevocable. No 

vehicle transfer election may be made to 

transfer an amount of credit that would 

otherwise be allowed to the electing 

taxpayer under section 38. 

(d) Federal income tax consequences 

of the vehicle transfer election—(1) 

Treatment of electing taxpayer. In the 

case of a vehicle transfer election, the 

Federal income tax consequences for the 

electing taxpayer are as follows— 

(i) The credit amount under section 

30D that the electing taxpayer elects to 

transfer to the eligible entity under 

section 30D(g) and paragraph (c) of this 

section may exceed the electing 

taxpayer’s regular tax liability (as 

defined in section 26(b)(1) of the Code) 

for the taxable year in which the sale 

occurs, and the excess, if any, is not 

subject to recapture. 

(ii) The payment made by an eligible 

entity to an electing taxpayer under 

section 30D(g)(2)(C) and paragraph (c) of 

this section to an electing taxpayer 


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Federal Register / Vol. 88, No. 194 / Tuesday, October 10, 2023 / Proposed Rules 70333 

pursuant to the vehicle transfer election 

is not includible in the gross income of 

the electing taxpayer. 

(iii) The payment made by an eligible 

entity to an electing taxpayer under 

section 30D(g)(2)(C) and paragraph (c) of 

this section is treated as repaid by the 

electing taxpayer to the eligible entity as 

part of the purchase price of the new 

clean vehicle. Thus, the repayment by 

the electing taxpayer is included in the 

electing taxpayer’s basis in the new 

clean vehicle prior to the application of 

the basis reduction rule in section 

30D(f)(1). 

(2) Treatment of eligible entity. In the 

case of a vehicle transfer election, the 

Federal income tax consequences for the 

eligible entity are as follows— 

(i) The eligible entity is allowed the 

credit under section 30D with respect to 

the new clean vehicle and may receive 

an advance payment pursuant to section 

30D(g)(7) and paragraph (e) of this 

section; 

(ii) Advance payments received by the 

eligible entity are not treated as a tax 

credit in the hands of the eligible entity 

and may exceed the eligible entity’s 

regular tax liability (as defined in 

section 26(b)(1)) for the taxable year in 

which the sale occurs; 

(iii) An advance payment received by 

the eligible entity is not included in the 

gross income of the eligible entity; 

(iv) The payment made by an eligible 

entity under section 30D(g)(2)(C) and 

paragraph (c) of this section to an 

electing taxpayer is not deductible by 

the eligible entity; 

(v) The payment made by an eligible 

entity to an electing taxpayer under 

section 30D(g)(2)(C) and paragraph (c) of 

this section is treated as repaid by the 

electing taxpayer to the eligible entity as 

part of the purchase price of the new 

clean vehicle. Thus, the repayment by 

the electing taxpayer is treated as an 

amount realized of the eligible entity 

under section 1001 of the Code and the 

regulations in this part under section 

1001; and 

(vi) If the eligible entity is a 

partnership or an S corporation, then— 

(A) The IRS will make the advance 

payment to such partnership or S 

corporation equal to the amount of the 

section 30D credit allowed that is 

transferred to the eligible entity; 

(B) Such section 30D credit is reduced 

to zero and is, for any other purpose of 

the Code, deemed to have been allowed 

solely to such entity (and not allocated 

or otherwise allowed to its partners or 

shareholders) for such taxable year; and 

(C) The amount of the advance 

payment is not treated as tax exempt 

income to the partnership or S 

corporation for purposes of the Code. 

(3) Form of payment from eligible 

entity to electing taxpayer. The tax 

treatment of the payment made by the 

eligible entity to the electing taxpayer 

described in paragraphs (d)(1) and (2) of 

this section is the same regardless of 

whether the payment is made in cash or 

in the form of a partial payment or 

down payment for purchase of the new 

clean vehicle. 

(4) Application of certain other 

requirements. In the case of a vehicle 

transfer election, the following 

additional rules apply— 

(i) The requirements of section 

30D(f)(1) (regarding basis reduction) and 

30D(f)(2) (regarding no double benefit) 

apply to the electing taxpayer as if the 

vehicle transfer election were not made 

(so, for example, the electing taxpayer 

must reduce its basis in the vehicle by 

the amount of the section 30D credit, 

regardless of the vehicle transfer 

election); 

(ii) Section 30D(f)(6) (regarding the 

election not to take the credit) will not 

apply (in other words, by electing to 

transfer the credit, the electing taxpayer 

is electing to take the credit); and 

(iii) Section 30D(f)(9) (regarding the 

VIN requirement) will 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. 

(5) Examples. The following examples 

illustrate the rules under paragraph (d) 

of this section. 

(i) Example 1: Electing taxpayer’s 

regular tax liability less than value of 

the credit—(A) Facts. A taxpayer, who 

is an individual, purchases a new clean 

sports utility vehicle from a dealer that 

is a C corporation. The taxpayer satisfies 

the requirements to be an electing 

taxpayer and elects to transfer the 

section 30D credit to the dealer. The 

dealer is a registered dealer and satisfies 

the requirements to be an eligible entity. 

The purchase price for the vehicle is 

$57,500. The credit otherwise allowable 

to the electing taxpayer by section 30D 

with respect to the vehicle is $7,500. 

The eligible entity makes the payment 

required to be made to the electing 

taxpayer in the form of a cash payment 

of $7,500. The electing taxpayer pays 

back the $7,500 to the eligible entity and 

pays an additional $50,000 as the 

purchase price of the vehicle. The 

electing taxpayer’s regular tax liability 

for the year is less than $7,500. 

(B) Analysis. Under paragraph (d)(1) 

of this section, the electing taxpayer 

may transfer the credit even though the 

electing taxpayer’s regular tax liability is 

less than $7,500, and no amount of the 

credit will be recaptured from the 

taxpayer on the basis that the allowable 

credit exceeded their regular tax 

liability. The eligible entity’s $7,500 

payment to the electing taxpayer is not 

included in the electing taxpayer’s gross 

income, and the electing taxpayer’s 

purchase price for the vehicle is $57,500 

(including both the $7,500 payment and 

the additional $50,000 purchase price 

paid), prior to the application of the 

basis reduction rule of section 30D(f)(1). 

After application of the basis reduction, 

the electing taxpayer’s basis in the 

vehicle is $50,000. The eligible entity is 

eligible to receive an advance payment 

of $7,500 for the transferred section 30D 

credit as provided in section 30D(g)(7) 

and paragraph (e) of this section. Under 

paragraph (d)(2) of this section, the 

eligible entity may receive the advance 

payment regardless of whether the 

eligible entity’s regular tax liability is 

less than $7,500. The advance payment 

is not treated as a credit toward the 

eligible entity’s tax liability (if any), nor 

is it included in the eligible entity’s 

gross income, the eligible entity’s $7,500 

payment to the electing taxpayer is not 

deductible, and the eligible entity’s 

amount realized is $57,500 upon the 

sale of the vehicle (including both the 

$7,500 payment and the additional 

$50,000 purchase price of the vehicle). 

(ii) Example 2: Non-cash payment by 

eligible entity to electing taxpayer—(A) 

Facts. The facts are the same as in 

paragraph (d)(5)(i)(A) of this section 

(facts of Example 1), except that the 

eligible entity makes the payment to the 

electing taxpayer in the form of a 

reduction in the purchase price (rather 

than as a cash payment). 

(B) Analysis. Paragraph (d)(3) of this 

section provides that the application of 

paragraphs (d)(1) and (2) of this section 

is not dependent on the form of 

payment from an eligible entity to an 

electing taxpayer (for example, a 

payment in cash or a payment in the 

form of a reduction in purchase price). 

Thus, the analysis is the same as in 

paragraph (d)(5)(i)(B) of this section 

(analysis of Example 1). 

(iii) Example 3: Eligible entity is a 

partnership—(A) Facts. The facts are the 

same as in paragraph (d)(5)(i)(A) of this 

section (facts of Example 1), except that 

the dealer is a partnership. 

(B) Analysis. The analysis as to the 

electing taxpayer is the same as in 

paragraph (d)(5)(i)(B) of this section 

(analysis of Example 1). Because the 

eligible entity is a partnership, 

paragraph (d)(2)(vi) of this section 

applies. Thus, the advance payment is 

made to the partnership, the credit is 

reduced to zero and is, for any other 

purpose of the Code, deemed to have 

been allowed solely to the partnership 


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70334 Federal Register / Vol. 88, No. 194 / Tuesday, October 10, 2023 / Proposed Rules 

(and not allocated or otherwise allowed 

to its partners) for such taxable year. 

The amount of the advance payment is 

not treated as tax exempt income to the 

partnership for purposes of the Code. 

(e) Advance payments received by 

eligible entities—(1) In general. An 

eligible entity may receive advance 

payments from the IRS corresponding to 

the amount of the section 30D credit for 

which a vehicle transfer election was 

made by an electing taxpayer to the 

eligible entity pursuant to section 

30D(g) and paragraph (c) of this section 

before the eligible entity files its Federal 

income tax return for the taxable year 

that includes the taxable year with 

respect to which the vehicle transfer 

election corresponds. This advance 

payment program is the exclusive 

mechanism for an eligible entity to 

receive any payment related to a section 

30D credit pursuant to section 30D(g) 

and paragraph (c) of this section. The 

eligible entity may not claim a section 

30D credit on a Federal income tax 

return. 

(2) Requirements for a registered 

dealer to become an eligible entity. A 

registered dealer qualifies as an eligible 

entity, and may therefore receive an 

advance payment, by meeting the 

following requirements— 

(i) The registered dealer submits 

required registration information and is 

in dealer tax compliance; 

(ii) The registered dealer retains 

information regarding the vehicle 

transfer election for three calendar years 

beginning with the year immediately 

after the year in which the vehicle is 

placed in service, as described in 

guidance published in the Internal 

Revenue Bulletin (see § 601.601 of this 

chapter); and 

(iii) The registered dealer meets any 

other requirements of section 30D(g) 

and this section included in guidance 

published in the Internal Revenue 

Bulletin (see § 601.601 of this chapter). 

(3) Suspension of registered dealer 

eligibility. A registered dealer may be 

suspended from the advance payment 

program pursuant to the procedures as 

described in guidance published in the 

Internal Revenue Bulletin (see § 601.601 

of this chapter). Any decision made by 

the IRS relating to the suspension of a 

dealer’s registration is not subject to 

administrative appeal to the IRS 

Independent Office of Appeals unless 

the IRS and the IRS Independent Office 

of Appeals agree that such review is 

available and the IRS provides the time 

and manner for such review. 

(4) Revocation of registered dealer 

eligibility. A registered dealer’s 

registration may be revoked pursuant to 

the procedures as described in guidance 

published in the Internal Revenue 

Bulletin (see § 601.601 of this chapter). 

Any decision made by the IRS relating 

to the revocation of a dealer’s 

registration is not subject to 

administrative appeal to the IRS 

Independent Office of Appeals unless 

the IRS and the IRS Independent Office 

of Appeals agree that such review is 

available and the IRS provides the time 

and manner for such review. 

(f) Increase in tax—(1) Recapture 

where taxpayer exceeds modified 

adjusted gross income limitation. If the 

section 30D credit would otherwise (but 

for section 30D(g) and the rules of this 

section) not be allowable to a taxpayer 

that elected to transfer the credit under 

section 30D(g) and this section because 

the taxpayer exceeds the limitation 

based on modified adjusted gross 

income in section 30D(f)(10), then the 

income tax imposed on such taxpayer 

under chapter 1 of the Code (chapter 1) 

for the taxable year in which such 

vehicle was placed in service is 

increased by the amount of the payment 

received by the taxpayer. The taxpayer 

must reconcile such amounts on the tax 

return described in paragraph (g)(2) of 

this section. 

(2) Excessive payments—(i) In 

general. This paragraph (f)(2) provides 

rules under section 30D(g)(7)(B), under 

which rules similar to the rules of 

section 6417(d)(6) of the Code apply to 

the advance payment program. In the 

case of any advance payment that the 

IRS determines constitutes an excessive 

payment, the tax imposed on the 

eligible entity under chapter 1, 

regardless of whether such entity would 

otherwise be subject to tax under 

chapter 1, for the taxable year in which 

such determination is made will be 

increased by the sum of the following 

amounts— 

(A) The amount of the excessive 

payment; plus 

(B) An amount equal to 20 percent of 

such excessive payment. 

(ii) Reasonable cause. The amount 

described in paragraph (f)(2)(i)(B) of this 

section will not apply to an eligible 

entity if the eligible entity demonstrates 

to the satisfaction of the IRS that the 

excessive payment resulted from 

reasonable cause. In the case of a 

vehicle returned to the eligible entity 

within 30 days of being placed in 

service for which a vehicle transfer 

election was made by the electing 

taxpayer, as described in § 1.30D– 

4(d)(1)(ii), the eligible entity will be 

treated as demonstrating reasonable 

cause. 

(iii) Excessive payment defined. 

Excessive payment means an advance 

payment made— 

(A) To a registered dealer that fails to 

meet the requirements to be an eligible 

entity provided in section 30D(g)(2) and 

paragraph (e)(2) of this section; or 

(B) Except as provided in paragraph 

(f)(2)(iv) of this section, to an eligible 

entity with respect to a vehicle to the 

extent the payment exceeds the amount 

of the credit that, without application of 

section 30D(g) and this section, would 

be otherwise allowable to the electing 

taxpayer with respect to the vehicle for 

such tax year. 

(iv) Special rule for cases in which the 

purchaser’s modified adjusted gross 

income exceeds the limitation. Any 

excess described in paragraph 

(f)(2)(iii)(B) of this section due to the 

purchaser exceeding the limitation 

based on modified adjusted gross 

income provided in section 30D(f)(10) is 

not an excessive payment. Instead, the 

value of the amount of the advance 

payment is recaptured from the 

purchaser under section 30D(f)(10) and 

paragraph (f)(1) of this section. 

(3) Example. This paragraph (f)(3) 

provides an example to illustrate the 

excessive payment rules provided in 

paragraph (f)(2) of this section. 

(i) Facts. In 2024, D, a registered 

dealer, receives an advance payment of 

$7,500 with respect to a credit 

transferred under section 30D(g)(1) and 

paragraph (c) of this section with 

respect to a new clean vehicle. In 2025, 

the IRS determines that the registered 

dealer was not an eligible entity with 

respect to the vehicle at the time of the 

receipt of the advance payment in 2024 

because the registered dealer failed to 

satisfy a requirement in section 

30D(g)(2) and paragraph (e)(2) of this 

section to be an eligible entity with 

respect to the vehicle. D is unable to 

show reasonable cause for the failure. 

(ii) Analysis. Under paragraph (f)(2)(i) 

of this section, the tax imposed on D is 

increased by the amount of the 

excessive payment if the advance 

payment received by D constitutes an 

excessive payment. Under paragraph 

(f)(2)(iii) of this section, the entire 

amount of the $7,500 advance payment 

received by D is an excessive payment 

because D did not meet the 

requirements to be an eligible entity 

under section 30D(g)(2) and paragraph 

(e)(2) of this section. Additionally, 

because D cannot show reasonable 

cause for its failure to meet these 

requirements, the tax imposed under 

chapter 1 on D is increased by $9,000 

in 2025 (the taxable year of the IRS 

determination). This is comprised of the 

$7,500 value of the credit plus the 

$1,500 penalty, calculated as 20% 

penalty on such $7,500 (20% * $7,500 

= $1,500). This treatment applies 


ddrumheller on DSK120RN23PROD with PROPOSALS3
Federal Register / Vol. 88, No. 194 / Tuesday, October 10, 2023 / Proposed Rules 70335 

regardless of whether D is otherwise 

subject to tax under chapter 1 (for 

example, if D is a partnership). 

(g) Requirement of return—(1) In 

general. An electing taxpayer that makes 

a vehicle transfer election must file an 

income tax return for the taxable year in 

which the vehicle transfer election is 

made and indicate such election on the 

return per instructions. The electing 

taxpayer must include the VIN of the 

new clean vehicle on such return, as 

provided for in forms and instructions. 

(2) Income tax return. For purposes of 

this section, the term income tax return 

means a Form 1040, U.S. Individual 

Income Tax Return, with an attached 

Form 8936, Clean Vehicle Credits, or 

successor forms, 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 that includes all of 

the information required on the forms 

and in instructions. 

(h) Two vehicle transfer elections per 

year. A taxpayer may make no more 

than two transfer elections per taxable 

year, consisting of either two section 

30D credits or one section 30D credit 

and one section 25E credit. In the case 

of a joint return, each individual 

taxpayer may make no more than two 

transfer elections per taxable year. 

(i) Severability. The provisions of this 

section are separate and severable from 

one another. If any provision of this 

section is stayed or determined to be 

invalid, it is the agency’s intention that 

the remaining provisions will continue 

in effect. 

(j) Applicability date. This section 

applies to taxable years beginning after 

December 31, 2023. 

PART 301—PROCEDURE AND 

ADMINISTRATION 

■ Par 7. The authority citation for part 

301 is amended by adding an entry in 

numerical order for § 301.6213–2 to 

read, in part, as follows: 

Authority: 26 U.S.C. 7805. 

* * * * * 

Section 301.6213–2 also issued under 26 

U.S.C. 6213. 

* * * * * 

■ Par 8. Section 301.6213–2 is added to 

read as follows: 

§ 301.6213–2 Omission of correct vehicle 

identification number. 

(a) In general. The definition of the 

term mathematical or clerical error in 

section 6213(g)(2) of the Internal 

Revenue Code (Code) includes: 

(1) Under section 6213(g)(2)(T), an 

omission of a correct vehicle 

identification number required under 

section 30D(f)(9) of the Code (relating to 

credit for new clean vehicles) to be 

included on a return; 

(2) Under section 6213(g)(2)(U), an 

omission of a correct vehicle 

identification number required under 

section 25E(d) of the Code (relating to 

credit for previously-owned clean 

vehicles) to be included on a return; and 

(3) Under section 6213(g)(2)(V), an 

omission of a correct vehicle 

identification number required under 

section 45W(e) of the Code (relating to 

commercial clean vehicle credit) to be 

included on a return. 

(b) Omission of a correct vehicle 

identification number. For purposes of 

paragraph (a) of this section, a taxpayer 

is treated as having omitted a correct 

vehicle identification number if: 

(1) The vehicle identification number 

required to be reported under section 

30D(f)(9), 25E(d), or 45W(e) is not 

included on the return of tax; 

(2) The vehicle identification number 

included on the return of tax is not that 

of a vehicle eligible for a credit under 

section 30D, 25E, or 45W; 

(3) The vehicle identification number 

included on the return of tax is not that 

of a vehicle eligible for a credit under 

section 30D, 25E, or 45W for the year in 

which it is claimed; 

(4) The vehicle identification number 

included on the return of tax differs 

from the vehicle identification number 

reported to the IRS and the taxpayer 

under section 30D(d)(1)(H) for each new 

clean vehicle placed in service during 

the taxable year by the taxpayer who 

was issued the report; or 

(5) The vehicle identification number 

included on the return of tax differs 

from the vehicle identification number 

reported to the IRS and the taxpayer 

under section 25E(c)(1)(D)(i) for each 

previously-owned clean vehicle placed 

in service during the taxable year by the 

taxpayer who was issued the report. 

(c) Applicability date. This section 

applies to taxable years beginning after 

December 31, 2023. 

Douglas W. O’Donnell, 

Deputy Commissioner for Services and 

Enforcement. 

[FR Doc. 2023–22353 Filed 10–6–23; 8:45 am] 

BILLING CODE 4830–01–P 


ddrumheller on DSK120RN23PROD with PROPOSALS3