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The IRS has published proposed rules addressing the specific requirements for new clean vehicles to qualify for clean vehicle tax credit enacted as part of the Inflation Reduction Act (IRA).

The tax credit includes domestic content requirements relating to the amount of critical minerals and battery components. A taxpayer may claim a $3,750 credit for a vehicle that meets the requirements relating to critical minerals and $3,750 if the vehicle meets the requirements for battery components, up to a maximum credit of $7,500 per vehicle.

Critical minerals used in car batteries are required to be extracted or processed in the United States or in “any country with which the United States had a free trade agreement in effect.”

The applicable percentage requirements for critical minerals used in batteries are outlined in Section 30D(e)(1)(B) with increments going up by 10 percent each tax year. For vehicles placed into service during calendar year 2024, the critical mineral requirement is 50 percent. By 2027, the percentage increases to 80 percent.

The IRA placed origin requirements on battery components in section 30D(e)(2). To receive the clean vehicle credit, manufacturers must ensure that a certain percentage of battery components must be manufactured or assembled in North America. For vehicles placed into service before January 2024, the requirement is 50 percent. The percentage rises to 100 percent for vehicles placed into service after December 31, 2028.

The IRS is currently accepting comments on the proposed rules.


Mary Bachinger

Director, Tax Policy


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