The Treasury Department and Internal Revenue Service recently issued a notice of proposed rulemaking on the credit for Qualified Commercial Clean Vehicles (tax code section 45W).
Treasury and IRS on Wednesday also released final regulations and procedural guidance for the Clean Electricity Low-Income Communities Bonus Credit Amount Program under tax code section 48E(h) and on Tuesday released final rules for the Clean Electricity Investment and Production Tax Credits – also known as the technology-neutral credits – in tax code sections 45Y and 48E.
Commercial Vehicle Credit
The credit for qualified commercial clean vehicles (45W) may be claimed by purchasing and placing in service qualified commercial clean vehicles – including certain battery electric vehicles (BEVs), plug-in hybrid EVs (PHEVs), fuel cell electric vehicles (FCEVs) and plug-in hybrid fuel cell electric vehicles (PHFCEVs).
The credit is the lesser amount of either 30 percent of the vehicle’s basis (15 percent for PHEV) or the vehicle’s incremental cost in excess of a vehicle comparable in size or use powered solely by gasoline or diesel.
A credit up to $7,500 may be claimed for a single qualified commercial clean vehicle for cars and light-duty trucks (Gross Vehicle Weight Rating (GVWR) of less than 14,000 pounds), or otherwise $40,000 for vehicles like electric buses and semi-trucks (GVWR equal to or greater than 14,000 pounds).
The Notice of Proposed Rulemaking issued Jan. 10 proposes rules to implement the 45W credit, including:
- Determining credit amount. The NPRM proposes various pathways for taxpayers to determine the incremental cost of a qualifying commercial clean vehicle for purposes of calculating the amount of 45W credit. For example, the NPRM proposes that taxpayers may continue to use the incremental cost safe harbors such as those set out in Notice 2023-9 and Notice 2024-5, may rely on a manufacturer’s written cost determination to determine the incremental cost of a qualifying commercial clean vehicle, or may calculate the incremental cost of a qualifying clean vehicle versus an internal combustion engine (ICE) vehicle based on the differing costs of the vehicle powertrains.
- Clarifying requirements for qualifying vehicles and eligibility. The NPRM proposes rules regarding the types of vehicles that qualify for the credit and aligns certain definitional concepts with those applicable to the 30D and 25E credits. In addition, the NPRM proposes that vehicles are only eligible if they are used 100 percent for trade or business, excepting de minimis personal use, and that the 45W credit is disallowed for qualified commercial clean vehicles that were previously allowed a clean vehicle credit under 30D or 45W. The NPRM requests comment on issues related to off-road mobile machinery, including approaches that might be adopted in applying the definition of mobile machinery to off-road vehicles and whether to create a product identification number system for such machinery to comply with statutory requirements.
Public comments on the NPRM are due in 60 days with a public hearing scheduled for April 28, 2025.
Clean Electricity Low-Income Communities Bonus Credit
Treasury and IRS final regulations and procedural guidance released Wednesday provides for the switch from the Code Section 48(e) Low-Income Communities Bonus to the Section 48E(h) Clean Electricity Low-Income Communities Bonus for 2025.
This new Program will open for applications in 2025 and under the statute will allocate 1.8 gigawatts of annual capacity through 2032 and possibly beyond dependent on GHG emission levels. The final regulations and revenue procedure released today provide guidance for applicants seeking an increased credit amount under this competitive program.
For each program year, the annual capacity limitation available for allocation is divided across the facility categories as described in the table below.
For the 2025 Program Year, approximately 174,243 kilowatts (DC) are being carried over from previous program years and distributed evenly between the four categories. The application period will open on January 16, 2025 at 9:00 am ET and close on the on August 1, 2025 at 11:59 pm ET.
When the application period opens, there will be an initial 30-day period for applications to be submitted that will end on February 14, 2025, at 11:59 pm ET. Applications submitted after this 30-day period will be considered on a rolling basis and only after the review of applications submitted during the 30-day period have been completed and only if capacity is available.
Individuals interested in learning more about the Program or submitting an application should visit the Program’s landing page on the IRS website here.
For more information, see Treasury’s Press Release.
Tech-Neutral Energy Tax Credits
Treasury and the IRS also released final rules for the Clean Electricity Investment and Production Tax Credits – also known as the technology-neutral credits – in tax code sections 45Y and 48E.
The final rules issued provide clarity and certainty around what clean electricity zero-emissions technologies qualify for the credits – including wind, solar, hydropower, marine and hydrokinetic, geothermal, nuclear, and certain waste energy recovery property.
Treasury and the IRS also announced the “imminent” release of the first “Annual Table” listing qualifying technologies. The final rules also provide guidance to clarify how combustion and gasification technologies can qualify in the future – including on how lifecycle analysis assessments compliant with the statute will be conducted.
The existing Production Tax Credit and Investment Tax Credit will be available to projects that began construction before 2025. Qualifying projects placed in service after December 31, 2024 will be eligible for the new Clean Electricity Credits.
The final rules largely maintain the rules as proposed. The final rules also confirm that future changes to the list of zero-emissions technologies or the designation of a lifecycle analysis model that may be used to determine emissions rates will need to be accompanied by an analysis prepared by the U.S. Department of Energy’s National Labs, in consultation with interagency and other experts. The National Labs are already analyzing the lifecycle emissions of electricity production using certain biomass technologies, based on the requirements in the final rules. Treasury stated that it expects this analysis, when complete, will provide additional clarity for taxpayers.
APPA noted that the incoming Trump Administration is expected to subject any new guidance to an intense review.
In general, anything that can be done by the president or an administrative agency can usually by undone by those same actors, using the same administrative processes. Thus, the procedural guidance and proposed rules could be rescinded.
