Buyers of eligible clean vehicles can transfer Sec. 30D or Sec. 25E credits to a registered dealer in return for a cash payment or having the credit treated as a partial payment or down payment on the vehicle in 2024, according to IRS proposed regulations.
The transfers allow vehicle buyers to lower their purchase price at the point of sale, rather than having to wait to claim the credit on their tax return the next year.
Friday’s proposed regulations (REG-113064-23) explain how, starting on Jan. 1, 2024, buyers can transfer their Sec. 30D new or Sec. 25E used clean vehicle credits to registered dealers. The proposed regulations also provide guidance for the recapturing of the credit.
Transfers of the 30D new clean vehicle credit, which is worth up to $7,500, and the 25E previously owned clean vehicle credit, which is worth up $4,000, were provided in the Inflation Reduction Act, P.L. 117-169.
“For the first time, the Inflation Reduction Act allows consumers to reduce the up-front cost of a clean vehicle, expanding consumer choices, and helping car dealers expand their businesses,” Laurel Blatchford, chief implementation officer for the Inflation Reduction Act, said in a news release. “The IRS has focused on streamlining this process for car dealers as part of its commitment to improving service and helping taxpayers claim the credits they are eligible for.”
The IRS expects to issue advance payments to dealers in the amount of the transferred credit within 72 hours of the purchase and the dealer’s submission of required information including in a “time of sale” report, the news release said.
As the news release notes, the proposed regulations also provide eligibility rules for the previously owned clean-vehicle credit that would give consumers more certainty regarding their ability to claim and to transfer the credit. They also clarify that eligible consumers may transfer the full value of the new or previously owned vehicle credit regardless of their individual tax liability.
The proposed regulations also provide rules regarding who is eligible to elect to transfer the credit to the dealer and under what circumstances these taxpayers may have to pay back, or recapture, some of the transferred credit. They further include safeguards against fraud or abuse and clarify the federal income tax treatment of the transferred credit and advance payment.
Rev. Proc. 2023-33 provides additional information on registration requirements and how the mechanics of this transfer will work for car dealers. For buyers to be eligible to claim or transfer a credit starting Jan.1, 2024, the dealer must first register with the IRS Energy Credits Online Portal, a website that the IRS said will be available later this month. Dealers will also use the portal to submit their time-of-sale reports, which confirm vehicles’ eligibility for a credit, regardless of whether the buyer chooses to transfer the credit to the dealer.