The U.S. Department of the Treasury and Internal Revenue Service on Sept. 18 issued a Notice of Proposed Rulemaking and additional guidance on the Alternative Fuel Vehicle Refueling Property Credit as expanded by the Inflation Reduction Act.
The guidance “will provide clarity on alternative fuel vehicle refueling property investments for battery-powered electric vehicle charging and other clean fuel infrastructure such as hydrogen refueling,” a Treasury Department news release said.
The Alternative Fuel Vehicle Refueling Property Credit (section 30C) works in concert with the New and Previously Owned Clean Vehicle Credits and Advanced Manufacturing Production Credit.
The section 30C provision provides a tax credit for up to 30% of the cost of installing qualified alternative fuel vehicle refueling property, such as chargers and hydrogen refueling property.
The credit may be claimed by individuals up to $1,000 and by businesses up to $100,000 for each single item of property placed in service in an eligible census tract.
The credit may also be claimed by tax-exempt and governmental entities using elective pay or, alternatively, by the sellers of eligible property to such entities.
An eligible census tract is any population census tract that is a low-income community or that is not an urban area. Approximately two-thirds of Americans live in eligible census tracts. Business and tax-exempt governmental entities claiming the Alternative Fuel Vehicle Refueling Property Credit can receive an enhanced credit if they are paying workers prevailing wages and using registered apprentices to install the equipment.
Treasury’s Office of Economic Policy estimates that, when discounting expected annual savings over the 15-year lifespan of a vehicle, owners of electric vehicles will save $18,000 to $24,000 more than if they had purchased a comparable gasoline vehicle instead, and fuel is the largest contributor to these savings.
The Notice of Proposed Rulemaking proposes rules to implement the 30C credit, including by, among other things:
- Defining credit-eligible 30C property: The NPRM would describe that 30C property includes all functionally interdependent components of recharging or refueling property, as well as property integral to the recharging or refueling property that is placed in service by the taxpayer located at the same or immediately adjacent physical address as the fuel delivery point.
- Defining a single item of property: The NPRM would define a single item of 30C property as each charging port or fuel dispenser, as well as each energy storage property. Property that is functionally interdependent or integral to more than a single item is apportioned per item.
- Defining energy storage property: The NPRM defines the types of energy storage property that qualify as a single item of 30C property, including electrical energy storage property. The proposed definition includes rechargeable electrochemical batteries of all types used to smooth costs and minimize the impact on the grid by storing cheaper, non-peak hour energy for use during higher-cost peak hours.
Alongside the NPRM, Treasury and IRS also released a notice that provides updated mapping tools taxpayers can use to determine their eligible census tracts, provides a transition rule, and provides that taxpayers may continue to follow Notice 2024-20 for rules describing eligible census tracts.
The NPRM will be open for public comment for 60 days and a public hearing will be scheduled if requested.
