3506 Federal Register / Vol. 90, No. 8 / Tuesday, January 14, 2025 / Proposed Rules 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–123525–23] 

RIN 1545–BR06 

Section 45W Credit for Qualified 

Commercial Clean Vehicles 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking 

and notice of public hearing. 

SUMMARY: This document contains 

proposed regulations that would 

provide guidance on the qualified 

commercial clean vehicle credit enacted 

by the Inflation Reduction Act of 2022. 

These proposed regulations would affect 

eligible taxpayers that place a qualified 

commercial clean vehicle in service 

during a taxable year. These proposed 

regulations would also affect 

manufacturers of qualified commercial 

clean vehicles. 

DATES: Written or electronic comments 

must be received by March 17, 2025. 

The public hearing on these proposed 

regulations is scheduled for April 28, 

2025, at 10 a.m. eastern standard time 

(EST). Requests to speak and outlines of 

topics to be discussed at the public 

hearing must be received by March 17, 

2025. If no outlines are received by 

March 17, 2025, the public hearing will 

be cancelled. 

ADDRESSES: Commenters are strongly 

encouraged to submit public comments 

electronically via the Federal 

eRulemaking Portal at https://

www.regulations.gov (indicate IRS and 

REG–123525–23) by following the 

online instructions for submitting 

comments. 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cannot be edited or withdrawn.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:01:PR (REG–123525–23), Room 

5203, Internal Revenue Service, P.O. 

Box 7604, Ben Franklin Station, 

Washington, DC 20044. 

FOR FURTHER INFORMATION CONTACT: 

Concerning the proposed regulations, 

David Villagrana or Rika Valdman at 

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

concerning submissions of comments or 

the public hearing, Publications and 

Regulations Section at (202) 317–6901 

(not a toll-free number) or by email at 

publichearings@irs.gov (preferred). 

SUPPLEMENTARY INFORMATION: 

Authority 

This document contains proposed 

amendments to the Income Tax 

Regulations (26 CFR part 1) regarding 

sections 25E, 30D, 45W, and 6417 of the 

Internal Revenue Code (Code) as they 

relate to the credit for qualified 

commercial clean vehicles (proposed 

regulations). The proposed regulations 

are issued by the Secretary of the 

Treasury or her delegate (Secretary) 

under the authority granted by sections 

25E(e), 30D(d)(3) and (f)(5), 45W(c)(1), 

(d)(1), and (f), 6417(h), and 7805(a) of 

the Code. 

Section 45W(f) provides an express 

delegation authorizing the Secretary to 

issue ‘‘such regulations or other 

guidance as the Secretary determines 

necessary to carry out the purposes of 

this section, including regulations or 

other guidance relating to determination 

of the incremental cost of any qualified 

commercial clean vehicle.’’ 

Section 45W(c)(1), in part, 

incorporates in the definition of the 

term ‘‘qualified commercial clean 

vehicle’’ that the vehicle ‘‘meets the 

requirements of section 30D(d)(1)(C).’’ 

Section 30D(d)(1)(C) requires that such 

vehicle be made by a ‘‘qualified 

manufacturer,’’ as defined in section 

30D(d)(3). Section 30D(d)(3) provides 

that a qualified manufacturer must enter 

‘‘into a written agreement with the 

Secretary under which such 

manufacturer agrees to make periodic 

written reports to the Secretary (at such 

times and in such manner as the 

Secretary may provide) providing 

vehicle identification numbers and such 

other information related to each 

vehicle manufactured by such 

manufacturer as the Secretary may 

require.’’ 

Section 45W(d)(1), which provides 

that rules similar to the rules under 

section 30D(f) (without regard to section 

30D(f)(10) or (11)) apply for purposes of 

section 45W, incorporates section 

30D(f)(5), which provides an express 

delegation of authority stating, ‘‘[t]he 

Secretary shall, by regulations, provide 

for recapturing the benefit of any credit 

allowable under subsection (a) with 

respect to any property which ceases to 

be property eligible for such credit.’’ 

Section 6417(h) authorizes the 

Secretary to issue such regulations or 

other guidance as may be necessary to 

carry out the purposes of section 6417. 

Finally, section 7805(a) authorizes the 

Secretary ‘‘to prescribe all needful rules 

and regulations for the enforcement of 

[the Code], including all rules and 

regulations as may be necessary by 

reason of any alteration of law in 

relation to internal revenue.’’ 

Background 

I. Overview 

Section 13403(a) of Public Law 117– 

169, 136 Stat. 1818 (August 16, 2022), 

commonly known as the Inflation 

Reduction Act of 2022 (IRA), added 

section 45W to the Code. Section 

13403(b)(1) of the IRA added section 

45W to the list of general business 

credits in section 38 of the Code. 

Section 45W provides a credit against 

the tax imposed by chapter 1 of the 

Code (chapter 1) with respect to each 

qualified commercial clean vehicle 

placed in service by the taxpayer during 

the taxable year (section 45W credit). 

The section 45W credit is effective for 

vehicles placed in service after 

December 31, 2022. The section 45W 

credit is one of three related clean 

vehicle credits enacted under or revised 

by the IRA. Section 25E provides a 

credit for previously-owned clean 

vehicles. Section 30D provides a credit 

for new clean vehicles. 

II. Section 45W 

Section 45W(a) provides that, for 

purposes of section 38, the qualified 

commercial clean vehicle credit for any 

taxable year is an amount equal to the 

sum of the credit amounts determined 

under section 45W(b) with respect to 

each qualified commercial clean vehicle 

placed in service by the taxpayer during 

the taxable year. The amount of the 

section 45W credit is treated as a 

general business credit. Section 

38(b)(37) lists as a current year business 

credit the qualified commercial clean 

vehicle credit determined under section 

45W. 

Section 45W(b)(1) provides that, 

subject to the limitation in section 

45W(b)(4), the amount of the section 

45W credit is the lesser of: (A) 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 

(ICE)), or (B) 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, with respect to any qualified 

commercial clean vehicle, any vehicle 

that is powered solely by a gasoline or 

diesel ICE and is comparable in size and 

use to such vehicle. 

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

section 45W credit amount determined 

under section 45W(b) with respect to 

any qualified commercial clean vehicle 


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cannot exceed: (A) in the case of a 

vehicle that has a gross vehicle weight 

rating of less than 14,000 pounds, 

$7,500; and (B) in the case of a vehicle 

not described in section 45W(b)(4)(A), 

$40,000. 

Section 45W(c) defines ‘‘qualified 

commercial clean vehicle’’ for purposes 

of the section 45W credit as any vehicle 

which: (1) meets the requirements of 

section 30D(d)(1)(C) of the Code, and is 

acquired for use or lease by the taxpayer 

and not for resale; (2) either meets the 

requirements of section 30D(d)(1)(D), 

and is manufactured primarily for use 

on public streets, roads, and highways 

(not including a vehicle operated 

exclusively on a rail or rails), or is 

mobile machinery, as defined in section 

4053(8) of the Code (including vehicles 

that are not designed to perform a 

function of transporting a load over the 

public highways); (3) either is propelled 

to a significant extent by an electric 

motor which draws electricity from a 

battery that has a capacity of not less 

than 15 kilowatt hours (or, in the case 

of a vehicle that has a gross vehicle 

weight rating of less than 14,000 

pounds, 7 kilowatt hours) and is capable 

of being recharged from an external 

source of electricity, or is a motor 

vehicle that satisfies the requirements 

under section 30B(b)(3)(A) and (B) of 

the Code; and (4) is of a character 

subject to the allowance for 

depreciation. 

Section 45W(d) establishes special 

rules for purposes of the section 45W 

credit. Section 45W(d)(1) provides that 

rules similar to the rules of section 

30D(f)(1) through (9) apply to section 

45W. Section 45W(d)(2) provides that 

section 45W(c)(4) does not apply to any 

vehicle that is not subject to a lease and 

which is placed in service by a taxexempt entity described in section 

168(h)(2)(A)(i), (ii), or (iv) of the Code. 

Section 45W(d)(3) provides that no 

section 45W credit is allowed with 

respect to any vehicle for which a credit 

was allowed under section 30D. 

Section 45W(e) provides that no 

section 45W credit is allowed with 

respect to any vehicle unless the 

taxpayer includes the vehicle 

identification number of such vehicle 

on the return of tax 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 the 

determination of the incremental cost of 

any qualified commercial clean vehicle. 

Section 45W(g) provides that no 

section 45W credit is allowed with 

respect to a vehicle acquired after 

December 31, 2032. 

III. Section 25E 

Section 13402 of the IRA added 

section 25E to the Code. The credit 

under section 25E (section 25E credit) is 

a personal credit allowable under 

subpart A of the Code that relates to 

previously-owned clean vehicles. 

IV. Section 30D 

Section 30D was originally 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 the purchase and 

placing in service of new qualified plugin electric drive motor vehicles (section 

30D credit). Section 30D was amended 

several times since its enactment, most 

recently by section 13401 of the IRA. 

Section 30D, as amended by the IRA, 

relates to new clean vehicles. 

The section 30D credit may be treated 

as either a personal credit or a general 

business credit, depending on whether 

the vehicle is used for personal use or 

is of a character subject to the allowance 

for depreciation. 

Section 30D(d)(1) defines ‘‘new clean 

vehicle’’ as a motor vehicle that satisfies 

eight requirements set forth in section 

30D(d)(1)(A) through (H). As relevant to 

section 45W and these proposed 

regulations, section 30D(d)(1)(C) 

provides that the vehicle must be made 

by a qualified manufacturer, and section 

30D(d)(1)(D) provides that the vehicle 

must be treated as a motor vehicle for 

purposes of title II of the Clean Air Act 

(CAA). 

Section 30D(d)(3) defines ‘‘qualified 

manufacturer’’ as any manufacturer 

(within the meaning of the regulations 

prescribed by the Administrator of the 

Environmental Protection Agency (EPA) 

for purposes of the administration of 

title II of the CAA (42 U.S.C. 7521– 

7590)) that enters into a written 

agreement with the Secretary under 

which such manufacturer agrees to 

make periodic written reports to the 

Secretary (at such times and in such 

manner as the Secretary may provide) 

providing vehicle identification 

numbers and such other information 

related to each vehicle manufactured by 

such manufacturer as the Secretary may 

require. 

Section 30D(f)(1)–(9) provides special 

rules for purposes of section 30D that 

are relevant to section 45W by virtue of 

the cross-reference in section 45W(d)(1). 

Section 30D(f)(1) provides that the basis 

of any property for which a credit is 

allowable under section 30D(a) is 

reduced by the amount of such credit so 

allowed (determined without regard to 

section 30D(c)). 

Section 30D(f)(2) provides that the 

amount of any deduction or other credit 

allowable under chapter 1 for a vehicle 

for which a credit is allowable under 

section 30D(a) is reduced by the amount 

of credit allowed under section 30D(a) 

for such vehicle (determined without 

regard to section 30D(c)). 

Section 30D(f)(3) provides that in the 

case of a vehicle the use of which is 

described in section 50(b)(3) or (4) of the 

Code (generally, use by tax-exempt 

organizations, the United States, a 

government entity, or foreign person or 

entities) and that is not subject to a 

lease, the person who sold such vehicle 

to the person or entity using such 

vehicle is treated as the taxpayer that 

placed such vehicle in service, but only 

if such person clearly discloses to such 

person or entity in a document the 

amount of any credit allowable under 

section 30D(a) with respect to such 

vehicle (determined without regard to 

section 30D(c)). Section 30D(f)(3) was 

repealed for vehicles placed in service 

after December 31, 2023. 

Section 30D(f)(4) provides that no 

section 30D credit is allowable with 

respect to any property referred to in 

section 50(b)(1) (generally, property 

used predominantly outside of the 

United States). 

Section 30D(f)(5) authorizes the 

Secretary to promulgate regulations 

providing for the recapture of the 

benefit of any section 30D credit 

allowable with respect to any property 

which ceases to be property eligible for 

such credit. 

Section 30D(f)(6) provides that no 

section 30D credit is allowed for any 

vehicle if the taxpayer elects to not have 

section 30D apply to such vehicle. 

Section 30D(f)(7) provides that a 

vehicle is not considered eligible for a 

section 30D credit unless such vehicle 

is in compliance with: (A) the 

applicable provisions of the CAA for the 

applicable make and model year of the 

vehicle (or applicable air quality 

provisions of State law in the case of a 

State which has adopted such 

provisions under a waiver under section 

209(b) of the CAA), and (B) the motor 

vehicle safety provisions of 49 U.S.C. 

30101 through 30169. 

Section 30D(f)(8) provides that in the 

case of any vehicle, the credit described 

in section 30D(a) is only allowed once 

with respect to such vehicle, as 

determined based upon the vehicle 

identification number of such vehicle, 

including any vehicle with respect to 

which the taxpayer elects the 

application of section 30D(g). 

Section 30D(f)(9) provides that no 

section 30D credit is allowed with 

respect to any vehicle unless the 


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1The reference in section 6417(b)(6) to section 

45W(d)(3) was intended to be a reference to section 

45W(d)(2). See General Explanation of Tax 

Legislation Enacted in the 117th Congress, JCS–1– 

23 (December 21, 2023) at 282. Thus, the proposed 

regulations refer to section 45W(d)(2). See also TD 

9988, 89 FR 17546, at 17546 n.1. 

taxpayer includes the vehicle 

identification number of such vehicle 

on the return of tax for the taxable year. 

V. Section 6417 

Section 6417 of the Code allows an 

applicable entity (as defined in section 

6417(d)(1)(A)) to make an election with 

respect to an applicable credit (as 

defined in section 6417(b)) to be treated 

as making a payment against the tax 

imposed by subtitle A of the Code 

(related to income taxes) for the taxable 

year equal to the amount of such credit. 

Under section 6417(b)(6), in the case of 

a tax-exempt entity described in section 

168(h)(2)(A)(i), (ii), or (iv), the term 

‘‘applicable credit’’ includes the section 

45W credit determined under section 

45W by reason of section 45W(d)(2).1

VI. Prior Guidance 

A. Notice 2022–56 

On November 3, 2022, the Treasury 

Department and the IRS published 

Notice 2022–56, 2022–47 I.R.B. 480, 

seeking comments regarding sections 

45W and 30C of the Code. The notice 

requested general comments on issues 

arising under section 45W, as well as 

specific comments concerning: (1) 

factors to determine ‘‘comparable in size 

and use’’ for purposes of the comparable 

vehicle definition in section 45W(b)(3) 

used to determine incremental cost; (2) 

the definition of mobile machinery; (3) 

the application of ‘‘rules similar to the 

rules under section 30D(f)’’ to section 

45W; (4) the ‘‘no double benefit’’ rule in 

section 45W(d)(3); (5) compliance 

considerations for qualified 

manufacturers; (6) the definition of 

‘‘significant extent’’ for purposes of 

section 45W(c)(3)(A); (7) the term 

‘‘property of a character subject to an 

allowance for depreciation’’ for 

purposes of section 45W(c)(4); and (8) 

other terms in section 45W that require 

definition or additional guidance. 

The Treasury Department and the IRS 

received over 130 comments on Notice 

2022–56. These comments were 

carefully considered in the preparation 

of these proposed regulations. 

B. Revenue Procedures 

On December 27, 2022, the Treasury 

Department and the IRS published 

Revenue Procedure 2022–42, 2022–52 

I.R.B. 565. Among other things, Rev. 

Proc. 2022–42 provided 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 for 

credits under these sections. 

On October 23, 2023, the Treasury 

Department and the IRS published 

Revenue Procedure 2023–33, 2023–43 

I.R.B. 1135. Among other things, Rev. 

Proc. 2023–33 superseded certain 

provisions of Rev. Proc. 2022–42, and 

provided updated information on the 

submission of written agreements by 

manufacturers to the IRS in order to be 

considered qualified manufacturers, as 

well as updated information on the 

method of submission of monthly 

reports by qualified manufacturers. 

On December 18, 2023, the Treasury 

Department and the IRS published 

Revenue Procedure 2023–38, 2023–51 

I.R.B. 1544. Among other things, Rev. 

Proc. 2023–38 updated and 

consolidated the procedural rules for 

qualified manufacturers with respect to 

the section 25E credit, the section 30D 

credit, and the section 45W credit, and 

superseded certain provisions of Rev. 

Proc. 2022–42 and Rev. Proc. 2023–33. 

C. Safe Harbor Notices 

On January 17, 2023, the Treasury 

Department and the IRS published 

Notice 2023–9, 2023–3 I.R.B. 402, which 

provides a safe harbor for purposes of 

the section 45W credit regarding the 

incremental cost of certain qualified 

commercial clean vehicles placed in 

service in calendar year 2023, based on 

a December 2022 incremental cost 

analysis by the U.S. Department of 

Energy (DOE) across classes of street 

vehicles (DOE analysis). 

On January 8, 2024, the Treasury 

Department and the IRS published 

Notice 2024–5, 2024–2 I.R.B. 347, which 

provides a safe harbor for the purposes 

of the section 45W credit regarding the 

incremental cost of certain qualified 

commercial clean vehicles placed in 

service in calendar year 2024. The safe 

harbor for 2024 is based on the DOE 

analysis, as amended by the DOE in 

December 2023 to incorporate minor 

modifications that did not alter the 

incremental cost results. Notice 2024–5 

also requested comments regarding 

additional types or classes of vehicles 

that should be included in the safe 

harbor in the future. The Treasury 

Department and the IRS received 

comments in response to the Notice. 

These comments were carefully 

considered in the preparation of these 

proposed regulations. 

D. Final Regulations Under Sections 

25E, 30D, and 6213 

On May 6, 2024, the Treasury 

Department and the IRS published final 

regulations (TD 9995) in the Federal 

Register (89 FR 37706) providing rules 

and definitions for the section 25E 

credit and the section 30D credit. In 

addition, the final regulations provide 

guidance under section 6213(g)(2)(T) 

through (V) of the Code on the meaning 

of ‘‘mathematical or clerical error’’ with 

regard to certain assessments of tax 

without a notice of deficiency in 

connection with the section 25E credit, 

the section 30D credit, and the section 

45W credit. 

Explanation of Provisions 

I. Overview 

Proposed § 1.45W–1 would provide 

definitions applicable to section 45W 

and the section 45W regulations. 

Proposed § 1.45W–2 would provide 

rules for determining the amount of the 

section 45W credit, including the 

determination of incremental cost for 

qualified commercial clean vehicles. 

Proposed § 1.45W–3 would provide 

rules related to a vehicle’s qualification 

as a qualified commercial clean vehicle. 

Proposed § 1.45W–4 would provide 

special rules relating to the credit 

eligibility of a vehicle involved in 

certain transactions and uses, the 

interaction of the section 45W credit 

with other credits, and recapture of the 

section 45W credit. Proposed § 1.45W– 

5 would provide reporting requirements 

for purposes of the section 45W credit. 

II. Credit for Qualified Commercial 

Clean Vehicles; Definitions 

Proposed § 1.45W–1 would provide 

definitions applicable to section 45W 

and the section 45W regulations. 

A. Battery 

Proposed § 1.45W–1(b)(1) would 

define the term ‘‘battery’’ to mean a 

collection of one or more battery 

modules, each of which has two or more 

battery cells, electrically configured in 

series or parallel, to create voltage or 

current. The term ‘‘battery’’ does not 

include items such as thermal 

management systems or other parts of a 

battery cell or module that do not 

directly contribute to the 

electrochemical storage of energy within 

the battery, such as battery cell cases, 

cans, or pouches. This definition is 

consistent with section 45W(c)(3)(A) 

because battery modules and cells are 

the sources from which an electric 

motor draws electricity. The definition 

is also consistent with the definition of 

battery in § 1.30D–2(b)(5). 


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B. Battery Electric Vehicle 

Proposed § 1.45W–1(b)(2) would 

define the term ‘‘battery electric 

vehicle’’ (BEV) as a vehicle propelled 

solely by an electric motor that draws 

electricity from batteries capable of 

being recharged from an external source 

of electricity. This definition is 

consistent with section 45W(c)(3)(A), 

which requires, in part, that a qualified 

commercial clean vehicle be propelled 

to a significant extent by an electric 

motor that draws electricity from a 

battery. 

C. Fuel Cell Electric Vehicle 

Proposed § 1.45W–1(b)(3) would 

define ‘‘fuel cell electric vehicle’’ 

(FCEV) as a vehicle (i) that is propelled 

by power derived from one or more cells 

that convert chemical energy directly 

into electricity by combining oxygen 

with hydrogen fuel which is stored on 

board the vehicle in any form and may 

or may not require reformation prior to 

use, and (ii) that, in the case of a light 

duty vehicle (that is, a passenger 

automobile or light truck), has received 

on or after August 8, 2005 (the date of 

the enactment of section 30B), a 

certificate that such vehicle meets or 

exceeds the Bin 5 Tier II emission level 

established in regulations prescribed by 

the Administrator of the Environmental 

Protection Agency (EPA) under section 

202(i) of the CAA for that make and 

model year vehicle. This definition 

repeats the substance of section 

30B(b)(3)(A) and (B) and adds the 

enactment date of section 30B (August 

8, 2005) to implement section 

45W(c)(3)(B), which incorporates the 

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

and (B). 

D. Gross Vehicle Weight Rating 

Proposed § 1.45W–1(b)(4) would 

define ‘‘gross vehicle weight rating’’ 

(GVWR) as having the meaning 

provided in 49 CFR 571.3(b) and 40 CFR 

86.082–2. The Department of 

Transportation (DOT) definition of 

GVWR in 49 CFR 571.3(b) (providing 

definitions related to Federal Motor 

Vehicle Safety Standards) is 

substantially identical to the EPA 

definition of GVWR in 40 CFR 86.082– 

2 (related to the control of emissions 

from highway vehicles and engines). 

Because ‘‘gross vehicle weight rating’’ is 

a term of art embedded in the regulatory 

regimes of two other Federal agencies, 

proposed § 1.45W–1(b)(4) would 

provide a definition consistent with 

existing DOT and EPA regulations. 

E. Manufacturer 

Proposed § 1.45W–1(b)(5)(i) would 

define ‘‘manufacturer’’ as any 

manufacturer within the meaning of the 

regulations prescribed by the 

Administrator of the EPA for purposes 

of the administration of title II of the 

Clean Air Act (42 U.S.C. 7521 et seq.) 

and as defined in 42 U.S.C. 7550(1). 

This definition would repeat the 

substance of the definition of 

‘‘manufacturer’’ within section 

30D(d)(3)’s definition of ‘‘qualified 

manufacturer,’’ which is incorporated 

by section 45W(c)(1). Consistent with 

the definition of ‘‘manufacturer’’ 

provided in § 1.30D–2(b)(28), proposed 

§ 1.45W–1(b)(5)(i) would provide that, if 

multiple manufacturers are involved in 

the production of a vehicle, the 

requirements of section 30D(d)(3) must 

be met by the manufacturer that satisfies 

the reporting requirements of the 

greenhouse gas emissions standards set 

by the EPA under the Clean Air Act (42 

U.S.C. 7521 et seq.) for the subject 

vehicle. 

In addition, the proposed rules would 

move the existing rule regarding the 

modification of a new motor vehicle 

that has not yet been placed in service 

from § 1.30D–2(b)(28)(ii)(B) to § 1.45W– 

1(b)(5)(ii) so that all rules related to the 

section 45W credit would be included 

in the section 45W regulations. This 

rule allows a manufacturer that modifies 

a new motor vehicle (as defined in 42 

U.S.C. 7550(3)) that does not satisfy the 

requirements of section 45W(c)(3) so 

that the vehicle, after modification, does 

satisfy such requirements to enter into 

an agreement under section 30D(d)(3) if 

such modification occurs prior to the 

new motor vehicle being placed in 

service. 

F. Placed in Service 

Under proposed § 1.45W–1(b)(6), a 

qualified commercial clean vehicle 

would be considered ‘‘placed in 

service’’ on the date the taxpayer takes 

possession of the vehicle. This proposed 

definition is consistent with the 

definition provided in § 1.30D–2(b)(36) 

and § 1.25E–1(b)(10), which gives effect, 

in the specific context of vehicles, to the 

general concept of ‘‘placed in service’’ 

from other Code provisions addressing 

credits and depreciation. See § 1.46– 

3(d)(1)(ii) and (d)(4)(i) (for qualified 

investments, property is considered 

placed in service in the earlier of the 

period for depreciation with respect to 

such property begins or when placed in 

a condition or state of readiness and 

availability for a specifically assigned 

function); § 1.167(a)–11(e)(1)(i) (for 

purposes of depreciation, property is 

first placed in service when first placed 

in a condition or state of readiness and 

availability for a specifically assigned 

function); and § 1.179–4(e) (property is 

considered placed in service when 

placed in a condition or state of 

readiness and availability for a 

specifically assigned function); see also 

Consumers Power Co. v. Comm’r, 89 

T.C. 710 (1987) (citing §§ 1.46–3(d)(1)(ii) 

and 1.167(a)–11(e)(1)(i), hydroelectric 

plant placed in service for purposes of 

depreciation and investment credit 

when all phases of preoperational 

testing were completed, thereby 

demonstrating that the plant was 

available for service on a regular basis); 

Noell v. Comm’r, 66 T.C. 718, 728–729 

(1976) (citing § 1.46–3(d)(1)(ii), landing 

strip placed in service for purposes of 

investment credit when strip was paved 

and therefore available for full service). 

The proposed definition is also 

consistent with regulations issued under 

Code sections addressing the excise tax 

on heavy trucks and trailers, 26 CFR 

145.4051–1(c)(2) of the Temporary 

Excise Tax Regulations under the 

Highway Revenue Act of 1982 (Pub. L. 

97–424) (‘‘a vehicle shall be considered 

placed in service on the date on which 

the owner of the vehicle took actual 

possession of the vehicle’’). 

G. Plug-in Hybrid Electric Vehicle 

Proposed § 1.45W–1(b)(7) would 

define ‘‘plug-in hybrid electric vehicle’’ 

(PHEV) as a vehicle that uses batteries 

that can be recharged from an external 

source of electricity to power an electric 

motor that propels the vehicle to a 

significant extent, and another fuel, 

such as gasoline or diesel, to power an 

ICE or other propulsion source. This 

definition is consistent with section 

45W(c)(3)(A), which requires, in part, a 

vehicle propelled by an electric motor 

that draws electricity from a battery, and 

with section 45W(b)(1)(A), which 

contemplates differing basis percentages 

for purposes of calculating the amount 

of the section 45W credit depending on 

whether a vehicle is powered in part by 

a gasoline or diesel ICE. 

H. Plug-in Hybrid Fuel Cell Electric 

Vehicle 

Proposed § 1.45W–1(b)(8) would 

define ‘‘plug-in hybrid fuel cell electric 

vehicle’’ (PHFCEV) as a vehicle that 

uses batteries that can be recharged from 

an external source of electricity to 

power an electric motor that propels the 

vehicle to a significant extent and a 

hydrogen fuel source that powers an 

electric motor through the fuel cell 

system. This definition is consistent 

with section 45W(c)(3)(A), which 

requires, in part, a vehicle propelled by 

an electric motor that draws electricity 

from a battery. 


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3510 Federal Register / Vol. 90, No. 8 / Tuesday, January 14, 2025 / Proposed Rules 

I. Qualified Commercial Clean Vehicle 

Proposed § 1.45W–1(b)(9) would 

define ‘‘qualified commercial clean 

vehicle’’ to mean a vehicle that meets 

the requirements of section 45W(c) and 

§ 1.45W–3(b) through (d). Because 

section 30D(d)(1)(C), incorporated by 

section 45W(c)(1), requires a qualified 

commercial clean vehicle to be made by 

a qualified manufacturer, proposed 

§ 1.45W–1(b)(9)(i), (ii), and (iii) would 

add that a vehicle does not meet the 

requirements of section 45W(c) if the 

qualified manufacturer fails to provide a 

periodic written report for such vehicle 

prior to the vehicle being placed in 

service by the taxpayer claiming the 

credit reporting the vehicle 

identification number of such vehicle, 

and certifying compliance with the 

requirements of section 45W(c); if the 

qualified manufacturer provides 

incorrect information with respect to the 

vehicle on such report; or if the 

qualified manufacturer fails to update 

its report in the event of a material 

change with respect to the vehicle. 

These proposed rules are consistent 

with those that apply to qualified 

manufacturers in the context of other 

clean vehicle credits. See § 1.30D– 

2(b)(32). 

J. Qualified Manufacturer 

Proposed § 1.45W–1(b)(10) would 

define ‘‘qualified manufacturer,’’ 

consistent with § 1.30D–2(b)(42), to 

mean a manufacturer that meets the 

requirements described in section 

30D(d)(3) at the time the manufacturer 

submits a periodic written report to the 

IRS under a written agreement 

described in section 30D(d)(3). The term 

‘‘qualified manufacturer’’ would not, 

under the proposed rule, include any 

manufacturer whose qualified 

manufacturer status has been terminated 

by the IRS. Proposed § 1.45W–1(b)(10) 

would further provide that the IRS may 

terminate qualified manufacturer status 

for fraud, intentional disregard, or gross 

negligence with respect to any 

requirements of sections 25E, 30D, 45W, 

regulations or any guidance thereunder, 

including with respect to the periodic 

written reports described in section 

30D(d)(3). See § 601.601 of the 

Statement of Procedural Rules (26 CFR 

part 1). 

K. Secretary 

Proposed § 1.45W–1(b)(11) would 

provide that the term ‘‘Secretary’’ has 

the meaning provided in section 

7701(a)(11)(B) of the Code. 

L. Section 45W Regulations 

Proposed § 1.45W–1(b)(12) would 

define the term ‘‘section 45W 

regulations’’ to mean §§ 1.45W–1 

through 1.45W–5. 

III. Amount of Section 45W Credit; 

Incremental Cost 

Proposed § 1.45W–2 would provide 

rules for determining the amount of the 

section 45W credit, including the 

determination of incremental cost for 

qualified commercial clean vehicles. 

A. Per-Vehicle Credit Amount 

Section 45W(b)(1) provides that, 

subject to section 45W(b)(4), the amount 

of the section 45W credit for a qualified 

commercial clean vehicle placed in 

service during the taxable year is equal 

to the lesser of: (1) 15 percent of the 

basis in such vehicle, or 30 percent in 

the case of a vehicle not powered by a 

gasoline or diesel ICE; or (2) the 

incremental cost of such vehicle (as that 

phrase is defined in section 45W(b)(2)). 

Section 45W(b)(4) limits the amount of 

the section 45W credit with respect to 

any qualified commercial clean vehicle 

to $7,500 in the case of a vehicle that 

has a GVWR of less than 14,000 pounds, 

and $40,000 in the case of any other 

vehicle. 

Proposed § 1.45W–2(a) would 

therefore provide that, subject to the 

limitation in section 45W(b)(4), the pervehicle credit amount under section 

45W(b)(1) with respect to any qualified 

commercial clean vehicle is the lesser of 

15 percent of the basis of such vehicle 

(or 30 percent in the case of a vehicle 

not powered by a gasoline or diesel 

ICE), or the incremental cost of such 

vehicle. 

B. Incremental Cost of a Qualified 

Commercial Clean 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 such price of a 

comparable vehicle. Section 45W(b)(3) 

defines a comparable vehicle, with 

respect to any qualified commercial 

clean vehicle, as a vehicle powered 

solely by a gasoline or diesel ICE that is 

comparable in size and use to such 

vehicle. 

Section 45W incentivizes taxpayers to 

purchase vehicles with certain clean 

propulsion technologies instead of 

vehicles powered solely by a gasoline or 

diesel ICE. Any cost comparison 

between such vehicles and their ICE 

alternatives, no matter how precisely 

defined, would inevitably reflect cost 

differences beyond those associated 

with the propulsion technologies (for 

example, a custom body would likely 

create a cost difference between two 

otherwise similar vehicles). If such cost 

differences were reflected in the amount 

of the credit, the credit could 

incentivize adoption of vehicle features 

unrelated to the purposes of section 

45W. 

Proposed § 1.45W–2(b) would 

therefore provide that incremental cost 

is determined by multiplying the 

manufacturer’s cost of the components 

necessary for the powertrain of the 

qualified commercial clean vehicle by 

the retail price equivalent (RPE) of that 

vehicle, and then subtracting from that 

amount the product of the 

manufacturer’s cost of the powertrain of 

the comparable vehicle and the RPE of 

that vehicle. Expressed formulaically, 

the rule is as follows: 

Incremental cost = (cost of qualified 

commercial clean vehicle 

powertrain × RPE of qualified 

commercial clean vehicle)¥(cost of 

comparable vehicle powertrain × 

RPE of comparable vehicle) 

This approach attempts to eliminate, 

to the extent possible, any cost 

differences unrelated to the propulsion 

technologies of the vehicles (see also the 

discussion of ‘‘comparable vehicle’’ in 

section III.D of this Explanation of 

Provisions). Application of an RPE (see 

section III.C of this Explanation of 

Provisions) adjusts the manufacturer’s 

cost of a powertrain to reflect the 

taxpayer’s cost with respect to that 

powertrain. See section III of this 

Explanation of Provisions for a 

discussion of the ways in which a 

taxpayer might ascertain manufacturer’s 

costs. 

The Treasury Department and the IRS, 

in consultation with the DOE, are 

proposing an incremental cost equation 

based on the incremental cost of the 

powertrain because the powertrain is a 

large fraction of the incremental cost 

between a clean vehicle and a 

comparable vehicle and because there is 

robust data available to verify the 

difference in costs between vehicles. 

This incremental cost equation is 

consistent with current modeling done 

by the DOE regarding the costs of clean 

vehicles compared to ICE vehicles. As 

modeling techniques, data capabilities, 

and vehicle design evolve, the Treasury 

Department and the IRS will continue to 

study this approach. 

To implement this approach in the 

context of the range of propulsion 

technologies and configurations 

contemplated by the statute (that is, 

BEVs, FCEVs, PHEVs, and PHFCEVs), 

the Treasury Department and the IRS, in 

consultation with the DOE, developed 

specific equations and associated 

definitions for BEVs, FCEVs, PHEVs, 

and PHFCEVs that would be provided 


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Federal Register / Vol. 90, No. 8 / Tuesday, January 14, 2025 / Proposed Rules 3511 

in proposed § 1.45W–2(c)(2) through (5) 

and (d). These equations would be 

powertrain-specific versions of the 

general equation described in proposed 

§ 1.45W–2(b) and would specify the cost 

of the components that, with respect to 

each type of powertrain, comprise the 

powertrain cost. For example, the cost 

of a BEV powertrain would, under the 

rule provided in § 1.45W–2(c)(2), be 

equal to the sum of the costs of the 

electric traction drive system, the 

battery, and the electrical accessories, 

each a term defined in § 1.45W–2(d)(1) 

through (3). These equations and rules 

provided in proposed § 1.45W–2(c)(2) 

through (5), which address the cost of 

BEV, PHEV, FCEV, and PHFCEV 

powertrains and the cost of ICE 

powertrains of comparable vehicles, are 

consistent with the incremental cost 

provisions of section 45W(b)(2) and (3). 

The Treasury Department and the IRS 

welcome comments on these proposed 

incremental cost equations and rules. In 

particular, comments are requested on 

whether other vehicle equipment or 

aspects of a vehicle’s design should be 

included in the incremental cost 

equations. Any recommended additions, 

however, must be supportable by robust, 

verifiable quantitative data. 

C. Retail Price Equivalent and Safe 

Harbor 

Because section 45W(b)(2) defines 

incremental cost in terms of purchase 

price rather than manufacturer’s cost, an 

RPE is necessary to adjust a 

manufacturer’s cost of a qualified 

commercial clean vehicle powertrain 

and an ICE powertrain to reflect a 

taxpayer’s purchase price of such 

powertrains. RPEs vary from vehicle to 

vehicle, manufacturer to manufacturer, 

and across different segments of the 

market (that is, a reasonable RPE for a 

lightweight vehicle may differ from a 

reasonable RPE for medium or a heavyduty vehicle). Consistent with this 

understanding, proposed § 1.45W– 

2(b)(1) would allow taxpayers to 

calculate the incremental cost of a 

qualified commercial clean vehicle 

using the RPE applicable to such 

vehicle. 

Proposed § 1.45W–2(b)(3)(i) would 

provide that a qualified commercial 

clean vehicle’s RPE is determined by 

calculating the ratio of the 

manufacturer’s suggested retail price 

(MSRP) of such vehicle to the 

manufacturer’s cost to manufacture such 

vehicle. Proposed § 1.45W–2(b)(3)(i) 

through (iii) would further provide that 

the MSRP represents the sum of the 

retail price and the retail delivered price 

suggested by the manufacturer for each 

accessory or item of optional equipment 

which is not included within the retail 

price as reported on the label that is 

affixed to the windshield or side 

window of the vehicle, as described in 

15 U.S.C. 1232. Because RPE represents 

the ratio of the MSRP of the vehicle to 

the manufacturer’s cost, it is 

understood, for purposes of the 

incremental cost determination required 

by section 45W and proposed § 1.45W– 

2(b)(3), to represent that ratio with 

respect to every component of the 

vehicle, including those that comprise 

the vehicle’s powertrain. 

The Treasury Department and the IRS 

understand that providing the precise 

RPE for a vehicle may involve the 

effective disclosure of proprietary 

information. For this reason, the 

Treasury Department and the IRS, in 

consultation with the DOE, intend to 

provide RPE safe harbors for different 

segments of the vehicle market in the 

near term. Taxpayers are advised to 

check www.irs.gov for updates. See 

section VI.C of the Background section 

of this preamble. 

D. Comparable Vehicle 

Section 45W(b)(3) provides that, for 

purposes of determining incremental 

cost, the term ‘‘comparable vehicle’’ 

means, with respect to any qualified 

commercial clean vehicle, any vehicle 

that is powered solely by a gasoline or 

diesel ICE and that is comparable in size 

and use to such vehicle. To clarify the 

meaning of ‘‘size and use,’’ proposed 

§ 1.45W–2(b)(4) would provide that a 

vehicle powered solely by a gasoline or 

diesel ICE is comparable in size and use 

to a qualified commercial clean vehicle 

if the vehicles have substantially similar 

GVWRs, number of doors, towing 

capacity, passenger capacity, cargo 

capacity, mounted equipment, 

drivetrain type, overall width, height 

and ground clearance, trim level, and so 

on. The Treasury Department and the 

IRS intend this list to be representative 

of the types of criteria under which the 

comparability of two vehicles would be 

assessed. This list also distinguishes 

such criteria from the mere performance 

characteristics of powertrains (which, if 

used as a sole basis for comparison, 

could result in a negative incremental 

cost and therefore a section 45W credit 

of $0). In other words, a solely gasolineor diesel-powered ICE vehicle is not 

necessarily comparable to a qualified 

commercial clean vehicle simply 

because the performance characteristics 

of the powertrains are identical. Rather, 

a comparable vehicle must be in the 

same class and share other 

characteristics, as appropriate to the 

vehicle, such as number of doors, cargo 

capacity, drivetrain type, and trim level. 

See the example provided in § 1.45W– 

2(b)(4)(iv). 

Proposed § 1.45W–2(b)(4)(ii) would 

provide that, in the specific 

circumstance where the qualified 

manufacturer of a qualified commercial 

clean vehicle manufactures a solely 

gasoline- or diesel-powered ICE version 

(excluding prototype or other nonproduction versions) of such qualified 

commercial clean vehicle, meaning a 

vehicle of the same model and model 

year, and with features substantially 

similar to those of the qualified 

commercial clean vehicle (such as those 

noted in the prior paragraph), such 

vehicle is the only comparable vehicle 

for purposes of the incremental cost 

determination under section 

45W(b)(1)(B) and (2). In circumstances 

in which a qualified manufacturer of a 

qualified commercial clean vehicle does 

not manufacture a solely gasoline- or 

diesel-powered ICE version of such 

qualified commercial clean vehicle that 

is of the same model and model year, 

and with features substantially similar 

to those of the qualified commercial 

clean vehicle, the comparable vehicle 

for purposes of the incremental cost 

determination under section 

45W(b)(1)(B) and (2) would be 

determined by the taxpayer (or 

manufacturer) based on the criteria 

identified in the prior paragraph. 

E. Negative Incremental Cost Treated as 

Zero 

Proposed § 1.45W–2(c)(8) would treat 

an incremental cost calculation that 

results in a negative figure (meaning the 

qualified manufacturer’s cost of the 

qualified commercial clean vehicle’s 

powertrain is less than the 

manufacturer’s cost of the ICE 

powertrain of a comparable vehicle) as 

zero. Because zero would in every case 

be the lesser of the allowable basis 

percentage, as provided in section 

45W(b)(1), no credit would be allowed 

with respect to such vehicle. This rule 

is consistent with the ‘‘lesser of’’ 

comparison required by section 

45W(b)(1) and the general purpose of 

section 45W to incentivize the purchase 

of vehicles with certain clean 

propulsion technologies instead of ICE 

alternatives. The fact that a taxpayer’s 

calculation of incremental cost under 

the general rule is zero for a particular 

qualified commercial clean vehicle 

would not preclude that taxpayer from 

using a safe harbor described in 

proposed § 1.45W–2(c)(11) to determine 

incremental cost in order to claim the 

section 45W credit with respect to that 

vehicle. 


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3512 Federal Register / Vol. 90, No. 8 / Tuesday, January 14, 2025 / Proposed Rules 

F. Incremental Cost if No Comparable 

Vehicle Exists 

If the particular characteristics of a 

qualified commercial clean vehicle lead 

a taxpayer to conclude that no 

comparable vehicle exists and, as a 

result, no incremental cost is calculable 

for that vehicle, proposed § 1.45W– 

2(c)(9) would provide that the 

incremental cost of such vehicle is zero. 

However, consistent with the proposed 

rule described in the preceding 

paragraph, the fact that the incremental 

cost under the general rule is zero for a 

particular qualified commercial clean 

vehicle does not preclude that taxpayer 

from using a safe harbor described in 

proposed § 1.45W–2(c)(11) to determine 

incremental cost in order to claim the 

section 45W credit with respect to that 

vehicle. This proposed rule would 

apply only to situations in which no ICE 

vehicle alternative is produced by any 

manufacturer, for example, because the 

intended operating environment 

precludes the use of ICE vehicles. At 

this time, the Treasury Department and 

the IRS, in consultation with the DOE, 

have not identified any qualified 

commercial clean vehicles for which no 

comparable vehicle exists. For these 

reasons, proposed § 1.45W–2(c)(9) is 

expected to be relevant only in rare 

instances. The Treasury Department and 

the IRS note that proposed § 1.45W– 

2(c)(9) aligns with one purpose of 

section 45W—to incentivize the 

adoption of electric, hybrid, and fuel 

cell vehicles instead of ICE alternatives. 

G. Power Takeoffs 

Some vehicles eligible for the section 

45W credit may use power takeoffs to 

transmit power to drive machinery or 

equipment other than the vehicle itself. 

In the case of a BEV or hybrid vehicle, 

the use of power takeoffs might 

necessitate additional batteries; in the 

case of an FCEV, the use of power 

takeoffs might necessitate additional 

fuel cells or additional hydrogen 

storage. This situation, however, 

appears indistinguishable from a 

situation in which a BEV or hybrid 

vehicle might be equipped with 

additional batteries for other reasons 

(for example, extended range), or a 

situation in which an FCEV might be 

equipped with additional fuel cells for 

other reasons. Even if this were not the 

case, determining, at the time the 

taxpayer claims the credit, the relative 

extent to which the batteries in any 

given qualified commercial clean 

vehicle might be employed to power the 

vehicle and the ancillary machinery 

would present significant challenges. As 

a result, proposed § 1.45W–2(c)(7) 

would provide that the incremental cost 

calculation for a qualified commercial 

clean vehicle with a power takeoff 

would be carried out in the same 

manner as the incremental cost 

calculation for a qualified commercial 

clean vehicle without a power takeoff. 

Specifically, an appropriate comparable 

vehicle would be selected (likely a 

vehicle with the same type of takeoffpowered machinery or equipment or 

machinery) and the manufacturer’s cost 

of the ICE powertrain would be 

subtracted from the qualified 

manufacturer’s cost of the BEV, FCEV, 

PHEV, or PHFCEV powertrain (inclusive 

of any additional batteries, fuel cells, or 

hydrogen storage). 

H. Auxiliary Power Units 

Some vehicles eligible for the section 

45W credit may use auxiliary power 

units (APUs) to drive machinery or 

equipment that is mounted or installed 

on the vehicle; such APUs are not 

necessarily electric, hybrid, or fuel cell 

based. Proposed § 1.45W–2(c)(6) would 

clarify that the incremental cost of 

qualified commercial clean vehicles 

outfitted with APUs is calculated 

exclusive of the installed APUs. For 

example, the comparable vehicle for a 

BEV outfitted with an APU to drive an 

aerial lift may be an ICE truck outfitted 

with an APU to drive an aerial lift (see 

discussion of comparable vehicles in 

section III.D of this Explanation of 

Provisions), but the manufacturer’s cost 

of the APU is disregarded in the 

incremental cost equation for both the 

BEV and the ICE vehicles. Similarly, to 

calculate the incremental cost of a FCEV 

with an installed APU that powers the 

refrigeration unit, the appropriate 

comparable vehicle may be an ICE 

refrigerator truck, but the 

manufacturer’s cost of the APU is 

disregarded for both vehicles. 

I. Reliance on Qualified Manufacturer’s 

Incremental Cost Calculation and Safe 

Harbor 

Information regarding a qualified 

manufacturer’s cost for the components 

of a qualified commercial clean vehicle 

powertrain may not be readily available 

to taxpayers. If a qualified manufacturer 

discloses this information to a taxpayer 

to facilitate the taxpayer’s calculation of 

incremental cost, or if the qualified 

manufacturer discloses its incremental 

cost calculation for a qualified 

commercial clean vehicle it 

manufactures as provided in section 

45W and these regulations, proposed 

§ 1.45W–2(c)(10) would permit 

taxpayers to rely on such disclosure. 

Taxpayers would, however, be required 

to retain the disclosure documentation 

in their records as long as the period of 

limitations for the taxable period in 

which the credit was claimed remains 

open. A qualified manufacturer that 

discloses its incremental cost 

calculation for a qualified commercial 

clean vehicle it manufactures must base 

such incremental cost calculation on 

actual cost data for both the qualified 

commercial clean vehicle and the 

comparable vehicle. Similarly, a 

taxpayer that calculates incremental 

cost by using cost data for the qualified 

commercial clean vehicle provided by 

the qualified manufacturer must use 

actual cost data for the comparable 

vehicle for such calculation. See the 

definition of ‘‘qualified manufacturer’’ 

provided in proposed § 1.45W–1(b)(10) 

and discussed in section II.J of this 

Explanation of Provisions for the 

potential consequences of qualified 

manufacturer fraud, intentional 

disregard, and gross negligence with 

respect to the requirements of section 

45W, the section 45W regulations, and 

any guidance issued under section 45W. 

Alternatively, taxpayers may rely on 

the incremental cost safe harbors 

published in Notice 2023–9 and Notice 

2024–5, and any succeeding guidance 

published in the Internal Revenue 

Bulletin, as applicable, for the taxable 

year in which a credit is claimed. These 

incremental cost safe harbors are based 

on the incremental cost analysis 

conducted by the DOE, as described in 

periodic reports published by the DOE. 

J. Powertrain Subcomponents 

The Treasury Department and the IRS, 

in consultation with the DOE, 

developed proposed § 1.45W–2(d)(1) 

through (9) to provide definitions and 

clarify the typical subcomponents of a 

BEV, FCEV, PHEV, PHFCEV, and ICE 

powertrain for purposes of determining 

a qualified commercial clean vehicle’s 

incremental cost under section 

45W(b)(2) and (3) and § 1.45W–2(c). 

Recognizing that different vehicles may 

implement different technologies, 

system configurations, and design 

decisions, the subcomponents listed in 

the definitions in § 1.45W–2(d)(1) 

through (9) are not intended to prescribe 

required subcomponents or to be an 

exhaustive list of those that may be 

appropriate to consider for purposes of 

determining the incremental cost of a 

given vehicle. For example, the 

qualified manufacturer’s cost of a BEV 

powertrain must reflect the qualified 

manufacturer’s cost of the electric 

traction drive system, battery, 

transmission, and electrical accessories, 

but each of those components are 

comprised of subcomponents that may 

vary among vehicles. 


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2Whether an activity is treated as a trade or 

business depends on the facts and circumstances of 

the activity. Courts have considered factors such as 

the profit motive of the taxpayer and the regularity 

and continuity of the activity. Commissioner v. 

Groetzinger, 480 U.S. 23 (1987). 

K. Incremental Cost of Qualified 

Commercial Clean Vehicle Previously 

Placed in Service by Another Person 

Proposed § 1.45W–2(f)(1) would 

provide that the incremental cost of a 

qualified commercial clean vehicle 

previously placed in service by another 

person is calculated by multiplying the 

incremental cost of such vehicle when 

new by a residual value factor 

determined by the age of the vehicle. 

Proposed § 1.45W–2(f)(2) would provide 

that the age of such a vehicle is 

determined by subtracting the model 

year of the vehicle from the calendar 

year in which the taxpayer places the 

vehicle in service as a qualified 

commercial clean vehicle. Because 

model years are, in some cases, released 

ahead of calendar years, and because it 

is possible for a single vehicle to be sold 

more than once within a twelve-month 

period, an age of zero (or a negative 

number in the case of a vehicle placed 

in service twice before the calendar year 

corresponding to its model year) does 

not result in an incremental cost of a 

used qualified commercial clean vehicle 

equal to that of the vehicle when new. 

The residual value factor table in 

proposed § 1.45W–2(f)(3) reflects an 

analysis conducted by the DOE with 

respect to the decline in the value of 

vehicles with ICE powertrains over 

time. The analysis for light-duty 

vehicles (Class 1–3 Passenger Car and 

Light Truck) utilized MSRP and ‘‘True 

Market Value’’ estimates from Edmunds 

to calculate residual values across 

specific makes and models, powertrains, 

vehicle age, and size classes for vehicles 

with model years from 2010 to 2021. For 

medium to heavy duty vehicles (Class 

4–8), residual values were calculated 

from used vehicle listing data from 

Commercial Truck Trader and 

TruckPaper.com, validated against data 

from Price Digests for vehicles with 

model years from 2000 to 2020. As a 

mature propulsion technology, ICE 

vehicles exhibit a relatively stable 

pattern of declining value compared to 

their clean vehicle counterparts, 

meaning, in part, that ICE vehicles tend 

to retain more value over time than 

clean vehicles. Analysis of the declining 

value patterns of ICE vehicles compared 

to their clean counterparts, however, 

suggests that the residual values of clean 

vehicles are coming into alignment with 

those of ICE vehicles. As a result, the 

ICE vehicle depreciation pattern 

represents a good approximation of the 

likely depreciation pattern for clean 

vehicles as clean vehicle technologies 

continue to mature. The residual value 

factor is applied to the incremental cost 

of the qualified commercial clean 

vehicle when new, regardless of 

whether that incremental cost is 

determined by the taxpayer, supplied to 

the taxpayer by the qualified 

manufacturer, or provided by safe 

harbor guidance published in the 

Internal Revenue Bulletin for the tax 

year in which such vehicle is originally 

placed in service. 

IV. Qualified Commercial Clean Vehicle 

Proposed § 1.45W–3 would provide 

rules related to a vehicle’s qualification 

as a qualified commercial clean vehicle. 

A. Vehicles Acquired for Use or Lease 

and Not for Resale 

Section 45W(c)(1) provides, in part, 

that a qualified commercial clean 

vehicle must be acquired for use or lease 

by the taxpayer and not for resale. 

Proposed § 1.45W–3(b)(1), would 

provide that, except in cases involving 

tax-exempt entities identified in section 

45W(d)(2), a taxpayer acquires a vehicle 

for use or lease if the taxpayer acquires 

it for use or lease in a trade or business 

of the taxpayer. Thus, for example, if a 

taxpayer that is engaged in the business 

of leasing vehicles to customers acquires 

a commercial clean vehicle for the 

purpose of leasing the vehicle to 

customers as part of that business, this 

requirement would be satisfied.2 For 

further consideration of vehicles 

purchased by a vehicle leasing business 

qualifying for a section 45W credit, see 

the recapture rules explained in V.E of 

this Explanation of Provisions. 

Proposed § 1.45W–3(b)(1) is 

consistent with the requirement under 

section 45W(c)(4) that the vehicle be of 

a character subject to the allowance for 

depreciation, which, under section 

167(a), extends only to property used in 

a trade or business or held for the 

production of income. The proposed 

rule is also consistent with the trade or 

business purposes expressed in section 

45W(c)(1), the statutory identification of 

the section 45W credit as being for 

‘‘commercial’’ clean vehicles, and the 

allowance of the credit as a section 38 

general business credit. 

If the lease of a qualified commercial 

clean vehicle would not be respected as 

a lease for Federal income tax purposes, 

proposed § 1.45W–3(b)(2) would treat 

the lessor as having acquired the vehicle 

for resale and disallow the credit to 

such lessor with respect to the 

purportedly leased vehicle. Whether the 

lessee may claim the section 45W credit 

with respect to the vehicle would 

depend on whether the requirements of 

section 45W and the section 45W 

regulations are met with respect to the 

vehicle. This rule, which recognizes that 

a sale may, in some cases, be 

mischaracterized as a lease for Federal 

income tax purposes, aligns with 

section 45W(c)(1) to limit ‘‘use and 

lease’’ to the scenarios in which the 

section 45W credit is allowable to a 

taxpayer. 

B. On-Road Vehicles 

Section 45W(c)(2)(A) provides that a 

qualified commercial clean vehicle may 

be a vehicle ‘‘that meets the 

requirements of subparagraph (D) of 

section 30D(d)(1) and is manufactured 

primarily for use on public streets, 

roads, and highways (not including a 

vehicle operated exclusively on a rail or 

rails).’’ Regarding the former 

requirement, section 30D(d)(1)(D) states 

that the vehicle must be ‘‘treated as a 

motor vehicle for purposes of title II of 

the [CAA],’’ a determination that 

implicitly incorporates the EPA’s 

application of the relevant CAA 

provisions, as well as any applicable 

regulations or guidance thereunder. The 

latter requirement, ‘‘manufactured 

primarily for use on public streets, 

roads, and highways,’’ occurs with 

sufficient frequency in the Internal 

Revenue Code, the U.S. Code more 

broadly, and various regulations and 

guidance issued thereunder to warrant 

deference to existing understandings of 

the phrase across Federal statutes. 

Section 45W(c)(2)(B) provides, in the 

alternative, that a qualified commercial 

clean vehicle may be a vehicle ‘‘that is 

mobile machinery, as defined in section 

4053(8) (including vehicles that are not 

designed to perform a function of 

transporting a load over the public 

highways).’’ The definition of mobile 

machinery provided in section 4053(8) 

presents significant challenges for 

taxpayers and the IRS in the context of 

section 45W. For a discussion of the 

complexities of section 4053(8) in the 

context of section 45W generally, and 

the implications of those complexities 

for the credit-eligibility of off-road 

vehicles in particular, see section VII of 

this Explanation of Provisions. 

Section 4053(8) is an exemption to 

certain Federal excise taxes imposed on 

highway vehicles (see sections 4051(a), 

4071(a), and 4481(a)), a concept defined 

in § 48.4061(a)–1(d) of the 

Manufacturers and Retailers Excise Tax 

Regulations as ‘‘any self-propelled 

vehicle, or any trailer or semitrailer, 

designed to perform a function of 

transporting a load over public 

highways, whether or not also designed 


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3514 Federal Register / Vol. 90, No. 8 / Tuesday, January 14, 2025 / Proposed Rules 

3 In the Description of Energy Tax Changes Made 

by Public Law 117–169, the Joint Committee on 

Taxation describes section 45W as ‘‘creat[ing] a 

credit for qualified commercial clean vehicles 

originally placed in service by a taxpayer,’’ and in 

footnote 111 adds: ‘‘A technical correction may be 

necessary to reflect this intent.’’ JCT, Description of 

Energy Tax Changes Made by Public Law 117–169, 

p. 58 (Apr. 19, 2023). 

to perform other functions.’’ In other 

words, mobile machinery as defined in 

4053(8), in the context of existing 

Federal excise taxes, is meaningful only 

as a subset of highway vehicles. As a 

result, most, if not all, vehicles 

traditionally considered ‘‘mobile 

machinery’’ (including those exempt 

from the aforementioned Federal excise 

taxes) would be eligible for the section 

45W credit under section 45W(c)(2)(A). 

A vehicle may satisfy the 

requirements of both section 

45W(c)(2)(A) and (B). For example, a 

digger derrick truck exempt from the tax 

imposed by section 4051 by reason of 

section 4053(8) would qualify for the 

credit under section 45W(c)(2)(B). 

Furthermore, because it is a ‘‘highway 

vehicle’’ under § 48.4061(a)–1(d), the 

digger derrick would almost certainly 

also qualify under section 45W(c)(2)(A), 

meaning that it would be treated as a 

motor vehicle for purposes of title II of 

the CAA and be considered 

manufactured primarily for use on the 

public streets, roads, and highways. In 

such instances, the taxpayer may choose 

the prong of section 45W(c)(2) under 

which the vehicle will qualify, which 

may be relevant for recordkeeping and 

other purposes. 

C. Electric Motor and Battery 

Requirements 

Section 45W(c)(3)(A) provides 

requirements with respect to the electric 

motor and battery of certain qualified 

commercial clean vehicles. In part, 

section 45W(c)(3)(A) requires that a 

qualified commercial clean vehicle be 

propelled to a significant extent by an 

electric motor that draws electricity 

from a battery that meets certain 

specifications depending on the GVWR 

of the vehicle. Proposed § 1.45W–3(d)(1) 

would repeat the substance of section 

45W(c)(3)(A). Proposed § 1.45W–3(d)(2) 

would clarify that a battery is capable of 

being recharged from an external source 

of electricity if such source of electricity 

is not an integral part of the vehicle. 

Proposed § 1.45W–3(d)(2) would also 

provide the example of a regenerative 

braking system as an integral part of the 

vehicle and, thus, not an external source 

of electricity. This rule would render 

certain hybrid vehicles ineligible for the 

section 45W credit, a result consistent 

with the requirement that the vehicle be 

propelled to a significant extent by an 

electric motor which draws electricity 

from a battery and the requirement for 

an external source of electricity. 

V. Special Rules 

Section 45W(d) provides three special 

rules. First, section 45W(d)(1) provides, 

by cross reference to section 30D(f), that 

rules similar to the rules under section 

30D(f)(1) through (9) apply for purposes 

of the section 45W credit. Second, 

section 45W(d)(2) provides that a 

qualified commercial clean vehicle 

placed in service by a tax-exempt entity 

described in section 168(h)(2)(A)(i), (ii), 

or (iv) is not required to be of a 

character subject to the allowance for 

depreciation if it is not subject to a 

lease. Third, section 45W(d)(3) provides 

that any vehicle for which a credit was 

allowed under section 30D is not 

allowed a section 45W credit. 

Proposed § 1.45W–4 would provide 

special rules relating to the credit 

eligibility of a vehicle resulting from 

certain transactions and uses, the 

interaction of the section 45W credit 

with other credits, and recapture of the 

section 45W credit. These rules are 

described in Part V.A. through E. of this 

Explanation of Provisions. 

A. No Double Benefit Rule 

Section 30D(f)(8), as incorporated by 

section 45W(d)(1), provides that a 

section 45W credit is allowed only once 

with respect to a vehicle, as determined 

based upon the vehicle identification 

number of such vehicle. Section 

45W(d)(3) provides that no credit is 

allowed under section 45W with respect 

to any vehicle for which a credit was 

allowed under section 30D. To 

consolidate these two rules, proposed 

§ 1.45W–4(a)(1) would provide that no 

credit will be allowed under section 

45W(a) with respect to any vehicle for 

which a section 45W credit or a section 

30D credit was previously allowed for 

such vehicle. 

Section 45W(d)(1), which 

incorporates section 30D(f)(2), provides 

a general no double benefit rule with 

respect to any deduction or other credit 

allowable under chapter 1 for a vehicle 

for which a credit was allowed under 

section 45W. Proposed § 1.45W–4(a)(2) 

would repeat the substance of section 

30D(f)(2). This proposed rule is 

consistent with the no double benefit 

rule provided in § 1.25E–2(b)(1). 

B. Vehicles Previously Placed in Service 

Section 45W does not explicitly 

prohibit vehicles previously placed in 

service from being eligible for a section 

45W credit.3 Vehicles previously placed 

in service present challenges with 

regard to the statutory no double benefit 

rules in that taxpayers seeking to claim 

the section 45W credit for such vehicles 

may not have access to information 

about whether a deduction or credit was 

previously allowed, or to what extent, 

and the IRS would be prohibited from 

providing such information because 

disclosure of information related to 

another taxpayer’s claim for a tax credit 

for a particular vehicle is confidential 

return information and is protected from 

disclosure under section 6103 of the 

Code. Nonetheless, the normal rules 

requiring taxpayers to establish their 

entitlement to a credit or other tax 

benefit apply. Accordingly, a taxpayer 

claiming a 45W credit for a vehicle 

previously placed in service must 

maintain evidence in their books and 

records sufficient to establish that no 

credit under section 30D or section 45W 

has been allowed previously with 

respect to the vehicle, and in the case 

of any prior credit allowed under 

section 25E, the amount of such prior 

credit, and must provide such 

information to the IRS upon request. See 

§ 1.6001–1; Roberts v. Comm’r, 62 T.C. 

834, 836 (T.C. 1974); Isaacs v. Comm’r, 

109 T.C.M. (CCH) 1624 (T.C. 2015). 

Such evidence may include signed 

attestations from all previous owners 

that a credit was not claimed with 

respect to such vehicle. 

The proposed regulations would also 

amend § 1.25E–2 by adding a new 

paragraph (b)(3), which would clarify 

that a vehicle for which a credit was 

allowed under section 45W may qualify 

for a section 25E credit in a subsequent 

year with no reduction in the amount of 

allowable section 25E credit. This rule 

would be consistent with § 1.25E– 

2(b)(2), which provides a similar rule 

regarding the interaction between the 

section 25E credit and the section 30D 

credit. 

C. Credit Ineligibility Resulting From 

Certain Transactions and Uses 

Proposed § 1.45W–4(b)(2) would 

provide that if a sale of a qualified 

commercial clean vehicle is cancelled 

before the taxpayer places the vehicle in 

service, then (i) the taxpayer may not 

claim the section 45W credit with 

respect to such vehicle; (ii) the vehicle 

may still be eligible for the section 45W 

credit; and (iii) a subsequent buyer will 

not be required to apply the residual 

value rules of § 1.45W–2(f)(3) to 

determine the incremental cost of the 

vehicle. 

Proposed § 1.45W–4(b)(3) would 

provide that if a taxpayer returns a 

qualified commercial clean vehicle to 

the seller within 30 days of placing such 

vehicle in service, then (i) the taxpayer 

may not claim the section 45W credit 


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Federal Register / Vol. 90, No. 8 / Tuesday, January 14, 2025 / Proposed Rules 3515 

4Revisions to § 1.6417–6(b)(1) were previously 

proposed in the notice of proposed rulemaking 

(REG–118269–23), published in the Federal 

Register (89 FR 76759, September 19, 2024), which 

sets forth rules regarding the Section 30C 

Alternative Fuel Vehicle Refueling Property Credit. 

These proposed regulations include identical 

proposed language to § 1.6417–6(b)(1) other than 

the addition of a reference to section 45W(d)(1). 

with respect to such vehicle; (ii) the 

vehicle may still be eligible for the 

section 45W credit; and (iii) a 

subsequent buyer must apply the 

residual value rules of § 1.45W–2(f)(3) to 

determine the incremental cost of the 

vehicle. 

In the case of a resale of a qualified 

commercial clean vehicle, proposed 

§ 1.45W–4(b)(4) would provide that if a 

taxpayer resells such vehicle within 30 

days of placing the vehicle in service, 

then (i) the taxpayer is treated as having 

acquired such vehicle with the intent to 

resell; (ii) the taxpayer may not claim 

the section 45W credit with respect to 

the vehicle; (iii) the vehicle may still be 

eligible for the section 45W credit; and 

(iv) a subsequent buyer must apply the 

residual value rules of § 1.45W–2(f)(3) to 

determine the incremental cost of the 

vehicle. 

D. Business Use of Qualified 

Commercial Clean Vehicle Required 

Section 45W(c)(4) requires a qualified 

commercial clean vehicle to be of a 

character subject to the allowance for 

depreciation. Nothing in section 45W 

indicates that a partial section 45W 

credit is allowable with respect to a 

vehicle that is used only partially for 

business use and is therefore only 

partially depreciable. Section 30D, a 

related clean vehicle credit that was 

amended by the IRA, explicitly includes 

an allocation rule to treat such credit as 

either a business or personal credit 

based upon business or personal use. 

See section 30D(c)(1). Section 30C, also 

enacted as part of the IRA, has a similar 

allocation rule. See section 30C(d)(1). 

The absence of such an allocation rule 

in section 45W, which was enacted as 

part of the same legislation, suggests 

that Congress did not intend for the 

section 45W credit to reflect less than 

100 percent business use. 

Proposed § 1.45W–4(b)(5) would 

provide that if a taxpayer’s trade or 

business use of a qualified commercial 

clean vehicle is less than 100 percent of 

the taxpayer’s total use of that vehicle 

(with the exception of incidental 

personal use, such as a stop for lunch 

on the way between two job sites) for 

the taxable year such vehicle is placed 

in service, including because the vehicle 

is sold or otherwise disposed of, then 

the vehicle is ineligible for the section 

45W credit. This rule would also apply 

to a qualified commercial clean vehicle 

placed in service by a tax-exempt entity, 

except that 100 percent trade or 

business use means the tax-exempt 

entity’s use that is related to an exempt 

purpose or an unrelated trade or 

business purpose. 

E. Recapture 

Section 30D(f)(5), which is 

incorporated in section 45W(d)(1), 

authorizes the Secretary to provide for 

recapturing the benefit of any section 

45W credit allowable with respect to 

any property which ceases to be 

property eligible for such credit. 

Proposed § 1.45W–4(c)(2)(i) would 

provide that if a taxpayer ceases to use 

the vehicle for 100 percent trade or 

business use during the 18-month 

period beginning on the date the vehicle 

is placed in service, including because 

the vehicle is sold or otherwise 

disposed of, then (i) the taxpayer may 

not claim the section 45W credit with 

respect to the vehicle, and if the 

taxpayer has already claimed the credit, 

the credit is recaptured; (ii) the vehicle 

may still be eligible for the section 45W 

credit; and (iii) a subsequent buyer must 

apply the residual value rules of 

§ 1.45W–2(f)(3) to determine the 

incremental cost of the vehicle. In 

determining the 18-month period as the 

appropriate length of time for which the 

vehicle must be used in a trade or 

business for purposes of recapturing the 

benefit of any section 45W credit 

allowable, the Treasury Department and 

the IRS took into consideration 

commercial vehicle leasing practices 

and sought to accommodate such 

practices. 

Proposed § 1.45W–4(c)(2)(ii) would 

provide that, for a vehicle placed in 

service by a tax-exempt entity, the 100 

percent trade or business use rule 

(excepting incidental personal use) in 

§ 1.45W–4(b)(5) applies, which means 

use for an exempt purpose or unrelated 

trade or business purpose. 

F. Elective Payment Election 

1. Section 6417 

Section 6417, enacted by the IRA, 

provides a benefit to applicable entities 

(defined in section 6417(d)(1)(A) and 

§ 1.6417–1(c)), which include certain 

tax-exempt and government entities that 

are described in section 50(b)(3) or (4). 

Section 6417 allows an applicable entity 

to make an election to be treated as 

making a payment of tax in the amount 

of certain applicable credits, including 

the section 45W credit, which results in 

a refund equal to the amount of the 

applicable credits if such entity has no 

other tax liability. Section 6417(d)(2)(A) 

requires an entity making an election to 

determine an applicable credit without 

regard to section 50(b)(3) or (4)(A)(i), 

effectively turning those sections off for 

purposes of calculating an applicable 

credit. 

These proposed regulations would 

make a clarification to proposed 

§ 1.6417–6(b)(1) 4 to align with these 

proposed section 45W regulations. 

Proposed § 1.6417–6(b)(1) in these 

proposed regulations would add a 

reference to section 45W(d)(1) (which 

incorporates the rules of section 

30D(f)(1) related to basis reduction and 

section 30D(f)(5) and the related 

proposed § 1.45W–4(c) pertaining to 

recapture) to the list of examples of 

provisions of the Code that apply. 

Accordingly, proposed § 1.6417–6(b)(1) 

would state that if ‘‘another provision of 

the Code contains a rule that operates 

without reference to section 50 to 

reduce the basis of property with 

respect to which an applicable credit is 

determined and/or recapture any 

amount of an applicable credit (such as 

sections 30C, 45Q(f)(4), 45W(d)(1), and 

48(a)(10)), then the rules of that 

provision of the Code and the 

regulations issued under that provision 

of the Code apply, except that any 

applicable credit continues to be 

determined without regard to section 

50(b)(3) and (4)(A)(i) and by treating any 

property with respect to which such 

applicable credit is determined as used 

in a trade or business of the applicable 

entity, consistent with section 

6417(d)(2) and § 1.6417–2(c).’’ 

2. Leases 

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

section 45W(c)(4) rule regarding 

depreciation does not apply to any 

vehicle that is not subject to a lease and 

that is placed in service by a tax-exempt 

entity described in section 

168(h)(2)(A)(i), (ii), or (iv). 

Proposed § 1.45W–4(d)(3) would 

provide that for purposes of section 

45W(d)(2), a vehicle is ‘‘subject to a 

lease’’ if it is leased within 30 days of 

being placed in service by a tax-exempt 

entity. For example, a school district 

purchases and places in service a fleet 

of electric school buses that otherwise 

qualify for the section 45W credit. The 

school district then leases the fleet to a 

school transportation contractor 31 days 

after the school district placed the fleet 

in service. The fleet of electric school 

buses is not subject to a lease within the 

meaning of section 45W(d)(2) and 

proposed § 1.45W–4(d)(3) because the 

buses were leased more than 30 days 

after being placed in service by the 

school district. As a result, the fleet of 


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3516 Federal Register / Vol. 90, No. 8 / Tuesday, January 14, 2025 / Proposed Rules 

5The section 4061 manufacturers excise tax on 

certain highway vehicles was repealed and replaced 

with the section 4051 retail excise tax on similar 

vehicles. See Highway Revenue Act of 1982 (Public 

Law 97–424), effective April 1, 1983. The 

§ 48.4061(a)–1(d) definition of ‘‘highway vehicle’’ is 

incorporated into the current section 4051 regime 

by § 145.4051–1(a)(2). 

electric school buses may be eligible for 

the section 45W credit. 

This definition of ‘‘subject to a lease’’ 

aligns with the statutory language that 

tax-exempt entities may be eligible for 

the section 45W credit if the qualified 

commercial clean vehicle at issue meets 

the relevant criteria near the time of 

being placed in service, which is when 

vehicle eligibility is measured. 

VI. Reporting Requirements 

Proposed § 1.45W–5 would provide 

reporting requirements for purposes of 

the section 45W credit. 

A. Requirement To File Return 

Section 45W(e) provides that no 

section 45W credit can be determined 

with respect to any vehicle unless the 

taxpayer includes the vehicle 

identification number of such vehicle 

on the return of tax for the taxable year. 

Proposed § 1.45W–5(a) would provide 

that no section 45W credit is allowed 

unless the taxpayer claiming such credit 

files a Federal income tax return or 

information return, as appropriate, for 

the taxable year in which the qualified 

commercial clean vehicle is placed in 

service. The taxpayer must attach to 

such return a completed Form 8936, 

Clean Vehicle Credits, or successor 

form, that includes all information 

required by the form and instructions. 

The taxpayer must also attach a 

completed Schedule A (Form 8936), 

Clean Vehicle Credit Amount, or 

successor form or schedule, that 

includes all information required by the 

schedule and instructions, such as the 

vehicle identification number of the 

qualified commercial clean vehicle. 

B. Credit May Generally Be Claimed on 

Only One Tax Return 

Proposed § 1.45W–5(b)(1) would 

provide a general rule, subject to the 

exceptions discussed later in this 

Explanation of Provisions, that the 

amount of the section 45W credit 

attributable to a qualified commercial 

clean vehicle may be claimed on only 

one Federal income tax return, 

including on a joint return in which one 

of the spouses or the spouse’s whollyowned business entity is listed on the 

title as the sole owner of the vehicle. In 

the event a qualified commercial clean 

vehicle is placed in service by multiple 

taxpayers that do not file a joint tax 

return (for example, in the case of 

married individuals filing separate 

returns), no allocation or proration of 

the section 45W credit will be available, 

and only one of the taxpayers placing 

the qualified commercial clean vehicle 

in service will be eligible for the entirety 

of the allowable section 45W credit. 

Proposed § 1.45W–5(b)(2) would 

provide a rule for grantor trusts. 

Specifically, proposed § 1.45W–5(b)(2) 

would provide that for qualified 

commercial clean vehicles placed in 

service by a trust, to the extent the 

grantor or another person is treated as 

owning all or part of a trust under 

sections 671 through 679 of the Code, 

the section 45W credit will be allocated 

to such grantor or other person in 

accordance with § 1.671–3(a)(1). 

Proposed § 1.45W–5(b)(3) would 

provide an exception for qualified 

commercial clean vehicles placed in 

service by certain passthrough entities, 

namely a partnership or S corporation. 

In such cases, the section 45W credit 

will be allocated among the partners of 

the partnership under § 1.704–1(b)(4)(ii) 

or among the shareholders of the S 

corporation under sections 1366(a) and 

1377(a) of the Code and claimed on the 

tax returns of the ultimate partners or of 

the S corporation shareholders. 

C. Taxpayer Reliance on Manufacturer 

Certifications and Periodic Written 

Reports to IRS 

Proposed § 1.45W–5(c) would allow 

taxpayers to rely on certain 

certifications and information provided 

by a manufacturer. Under this proposed 

rule, a taxpayer that acquires a qualified 

commercial clean vehicle and places it 

in service would be able to rely on the 

information and certifications contained 

in the qualified manufacturer’s written 

reports to the IRS. The procedures for 

such periodic written reports are 

established in guidance published in the 

Internal Revenue Bulletin. To the extent 

a taxpayer relies on certifications or 

attestations from the qualified 

manufacturer, the qualified commercial 

clean vehicle the taxpayer acquires will 

be deemed to meet the requirements of 

sections 30D(d)(1)(C) and 45W(c)(1). 

VII. Off-Road Mobile Machinery 

Section 45W(c)(2) provides, in part, 

that the term ‘‘qualified commercial 

clean vehicle’’ includes ‘‘mobile 

machinery, as defined in section 4053(8) 

(including vehicles that are not 

designed to perform a function of 

transporting a load over the public 

highways).’’ Section 4053(8), in turn, 

defines mobile machinery as any 

vehicle which consists of a chassis (A) 

to which there has been permanently 

mounted (by welding, bolting, riveting, 

or other means) machinery or 

equipment to perform a construction, 

manufacturing, processing, farming, 

mining, drilling, timbering, or similar 

operation if the operation of the 

machinery or equipment is unrelated to 

transportation on or off the public 

highways, (B) which has been specially 

designed to serve only as a mobile 

carriage and mount (and a power 

source, if applicable) for the particular 

machinery or equipment involved, 

whether or not such machinery or 

equipment is in operation, and (C) 

which, by reason of such special design, 

could not, without substantial structural 

modification, be used as a component of 

a vehicle designed to perform a function 

of transporting any load other than that 

particular machinery or equipment or 

similar machinery or equipment 

requiring such a specially designed 

chassis. 

Section 4053(8) is an exemption from 

the tax imposed by section 4051(a) and 

has been employed as an exemption 

from the taxes imposed by sections 

4071(a) and 4481(a), all of which 

contribute to the Highway Trust Fund. 

See section 9503(b) of the Code. In that 

context, the section 4053(8) definition is 

relevant only to highway vehicles, 

defined in § 48.4061(a)–1(d) 5 as ‘‘any 

self-propelled vehicle, or any trailer or 

semitrailer, designed to perform a 

function of transporting a load over 

public highways, whether or not also 

designed to perform other functions.’’ 

The parenthetical in section 

45W(c)(2)(B)—‘‘including vehicles that 

are not designed to perform a function 

of transporting a load over the public 

highways’’—contradicts that definition 

and, therefore, arguably expands the 

traditional category of ‘‘mobile 

machinery’’ to include off-road vehicles. 

Such an expanded category might, for 

purposes of section 45W, include 

certain agricultural vehicles, 

construction vehicles, forestry vehicles, 

utility vehicles designed for airport 

operations, and other types of off-road 

vehicles. 

However, section 4053(8) and several 

provisions of section 45W present 

significant challenges with respect to 

the administrability of a section 45W 

credit that encompasses such off-road 

vehicles. Recognizing that, whenever 

possible, every word and every 

provision of a statute should be given 

effect, Washington Market Co. v. 

Hoffman, 101 U.S. 112, 115–6 (1879), 

the Treasury Department and the IRS 

continue to study, and request any 

relevant comments on, the 

considerations described in section 


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VII.A through G of this Explanation of 

Provisions. 

A. Section 4053(8) as Applied to OffRoad Vehicles 

The definition of ‘‘mobile machinery’’ 

provided in section 4053(8) is vehicle 

specific and fact intensive. Vehicles 

with chassis that include a pintle hook 

or that have been modified to 

accommodate a water tank do not 

qualify as mobile machinery because 

such vehicles are not specially designed 

to serve only (solely) as the mobile 

carriage or mount for the mounted 

equipment or machinery. Florida Power 

& Light Co. v. U.S., 375 F.3d 1119 (Fed. 

Cir. 2004). For the same reason, peanut 

drying trailers and boat trailers are not 

mobile machinery. Rockwater, Inc. v. 

U.S., No. 4:21–CV–00125–CDL, 2023 

WL 2473452 (M.D. Ga. Jan. 3, 2023), 

aff’d in part, reversed in part and 

remanded in part, 2024 WL 4799277, 

(11th Cir. Nov. 16, 2024); Hostar Marine 

Transp. Systems, Inc. v. U.S., No. 06– 

10834–DPW, 2008 WL 4615464 (D. 

Mass. Oct. 16, 2008), aff’d, 592 F.3d 202 

(1st Cir. 2010). In addition, highway 

tractors fitted with winches, 

compressors, or blowers are not mobile 

machinery because such equipment, 

used to load or unload cargo, is not 

‘‘unrelated to transportation on or off 

the public highways.’’ Schlumberger 

Technology Corp. and Subsidiaries v. 

U.S., 55 Fed. Cl. 203 (2003). 

When applied to off-road vehicles, a 

category to which section 4053(8) was 

not traditionally relevant, the text of 

section 4053(8) presents significant 

challenges for taxpayers and the IRS. 

Particular vehicles would, on a vehicleby-vehicle basis, be rendered ineligible 

for the section 45W credit for reasons 

irrelevant to the purpose of the credit, 

such as the presence of a pintle hook or 

the fact that the vehicle can carry a load 

other than its mounted machinery or 

equipment. Consideration of these types 

of vehicle features, although critical to 

ensuring the correct taxation of highway 

vehicles for purposes of the Highway 

Trust Fund, would lead to arbitrary 

results in the context of a credit 

intended to incentivize the use of clean 

vehicle propulsion technologies—for 

example, the eligibility of one vehicle 

for the section 45W credit and the 

ineligibility of an identical vehicle, 

except for the addition of a pintle hook. 

To mitigate these challenges, the 

Treasury Department and the IRS are 

considering an approach that would 

deem off-road vehicles (that is, 

‘‘vehicles not designed to perform a 

function of carrying a load over the 

public highways’’) to satisfy the 

requirements of section 4053(8)(B) and 

(C). Such an approach would 

acknowledge that section 4053(8)(B) and 

(C) assess a vehicle’s potential to cause 

wear and tear on the public highways. 

While this is critical in determining 

whether a vehicle qualifies for an 

exemption from taxes that fund the 

Highway Trust Fund, it has no 

relevance to off-road vehicles. 

Therefore, this approach would apply 

the core definition of ‘‘mobile 

machinery’’ provided in section 

4053(8)(A) and, consistent with the 

cross reference provided in section 

45W(c)(2)(B), do so in precisely the 

same way as section 4053(8)(A) is 

applied in the context of Federal excise 

taxes. 

While this approach would render 

vehicle-by-vehicle analysis unnecessary 

in many cases and might eliminate 

certain types of inconsistent results with 

respect to vehicle eligibility for the 

section 45W credit, categorical bars on 

eligibility for certain types of vehicles 

would remain. For example, off-road 

dump trucks would be ineligible for the 

credit because their permanently 

mounted machinery or equipment, that 

is, the hydraulics that lift the dump 

body, is not ‘‘unrelated to 

transportation’’ (the dump structure 

itself is a vehicle body rather than 

machinery or equipment; see Notice 

2017–5, 2017–6 IRB 779). Agricultural 

tractors would be ineligible to the extent 

they lack permanently mounted 

machinery or equipment. Forklifts could 

be ineligible because their permanently 

mounted equipment, which can be used 

to load and unload goods and transport 

goods from one location to another, is 

related to transportation. And mowers 

would be ineligible because their 

permanently mounted machinery or 

equipment does not perform an 

operation similar to those enumerated 

in section 4053(8)(A). The Treasury 

Department and the IRS request 

comments on other approaches that 

might be adopted in applying section 

4053(8) to off-road vehicles in a manner 

consistent with both the purpose and 

text of section 45W and the statutory 

requirements of section 4053(8), 

including established case law 

interpreting section 4053(8). 

B. Off-Road Vehicles Lack NHTSARequired VINs 

1. In General 

Section 45W(e) provides that no 

credit can be determined under section 

45W(a) with respect to any vehicle 

unless the taxpayer includes the vehicle 

identification number of such vehicle 

on the return of tax for the taxable year. 

See also section 45W(d)(1), which 

requires, among other things, the 

application of rules similar to those 

provided in section 30D(f)(8) (‘‘In the 

case of any vehicle, the credit described 

in [section 30D](a) shall only be allowed 

once with respect to such vehicle, as 

determined based upon the vehicle 

identification number of such vehicle 

[. . . .]’’); section 30D(f)(9) (‘‘No credit 

shall be allowed under this section with 

respect to any vehicle unless the 

taxpayer includes the vehicle 

identification number of such vehicle 

on the return of tax for the taxable 

year.’’); and, the definition of ‘‘qualified 

manufacturer’’ provided by section 

30D(d)(3), incorporated by section 

45W(c)(1) by cross-reference to ‘‘the 

requirements of section 30D(1)(C),’’ 

which, by definition, requires a 

qualified manufacturer to enter into a 

written agreement with the Secretary 

under which such manufacturer agrees 

to make periodic written reports to the 

Secretary providing, among other 

things, vehicle identification numbers 

‘‘related to each vehicle manufactured 

by such manufacturer as the Secretary 

may require.’’ 

Neither section 45W nor any other 

section of the Code provides a definition 

of ‘‘vehicle identification number’’ or 

‘‘VIN.’’ See sections 25E, 30D, 45W, 

170(f)(12), and 6213(g)(2)(T) through 

(V). A ‘‘vehicle identification number,’’ 

as a term of art and in common speech, 

refers specifically to the series of Arabic 

numbers and Roman letters (defined in 

49 CFR 565.13(a)) that the manufacturer 

assigns to every motor vehicle in the 

United States, including imported 

vehicles, subject to the authority of the 

National Highway Traffic Safety 

Administration (NHTSA), an operating 

administration that is part of the DOT. 

See 49 CFR 565.10 through 565.14. For 

this purpose, motor vehicles are 

vehicles ‘‘driven or drawn by 

mechanical power and manufactured 

primarily for use on public streets, 

roads, and highways.’’ 49 U.S.C. 30101– 

30102. As a result, manufacturers of offroad vehicles are not required by 

NHTSA to assign VINs to such vehicles. 

To give effect to the parenthetical in 

section 45W(c)(2)(B) that includes offroad vehicles, therefore, requires a more 

general understanding of the term 

‘‘vehicle identification number’’ as used 

in section 45W. Such an understanding 

might encompass other numbering 

systems, provided that those systems 

would, if integrated with the NHTSArequired VIN system, allow qualified 

manufacturers and the IRS to uniquely 

identify each credit-eligible vehicle for 

purposes of the qualified manufacturer 

requirements of section 30D(d)(3) and 

the one-credit-per-vehicle provision of 


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section 30D(f)(8)—for example, product 

identification numbers (PINs) 

administered by the Society of 

Automotive Engineers (SAE) or the 

Association of Equipment 

Manufacturers (AEM). Compliance with 

section 30D(d)(3) and (f)(8)—and, thus, 

the eligibility of any off-road vehicle for 

the section 45W credit—would depend 

on the integration of the various 

‘‘vehicle identification number’’ systems 

in question, which would determine 

eligibility based on either a NHTSArequired VIN or a unique identifier 

system for vehicles that do not have a 

NHTSA-required VIN. The IRS must be 

able to identify each section 45W crediteligible vehicle based solely on the 

‘‘vehicle identification number’’ 

assigned to the vehicle, and the ‘‘vehicle 

identification number’’ must be unique 

across all numbering systems accepted 

by the IRS for the purpose of 

administering section 45W. To integrate 

the unique identifier system with the 

NHTSA-required VIN, the unique 

identifier system should be a 17-digit 

alpha-numeric identifier. 

2. Potential Integrated System for 

Vehicle Identification Numbers 

The Treasury Department and the IRS 

are studying various potential options 

for an integrated system of vehicle 

identification numbers for purposes of 

section 45W. Until guidance is 

published detailing any such future 

system, vehicles without a NHTSArequired VIN are unable to satisfy the 

statutory VIN requirement in section 

45W(e) and are therefore ineligible for 

the section 45W credit. 

The various potential options under 

consideration by the Treasury 

Department and the IRS include the 

following structural elements: 

i. If a qualified commercial clean 

vehicle has a NHTSA-required VIN, the 

qualified manufacturer of such vehicle 

would need to report the NHTSArequired VIN to the IRS for such vehicle 

to be eligible for the section 45W credit. 

The taxpayer claiming a section 45W 

credit for the qualified commercial 

clean vehicle in such a case would need 

to report the NHTSA-required VIN on 

their tax return for the taxable year in 

which the section 45W credit is claimed 

for such claim to be valid. 

ii. If a qualified manufacturer assigns 

a PIN to a qualified commercial clean 

vehicle and that PIN is also a unique 17- 

digit identifier consisting of a three-digit 

World Manufacturer Code (WMC) and 

14 alpha-numeric characters that follow, 

the qualified manufacturer would need 

to provide the PIN to the taxpayer no 

later than 15 days from the time the 

identity of the taxpayer purchasing the 

vehicle is known, or 15 days from when 

the taxpayer requests a PIN from the 

qualified manufacturer, whichever is 

later. The qualified manufacturer could 

choose to satisfy this requirement by 

labeling the PIN on the vehicle, 

including adding the PIN to the item of 

specified property by affixing a label to 

the vehicle or by etching the PIN on the 

vehicle. Alternatively, a qualified 

manufacturer could choose to affix a 

label containing the PIN to the vehicle’s 

documentation or purchase records. The 

qualified manufacturer would need to 

report the PIN and the identity of the 

taxpayer purchasing the vehicle to the 

IRS no later than 15 days from the time 

that the identity of the taxpayer 

purchasing the vehicle is known for the 

vehicle to be considered eligible. A 

taxpayer claiming a section 45W credit 

in such a case would need to report the 

PIN on their tax return or information 

return for the taxable year in which the 

section 45W credit is claimed for such 

claim to be valid. 

iii. If a qualified commercial clean 

vehicle does not have a VIN or a PIN 

issued by a qualified manufacturer, the 

qualified manufacturer could apply to 

receive a valid three-digit unique 

qualified manufacturer identifier 

(QMID). Upon the issuance of a QMID, 

the qualified manufacturer would assign 

unique 17-digit PINs to the qualified 

commercial clean vehicles it 

manufactures. Each 17-digit PIN would 

begin with the QMID followed by 14 

alpha-numeric digits that the qualified 

manufacturer assigns to each vehicle. 

The qualified manufacturer would need 

to provide the PIN to the taxpayer no 

later than 15 days from the time the 

identity of the taxpayer purchasing the 

vehicle is known, or 15 days from when 

the taxpayer requests a PIN from the 

qualified manufacturer, whichever is 

later. The qualified manufacturer could 

choose to satisfy this requirement by 

labeling the PIN on the vehicles, 

including adding the PIN to the item of 

specified property by affixing a label to 

the vehicle or by etching the PIN on the 

vehicle. Alternatively, a qualified 

manufacturer could choose to affix a 

label containing the PIN to the vehicle’s 

documentation or purchase records. The 

qualified manufacturer would need to 

report the PIN and the identity of the 

taxpayer purchasing the vehicle to the 

IRS no later than 15 days from the time 

that the identity of the taxpayer 

purchasing the vehicle is known for the 

vehicle to be considered eligible. A 

taxpayer claiming a section 45W credit 

in such a case would need to report the 

PIN on the taxpayer’s tax return or 

information return for the taxable year 

in which the section 45W credit is 

claimed for such claim to be valid. 

iv. A qualified manufacturer would 

not be able to set prerequisites for a 

taxpayer receiving a PIN that are not 

required to verify the purchase of the 

qualified commercial clean vehicle, 

such as requiring taxpayers to sign up 

for promotional emails, texts, or other 

communications from the qualified 

manufacturer, its related entities, or 

partners. However, qualified 

manufacturers could choose to provide 

PINs to taxpayers through the mail, 

online, email, or other means of 

electronic delivery. Qualified 

manufacturers could choose to provide 

PINs in conjunction with a formal 

registration for a warranty, provided 

that the taxpayer could easily obtain the 

PIN without completing the formal 

warranty registration. 

v. For qualified commercial clean 

vehicles previously placed in service by 

another person or entity, a subsequent 

taxpayer could be required to contact 

the qualified manufacturer to obtain a 

PIN. 

vi. Qualified manufacturers that 

manufacture vehicles without a 

NHTSA-required VIN would need to 

enter into new qualified manufacturer 

agreements. 

3. Vehicles Without a NHTSA-Required 

VIN Are Not Currently Eligible for the 

Credit 

Eligibility of any off-road vehicle for 

the section 45W credit is dependent on 

the issuance of final regulations 

establishing an integrated vehicle 

identification number system that 

accommodates off-road mobile 

machinery or other vehicles without a 

NHTSA-required VIN that is sufficient 

to satisfy the statutory vehicle 

identification number requirement. This 

means that off-road mobile machinery 

without a NHTSA-required VIN is not 

eligible for the section 45W credit. 

4. Request for Comments 

The Treasury Department and the IRS 

request comments on the potential 

integrated vehicle identification number 

system described in section VII.B2 of 

this Explanation of Provisions. 

Specifically, the Treasury Department 

and the IRS request comments on the 

following questions: 

i. What challenges, if any, would 

manufacturers have in implementing 

and complying with the integrated 

vehicle identification number system 

described in section VII.B2 of this 

Explanation of Provisions? What would 

be the costs and timeline for 

manufacturers to implement and 

comply with the proposed system? Are 


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there cases in which manufacturers or 

other stakeholders, such as retailers, 

would decline to employ the system 

because compliance would be overly 

burdensome? Commenters are 

encouraged to specifically identify types 

and amounts of costs that manufacturers 

would incur in implementing and 

complying with the proposed system, as 

well as specific aspects of the proposal 

that would require set amounts of time 

to develop and implement. 

ii. Should the Treasury Department 

and the IRS leverage existing systems, 

e.g. SAE or AEM, that assign WMCs that 

could be used as the first three digits of 

the PIN? Are there perceived problems 

with these systems? Do these systems 

ensure there is no overlap with any 

VINs assigned under NHTSA’s rules? 

Are there other PIN tracking systems in 

place that the IRS could leverage? 

iii. If the Treasury Department and the 

IRS were to implement the integrated 

vehicle identification number system 

described in section VII.B2 of this 

Explanation of Provisions, what changes 

or exceptions, if any, should be made? 

iv. What modifications, if any, could 

be made to the integrated vehicle 

identification number system described 

in section VII.2 of this Explanation of 

Provisions to accommodate limitations 

while still adhering to the unique 

identifier requirement? 

v. How would qualified 

manufacturers furnish PINs to taxpayers 

(e.g., with the vehicle, through an online 

website, etc.) in a manner that ensures 

the taxpayer has easy access to the PIN 

when filing their tax return or 

information return? How would off-road 

vehicle manufacturers obtain and 

provide information on the identity of 

those purchasing qualified commercial 

clean vehicles to assist the IRS in 

ensuring compliance? What labelling 

requirements should apply in assigning 

PINs? 

C. Manufacturers That Exclusively 

Manufacture Off-Road Clean Vehicles 

Are Not Qualified Manufacturers 

Section 45W(c)(1) provides, in part, 

that a qualified commercial clean 

vehicle must meet the requirements of 

section 30D(d)(1)(C). Section 

30D(d)(1)(C), in turn, provides that a 

vehicle must be made by a qualified 

manufacturer. Section 30D(d)(3), 

incorporated by section 45W(c)(1)’s 

cross reference to section 30D(d)(1)(C), 

defines ‘‘qualified manufacturer,’’ in 

part, as any manufacturer within the 

meaning of the regulations prescribed 

by the Administrator of the EPA for 

purposes of the administration of title II 

of the CAA (42 U.S.C. 7521–7590). 

Section 216(1) of the CAA, generally 

referenced in regulations under title II of 

the CAA (see, for example, 40 CFR 

86.082–2(b), 85.1902(f), and 1037.801), 

defines ‘‘manufacturer’’, in relevant 

part, as ‘‘any person engaged in the 

manufacturing or assembling of new 

motor vehicles, new motor vehicle 

engines, new nonroad vehicles or new 

nonroad engines, or importing such 

vehicles or engines for resale . . . .’’ 

Section 216(2) of the CAA defines 

‘‘motor vehicle’’ as any self-propelled 

vehicle designed for transporting 

persons or property on a street or 

highway. Section 216(11) of the CAA 

defines ‘‘nonroad vehicle’’ as a vehicle 

that is powered by a nonroad engine 

and that is not a motor vehicle or a 

vehicle used solely for competition. 

Section 216(10) of the CAA in turn 

defines ‘‘nonroad engine’’ as an ICE 

(including the fuel system) that is not 

used in a motor vehicle or a vehicle 

used solely for competition. 

Under these definitions, 

‘‘manufacturer’’ includes a maker of an 

off-road vehicle with a ‘‘conventional’’ 

ICE, a maker of an off-road vehicle with 

a hybrid engine (to the extent that such 

vehicle includes an ICE), or a maker of 

motor vehicles. It does not include a 

maker of only off-road vehicles with an 

exclusively electric motor or fuel cell 

system. Consequently, makers of such 

off-road vehicles that do not also make 

any motor vehicles or off-road vehicles 

with ICEs or hybrid engines cannot be 

‘‘qualified manufacturers’’ for purposes 

of section 45W, and their vehicles are, 

consequently, ineligible for the credit. 

This result, which might allow a section 

45W credit for an off-road vehicle 

equipped with a hybrid powertrain but 

in some cases disallow a credit for a 

functionally identical vehicle equipped 

with an electric powertrain, may 

disadvantage manufacturers who make 

only products that appear well aligned 

with the purposes of the credit. 

D. Some Off-Road Vehicles May Not 

Display Their Gross Vehicle Weight 

Ratings 

Section 45W(b)(4) provides a 

limitation for the credit based on the 

vehicle’s GVWR, such that the amount 

of the section 45W credit does not 

exceed $7,500 in the case of a vehicle 

that has a GVWR of less than 14,000 

pounds, and $40,000 for other vehicles. 

Similarly, section 45W(c)(3)(A) bases 

battery capacity requirements applicable 

to certain vehicles by reference to 

GVWR: a battery that has a capacity of 

not less than 15 kilowatt hours (or, in 

the case of a vehicle that has a GVWR 

of less than 14,000 pounds, 7 kilowatt 

hours). 

GVWR is not defined in the Internal 

Revenue Code or any regulations 

thereunder. However, the DOT and the 

EPA have defined the term for purposes 

of regulating motor vehicle safety and 

emissions. DOT regulations define the 

term ‘‘gross vehicle weight rating’’ as 

the value specified by the manufacturer 

as the loaded weight of a single vehicle. 

See 49 CFR 383.5 and 571.3(b). 

Similarly, EPA regulations define the 

term ‘‘gross vehicle weight rating’’ as 

the value specified by the manufacturer 

as the maximum design loaded weight 

of a single vehicle. See 40 CFR 86.082– 

2. 

Motor vehicles are required by DOT 

regulations to be affixed with labels 

including the GVWR of the vehicle (see 

49 CFR parts 567 and 568). The only 

vehicles to which those standards apply 

are motor vehicles, which are defined in 

49 U.S.C. 30102 as ‘‘vehicle[s] driven or 

drawn by mechanical power and 

manufactured primarily for use on 

public streets, roads, and highways 

[. . . .]’’ Off-road vehicles may not have 

a GVWR affixed. It may, therefore, be 

difficult for taxpayers to determine and 

substantiate the appropriate credit 

limitation under section 45W(b)(4). 

E. Off-Road Vehicles Employing Fuel 

Cells May Be Ineligible 

Section 45W(c)(3)(B) provides that a 

qualified commercial clean vehicle 

includes ‘‘a motor vehicle which 

satisfies the requirements under 

subparagraphs (A) and (B) of section 

30B(b)(3) if the vehicle satisfies the 

other requirements of section 45W(c).’’ 

Section 30B(b)(3) defines a ‘‘new 

qualified fuel cell motor vehicle’’ for 

purposes of section 30B as a motor 

vehicle, and provides among other 

requirements that it be a motor vehicle 

(A) that is propelled by power derived 

from 1 or more cells that convert 

chemical energy directly into electricity 

by combining oxygen with hydrogen 

fuel that is stored on board the vehicle 

in any form and may or may not require 

reformation prior to use, and (B) that, in 

the case of a passenger automobile or 

light truck, has received on or after the 

date of the enactment of this section a 

certificate that such vehicle meets or 

exceeds the Bin 5 Tier II emission level 

established in regulations prescribed by 

the Administrator of the EPA under 

section 202(i) of the CAA for that make 

and model year vehicle. Section 

30B(b)(3)(A) and (B) apply, in the 

context of section 30B, only to ‘‘motor 

vehicles,’’ a term defined in section 

30B(h)(1) to mean ‘‘any vehicle which is 

manufactured primarily for use on 

public streets, roads, and highways (not 

including a vehicle operated exclusively 


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on a rail or rails) and which has at least 

4 wheels.’’ If this definition of ‘‘motor 

vehicle’’ applies to section 

45W(c)(3)(B)—a meaning suggested by 

that subparagraph’s use of the term 

‘‘motor vehicle’’ (which appears 

nowhere else in section 45W)—then offroad vehicles powered by otherwise 

eligible fuel-cell technology would be 

ineligible for the section 45W credit. 

F. DOT Vehicle Safety Provisions 

Section 45W(d)(1) requires, among 

other things, the application of a rule 

similar to section 30D(f)(7). Section 

30D(f)(7) provides, in part, that a vehicle 

is not considered eligible for a credit 

unless such vehicle is in compliance 

with the motor vehicle safety provisions 

of 49 U.S.C. 30101 through 30169. As 

described in section VII.B of this 

Explanation of Provisions, the grant of 

authority under those provisions of law 

do not extend to off-road vehicles. See 

49 U.S.C. 30101 through 30102. It is 

unlikely that any off-road vehicle might 

be, as a factual matter, compliant with 

safety provisions that, legally, do not 

apply to it. 

However, given the broad scope of 

vehicles that potentially fall under the 

category of off-road vehicles for 

purposes of section 45W, and the scope 

of the safety provisions provided in 49 

U.S.C. 30101 through 30169, identifying 

similar safety provisions and the criteria 

by which such similarity might be 

judged appear to present significant 

challenges. 

G. Math Error Authority 

Section 6213(g)(2)(V) provides that 

the term ‘‘mathematical or clerical 

error’’ means an omission of a correct 

vehicle identification number required 

to be included on a return under section 

45W(e). As noted in section VII.B of this 

Explanation of Provisions, treating offroad mobile machinery (as described in 

the parenthetical in section 

45W(c)(2)(B)) as eligible for the 45W 

credit would require a broad 

interpretation of the term ‘‘vehicle 

identification number’’ as that term is 

used in section 45W(e) and the 

provisions of section 30D that are 

incorporated into section 45W through 

section 45W(d)(1). If the Treasury 

Department and the IRS were to develop 

an integrated vehicle identification 

number system that could accommodate 

a broad, general definition of the term 

‘‘vehicle identification number’’ to 

encompass off-road mobile machinery 

in the section 45W context, the Treasury 

Department and the IRS would propose 

a conforming amendment to § 301.6213– 

2. Such an amendment would provide 

clarity to taxpayers by providing a crossreference to this broad, general 

definition of the term ‘‘vehicle 

identification number.’’ 

H. Other Considerations 

The proposed regulations may 

introduce challenges to allowing section 

45W credits for off-road vehicles beyond 

those flowing from the statutory 

language, particularly in the calculation 

of incremental cost of off-road vehicles. 

Determining the residual value of offroad vehicles that have been previously 

placed in service by another person or 

entity, the appropriate considerations 

for identifying a comparable vehicle, 

and the appropriate RPE or RPEs for 

purposes of a safe harbor, all present 

considerable difficulties given the range 

of vehicles that may fall into the offroad vehicle category. 

I. Request for Comments 

The Treasury Department and the IRS 

are, in consultation with the DOE, 

continuing to study these and related 

questions. The Treasury Department 

and the IRS request comments on each 

of the considerations described in 

section VII.A through H of this 

Explanation of Provisions related to the 

eligibility of off-road mobile machinery 

for the section 45W credit. 

Proposed Applicability Dates 

Proposed §§ 1.45W–1 through 1.45W– 

5 are proposed to apply to taxable years 

ending after [date of publication of the 

final regulations in the Federal 

Register]. Proposed § 1.25E–2(b)(3) is 

proposed to apply to taxable years 

ending after [date of publication of the 

final regulations in the Federal 

Register]. Proposed § 1.30D–2(b)(28)(ii) 

is proposed to apply to taxable years 

ending after [date of publication of the 

final regulations in the Federal 

Register]. The second and third 

sentences of proposed § 1.6417–6(b)(1) 

are proposed to apply to property 

placed in service in taxable years ending 

after [date of publication of the final 

regulations in the Federal Register]. 

Special Analyses 

I. 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. 

II. 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. An agency 

may not conduct or sponsor, and a 

person is not required to respond to, a 

collection of information unless it 

displays a valid control number 

assigned by the Office of Management 

and Budget. 

OMB Control Number 1545–2137 

covers Form 8936 and Form 8936–A 

regarding clean vehicle credits, 

including the requirement to include on 

the taxpayer’s return for the taxable year 

the vehicle identification number of the 

vehicle for which the section 45W credit 

is claimed. Rev. Proc. 2022–42 and Rev. 

Proc. 2023–38 describe the procedural 

requirements for qualified 

manufacturers to make periodic written 

reports to the IRS to provide 

information related to each vehicle 

manufactured by such manufacturer 

that is eligible for the section 45W credit 

as required in section 30D(d)(3). The 

collections of information contained in 

Rev. Proc. 2022–42 and Rev. Proc. 

2023–38 are described in those 

documents and were submitted to the 

Office of Management and Budget in 

accordance with the PRA under control 

number 1545–2137. The notice of 

proposed rulemaking is not changing or 

creating these already approved 

collection requirements. 

In accordance with § 1.6001–1, a 

taxpayer claiming a credit under section 

45W must keep permanent books of 

account or records sufficient to establish 

the amount of any such credit required 

to be shown by such taxpayer in any 

return of tax or information. For PRA 

purposes, general tax records are 

already approved by OMB under 1545– 

0074 for individuals, 1545–0123 for 

business entities, and under 1545–0092 

for trust and estate filers. The notice of 

proposed rulemaking is not changing or 

creating these already approved 

collection requirements. 

The collections of information in the 

proposed regulations creates reporting, 

third-party disclosure and 

recordkeeping requirements that are 

necessary to ensure that specified 

property meets the requirements for the 

qualified commercial clean vehicle 

credit under section 45W. These 

collections of information generally 

would be used by the IRS for tax 

compliance purposes and by taxpayers 

to ensure the vehicle qualifies for the 

credit. 

The reporting requirements include a 

provision requiring manufacturers to 


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register with the IRS to become 

qualified manufacturers, as detailed in 

§ 1.45W–5(c). The third-party disclosure 

requirement includes the requirement 

that manufacturers provide taxpayers 

with a PIN number that identifies the 

specified property as qualified under 

section 45W. The likely respondents are 

businesses and other for-profit entities. 

The burden for these requirements is as 

follows: 

Estimated number of respondents: 

4,500. 

Estimated frequency of responses: 1. 

Estimated average annual burden per 

response: 0.25 hours. 

Estimated total reporting burden: 

1,125 hours. 

The proposed regulations include a 

third-party disclosure and associated 

recordkeeping requirements for 

qualified manufacturers to provide 

taxpayers with the incremental cost 

value, which may include detailed cost 

information for the powertrains, and for 

taxpayers to keep records of these 

disclosures, as detailed in § 1.45W– 

2(c)(10). 

The likely respondents are businesses 

and other for-profit and tax-exempt 

entities. The burden for these 

requirements is as follows: 

Estimated number of respondents: 

500. 

Estimated frequency of responses: 1. 

Estimated average annual burden per 

response: 1.0 hours. 

Estimated total reporting burden: 500 

hours. 

The collections of information 

contained in this notice of proposed 

rulemaking have been submitted to the 

Office of Management and Budget for 

review in accordance with the 

Paperwork Reduction Act under OMB 

Control Number 1545–2137. 

Commenters are strongly encouraged to 

submit public comments electronically. 

Written comments and 

recommendations for the proposed 

information collection should be sent to 

https://www.reginfo.gov/public/do/ 

PRAMain, with copies to the IRS. Find 

this particular information collection by 

selecting ‘‘Currently under Review— 

Open for Public Comments,’’ and then 

by using the search function. Submit 

electronic submissions for the proposed 

information collection to the IRS via 

email at pra.comments@irs.gov (indicate 

REG–123525–23 on the Subject line). 

Comments on the collection of 

information must be received by March 

17, 2025. 

III. 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, 

these proposed regulations include an 

IRFA. The Treasury Department and the 

IRS invite comments on both the 

number of entities affected by these 

proposed regulations and the economic 

impact of these proposed regulations on 

small entities. 

Small business entities that claim the 

section 45W credit must satisfy 

reporting requirements. They will 

continue to file Form 8936, Clean 

Vehicle Credits (or successor form as the 

Secretary prescribes), as was the case for 

the section 45W credit prior to the 

publication of these proposed 

regulations. The estimated burden for 

business taxpayers filing Form 8936 is 

approved under OMB control number 

1545–2137 and 1545–0123. 

Although the Treasury Department 

and IRS estimate that small business 

entities will claim the credit under 

section 45W in a given year, the 

proposed regulations will not have a 

significant economic impact on such 

entities because the proposed 

regulations do not impose any 

additional burden on taxpayers outside 

of what is provided by the statute. For 

example, section 30D(f)(5), which is 

incorporated into the section 45W 

regime by section 45W(d)(1), requires 

the Secretary to prescribe regulations 

that provide for the recapture of the 

credit with respect to any property 

which ceases to be property eligible for 

such credit. These proposed rules 

merely provide the framework for the 

statutorily required recapture. 

The Treasury Department and IRS 

have determined that the continued 

requirement to file a Form 8936 (or 

successor form as the Secretary 

prescribes) is unlikely to involve 

significant administrative costs beyond 

what was previously required. 

A. Need for and Objectives of the Rule 

The proposed regulations would 

provide the eligibility rules and key 

definitions applicable to the section 

45W credit to allow taxpayers to know 

whether the clean vehicle they intend to 

purchase is eligible for the section 45W 

credit. In addition, the proposed 

regulations would provide rules 

regarding the recapture authority under 

section 45W(d)(1), so that taxpayers and 

the IRS would have clear rules regarding 

when a clean vehicle may cease to be 

eligible property for purposes of the 

section 45W credit. Further, the 

proposed regulations would provide 

rules for determining the amount of the 

section 45W credit, including the 

determination of incremental cost for 

qualified commercial clean vehicles. 

The proposed rules are expected to 

encourage taxpayers to purchase and 

place in service qualified commercial 

clean vehicles, thereby increasing the 

number of clean vehicles on the roads. 

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 commercial purchasers of 

qualified commercial clean vehicles and 

qualified manufacturers of qualified 

commercial clean vehicles. The 

Treasury Department and the IRS 

currently estimate the number of 

manufacturers of on-road qualified 

commercial clean vehicles to be 

approximately 77, and the number of 

manufacturers of off-road mobile 

machinery to be approximately 4,500. 

For off-road mobile machinery 

manufacturer estimates, the Treasury 

Department and IRS reviewed tax return 

filings for relevant industry codes for 

prior taxable years and made 

assumptions regarding the likelihood of 

such taxpayers manufacturing electric 

or hydrogen-powered off-road mobile 

machinery. For taxpayers that are not 

likely to meet the definition of small 


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3522 Federal Register / Vol. 90, No. 8 / Tuesday, January 14, 2025 / Proposed Rules 

business entity, the Treasury 

Department and the IRS assumed that 

100 percent would manufacture off-road 

mobile machinery that may qualify for 

the credit under section 45W. For 

taxpayers likely to meet the definition of 

small business entity, the Treasury 

Department and the IRS assumed that 

varying percentages of such taxpayers, 

based on the size of their operations, 

would manufacture off-road mobile 

machinery that may qualify for the 

credit under section 45W. 

Of the estimated 77 manufacturers of 

on-road qualified commercial clean 

vehicles, the Treasury Department and 

the IRS have determined that none of 

them are small businesses entities. Of 

the estimated 4,500 manufacturers of 

off-road mobile machinery, the Treasury 

Department and the IRS estimate that 

more than half would likely be 

considered a small business entity. 

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 if the integrated system for vehicle 

identification numbers for purposes of 

section 45W is established. 

1. Impact of the Rules 

The recordkeeping and reporting 

requirements would increase for 

qualified manufacturers of off-road 

mobile machinery seeking to become 

qualified manufacturers in the event of 

the establishment of an integrated 

system for vehicle identification 

numbers. Although the Treasury 

Department and the IRS do not have 

sufficient data to precisely determine 

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. Based 

on the total number of estimated 

manufacturers of off-road mobile 

machinery (4500) and an estimated 

registration time of 0.25 hours per 

registration, the Treasury Department 

and IRS estimate that off-road mobile 

machinery manufacturers will spend a 

total of 1,125 hours registering as 

qualified manufacturers. 

2. Alternatives Considered 

The Treasury Department and the IRS 

considered various alternatives in 

promulgating these proposed 

regulations. Significant alternatives and 

issues considered include: (1) the 

application of NHTSA rules toward 

administering vehicle identification 

numbers; (2) the appropriate length of 

time for which a vehicle must be used 

in a trade or business as it relates to the 

recapture rules provided in proposed 

§ 1.45W–4(c); and (3) how best to 

implement the no double benefit rules 

and incremental cost calculation to the 

eligibility of used vehicles for the 

section 45W credit. 

Regarding the application of NHTSA’s 

rules administering vehicle 

identification numbers compared to an 

integrated vehicle identification system, 

the Treasury Department and the IRS 

considered the appropriate scope of the 

definition of ‘‘vehicle identification 

number’’ and how that definition 

should be consistent with or diverge 

from the inclusion of and reference to 

off-road mobile machinery in the 

statutory text of section 45W(c)(2)(B). 

The Treasury Department and the IRS 

considered interpreting the ‘‘VIN 

number’’ requirement in section 45W(e) 

to mean a NHTSA-required VIN, 

consistent with the established 

definition of ‘‘vehicle identification 

number’’ in DOT regulations. See 49 

CFR 565.10 through 565.14. However, 

the only vehicles regulated by NHTSA 

are motor vehicles, which are vehicles 

manufactured primarily for use on 

public streets, roads, and highways. See 

49 U.S.C. 30102(7). Thus, off-road 

vehicles do not have NHTSA-required 

VINs. Therefore, this interpretation 

would effectively exclude all off-road 

mobile machinery, which Congress may 

have intended to include, as reflected in 

the parenthetical of section 

45W(c)(2)(B). 

The Treasury Department and the IRS 

considered alternatives to the recapture 

rules provided in proposed § 1.45W– 

4(c). Given that some taxpayers may 

consider using vehicles for partial 

business and partial personal use, the 

Treasury Department and the IRS 

determined it was necessary to provide 

rules regarding when the value of the 

section 45W credit can be recaptured 

when the vehicle is used less than 100 

percent for trade or business use, other 

than incidental personal use. The 

Treasury Department and the IRS also 

considered the appropriate length of 

time for which the vehicle must be used 

in a trade or business. Longer and 

shorter periods of time were considered. 

Based on knowledge of commercial 

vehicle leasing practices (fleet leasing), 

the Treasury Department and the IRS 

determined that it was appropriate to 

require a qualified commercial clean 

vehicle to be used for 100 percent trade 

or business use for 18 months after it is 

placed in service. 

The Treasury Department and the IRS 

considered issues raised by the 

applicability of the section 45W credit 

to used vehicles, since the statute does 

not contain an original use requirement. 

In particular, the Treasury Department 

and the IRS considered how best to 

implement the statutory no double 

benefit rules. Section 45W(d)(3) 

provides that no credit is allowed with 

respect to any vehicle for which a credit 

was allowed under section 30D. Section 

45W(d)(1), in turn, incorporates section 

30D(f)(8), which provides in relevant 

part that in the case of any vehicle, the 

credit shall only be allowed once with 

respect to such vehicle, as determined 

based upon the vehicle identification 

number of such vehicle. Section 

45W(d)(1) also incorporates the no 

double benefit rule in section 30D(f)(2). 

Subsequent buyers of qualified 

commercial clean vehicles generally 

would not know if a prior tax credit for 

clean vehicles had been claimed with 

respect to a particular used vehicle. In 

addition, the IRS generally is legally 

prohibited from disclosing such 

confidential tax information. Given 

these constraints and to ensure 

compliance with the no double benefit 

rules, a taxpayer claiming such credit 

must establish that they are entitled to 

the credit by keeping evidence in their 

books and records, which may be 

provided to the IRS upon request, 

sufficient to establish that no deduction 

or other credit was previously allowed 

on such vehicle. 

3. Duplicative, Overlapping, or 

Conflicting Federal Rules 

The proposed regulations would not 

duplicate, overlap, or conflict with any 

relevant Federal rules. As discussed in 

the Explanation of Provisions, the 

proposed regulations would merely 

provide requirements, procedures, and 

definitions related to the section 45W 

credit. The Treasury Department and 

the IRS invite input from interested 

members of the public about identifying 

and avoiding overlapping, duplicative, 

or conflicting requirements. 

C. 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 their impact on small business. 

IV. Unfunded Mandates Reform Act 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 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). These proposed regulations 


khammond on DSK9W7S144PROD with PROPOSALS3
Federal Register / Vol. 90, No. 8 / Tuesday, January 14, 2025 / Proposed Rules 3523 

do 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. 

Comments and Public Hearing 

Before these proposed amendments to 

the regulations are adopted as final 

regulations, consideration will be given 

to comments regarding the notice of 

proposed rulemaking that are submitted 

timely to the IRS as prescribed in the 

preamble under the ADDRESSES section. 

The Treasury Department and the IRS 

request comments on all aspects of the 

proposed regulations. All comments 

will be made available at https://

www.regulations.gov. Once submitted to 

the Federal eRulemaking Portal, 

comments cannot be edited or 

withdrawn. 

A public hearing with respect to this 

notice of proposed rulemaking has been 

scheduled for April 28, 2025, beginning 

at 10 a.m. EST in the Auditorium at the 

Internal Revenue Building, 1111 

Constitution Avenue NW, Washington, 

DC. Due to building security 

procedures, visitors must enter at the 

Constitution Avenue entrance. In 

addition, all visitors must present photo 

identification to enter the building. 

Because of access restrictions, visitors 

will not be admitted beyond the 

immediate entrance area more than 30 

minutes before the hearing starts. 

Participants may alternatively attend the 

public hearing by telephone. 

The rules of 26 CFR 601.601(a)(3) 

apply to the public hearing. Persons 

who wish to present oral comments at 

the public hearing must submit an 

outline of the topics to be discussed and 

the time to be devoted to each topic by 

March 17, 2025. A period of 10 minutes 

will be allotted to each person for 

making comments. An agenda showing 

the scheduling of the speakers will be 

prepared after the deadline for receiving 

outlines has passed. Copies of the 

agenda will be available free of charge 

at the public hearing. If no outline of the 

topics to be discussed at the public 

hearing is received by March 17, 2025, 

the public hearing will be cancelled. If 

the public hearing is cancelled, a notice 

of cancellation of the public hearing 

will be published in the Federal 

Register. 

Individuals who want to testify in 

person at the public hearing must send 

an email to publichearings@irs.gov to 

have your name added to the building 

access list. The subject line of the email 

must contain the regulation number 

REG–123525–23 and the language 

TESTIFY In Person. For example, the 

subject line may say: Request to 

TESTIFY In Person at Hearing for REG– 

123525–23. 

Individuals who want to testify by 

telephone at the public hearing must 

send an email to publichearings@irs.gov 

to receive the telephone number and 

access code for the public hearing. The 

subject line of the email must contain 

the regulation number REG–123525–23 

and the language TESTIFY 

Telephonically. For example, the 

subject line may say: Request to 

TESTIFY Telephonically at Hearing for 

REG–123525–23. 

Individuals who want to attend the 

public hearing in person without 

testifying must also send an email to 

publichearings@irs.gov to have your 

name added to the building access list. 

The subject line of the email must 

contain the regulation number REG– 

123525–23 and the language ATTEND 

In Person. For example, the subject line 

may say: Request to ATTEND Hearing In 

Person for REG–123525–23. Requests to 

attend the public hearing must be 

received by 5 p.m. EST on April 24, 

2025. 

Individuals who want to attend the 

public hearing by telephone without 

testifying must also send an email to 

publichearings@irs.gov to receive the 

telephone number and access code for 

the public hearing. The subject line of 

the email must contain the regulation 

number REG–123525–23 and the 

language ATTEND Hearing 

Telephonically. For example, the 

subject line may say: Request to 

ATTEND Hearing Telephonically for 

REG–123525–23. Requests to attend the 

public hearing must be received by 5 

p.m. EST on April 24, 2025. 

Public hearings will be made 

accessible to people with disabilities. To 

request special assistance during a 

public hearing please contact the 

Publications and Regulations Section of 

the Office of Associate Chief Counsel 

(Procedure and Administration) by 

sending an email to publichearings@

irs.gov (preferred) or by telephone at 

(202) 317–6901 (not a toll-free number) 

and must be received by at least April 

23, 2025. 

Statement of Availability of IRS 

Documents 

Revenue procedures, revenue rulings, 

notices, and other 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 authors of these 

proposed regulations are James 

Williford, Iris Chung, David Villagrana, 

and Rika Valdman of the Office of the 

Associate Chief Counsel (Passthroughs 

and Special Industries). However, other 

personnel from the Treasury 

Department, the DOE, and the IRS 

participated in their development. 

List of Subjects in 26 CFR Part 1 

Income taxes, Reporting and 

recordkeeping requirements. 

Proposed Amendments to the 

Regulations 

Accordingly, the Treasury Department 

and the IRS propose to amend 26 CFR 

part 1 as follows: 

PART 1—INCOME TAXES 

■ Paragraph 1. The authority citation 

for part 1 is amended by adding entries 

in numerical order for §§ 1.45W–1 

through 1.45W–5 to read in part as 

follows: 

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

* * * * * 

Section 1.45W–1 also issued under 26 

U.S.C. 45W(f) and 30D(d)(3). 

Section 1.45W–2 also issued under 26 

U.S.C. 45W(f). 

Section 1.45W–3 also issued under 26 

U.S.C. 45W(f). 

Section 1.45W–4 also issued under 26 

U.S.C. 45W(f) and 30D(f)(5). 

Section 1.45W–5 also issued under 26 

U.S.C. 45W(f). 

* * * * * 

■ Par. 2. Section 1.25E–2 is amended 

by: 

■ 1. Adding paragraph (b)(3); and 

■ 2. Revising paragraph (i). 

The addition and revision read as 

follows: 

§ 1.25E–2 Special rules. 

* * * * * 

(b) * * * 

(3) Interaction between section 25E 

and section 45W credits. A credit that 

has been allowed under section 45W of 


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3524 Federal Register / Vol. 90, No. 8 / Tuesday, January 14, 2025 / Proposed Rules 

the Code with respect to a vehicle in a 

taxable year before the taxable year in 

which a section 25E credit is allowable 

for that vehicle does not reduce the 

amount allowable under section 25E. 

* * * * * 

(i) Applicability dates—(1) In general. 

Except as provided in paragraph (i)(2) of 

this section, this section applies to 

previously-owned clean vehicles placed 

in service after December 31, 2022, in 

taxable years ending after October 10, 

2023. 

(2) Paragraph (b)(3) of this section. 

Paragraph (b)(3) of this section applies 

to taxable years ending after [date of 

publication of the final regulations in 

the Federal Register]. 

■ Par. 3. Section 1.30D–2 is amended by 

revising paragraphs (b)(28)(ii) and (d) to 

read as follows: 

§ 1.30D–2 Definitions for purposes of 

section 30D. 

* * * * * 

(b) * * * 

(28) * * * 

(ii) Modification of a new motor 

vehicle. If a manufacturer modifies a 

new motor vehicle (as defined in 42 

U.S.C. 7550(3)) that does not satisfy the 

requirements of section 30D(d)(1)(F) or 

(6) so that the new motor vehicle, after 

modification, does satisfy such 

requirements, then such manufacturer 

may satisfy the requirements of section 

30D(d)(3) if the modification occurred 

prior to the new motor vehicle being 

placed in service. 

* * * * * 

(d) Applicability dates—(1) In general. 

Except as provided in paragraph (d)(2) 

of this section, this section applies to 

taxable years ending after December 4, 

2023. 

(2) Paragraph (b)(28)(ii) of this 

section. Paragraph (b)(28)(ii) of this 

section applies to taxable years ending 

after [date of publication of the final 

regulations in the Federal Register]. 

■ Par. 4. Sections 1.45W–0 through 

1.45W–5 are added to read as follows: 

Sec. 

* * * * * 

1.45W–0 Table of contents. 

1.45W–1 Credit for qualified commercial 

clean vehicles; definitions. 

1.45W–2 Amount of section 45W credit; 

incremental cost. 

1.45W–3 Qualified commercial clean 

vehicle. 

1.45W–4 Special rules. 

1.45W–5 Reporting requirements. 

* * * * * 

§ 1.45W–0 Table of contents. 

This section lists the captions 

contained in §§ 1.45W–1 through 

1.45W–5. 

§ 1.45W–1 Credit for qualified commercial 

clean vehicles; definitions. 

(a) In general. 

(b) Definitions. 

(1) Battery. 

(2) Battery electric vehicle or BEV. 

(3) Fuel cell electric vehicle of FCEV. 

(4) Gross Vehicle Weight Rating or GVWR. 

(5) Manufacturer. 

(6) Placed in service. 

(7) Plug-in hybrid electric vehicle or PHEV. 

(8) Plug-in hybrid fuel cell electric vehicle 

or PHFCEV. 

(9) Qualified commercial clean vehicle. 

(10) Qualified manufacturer. 

(11) Secretary. 

(12) Section 45W regulations. 

(13) Statutory references. 

(i) Chapter 1. 

(ii) Code. 

(iii) Subtitle A. 

(c) Applicability date. 

§ 1.45W–2 Amount of section 45W credit; 

incremental cost. 

(a) Per vehicle amount. 

(b) Incremental cost. 

(1) In general. 

(2) Manufacturer’s cost. 

(3) Retail price equivalent. 

(i) In general. 

(ii) Retail price. 

(iii) Retail delivered price. 

(iv) Safe harbor. 

(4) Comparable vehicle. 

(i) In general. 

(ii) Gasoline- or diesel-powered vehicle by 

same manufacturer. 

(iii) Vehicle comparable in size and use. 

(iv) Example. 

(A) Facts. 

(B) Analysis. 

(c) Incremental cost equations and 

calculations. 

(1) ICE powertrain cost. 

(2) Battery electric vehicles. 

(3) Plug-in hybrid electric vehicles. 

(4) Fuel cell electric vehicles. 

(5) Plug-in hybrid fuel cell electric 

vehicles. 

(6) Incremental cost determined exclusive 

of auxiliary power units. 

(7) Incremental cost determine inclusive of 

additional batteries, fuel cells, or hydrogen 

storage. 

(8) Negative incremental cost treated as 

zero. 

(9) Incremental cost if no comparable 

vehicle exists. 

(10) Taxpayer reliance on qualified 

manufacturer’s incremental cost 

determination. 

(11) Safe harbor. 

(d) Definitions. 

(1) Battery. 

(2) Electric traction drive system and 

components. 

(3) Electrical accessories. 

(4) Engine and engine components. 

(5) Fuel cell. 

(6) Hydrogen storage. 

(7) Hydrogen storage cost. 

(8) Mechanical accessories. 

(9) Transmission. 

(e) Examples. 

(1) Example 1. 

(i) Facts. 

(ii) Analysis. 

(2) Example 2. 

(i) Facts. 

(ii) Analysis. 

(3) Example 3. 

(i) Facts. 

(ii) Analysis. 

(f) Incremental cost of qualified 

commercial clean vehicle previously placed 

in service by another person or entity. 

(1) In general. 

(2) Age of a qualified commercial clean 

vehicle previously placed in service by 

another person or entity. 

(3) Residual value factor. 

(4) Example. 

(i) Facts. 

(ii) Analysis. 

(g) Applicability date. 

§ 1.45W–3 Qualified commercial clean 

vehicle. 

(a) In general. 

(b) Acquired for use or lease and not for 

resale by the taxpayer. 

(1) In general. 

(2) Recharacterization of lease. 

(c) Type of vehicle. 

(1) In general. 

(2) On-road vehicle. 

(3) Mobile machinery. 

(d) Electric motor and battery 

requirements. 

(1) In general. 

(2) Battery capable of being recharged from 

an external source of electricity. 

(e) Applicability date. 

§ 1.45W–4 Special rules. 

(a) No double benefit. 

(1) Previous allowance of section 45W or 

30D credit. 

(2) Allowance of other deduction or credit. 

(b) Credit ineligibility resulting from 

certain transactions and uses. 

(1) In general. 

(2) Cancelled sale. 

(3) Vehicle return. 

(4) Resale. 

(5) Less than 100 percent trade or business 

use in taxable year vehicle is placed in 

service. 

(c) Recapture. 

(1) In general. 

(2) Recapture in the case of less than 10 

percent trade or business use. 

(i) In general. 

(ii) Applicability to vehicles placed in 

service by a tax-exempt entity. 

(d) Elective payment elections. 

(e) Leases. 

(f) Applicability date. 

§ 1.45W–5 Reporting requirements. 

(a) Requirement to file return. 

(b) Credit may generally be claimed on 

only one tax return. 

(1) In general. 

(2) Grantor trusts. 

(3) Partnerships and S corporations. 

(c) Taxpayer reliance on manufacturer 

certifications and periodic written reports to 

the IRS. 

(d) Applicability date. 


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§ 1.45W–1 Credit for qualified commercial 

clean vehicles; definitions. 

(a) In general. The section 45W 

regulations (defined in paragraph (b)(12) 

of this section) apply for purposes of 

determining the availability and amount 

of any credit under section 45W of the 

Internal Revenue Code (Code) with 

respect to a qualified commercial clean 

vehicle placed in service by a taxpayer 

during such taxpayer’s taxable year 

(section 45W credit). Paragraph (b) of 

this section provides definitions of 

terms for purposes of applying section 

45W and the section 45W regulations. 

Section 1.45W–2 provides rules for 

determining the per-vehicle credit 

amount under section 45W(b). Section 

1.45W–3 provides rules related to the 

definition of qualified commercial clean 

vehicle under section 45W(c). Section 

1.45W–4 provides special rules related 

to section 45W(d). Section 1.45W–5 

provides reporting requirements for 

purposes of section 45W. 

(b) Definitions. The following 

definitions apply for purposes of section 

45W and the section 45W regulations. 

For definitions specific to incremental 

cost calculations, see § 1.45W–2(d). 

(1) Battery. Battery means a collection 

of one or more battery modules, each of 

which has two or more battery cells, 

electrically configured in series or 

parallel, to create voltage or current. The 

term battery does not include items 

such as thermal management systems or 

other parts of a battery cell or module 

that do not directly contribute to the 

electrochemical storage of energy within 

the battery, such as battery cell cases, 

cans, or pouches. 

(2) Battery electric vehicle or BEV. 

Battery electric vehicle or BEV means a 

vehicle propelled solely by an electric 

motor that draws electricity from 

batteries capable of being recharged 

from an external source of electricity. 

(3) Fuel cell electric vehicle or FCEV. 

Fuel cell electric vehicle or FCEV means 

a vehicle— 

(i) That is propelled by power derived 

from one or more cells that convert 

chemical energy directly into electricity 

by combining oxygen with hydrogen 

fuel that is stored on board the vehicle 

in any form and may or may not require 

reformation prior to use; and 

(ii) That, in the case of a light-duty 

vehicle (that is, a passenger automobile 

or light truck), has received on or after 

August 8, 2005 (the date of the 

enactment of section 30B of the Code), 

a certificate indicating that such vehicle 

meets or exceeds the Bin 5 Tier II 

emission level established in regulations 

in 40 CFR chapter I prescribed by the 

Administrator of the Environmental 

Protection Agency (EPA) under section 

202(i) of the Clean Air Act (CAA) (42 

U.S.C. 7521(i)) for that make and model 

year vehicle. 

(4) Gross vehicle weight rating or 

GVWR. Gross vehicle weight rating or 

GVWR has the meaning provided in 40 

CFR 86.082–2 and 49 CFR 571.3(b). 

(5) Manufacturer—(i) In general. 

Manufacturer means any manufacturer 

within the meaning of the regulations in 

40 CFR chapter I prescribed by the 

Administrator of the EPA for purposes 

of the administration of title II of the 

CAA (42 U.S.C. 7521 et seq.) and as 

defined in 42 U.S.C. 7550(1). If multiple 

manufacturers are involved in the 

production of a vehicle, the 

requirements of section 30D(d)(3) must 

be met by the manufacturer that satisfies 

the reporting requirements of the 

greenhouse gas emissions standards set 

by the EPA under the CAA (42 U.S.C. 

7521 et seq.) for the subject vehicle. 

(ii) Modification of a new motor 

vehicle. If a manufacturer modifies a 

new motor vehicle (as defined in 42 

U.S.C. 7550(3)) that does not satisfy the 

requirements of section 45W(c)(3) so 

that the vehicle, after modification, does 

satisfy such requirements, then such 

manufacturer may satisfy the 

requirements of section 30D(d)(3) of the 

Code and § 1.30D–2(b)(28)(i) for 

purposes of paragraph (b)(5)(i) of this 

section if the modification occurs prior 

to the vehicle being placed in service. 

(6) Placed in service. A qualified 

commercial clean vehicle is considered 

to be placed in service on the date the 

taxpayer takes possession of the vehicle. 

(7) Plug-in hybrid electric vehicle or 

PHEV. Plug-in hybrid electric vehicle or 

PHEV means a vehicle that uses 

batteries that can be recharged from an 

external source of electricity to power 

an electric motor that propels the 

vehicle to a significant extent, and 

another fuel, such as gasoline or diesel, 

to power an internal combustion engine 

or other propulsion source. 

(8) Plug-in hybrid fuel cell electric 

vehicle or PHFCEV. Plug-in hybrid fuel 

cell electric vehicle or PHFCEV means a 

vehicle that uses batteries that can be 

recharged from an external source of 

electricity to power an electric motor 

that propels the vehicle to a significant 

extent and a hydrogen fuel source that 

powers an electric motor through the 

fuel cell system. 

(9) Qualified commercial clean 

vehicle. Qualified commercial clean 

vehicle means a vehicle that meets the 

requirements of section 45W(c) and 

§ 1.45W–3(b) through (d). Vehicles that 

may qualify as qualified commercial 

clean vehicles include BEVs, FCEVs, 

PHEVs, and PHFCEVs. A vehicle does 

not meet the requirements of section 

45W(c) if— 

(i) The qualified manufacturer fails to 

provide a periodic written report for 

such vehicle prior to the vehicle being 

placed in service by the taxpayer 

claiming the credit that reports the 

vehicle identification number of such 

vehicle and certifies compliance with 

the requirements of section 45W(c); 

(ii) The qualified manufacturer 

provides incorrect information with 

respect to the periodic written report for 

such vehicle; or 

(iii) The qualified manufacturer fails 

to update its periodic written report in 

the event of a material change with 

respect to such vehicle. 

(10) Qualified manufacturer. 

Qualified manufacturer means a 

manufacturer that meets the 

requirements described in section 

30D(d)(3) at the time the manufacturer 

submits a periodic written report to the 

Internal Revenue Service (IRS) under a 

written agreement described in section 

30D(d)(3). The term qualified 

manufacturer does not include any 

manufacturer whose qualified 

manufacturer status has been terminated 

by the IRS. The IRS may terminate 

qualified manufacturer status for fraud, 

intentional disregard, or gross 

negligence with respect to any 

requirements of section 45W, the 

section 45W regulations, or any 

guidance under section 45W, including 

with respect to the periodic written 

reports described in section 30D(d)(3) 

and this paragraph (b)(10). The IRS may 

also terminate qualified manufacturer 

status for fraud, intentional disregard, or 

gross negligence with respect to any 

requirement of section 25E or 30D or 

any regulations in this chapter or 

guidance thereunder. 

(11) Secretary. Secretary has the 

meaning provided in section 

7701(a)(11)(B) of the Code. 

(12) Section 45W regulations. Section 

45W regulations means this section and 

§§ 1.45W–2 through 1.45W–5. 

(13) Statutory references—(i) Chapter 

1. Chapter 1 means chapter 1 of the 

Code. 

(ii) Code. Code means the Internal 

Revenue Code. 

(iii) Subtitle A. Subtitle A means 

subtitle A of the Code. 

(c) Applicability date. This section 

applies to qualified commercial clean 

vehicles placed in service in taxable 

years ending after [date of publication of 

the final regulations in the Federal 

Register]. 


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§ 1.45W–2 Amount of section 45W credit; 

incremental cost. 

(a) Per-vehicle credit amount. Subject 

to the limitation in section 45W(b)(4) of 

the Code, the per-vehicle credit amount 

under section 45W(b)(1) with respect to 

any qualified commercial clean vehicle 

is the lesser of 15 percent of the basis 

of such vehicle (or 30 percent in the 

case of a vehicle not powered by a 

gasoline or diesel internal combustion 

engine (ICE)), or the incremental cost of 

such vehicle. 

(b) Incremental cost—(1) In general. 

For purposes of section 45W(b)(2), the 

incremental cost of any qualified 

commercial clean vehicle is determined 

using the incremental cost calculations 

and equations in paragraph (c) of this 

section to determine the amount equal 

to the excess of— 

(i) The product of the qualified 

manufacturer’s cost of components 

necessary for the BEV powertrain, FCEV 

powertrain, PHEV powertrain, or 

PHFCEV powertrain used in the vehicle 

and the retail price equivalent (RPE) of 

such vehicle; minus 

(ii) The product of the manufacturer’s 

cost of components necessary for the 

powertrain of a comparable vehicle 

powered solely by a gasoline or diesel 

ICE and the RPE of such comparable 

vehicle. 

(2) Manufacturer’s cost. For purposes 

of this section, a manufacturer’s cost 

includes only its direct manufacturing 

costs, which may include, but are not 

limited to, the costs of materials and 

labor. 

(3) Retail price equivalent—(i) In 

general. The RPE is the ratio of the 

manufacturer’s suggested retail price 

(MSRP) of a vehicle to the 

manufacturer’s cost to manufacture such 

vehicle. The MSRP is the sum of the 

retail price and the retail delivered 

price. 

(ii) Retail price. For purposes of 

paragraph (b)(3)(i) of this section, retail 

price is the retail price of the vehicle 

suggested by the manufacturer as 

described in 15 U.S.C. 1232(f)(1). 

(iii) Retail delivered price. Retail 

delivered price, for purposes of 

paragraph (b)(3)(i) of this section, is the 

retail delivered price suggested by the 

manufacturer for each accessory or item 

of optional equipment physically 

attached to such vehicle at the time of 

its delivery to the dealer that is not 

included within the price of such 

vehicle as stated pursuant to 15 U.S.C. 

1232(f)(1), as described in 15 U.S.C. 

1232(f)(2). 

(iv) Safe harbor. The Secretary may 

publish guidance in the Internal 

Revenue Bulletin (see § 601.601 of this 

chapter) no more frequently than 

annually that will provide RPE safe 

harbors for different segments of the 

vehicle market. Any taxpayer that uses 

an RPE provided in safe harbor 

guidance published in the Internal 

Revenue Bulletin (see § 601.601 of this 

chapter) to determine the cost of a BEV, 

PHEV, FCEV, PHFCEV, or ICE 

powertrain will be deemed to have 

satisfied the requirements of this 

paragraph (b)(3), provided all 

requirements specified in the applicable 

RPE safe harbor guidance have been 

met. No formal election is required for 

a taxpayer to use a safe harbor RPE. 

(4) Comparable vehicle—(i) In 

general. A comparable vehicle is any 

vehicle that is powered solely by a 

gasoline or diesel ICE and is comparable 

in size and use to the qualified 

commercial clean vehicle. Except as 

provided in paragraph (b)(4)(ii) of this 

section, the manufacturer of the 

comparable vehicle need not be the 

manufacturer of the qualified 

commercial clean vehicle. 

(ii) Gasoline- or diesel-powered 

vehicle by same manufacturer. If the 

qualified manufacturer of a qualified 

commercial clean vehicle also 

manufactures a solely gasoline- or 

diesel-powered ICE version of such 

vehicle, meaning a vehicle of the same 

model, produced in the same model 

year, and with features substantially 

similar to those of the qualified 

commercial clean vehicle, such solely 

gasoline- or diesel-powered vehicle is 

the only comparable vehicle with 

respect to such qualified commercial 

clean vehicle. 

(iii) Vehicle comparable in size and 

use. A vehicle is comparable to a 

qualified commercial clean vehicle in 

size and use if, as relevant to the 

particular qualified commercial clean 

vehicle, it has substantially similar 

features, such as GVWR, number of 

doors, towing capacity, passenger 

capacity, cargo capacity, mounted 

equipment, drivetrain type, overall 

width, height and ground clearance, and 

trim level. 

(iv) Example: Comparable vehicle— 

(A) Facts. A passenger car with a BEV 

powertrain (BEV X) that is a qualified 

commercial clean vehicle has a GVWR 

of 4,800 pounds, four doors, fivepassenger seating capacity, a mid-range 

trim level, and a 250-horsepower 

powertrain. A passenger car with an ICE 

powertrain (ICE Car 1) has a GVWR of 

4,500 pounds, four doors, five-passenger 

seating capacity, a mid-range trim level, 

and a 200-horsepower powertrain. A 

second passenger car with an ICE 

powertrain (ICE Car 2) has a GVWR of 

4,500 pounds, two doors, two-passenger 

seating capacity, a high-end trim level, 

and a 250-horsepower powertrain. 

(B) Analysis. ICE Car 1 is comparable 

to BEV X because ICE Car 1 and BEV X 

have substantially similar GVWRs 

(4,800 pounds compared to 4,500 

pounds), numbers of doors (4), 

passenger capacity (5), and trim levels 

(mid-range). The fact that ICE Car 1 and 

BEV X have dissimilar horsepower is 

not determinative because whether two 

vehicles are comparable vehicles under 

the rules of paragraph (b)(4) of this 

section is not entirely dependent on the 

performance characteristics of the 

powertrains. ICE Car 2 and BEV X, 

which have different numbers of doors 

(4 compared to 2), passenger capacities 

(5 compared to 2), and trim levels (midrange compared to high-end), are not 

comparable. Therefore, ICE Car 1 is a 

comparable vehicle for purposes of 

calculating the incremental cost of BEV 

X, but ICE Car 2 is not. 

(c) Incremental cost equations and 

calculations. The incremental cost 

equations and calculations set forth in 

this paragraph (c) apply to determine 

the incremental cost of a qualified 

commercial clean vehicle for purposes 

of section 45W(b)(2) and this section. 

(1) ICE powertrain cost. For purposes 

of the equations and calculations in this 

paragraph (c), the ICE powertrain cost is 

the sum of the cost of the engine, the 

ICE transmission, and the mechanical 

accessories. 

(2) Battery electric vehicles. In the 

case of a BEV, the incremental cost of 

the BEV is the product of the 

manufacturer’s cost of the BEV 

powertrain and the RPE of such vehicle, 

less the product of the manufacturer’s 

cost of the comparable vehicle ICE 

powertrain and the RPE of such vehicle. 

The BEV powertrain cost is the sum of 

the cost of the electric traction drive 

system (which, for purposes of equation 

1 to this paragraph (c)(2), includes the 

BEV transmission), the battery, and the 

electrical accessories. Expressed 

formulaically, the rule is as follows: 

Equation 1 to Paragraph (c)(2) 

Incremental cost of BEV = (BEV 

powertrain cost × RPE)¥(ICE 

powertrain cost × RPE) 

(3) Plug-in hybrid electric vehicles. In 

the case of a PHEV, the incremental cost 

of the PHEV is the product of the 

manufacturer’s cost of the PHEV 

powertrain and the RPE of such vehicle, 

less the product of the manufacturer’s 

cost of the comparable vehicle ICE 

powertrain and the RPE of such vehicle. 

The PHEV powertrain cost is the sum of 

the cost of the engine, the electric 

traction drive system (which, for 


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purposes of equation 2 to this paragraph 

(c)(3), includes the PHEV transmission), 

the battery, and the electrical 

accessories. Expressed formulaically, 

the rule is as follows: 

Equation 2 to Paragraph (c)(3) 

Incremental cost of PHEV = (PHEV 

powertrain cost × RPE)¥(ICE 

powertrain cost × RPE) 

(4) Fuel cell electric vehicles. In the 

case of a FCEV, the incremental cost of 

the FCEV is the product of the 

manufacturer’s cost of the FCEV 

powertrain and the RPE of such vehicle, 

less the product of the manufacturer’s 

cost of the comparable vehicle ICE 

powertrain and the RPE of such vehicle. 

The FCEV powertrain cost is the sum of 

the cost of the fuel cell system, the 

hydrogen storage, the electric traction 

drive system (which, for purposes of 

equation 3 to this paragraph (c)(4), 

includes the FCEV transmission), the 

battery, and the electrical accessories. 

Expressed formulaically, the rule is as 

follows: 

Equation 3 to Paragraph (c)(4) 

Incremental cost of FCEV = (FCEV 

powertrain cost × RPE)¥(ICE 

powertrain cost × RPE) 

(5) Plug-in hybrid fuel cell electric 

vehicles. In the case of a PHFCEV, the 

incremental cost of the PHFCEV is the 

product of the manufacturer’s cost of the 

PHFCEV powertrain and the RPE of 

such vehicle, less the product of the 

manufacturer’s cost of the comparable 

vehicle ICE powertrain and the RPE of 

such vehicle. The PHFCEV powertrain 

cost is the sum of the cost of the fuel 

cell system, the hydrogen storage, the 

electric traction drive system (which, for 

purposes of equation 4 to this paragraph 

(c)(5), includes the PHFCEV 

transmission), the battery, and the 

electrical accessories. Expressed 

formulaically, the rule is as follows: 

Equation 4 to Paragraph (c)(5) 

Incremental cost of PHFCEV = (PHFCEV 

powertrain cost × RPE)¥(ICE 

powertrain cost × RPE) 

(6) Incremental cost determined 

exclusive of auxiliary power units. The 

incremental cost of a qualified 

commercial clean vehicle is determined 

without regard to any auxiliary power 

unit installed on such vehicle or on a 

comparable vehicle. 

(7) Incremental cost determined 

inclusive of additional batteries, fuel 

cells, or hydrogen storage. The 

incremental cost of a qualified 

commercial clean vehicle is determined 

by adding to the cost of the BEV, FCEV, 

PHEV, or PHFCEV powertrain the cost 

of additional batteries installed on such 

vehicle, regardless of whether such 

additional batteries are required by a 

power takeoff, as well as additional fuel 

cells or additional hydrogen storage 

installed on such vehicle, regardless of 

whether such additional fuel cells are 

required by a power takeoff. 

(8) Negative incremental cost treated 

as zero. If the incremental cost 

calculation results in a negative number, 

meaning that the cost of the BEV, FCEV, 

PHEV, or PHFCEV powertrain used in 

the qualified commercial clean vehicle 

is less than the cost of the ICE 

powertrain of a comparable vehicle, 

then the incremental cost of the 

qualified commercial vehicle is zero. 

This paragraph (c)(8) does not affect the 

availability of the safe harbor described 

in paragraph (c)(11) of this section. 

(9) Incremental cost if no comparable 

vehicle exists. If a taxpayer or 

manufacturer cannot identify a 

comparable vehicle with respect to a 

particular qualified commercial clean 

vehicle, then the incremental cost of 

such qualified commercial clean vehicle 

is zero. This paragraph (c)(9) does not 

affect the availability of the safe harbor 

described in paragraph (c)(11) of this 

section. 

(10) Taxpayer reliance on qualified 

manufacturer’s incremental cost 

determination. If a qualified 

manufacturer provides a taxpayer with 

written documentation of the 

incremental cost of a qualified 

commercial clean vehicle that identifies 

the comparable vehicle such 

manufacturer used for the incremental 

cost calculation and the taxpayer keeps 

such incremental cost documentation in 

the taxpayer’s records for as long as the 

period of limitations for the taxable 

period in which the credit was claimed 

is open, the taxpayer may rely on such 

incremental cost for purposes of 

calculating the amount of the section 

45W credit (defined in § 1.45W–1(a)) 

with respect to such vehicle. See 

§ 1.45W–1(b)(9) for consequences of 

qualified manufacturer fraud, 

intentional disregard, or gross 

negligence with respect to any 

requirements of section 45W, the 

section 45W regulations (defined in 

§ 1.45W–1(b)(12)), or any guidance 

issued by the Secretary under section 

45W. 

(11) Safe harbor. The Secretary may 

publish guidance in the Internal 

Revenue Bulletin (see § 601.601 of this 

chapter) no more frequently than 

annually that will provide incremental 

cost safe harbors for different types and 

classes of qualified commercial clean 

vehicles placed in service during a 

specified period. Any taxpayer that uses 

an incremental cost safe harbor 

provided in guidance published in the 

Internal Revenue Bulletin (see § 601.601 

of this chapter) will be deemed to have 

satisfied the requirements of section 

45W(b)(1)(B) and (2) and paragraphs (b) 

and (c) of this section, provided all 

requirements specified in the applicable 

safe harbor guidance have been met. No 

formal election is required for a 

taxpayer to use an incremental cost safe 

harbor. 

(d) Definitions. This paragraph (d) 

provides definitions related to the 

incremental cost rules in section 

45W(b)(1)(B) and paragraphs (b) and (c) 

of this section. 

(1) Battery. Battery has the meaning 

provided in § 1.45W–1(b)(1). 

(2) Electric traction drive system and 

components—(i) Electric traction drive 

system. Electric traction drive system 

means a system used to provide vehicle 

propulsion in BEVs, FCEVs, PHEVs, and 

PHFCEVs by delivering torque to the 

wheels and axle of the vehicle, and 

includes, but is not limited to, an 

electric motor, an inverter, and a 

transmission. 

(ii) Electric motor. Electric motor 

means the component that includes the 

stator, rotor, shaft, housing, bearings, 

and lubrication elements. Multiple 

electric motors may be used in a 

vehicle. 

(iii) Inverter. Inverter means a 

component that converts direct current 

(DC) from the battery into alternating 

current (AC) to power the electric 

motor, providing precise control over 

motor operations. 

(iv) BEV, FCEV, PHEV, and PHFCEV 

transmission. For the definition of 

transmission for BEVs, FCEVs, PHEVs, 

and PHFCEVs, see paragraph (d)(9)(i) of 

this section. 

(3) Electrical accessories—(i) In 

general. Electrical accessories means 

accessories that support, but do not 

independently facilitate, the function of 

essential vehicle systems, and include, 

but are not limited to, battery 

enclosures, a compressor, an electric 

steering pump, high voltage cables and 

connections, thermal management 

systems, and a vacuum pump. 

(ii) Battery enclosures. Battery 

enclosures means components that 

consist of battery cases, cans or 

pouches, or casings or packaging used to 

enclose and protect battery cells and 

modules into a pack. 

(iii) Compressor. Compressor means a 

component that powers the air 

conditioning system, ensuring effective 

climate control within the vehicle. 

(iv) Electric steering pump. Electric 

steering pump means a component that 

provides hydraulic assistance for the 


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steering mechanism, enhancing ease of 

steering and vehicle maneuverability. 

(v) High voltage cables and 

connections. High voltage cables and 

connections means components that 

include all high voltage cables, 

connections to electric drive units, 

cables from the onboard charger, DC–DC 

converter, air compressors, and the 

charging cable from the charging port to 

the onboard charger. 

(vi) Thermal management systems. 

Thermal management systems means 

components that manage heating and 

cooling loads to ensure the efficient 

operation of the battery and electric 

traction drive system. 

(vii) Vacuum pump. Vacuum pump 

means a component that is essential for 

various vehicle systems that require 

vacuum assistance, contributing to 

overall system functionality. 

(4) Engine and engine components— 

(i) Engine. The engine generates power 

by burning fuel with air inside the 

engine. The engine includes, but is not 

limited to, air intake and cooling 

systems, assembly accessories, core 

engine components, engine management 

sensors and electronics, exhaust gas 

regulator and breather systems, fuel 

systems, induction air charging and fuel 

induction systems, power distribution 

and sensing for after-treatment, primary 

exhaust and after-treatment modules, 

and a valve train. 

(ii) Air intake and cooling systems. 

Air intake and cooling systems means 

components that ensure adequate 

airflow for combustion and regulate 

engine temperature through the use of 

pumps, pipes, and cooling fans. 

(iii) Assembly accessories. Assembly 

accessories means auxiliary components 

that are necessary for the assembly and 

integration of the powertrain system. 

(iv) Core engine components. Core 

engine components means components 

that include the engine cylinder head, 

crankshaft, and cylinder block, which 

form the fundamental structure of the 

engine, facilitating combustion and 

power generation. 

(v) Engine management sensors and 

electronics. Engine management sensors 

and electronics means control units and 

sensors that monitor and adjust engine 

parameters to maximize engine 

performance and minimize emissions. 

(vi) Exhaust gas regulator and 

breather systems. Exhaust gas regulator 

and breather systems means 

components that control the release of 

exhaust gases and maintain proper 

ventilation of the engine crankcase. 

(vii) Fuel system. Fuel system means 

components that encompass fuel 

storage, distribution, and evaporative 

control components, ensuring proper 

fuel delivery and reducing emissions. 

(viii) Induction air charging and fuel 

induction systems. Induction air 

charging and fuel induction systems 

means components that regulate the 

intake of air and fuel into the 

combustion chambers, ensuring efficient 

mixing and combustion. 

(ix) Power distribution and sensing for 

after-treatment. Power distribution and 

sensing for after-treatment means 

sensors and distribution mechanisms 

that manage the after-treatment process, 

ensuring effective emission control. 

(x) Primary exhaust and aftertreatment modules. Primary exhaust 

and after-treatment modules means 

components that handle the initial 

expulsion of exhaust gases and 

subsequent treatment to meet emission 

standards. 

(xi) Valve train. Valve train means a 

component that manages the timing and 

operation of the engine’s intake and 

exhaust valves, optimizing airflow and 

exhaust processes. 

(5) Fuel cell. Fuel cell means one or 

more cells in a stack that convert 

chemical energy directly into electricity 

by combining oxygen with hydrogen 

fuel that is stored on board the vehicle 

in any form and may or may not require 

reformation prior to use. The fuel cell 

system includes the stack as well as 

auxiliary components that include but 

are not limited to pumps, sensors, heat 

exchangers, gaskets, compressors, 

recirculation blowers, or humidifiers. 

(6) Hydrogen storage. Hydrogen 

storage means storage of hydrogen on 

board the vehicle in high-pressure tanks 

as a gas or liquid. 

(7) Hydrogen storage cost. Hydrogen 

storage cost includes the cost of the tank 

and the components that manage the 

flow of hydrogen from the tank to the 

fuel cell system (that is, hydrogen 

supply and regulation). 

(8) Mechanical accessories—(i) In 

general. Mechanical accessories are 

accessories that support, but do not 

independently facilitate, the function of 

essential vehicle systems, and include, 

but are not limited to, a compressor, a 

mechanical steering pump, and a water 

pump. 

(ii) Compressor. Compressor means a 

component that powers the air 

conditioning system, ensuring effective 

climate control within the vehicle. 

(iii) Mechanical steering pump. 

Mechanical steering pump means a 

component that provides hydraulic 

assistance to the steering mechanism, 

reducing the effort required by the 

driver to turn the steering wheel. 

(iv) Water pump. Water pump means 

a component that circulates coolant 

throughout the engine to maintain 

optimal operating temperatures and 

prevent overheating. 

(9) Transmission—(i) BEVs, FCEVs, 

PHEVs and PHFCEVs. For BEVs, FCEVs, 

PHEVs, and PHFCEVs, transmission 

means a mechanical device that uses a 

gear set—two or more gears working 

together—to change the speed or 

direction of rotation in a machine. For 

BEVs and FCEVs (electric vehicles), 

transmission means a component that 

consists of a single- or multi-speed, 

single- or multi-reduction gearbox that 

transfers power from the electric 

machine to the wheels. For PHEVs and 

PHFCEVs (plug-in hybrid vehicles), 

transmission components will depend 

on the vehicle driveline and orientation 

of the hybrid system (i.e., parallel or 

series) and may include, but are not 

limited to: 

(A) Two transmissions (one ICE 

transmission and one electric vehicle 

transmission); 

(B) One transmission with some 

components of both ICE and EV 

transmissions; and 

(C) One electric vehicle transmission 

only. 

(ii) ICE vehicles—(A) In general. For 

ICE vehicles, transmission means a 

mechanical device that uses a gear set 

(that is, two or more gears working 

together) to change the speed or 

direction of rotation in a machine. For 

ICE vehicles, a transmission may 

include, but is not limited to, a case, a 

drivetrain and geartrain, an internal 

clutch and torque converter, a 

lubrication system, a mechanical 

controls and electronic distribution 

system, a park-brake mechanism, and a 

transmission cooling system. 

(B) Case, drivetrain, and geartrain. 

Case, drivetrain, and geartrain means 

the mechanical components within the 

transmission that transfer power from 

the engine to the wheels, including 

gears and shafts. 

(C) Internal clutch and torque 

converter. Internal clutch and torque 

converter means components that 

facilitate smooth power transfer and 

gear changes, enhancing drivability. 

(D) Lubrication system. Lubrication 

system means components that ensure 

all moving parts within the transmission 

are adequately lubricated, reducing 

friction and wear. 

(E) Mechanical controls and 

electronic distribution system. 

Mechanical controls and electronic 

distribution system means components 

that manage the operation of the 

transmission, including gear selection 

and shifting through both mechanical 

and electronic means. 


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(F) Park-brake mechanism. Parkbrake mechanism means a component 

that ensures the vehicle remains 

stationary when parked. 

(G) Transmission cooling system. 

Transmission cooling system means 

components that prevent overheating of 

the transmission components, ensuring 

reliable performance under various 

operating conditions. 

(e) Examples—(1) Example 1: 

Incremental cost calculation for a 

qualified commercial clean vehicle—(i) 

Facts. Manufacturer is the qualified 

manufacturer of a model year 2024 

battery electric sport utility vehicle 

(BEV SUV). The BEV SUV is a qualified 

commercial clean vehicle with a GVWR 

of 4,600 pounds. Manufacturer is also 

the manufacturer of a gasoline-powered 

ICE SUV (ICE SUV) that, except for the 

powertrain, is identical to the BEV SUV. 

Manufacturer’s costs of the BEV SUV 

powertrain components are: electric 

traction drive system ($1,881.00), 

battery ($12,060.00), and electrical 

accessories ($1,437.00). The RPE of the 

BEV SUV is 1.49. Manufacturer’s costs 

of the ICE SUV powertrain components 

are: engine ($5,757.00), transmission 

($1,744.00), and mechanical accessories 

($415.00). The RPE of the ICE SUV is 

1.52. In 2025, Taxpayer purchases the 

BEV SUV for $50,000 and places the 

vehicle in service. At the time of 

Taxpayer’s purchase, Manufacturer 

provides Taxpayer with a written 

disclosure of Manufacturer’s 

incremental cost calculation, which 

Manufacturer calculated as described in 

paragraphs (b) and (c) of this section. 

(ii) Analysis—(A) Calculation of 

incremental cost. Under paragraph (b)(1) 

of this section, the incremental cost of 

the BEV SUV is the product of 

Manufacturer’s cost of the BEV SUV 

powertrain and the RPE of such vehicle, 

less the product of Manufacturer’s cost 

of the comparable vehicle ICE 

powertrain and the RPE of such vehicle. 

(1) Step 1. Under paragraph (c)(2) of 

this section, the BEV SUV powertrain 

cost is the sum of the cost of the electric 

traction drive system ($1,881.00), the 

battery ($12,060.00), and the electrical 

accessories ($1,437.00), multiplied by 

the RPE of the vehicle (1.49), or 

$22,913.22. 

(2) Step 2. Under paragraph (b)(4) of 

this section, the ICE SUV is the 

comparable vehicle with respect to the 

BEV SUV. Under paragraph (c)(1) of this 

section, the ICE SUV powertrain cost is 

the sum of the cost of the engine 

($5,757.00), the ICE transmission 

($1,744.00), and the mechanical 

accessories ($415.00), multiplied by the 

RPE of the vehicle (1.52), or $12,032.32. 

(3) Step 3. Under paragraph (c)(2) of 

this section, the incremental cost of the 

BEV SUV is determined by subtracting 

the cost of the ICE SUV powertrain in 

step 2 ($12,032.32) from the cost of the 

BEV SUV powertrain in step 1 

($22,913.22), or $10,880.90 

($22,913.22¥$12,032.32 = $10,880.90). 

(B) Determination of credit amount. 

Under paragraph (c)(10) of this section, 

Taxpayer may rely on Manufacturer’s 

incremental cost calculation, which is 

described in paragraphs (b) and (c) of 

this section, for purposes of determining 

the amount of the section 45W credit 

allowable for the BEV SUV. Subject to 

the limitation in section 45W(b)(4), the 

credit amount is the lesser of 30 percent 

of Taxpayer’s basis in the BEV SUV 

($50,000.00 × 30% = $15,000.00) or the 

incremental cost of the BEV SUV 

($10,880.90). Under section 45W(b)(4), 

the taxpayer’s credit is limited to a 

maximum of $7,500.00 because the 

vehicle has a GVWR of less than 14,000 

pounds. Therefore, the allowable 

section 45W credit with respect to the 

BEV SUV is $7,500.00. 

(2) Example 2: Section 45W credit 

equal to 30 percent of Taxpayer’s basis 

in a qualified commercial clean 

vehicle—(i) Facts. The facts are the same 

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

(Example 1), except that Taxpayer 

purchases the BEV SUV for $21,600.00 

and the incremental cost calculated by 

Manufacturer and provided in writing to 

Taxpayer is $7,000.00. 

(ii) Analysis. Under paragraph (c)(10) 

of this section, Taxpayer may rely on 

Manufacturer’s incremental cost 

calculation, which is described in 

paragraphs (b) and (c) of this section, for 

purposes of determining the amount of 

the section 45W credit allowable for the 

BEV SUV. Subject to the limitation in 

section 45W(b)(4), the credit amount 

equals the lesser of 30 percent of 

Taxpayer’s basis in the BEV SUV 

($21,600.00 × 30% = $6,480.00) or the 

incremental cost of the BEV SUV 

($7,000.00). Because $6,480.00 is below 

the $7,500 limitation in section 

45W(b)(4), the allowable section 45W 

credit with respect to the BEV SUV is 

$6,840.00. 

(3) Example 3: Incremental cost limit 

for a BEV with a GVWR over 14,000 

pounds—(i) Facts. Manufacturer is the 

qualified manufacturer of a model year 

2025 battery electric bus (BEV Bus). The 

BEV Bus has a GVWR of 14,500 pounds 

and is a qualified commercial clean 

vehicle. Manufacturer is also the 

manufacturer of an ICE Bus that, except 

for the powertrain, is substantially 

similar to the BEV Bus. Manufacturer’s 

costs of the BEV Bus powertrain 

components are: electric traction drive 

system ($4,586.00), battery ($18,535.00), 

and electrical accessories ($2,150.00). 

The RPE of the BEV Bus is 1.49. 

Manufacturer’s costs of the ICE Bus 

powertrain components are: engine 

($7,350.00), ICE transmission 

($4,730.00), and mechanical accessories 

($780.00). The RPE of the ICE Bus is 

1.52. In 2025, Taxpayer purchases the 

BEV Bus for $105,500.00, takes 

possession of the vehicle, and places it 

in service that same year. At the time 

Taxpayer purchases the BEV Bus, 

Manufacturer provides Taxpayer with a 

written disclosure of Manufacturer’s 

incremental cost calculation, which 

Manufacturer calculated in the manner 

described in paragraphs (b) and (c) of 

this section. 

(ii) Analysis—(A) Calculation of 

incremental cost. Under paragraph (c)(2) 

of this section, the incremental cost of 

the BEV Bus is the product of 

Manufacturer’s cost of the BEV Bus 

powertrain and the RPE of such vehicle, 

less the product of Manufacturer’s cost 

of the comparable vehicle ICE 

powertrain and the RPE of such vehicle. 

(1) Step 1. Under paragraph (c)(2) of 

this section, the BEV Bus powertrain 

cost is the sum of the cost of the electric 

traction drive system ($4,586.00), the 

battery ($18,535.00), and the electrical 

accessories ($2,150.00) multiplied by 

the RPE of the vehicle (1.49), or 

$37,653.79. 

(2) Step 2. Under paragraph (b)(4) of 

this section, the ICE Bus is the 

comparable vehicle with respect to the 

BEV Bus. Under paragraph (c)(1) of this 

section, the ICE Bus powertrain cost is 

the sum of the cost of the engine 

($7,350.00), the ICE transmission 

($4,730.00), and the mechanical 

accessories ($780.00) multiplied by the 

RPE of the vehicle (1.52), or $19,547.20. 

(3) Step 3. Under paragraph (c)(2) of 

this section, the incremental cost of the 

BEV Bus is determined by subtracting 

the cost of the ICE Bus powertrain 

($19,547.20) from the cost of the BEV 

Bus powertrain ($37,653.79), or 

$18,106.59 ($37,653.79 ¥ $19,547.20 = 

$18,106.59). 

(B) Determination of credit amount. 

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

Taxpayer may rely on Manufacturer’s 

incremental cost calculation, which is 

described in paragraphs (b) and (c) of 

this section. Subject to the limitation in 

section 45W(b)(4), the credit amount is 

the lesser of 30 percent of Taxpayer’s 

basis in the BEV Bus ($105,500 × 30% 

= $31,650.00) or the incremental cost of 

the BEV Bus ($18,106.59). Under section 

45W(b)(4), the section 45W credit is 

limited to $40,000 for the BEV Bus 

because it has a GVWR of more than 

14,000 pounds. Because $18,106.59 is 


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below the $40,000.00 limitation in 

section 45W(b)(4), the allowable section 

45W credit with respect to the BEV Bus 

is $18,106.59. 

(f) Incremental cost of qualified 

commercial clean vehicle previously 

placed in service by another person or 

entity—(1) In general. The incremental 

cost of a qualified commercial clean 

vehicle previously placed in service by 

another person or entity is the product 

of the incremental cost of the qualified 

commercial clean vehicle as calculated 

under paragraphs (b) and (c) of this 

section (that is, the incremental cost of 

such vehicle when new) and the 

residual value factor that corresponds to 

the age of the qualified commercial 

clean vehicle as determined under 

paragraph (f)(2) of this section. 

(2) Age of a qualified commercial 

clean vehicle previously placed in 

service by another person or entity. The 

age of a qualified commercial clean 

vehicle previously placed in service by 

another person or entity is determined 

by subtracting the model year of the 

vehicle from the calendar year in which 

the taxpayer places the vehicle in 

service. For purposes of this paragraph 

(f)(2) and paragraph (f)(3) of this section, 

a negative age (for example, a case in 

which a model year vehicle is sold 

twice prior to the calendar year that 

corresponds to that model year) is 

treated as zero. 

(3) Residual value factor. The residual 

value factor described in paragraph 

(f)(1) of this section applicable to 

relevant vehicle classes, based on 

GVWR, is as provided in the following 

tables: 

TABLE 1 TO PARAGRAPH (f)(3) 

Vehicle class and description GVWR 

(lbs.) 

Class 1 Passenger car .................................................................................................................................................................. <14,000 

Class 1 or 2–3 Light Truck (Van, Sport Utility Vehicle, Pickup Truck) ......................................................................................... <14,000 

Class 4–5 ....................................................................................................................................................................................... 14,000–19,500 

Class 6 ........................................................................................................................................................................................... 19,500–26,000 

Class 7–8 Box/Other ..................................................................................................................................................................... 26,000–60,000 

Class 8 Day Cab/Sleeper .............................................................................................................................................................. >33,000 

TABLE 2 TO PARAGRAPH (f)(3) 

Vehicle class/vehicle age 

Class 1 

passenger 

car 

(%) 

Class 1 or 

2–3 light 

truck 

(%) 

Class 4–5 

(%) 

Class 6 box 

(%) 

Class 7–8 

box/other 

(%) 

Class 8 day 

cab/sleeper 

(%) 

0 years ............................................................................. 70 75 95 90 95 85 

1 year ............................................................................... 60 70 85 80 85 75 

2 years ............................................................................. 55 60 80 70 80 60 

3 years ............................................................................. 50 55 75 60 70 55 

4 years ............................................................................. 40 45 70 55 65 45 

5 years ............................................................................. 40 40 65 45 60 40 

6 years ............................................................................. 35 35 60 40 55 35 

7 years ............................................................................. 30 35 55 35 50 30 

8 years ............................................................................. 25 30 50 35 45 25 

9 years ............................................................................. 25 25 45 30 45 25 

10 years ........................................................................... 20 25 45 25 40 20 

11 years ........................................................................... 20 20 40 25 35 20 

12 years ........................................................................... 15 20 40 20 35 15 

13 years ........................................................................... 15 15 35 20 30 15 

14 or more years ............................................................. 10 15 35 15 30 15 

(4) Example—(i) Facts. In December 

2024, X purchases and places in service 

a model year 2025 battery electric car 

(BEV car). The BEV car is a qualified 

commercial clean vehicle and has a 

GVWR of 3,900 pounds and an 

incremental cost of $15,000. X did not 

claim a section 45W credit with respect 

to the BEV car. X sells the BEV car to 

Y in December 2025 for $40,000. Y is a 

fiscal year taxpayer whose taxable year 

begins on October 1. 

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

this section, the BEV car is 0 years old 

because the model year of the BEV car 

(2025) subtracted from the calendar year 

Y placed the BEV car in service (2025) 

equals 0. Neither the calendar year in 

which X places the BEV car in service 

nor Y’s fiscal year is relevant to 

determining the age of the BEV car for 

purposes of paragraph (f)(2) of this 

section. The applicable residual value 

factor under paragraph (f)(3) of this 

section is therefore 70%. The 

incremental cost of the BEV car is 

$10,500 ($15,000 × 70%). Because the 

incremental cost of the BEV car 

($10,500) is less than 30% of Y’s basis 

in the vehicle ($40,000 × 30% = 

$12,000), $10,500 is the amount 

determined under section 45W(b)(1). 

Under section 45W(b)(4), the allowable 

section 45W credit for the BEV car is 

limited to $7,500 because the BEV car 

has a GVWR of less than 14,000 pounds. 

Therefore, Y’s allowable section 45W 

credit with respect to the BEV car is 

$7,500. 

(g) Applicability date. This section 

applies to qualified commercial clean 

vehicles placed in service in taxable 

years ending after [date of publication of 

the final regulations in the Federal 

Register]. 

§ 1.45W–3 Qualified commercial clean 

vehicle. 

(a) In general. To qualify as a qualified 

commercial clean vehicle for purposes 

of section 45W of the Code, a vehicle 

must meet the requirements of section 

45W(c) and paragraphs (b) through (d) 

of this section. 

(b) Acquired for use or lease and not 

for resale by the taxpayer—(1) In 

general. Under section 45W(c)(1), a 

qualified commercial clean vehicle must 

be acquired for use or lease and not for 


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resale by the taxpayer. For purposes of 

section 45W(c)(1), a taxpayer that is not 

a tax-exempt entity described in section 

168(h)(2)(A)(i), (ii), or (iv) of the Code 

acquires a vehicle for use or lease if the 

taxpayer acquires the vehicle for use or 

lease in a trade or business of the 

taxpayer. 

(2) Recharacterization of lease. If a 

lease of a qualified commercial clean 

vehicle would be treated as a sale rather 

than a lease for purposes of subtitle A, 

such lease will not be respected for 

purposes of section 45W(c)(1). In such 

case, the lessor will be treated as having 

acquired the vehicle for resale, and no 

credit will be allowed to such lessor 

under section 45W with respect to the 

vehicle. To the extent the lessor has 

claimed a section 45W credit (defined in 

§ 1.45W–1(a)) with respect to such 

vehicle, the recapture rules in § 1.45W– 

4(c) apply. 

(c) Type of vehicle—(1) In general. 

Under section 45W(c)(2), a qualified 

commercial clean vehicle must be either 

an on-road vehicle, as described in 

section 45W(c)(2)(A) and paragraph 

(c)(2) of this section, or mobile 

machinery, as described in section 

45W(c)(2)(B) and paragraph (c)(3) of this 

section. Some vehicles, such as a digger 

derrick truck, may qualify as both an onroad vehicle and mobile machinery. 

(2) On-road vehicle. An on-road 

vehicle is a vehicle that meets the 

requirements of section 30D(d)(1)(D) of 

the Code (that is, the vehicle is treated 

as a motor vehicle for purposes of title 

II of the Clean Air Act), is manufactured 

primarily for use on public streets, 

roads, and highways (not including a 

vehicle operated exclusively on a rail or 

rails). 

(3) Mobile machinery. Mobile 

machinery has the meaning provided in 

section 4053(8) of the Code. 

(d) Electric motor and battery 

requirements—(1) In general. Under 

section 45W(c)(3), a qualified 

commercial clean vehicle must be 

propelled to a significant extent by an 

electric motor that draws electricity 

from a battery that has a capacity of not 

less than 15 kilowatt hours (or, in the 

case of a vehicle that has a gross vehicle 

weight rating of less than 14,000 

pounds, 7 kilowatt hours) and is capable 

of being recharged from an external 

source of electricity, or is a motor 

vehicle that satisfies the requirements 

under section 30B(b)(3)(A) and (B). 

(2) Battery capable of being recharged 

from an external source of electricity. 

For purposes of section 45W(c)(3)(A), a 

battery is capable of being recharged 

from an external source of electricity if 

such source of electricity is not an 

integral part of the vehicle. For example, 

a regenerative braking system, in which 

the kinetic energy generated by the 

motion of the vehicle is used to recharge 

a battery, is not an external source of 

electricity for purposes of section 

45W(c)(3)(A) and this paragraph (d)(2). 

(e) Applicability date. This section 

applies to taxable years ending after 

[date of publication of the final 

regulations in the Federal Register]. 

§ 1.45W–4 Special rules. 

(a) No double benefit—(1) Previous 

allowance of section 45W or 30D credit. 

No credit is allowed under section 

45W(a) of the Code (section 45W credit) 

with respect to any vehicle for which a 

section 45W credit or a section 30D 

credit was previously allowed for such 

vehicle. 

(2) Allowance of other deduction or 

credit. Under sections 45W(d)(1) and 

30D(f)(2) of the Code, the amount of any 

deduction or other credit allowable 

under chapter 1 of the Code (chapter 1) 

for a vehicle for which a section 45W 

credit is allowable must be reduced by 

the amount of the section 45W credit 

allowed for such vehicle. See also 

§ 1.25E–2(b)(1). 

(3) Recordkeeping for the qualified 

commercial clean vehicle credit. In 

accordance with § 1.6001–1, a taxpayer 

claiming a credit under section 45W 

must keep permanent books of account 

or records sufficient to establish the 

amount of any such credit required to be 

shown by such taxpayer in any return 

of tax or information return. Such 

records must be sufficient to establish, 

for example, that the section 45W credit 

claimed is not disallowed by paragraph 

(a)(1) of this section, subject to 

reduction under § 1.25E–2(b)(1), or, if 

any such reduction is required, the 

amount of such reduction. 

(b) Credit ineligibility resulting from 

certain transactions and uses—(1) In 

general. This paragraph (b) provides 

rules that apply to certain transactions 

involving qualified commercial clean 

vehicles and certain uses of such 

vehicles, including cancelled sales, 

vehicle returns, resales, or less than 100 

percent use in a trade or business. 

(2) Cancelled sale. If a sale of a 

qualified commercial clean vehicle is 

cancelled before the taxpayer places the 

vehicle in service, then— 

(i) The taxpayer may not claim the 

section 45W credit with respect to the 

vehicle; 

(ii) The vehicle may still be eligible 

for the section 45W credit; and 

(iii) A subsequent buyer of the vehicle 

will not be required to apply the 

residual value rules of § 1.45W–2(f) to 

determine the incremental cost of the 

vehicle. 

(3) Vehicle return. If a taxpayer 

returns a qualified commercial clean 

vehicle to the seller within 30 days of 

placing such vehicle in service, then— 

(i) The taxpayer may not claim the 

section 45W credit with respect to the 

vehicle; 

(ii) The vehicle may still be eligible 

for the section 45W credit; and 

(iii) A subsequent buyer of the vehicle 

must apply the residual value rules of 

§ 1.45W–2(f) to determine the 

incremental cost of the vehicle. 

(4) Resale. If a taxpayer resells a 

qualified commercial clean vehicle 

within 30 days of placing the vehicle in 

service, then— 

(i) The taxpayer is treated as having 

acquired such vehicle with the intent to 

resell; 

(ii) The taxpayer may not claim the 

section 45W credit with respect to the 

vehicle; 

(iii) The vehicle may still be eligible 

for the section 45W credit; and 

(iv) A subsequent buyer of the vehicle 

must apply the residual value rules of 

§ 1.45W–2(f) to determine the 

incremental cost of the vehicle. 

(5) Less than 100 percent trade or 

business use in taxable year vehicle is 

placed in service. If a taxpayer’s trade or 

business use of a qualified commercial 

clean vehicle for the taxable year such 

vehicle is placed in service by the 

taxpayer is less than 100 percent of the 

taxpayer’s total use of that vehicle for 

that taxable year (other than incidental 

personal use, such as a stop for lunch 

on the way between two job sites), 

including because the vehicle is sold or 

otherwise disposed of, the vehicle is 

ineligible for the section 45W credit. 

This rule also applies to a qualified 

commercial clean vehicle placed in 

service by a tax-exempt entity, except 

that 100 percent trade or business use 

means the tax-exempt entity’s use that 

is related to an exempt purpose or an 

unrelated trade or business purpose. 

(c) Recapture—(1) In general. This 

paragraph (c) provides rules regarding 

the recapture of the section 45W credit 

pursuant to sections 45W(d)(1) and 

30D(f)(5). 

(2) Recapture in the case of less than 

100 percent trade or business use—(i) In 

general. Except as provided in 

paragraph (c)(2)(ii) of this section, if a 

taxpayer ceases to use a qualified 

commercial clean vehicle for 100 

percent trade or business use (other than 

incidental personal use) during the 18- 

month period beginning on the date the 

vehicle is placed in service, including 

because the vehicle is sold or otherwise 

disposed of, then— 

(A) The taxpayer may not claim the 

section 45W credit with respect to the 


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3532 Federal Register / Vol. 90, No. 8 / Tuesday, January 14, 2025 / Proposed Rules 

vehicle. If the taxpayer has already 

claimed the section 45W credit, the 

credit is recaptured as a tax under 

chapter 1. 

(B) The vehicle may still be eligible 

for the section 45W credit; and 

(C) A subsequent buyer must apply 

the residual value rules of § 1.45W– 

2(f)(3) to determine the incremental cost 

of the vehicle. 

(ii) Applicability to vehicles placed in 

service by a tax-exempt entity. For a 

qualified commercial clean vehicle 

placed in service by a tax-exempt entity, 

the 100 percent trade or business use 

rule in paragraph (c)(2)(i) of this section 

applies, except that, as provided in 

paragraph (b)(5) of this section, 100 

percent trade or business use means the 

tax-exempt entity’s use that is related to 

an exempt purpose or an unrelated trade 

or business purpose. 

(d) Elective payment elections. In the 

case of an applicable entity, as 

described in section 6417(d)(1) of the 

Code and § 1.6417–1(c) with respect to 

which an applicable credit listed in 

section 6417(b) is determined for a 

taxable year, section 6417(a) allows the 

applicable entity to make an election to 

treat the applicable entity as making a 

payment against the tax imposed by 

subtitle A of the Code equal to the 

amount of the applicable credit. Section 

6417(b)(6) and § 1.6417–1(d)(6) include 

the section 45W credit as an applicable 

credit, but only with respect to a section 

45W credit determined by reason of 

section 45W(d)(2) by a tax-exempt entity 

described in section 168(h)(2)(A)(i), (ii), 

or (iv) that is also an applicable entity 

listed in section 6417(d)(1) and 

§ 1.6417–1(c). 

(e) Leases. For purposes of section 

45W(d)(2), a vehicle is subject to a lease 

if it is leased within 30 days of being 

placed in service by a tax-exempt entity. 

(f) Applicability date. This section 

applies to taxable years ending after 

[date of publication of the final 

regulations in the Federal Register]. 

§ 1.45W–5 Reporting requirements. 

(a) Requirement to file return. No 

section 45W credit (defined in § 1.45W– 

1(a)) can be determined unless the 

taxpayer claiming such credit files a 

Federal income tax return or 

information return, as appropriate, for 

the taxable year in which the qualified 

commercial clean vehicle is placed in 

service. The taxpayer must attach to 

such return a completed Form 8936, 

Clean Vehicle Credits, or successor 

form, that includes all information 

required by the form and instructions. 

The taxpayer must also attach a 

completed Schedule A (Form 8936), 

Clean Vehicle Credit Amount, or 

successor form or schedule, that 

includes all information required by the 

schedule and instructions, including the 

vehicle identification number of the 

qualified commercial clean vehicle. 

(b) Credit may generally be claimed 

on only one tax return—(1) In general. 

Except as provided in paragraphs (b)(2) 

and (3) of this section, the amount of the 

section 45W credit attributable to a 

qualified commercial clean vehicle may 

be claimed on only one Federal income 

tax return, including on a joint return in 

which one of the spouses or the 

spouse’s wholly-owned business entity 

is listed on the title as the sole owner 

of the vehicle. In the event a qualified 

commercial clean vehicle is placed in 

service by multiple taxpayers that do 

not file a joint tax return (for example, 

in the case of married individuals filing 

separate returns), no allocation or 

proration of the section 45W credit is 

available. 

(2) Grantor trusts. In the case of a 

qualified commercial clean vehicle 

placed in service by a trust, to the extent 

the grantor or another person is treated 

as owning all or part of the trust under 

sections 671 through 679 of the Code, 

the section 45W credit is allocated to 

such grantor or other person in 

accordance with § 1.671–3(a)(1). 

(3) Partnerships and S corporations. 

In the case of a qualified commercial 

clean vehicle placed in service by a 

partnership or S corporation, the section 

45W credit is allocated among the 

partners of the partnership under 

§ 1.704–1(b)(4)(ii) or among the 

shareholders of the S corporation under 

sections 1366(a) and 1377(a) of the Code 

and claimed on the tax returns of the 

ultimate partners or of the S corporation 

shareholder(s). 

(c) Taxpayer reliance on 

manufacturer certifications and 

periodic written reports to the IRS. A 

taxpayer that acquires a qualified 

commercial clean vehicle and places it 

in service may rely on the information 

and certifications contained in the 

qualified manufacturer’s written reports 

to the IRS. The procedures for such 

periodic written reports are established 

in guidance published in the Internal 

Revenue Bulletin (see § 601.601 of this 

chapter). To the extent a taxpayer relies 

on certifications or attestations from the 

qualified manufacturer, the qualified 

commercial clean vehicle the taxpayer 

acquires will be deemed to meet the 

requirements of sections 30D(d)(1)(C) 

and 45W(c)(1) of the Code. 

(d) Applicability date. This section 

applies to taxable years ending after 

[date of publication of the final 

regulations in the Federal Register]. 

■ Par. 5. Section 1.6417–6 is amended 

by: 

■ 1. Adding two sentences to the end of 

paragraph (b)(1); and 

■ 2. Revising paragraph (e). 

The addition and revision read as 

follows: 

§ 1.6417–6 Special rules. 

* * * * * 

(b) * * * 

(1) * * * For purposes of this 

paragraph (b)(1), if an applicable credit 

is subject to section 50, then section 50 

applies without regard to section 

50(b)(3) and (b)(4)(A)(i). If another 

provision of the Code contains a basis 

reduction and/or recapture provision 

outside of section 50 that impacts the 

available credit (such as sections 30C(e), 

45Q(f)(4), 45W(d)(1), and 48(a)(10)), 

then the rules of that provision of the 

Code and the regulations in this chapter 

issued under that provision of the Code 

apply, except that any applicable credit 

continues to be determined without 

regard to section 50(b)(3) and (b)(4)(A)(i) 

and by treating any property with 

respect to which such credit is 

determined as used in a trade or 

business of the applicable entity, 

consistent with section 6417(d)(2) and 

§ 1.6417–2(c). 

* * * * * 

(e) Applicability dates—(1) In general. 

Except as provided in paragraph (e)(2) 

of this section, this section applies to 

taxable years ending on or after March 

11, 2024. For taxable years ending 

before March 11, 2024, taxpayers, 

however, may choose to apply the rules 

of §§ 1.6417–1 through 1.6417–4 and 

this section, provided the taxpayers 

apply the rules in their entirety and in 

a consistent manner. 

(2) Paragraph (b)(1) of this section. 

The second and third sentences of 

paragraph (b)(1) of this section apply to 

property placed in service in taxable 

years ending after [date of publication of 

the final regulations in the Federal 

Register]. 

Douglas W. O’Donnell, 

Deputy Commissioner. 

[FR Doc. 2025–00256 Filed 1–10–25; 8:45 am] 

BILLING CODE 4830–01–P 


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