Under the Inflation Reduction Act (IRA), private nonprofit colleges and certain public universities may elect the direct pay option to obtain several new energy tax credits, including for qualifying electric and fuel cell vehicles (EVs).On December 29, the IRS published notices outlining additional information related to EV credits for eligible institutions.
(For public institutions, the statute neglected to include state entities designated as instrumentalities of the state as being eligible entities for the credits. NACUBO and other higher education associations have reached out to members of Congress and Treasury officials alerting them to this drafting error for correction in future legislation and regulatory actions).
IRS Notice 2023-1 states that a credit is available for North American-built electric vehicles that will be based on the car’s battery capacity. The IRS also explains how it will calculate a vehicle’s manufacturer’s suggested retail price for the purpose of qualifying for the credit. The notice includes a list of vehicles that may qualify for the EV credit in 2023 but advises that vehicle identification numbers will need to be used to confirm whether a new EV will qualify for the credit.
The IRA included several requirements related to the manufacture and purchase EVs eligible for the credit, as well as requirements related to the manufacture and assembly of battery components in North America. While these requirements set forth in the IRA are outlined in Notice 22-46, which was published in October 2022, more specific proposed rules on battery components are expected from IRS in the coming weeks.
Notice 2023-9 was also published on December 29, addressing details related to the commercial clean vehicle credit. The amount of the credit for each qualified commercial clean vehicle is the lesser of:
- 30 percent of the taxpayer’s basis in the vehicle in the case of a vehicle not powered by gasoline or diesel internal combustion engine (15 percent in any other case), or
- The incremental cost of the vehicle.
The maximum credit allowed is $7,500 in the case of a qualified commercial clean vehicle with a gross vehicle weight rating of less than 12,000 pounds, and $40,000 for all other vehicles.