IRS and Treasury Department Issue New Guidance on Alternative Fuel Vehicle Refueling Property Credit

Internal Revenue Service

WASHINGTON, D.C. — The Internal Revenue Service (IRS) and the Department of the Treasury have recently issued Notice 2024-20, providing crucial guidance on the eligible census tracts for the qualified alternative fuel vehicle refueling property credit. The notice also announces the intent to propose regulations regarding this credit.

This move follows amendments to the credit for qualified alternative fuel vehicle refueling property under the Inflation Reduction Act. These changes apply to property placed in service between December 31, 2022, and January 1, 2033.

Under the new guidelines, the credit amount for property not subject to depreciation stands at 30% of the cost of the qualified property placed in service during the tax year. For depreciable property, the credit is 6% of the cost of the qualified property, but can be increased to 30% if the prevailing wage and apprenticeship requirements are met. However, the credit is capped at $100,000 for depreciable property and $1,000 for non-depreciable property.

A key factor for eligibility is the location of the property. To qualify for the credit, the property must be placed in service in an eligible census tract. This includes any population census tract that is classified as a low-income community or any tract that is not an urban area.

The primary purpose of Notice 2024-20 is to equip taxpayers with a list of eligible census tracts ahead of the 2023 filing season. It also explains how taxpayers can identify the 11-digit census tract identifier for the location where the property is placed in service. While the IRS intends to propose regulations encapsulating this information in the future, taxpayers may rely on the notice until such regulations are published.

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The notice also provides background information and definitions, describes relevant census concepts, and explains which delineation of census tract boundaries is applicable for each type of census tract determination. It further outlines how the updating of low-income community census tract determinations are considered for credit eligibility.

In addition to the notice, the IRS has also released a set of frequently asked questions related to the alternative fuel vehicle refueling property credit.

This guidance from the IRS and the Treasury Department marks a significant step in promoting the use of alternative fuel vehicles, which could have far-reaching implications for environmental sustainability and the nation’s efforts to combat climate change.

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