On October 6, 2023, the IRS released Revenue Procedure 2023-33.
The release contains proposed regulations for the transferability of tax credits for new and previously owned electric vehicles (EV), which will begin on January 1, 2024. It also provides information for auto dealers regarding reporting required information to both vehicle purchasers and the IRS.
Here’s what your dealership should know about the new guidance:
EV credit transferability
Under the Inflation Reduction Act of 2022, the New Clean Vehicle Credit and the Used Clean Vehicle Credit were established to provide credits of up to $7,500 and $4,000 respectively for the purchase of electric vehicles — provided that both the vehicles and the purchasers met certain eligibility requirements.
The credits contained a provision for sales made on or after January 1, 2024, stating that the clean vehicle credit available could be transferred from the eligible purchaser to the dealer. This provision is beneficial for EV customers, as it allows the dealer to apply the value of the credit to the purchase of the vehicle.
The credit can be used as a cash payment, down payment or partial downpayment, effectively lowering the purchase price and creating value for the customer at the point of sale instead of later at tax time.
The IRS is offering dealers advanced payment of credit transfer amounts. They expect to issue those advanced payments within 72 hours after the dealer submits required reports electronically and will confirm acceptance of advanced payment requests in real time.
The IRS has also provided guidance that advanced payments received by dealers are not treated as a tax credit to the dealer, will not be limited to the dealer’s tax liability and are not to be included in the dealer’s gross income. Additionally, the payment made to the customer in exchange for the credit transfer is not deductible by the dealer and is not to be included in the gross income of the customer.
It’s important to note that the vehicle purchaser will have to provide the dealer a copy of their valid government-issued photo ID and certain information and certifications at the time of sale. This includes certification that, to the best of their knowledge, the purchaser’s modified adjusted gross income from the year prior to the sale or the year of the sale did not, or will not, exceed certain limits.
If it turns out the purchaser’s modified adjusted gross income does exceed those limits and was not eligible for the credit, the purchaser will have to pick up the credit amount as additional tax on their tax return for the year of purchase. It will not fall to dealers to pay back advanced payments to the IRS.
Credit transfer is not mandatory and cannot be required, but if an EV customer does elect to transfer their credit to the dealer, the credit must be transferred in full. Also, each individual customer will be limited to two EV credit transfers in a single year: either two transfers for new clean EVs, or one for a new clean EV and one for a previously owned EV.
EV sale reporting
In December 2022, the IRS released Revenue Procedure 2022-42, which outlined the information that sellers of credit-eligible new and used EVs are required to report to their customers and to the IRS. In July 2023 the IRS released Form 15400, the Clean Vehicle Seller Report, designed to be used to report that required information. Despite these releases, there remained questions as to how that information would eventually be submitted to the IRS.
To submit required documentation for the sale of EVs, auto dealers will have to register as sellers with the IRS via their new IRS energy credits portal, which is expected to go live by the end of October 2023. To register, an individual authorized representative of the dealer will have to make certain certifications and provide identifying information and proof of licensure to sell vehicles.
Seller reports must be completed and given to the customer by the time of sale. For credit-eligible new and previously owned clean EVs sold on or before December 31, 2023, reports must be furnished to the IRS by January 15, 2024. Those reports may be submitted through the IRS energy credits portal, though the IRS has indicated it may provide other methods as well.
For sales on or after January 1, 2024, seller reports will be due to the IRS as soon as possible, but no later than three calendar days after the date of the sale. These reports must be submitted electronically through the IRS energy credits portal.
For all cases, the IRS encourages immediate submission of sellers reports as customers are advised to obtain proof of form acceptance prior to finalizing their purchase.
Registering for the new portal
In October 2023, the IRS will go live with their new IRS energy credits online portal, where EV dealers will need to register to submit credit-eligible EV sales reports and claim advanced payment for transferred new and previously owned clean vehicle credits. Registration and ongoing information submission will need to be completed by an individual dealer representative authorized to bind the dealership. However, starting in December 2023, dealers will be able to designate more than one such representative.
To register to submit sellers reports, dealers will have to make certain certifications and will have to provide their:
- Business address
- Email address
- Taxpayer identification number or employer identification number
For sellers of previously owned clean vehicles, they will also need to provide proof of licensure to sell vehicles and make certain certifications as required by the IRS.
To register to receive advanced payments of transferred credits, dealers will have to make some additional certifications and will also have to provide bank account information, as advanced payments will only be issued electronically.
Dealers should note that they must be in tax compliance to have their IRS registration approved.
While the new IRS guidance issued helps dealers understand the developing requirements for clean vehicle tax credits as they evolve, questions about implementation remain, including the interplay of form 15400 and the IRS energy credits portal.
The IRS indicates that by the end of 2023 they will be releasing relevant fact sheets, FAQ, checklists and other materials that should prove helpful. And they encourage taxpayers to visit their clean vehicles tax credits page for updates.
How Wipfli can help
Wipfli is ready to answer your current or future questions about how your dealership can take advantage of EV credits. Our dedicated energy credit tax team can help you understand which credits best support your business strategies and sustainability efforts while keeping you updated on the latest guidance. Contact us and learn how we can help you capture your full benefits.
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